Fortnightly, 7 August 2019

Fortnightly, 7 August 2019

August 7, 2019


7 August 2019
6 Av 5779
6 Dhul Hijjah 1440




1.1  Israel Provides $56 Million Boost for Joint Israel-US Research Projects
1.2  Netanyahu Government Meets in Eilat to Approve Development Plan
1.3  Arrow 3 Succeeds in Alaska Tests


2.1 Raises $8 Million to Help Publishers Boost Video Performance
2.2  Better Juice to Build Pilot Plant for Low-Sugar Orange Juice
2.3  Cervello Raises $4.5 Million
2.4  Parfois Fashion Accessory Chain Opening in Israel
2.5  Lightricks Raises $135 Million in Series C Funding from Goldman Sachs
2.6 Raises $150 Million as it’s Changing the Face of Work Software
2.7  Amazon Purchases E8 Storage
2.8  Illusive Networks Selected for Swiss Kickstart Innovation Program
2.9  Avis Partners with Otonomo to Unlock the Potential of Its Connected Car Data


3.1  WeWork to Launch First UAE Location in Early 2020 at Hub71
3.2  DIFC Furthers Collaboration with India and Signs Deal to Support Fintech Startups
3.3 Raises Seed Round from Wa’ed Ventures to Launch Traffic Monitoring Solutions
3.4  Zid Raises $2 Million led by Elm VC


4.1  Turkey Wastes 15% of National Income
4.2  Turkey’s Zero Waste Campaign Extended To Food & Textiles
4.3  Cyprus Edging Toward Zero-Energy Buildings
4.4  Greece’s Ministry of Health Moves on Smoking Ban


5.1  Average Annual Lebanese Inflation Rate Stands at 3.26% in First Half
5.2  Jordan’s Health Minister Presents Plan to Develop Comprehensive Health Centers

♦♦Arabian Gulf

5.3  Kuwait’s Budget Deficit Narrows to $11 Billion on Oil Prices & Revenues
5.4  UAE Remains the Fastest-Growing E-Commerce Market in Arab Middle East
5.5  UAE VAT Collection Set to Grow by 30% to Dh35 Billion in 2019
5.6  Abu Dhabi’s GDP Grows by 3.3% to $61.5 Billion in First Quarter
5.7  Saudi Arabia’s Budget Deficit Widens to $8.9 Billion in Second Quarter
5.8  Saudi Economic Growth Forecast Revised Downward on Oil Output
5.9  Saudi Oil Exports to China Reach Record Levels
5.10  Annual Consumer Prices in Saudi Arabia Show Decline

♦♦North Africa

5.11  IMF Disburses Final $2 Billion Tranche to Egypt to Finish the $12 Billion Loan Package
5.12  Egypt’s Suez Canal Zone Achieves Record Revenues
5.13  Egypt Signs Four Assistance Agreements with USAID Worth $59 Million
5.14  King Mohammed VI Announces Development Commission for Morocco
5.15  US Report Says Morocco Emerges as Hub for Foreign Investment
5.16  Moroccan Export Growth Rate Drops in First Half of 2019


6.1  Turkey’s Annual Inflation Rate in July Stood at 16.65%
6.2  Turkish Households Spend Most on Rent, Food and Transportation
6.3  Food Prices in Ankara Rise by 28% This Year
6.4  Turkey’s Foreign Trade Deficit Shrinks by 63.6% in First Half of 2019
6.5  Turkish Tourism Growth Improves in Second Quarter
6.6  World Banks Feels Turkey Needs Higher Productivity for Continual Growth
6.7  Greece’s State Revenues Record Major Slump in June
6.8  Greek Capital Controls set to be Fully Lifted by the End of September



7.1  Tisha B’Av to Be Observed on 10/11 August
7.2  Eid Al-Adha – Feast of the Sacrifice to Begin on 11 August
7.3  Arya Joins Most Popular Names in Israel In 2018


7.4  Saudi Arabia to Let Women Travel Abroad Without Permission
7.5  Morocco Accredits New Private School Majors


8.1  Better Juice Reduces All Types of Sugar in Juice
8.2  Magenta Medical Closes Funding Led by NEA in Its First Life Sciences Investment in Israel
8.3  Therapix Biosciences’ TheraPEA (CannAmide) Product Issued Canadian License
8.4  Stero Biotechs Starts Clinical Trial of Cannabidiol-Based Formulation for Crohn’s Disease
8.5  MetoMotion Receives $1.5 Million Investment for Its Greenhouse Robotic Worker (GRoW)
8.6  DarioHealth Launches New Blood Pressure Monitoring System
8.7  Foamix Announces $64 Million Capital Financing by Perceptive Advisors and OrbiMed
8.8  Can-Fite to Distribute Piclidenoson for the Treatment of Psoriasis in South Korea
8.9  iCAN: Israel-Cannabis & Citrine Establish iBOT: Israel Botanicals
8.10  Cardiovascular Systems Acquires Gardia Medical’s WIRION Embolic Protection System
8.11  RenalSense Obtains CE Mark for Clarity RMS Critical Care System for Urine Flow Monitoring
8.12  Foamix Submits NDA to FDA for FMX103 for the Treatment of Papulopustular Rosacea
8.13  OWC Receives a Permit for a Cannabis Based Ointment Efficacy Trial
8.14  CollPlant Developing 3D-Bioprinted Implants for Regeneration of Breast Tissue
8.15  Tel Aviv University Scientists Develop a Vaccine for Skin Cancer
8.16  SofWave Medical Closes $8.4 Million Financing Round


9.1  Foresight’s Successful US Technological Demonstrations Sells Quadsight Prototype
9.2  Bezeq Displaces All-Flash Array with Excelero Nvmesh for Data Warehouse Architecture
9.3  Optibus Releases Multi-Route Planning Capabilities for Public Transit
9.4  My Size Signs License Agreement With Penti for Smart Measurement Application MySizeID
9.5  OptimalPlus Launches Lifecycle Analytics Solution for ADAS
9.6  Nano Dimension Introduces DragonFly LDM for Lights-Out Digital Manufacturing of Electronics
9.7  Safe-T Announces First Tier-1 Collaboration for its IP Proxy Product with Korean ISP
9.8  Safe-T Announces First Tier-1 Collaboration for its IP Proxy Product with Korean ISP
9.9  Teltonika Cooperates with NanoLock Security for Powerful Router Cyber Defense
9.10  Karamba Security Teams with Cypress to Provide Embedded Cybersecurity


10.1  Israel Rises to Top 10 on the Global Innovation Index
10.2  Israel’s Unemployment Rate Rises to Over 4%


11.1  ISRAEL: S&P Reaffirms Israel’s AA- Credit Rating with a Stable Outlook
11.2  ISRAEL: Tel Aviv’s Tech Hub Ranks 6th in New Startup Ecosystem Report
11.3  ISRAEL: The Monetary Policy Report for the First Half of 2019
11.4  LEBANON: Lebanon’s Air Pollution Nears an Alarming Level
11.5  IRAQ: IMF Executive Board Concludes 2019 Article IV Consultation with Iraq
11.6  IRAQ: Fitch Affirms Iraq at ‘B-‘; Outlook Stable
11.7  ARABIAN GULF: China’s Gulf Investments Reveal Regional Strategy
11.8  QATAR: Qatar’s HVAC Maintenance Service Market
11.9  UAE: Diversified Investment in UAE Shaping China’s Economic Role in the ‎Gulf
11.10  EGYPT: IMF Completes Fifth Review under Extended Fund Facility (EFF) for Egypt
11.11  EGYPT: Egypt Evaluates Digital Upgrades, Prepares for More
11.12  EGYPT: Egyptian Car Market in Limbo
11.13  ALGERIA: Between Radical Change and Superficial Reform
11.14  MOROCCO: Twenty Years Under King Mohammed VI – Domestic Developments
11.15  MOROCCO: Twenty Years Under King Mohammed VI – Foreign Policy Developments
11.16  TURKEY: Turkey’s Current Account Deficit Shrinks, But Budget Gap Widens
11.17  GREECE: Fitch Affirms Greece at ‘BB-‘; Outlook Stable


1.1  Israel Provides $56 Million Boost for Joint Israel-US Research Projects

Israel’s Council for Higher Education (CHE) has earmarked some $56 million to a joint US-Israeli research program over five years.  The special budget will be allocated to a joint US-Israel program set up by National Science Foundation (NSF) and the United States–Israel Binational Science Foundation (BSF).  The money will enable the NSF-BSF program to run more US-Israeli scientific research projects in a variety of fields.

The NSF is an independent federal agency set up in 1950 by US Congress to promote the study of sciences.  The BSF promotes scientific relations between the US and Israel by supporting collaborative research programs.  The joint NSF-BSF program began operating in 2013 with the purpose of encouraging research collaboration between American and Israeli researchers.  Through this program, researchers from both countries jointly submit proposals to the NSF-BSF, which reviews submissions and approves the winning proposals.  The program distributes grants for a variety of fields of research, including: exact sciences, engineering, computer science, natural and life sciences, earth and environmental sciences, economics, and psychology.

In addition to the increased funding for NSF-BSF and as part of efforts to increase the scope of support of collaborations between Israeli researchers and institutions and American researchers, the CHE also approved two additional initiatives.  Starting this year, the CHE is increasing the number of postdoctoral scholarships for people studying in Israel, with an emphasis on outstanding postdoctoral students from leading universities in the United States and Canada.  The program, in collaboration with the Columbia’s Zuckerman Institute, will enable the admission of dozens of outstanding postdoctoral students in STEM subjects over the next several years at all Israeli research universities.  The amount of the scholarship for each postdoctoral student is $100,000 over two years, with the possibility of extending the scholarship for an additional two years.  The total budget will be approximately $11 million over the course of four years.

The CHE has also increased support of postdoctoral scholarships granted to Israeli and American scientists in the framework of the Fulbright Israel United States-Israel Education Fund (USIEF) from $20,000 a year to $35,000 a year for American postdoctoral students studying in Israel, and from $37,500 to $47,500 a year for Israeli postdoctoral students studying in the United States.  (ToI 31.07)

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1.2  Netanyahu Government Meets in Eilat to Approve Development Plan

On 4 August, Israel’s cabinet met in Eilat to approve a NIS 400 million development plan for the Red Sea city and the adjacent Eilot region in 2020-2023.  Prime Minister Netanyahu wanted the plan submitted together with the decision to close down Sde Dov Airport in Tel Aviv last June, in view of the consequences of closing the air route to the city, including in health, and Eilat’s need for development for a number of reasons.  The plan, based on budgets diverted from government ministries, includes development in health, tourism, maritime agriculture, maritime biotechnology and business.

The plan to revamp the health system in Eilat is needed primarily because of the lack of doctors and medical staff in the city, which has resulted in dozens of doctors being flown to Eilat weekly for years via Sde Dov Airport.  Eilat residents have also used Sde Dov to obtain medical treatment unavailable in Eilat by flying to the central region.  Since Sde Dov has been closed down, the shortage of staff and services has been exacerbated, now that many doctors have stopped flying to Eilat because flying through Ben Gurion Airport and Ramon Airport (located 20 minutes travel time from Eilat) takes more time.  Specialists currently lacking in Eilat include gynecologists, pediatricians, radiologists, child development doctors, psychiatrists, cardiologists, dermatologists, internal doctors and intensive care doctors.

The plan to boost medical services in Eilat amounts to NIS 150 million, NIS 50 million more than originally approved.  This plan includes grants of up to NIS 1 million for five years for doctors moving to Eilat (the current outlying areas grants are NIS 500,000, but these are motivating doctors to move to cities such as Beer Sheva or Nahariya, not Eilat).  A total of NIS 14 million will be allocated to this purpose, plus NIS 1.6 million for open grants for other health professionals.  Another NIS 13 million will be allocated to flying doctors to Eilat with cooperation between the health funds.  This will be added to the annual NIS 10 million that the health funds were already spending on flying doctors to the city.

NIS 14 million will be allocated for upgrading remote medical services (telemedicine), which can save on flying doctors to the city on the one hand and patients to the central region on the other.  The government will transfer NIS 26 million by 2023 to build a helicopter pad, so that there will be an available helicopter in the city.  NIS 1.6 million will be invested in encouraging a home treatment system, with cooperation between the funds, plus NIS 75 million for upgrading infrastructure lacking in Yoseftal, the only hospital in Eilat, which belongs to Clalit Health Services.  This infrastructure includes operating rooms, a dialysis institute, a gastroenterology institute, a room for treatment of acute cases of sexual assault, a CT scanner and maternity rooms.  (Globes 04.08)

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1.3  Arrow 3 Succeeds in Alaska Tests

The Ministry of Defense and the US Missile Defense Agency (MDA) have successfully completed a series of tests of the Arrow-3 Interceptor missile system, which is designed to intercept ballistic missiles outside the earth’s atmosphere, at Pacific Spaceport Complex-Alaska (PSCA) in Kodiak, Alaska.  The Ministry of Defense announced that a US radar system had been had used in the tests, and that the ability of the various systems to communicate operationally had been successfully demonstrated.  The Ministry of Defense said that the reason for holding the tests in Alaska was to examine the capabilities of the Arrow system, which could not be done in Israel.

The primary contractor for the integration and development of the Arrow Weapon System is IAI’s MALAM division which is responsible for the radar functions, along with Elbit Systems Elisra division which developed the firing management systems and IAI’s TAMAM division together with IMI and Rafael Advanced Defense Systems who jointly developed the interceptor.  America’s Boeing is also a partner in the system.

Considered one of the world’s best interceptors due to its breakthrough technological capabilities, the Arrow 3 is a highly maneuverable system designed to provide ultimate air defense by intercepting ballistic missiles when they are still outside the Earth’s atmosphere.  In addition to the Arrow system, Israel’s air defenses currently include the Iron Dome, designed to shoot down short-range rockets, and the David’s Sling missile defense system designed to intercept tactical ballistic missiles, medium- to long-range rockets, as well as cruise missiles fired at ranges between 40 to 300 km.  (Various 28.07)

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2.1 Raises $8 Million to Help Publishers Boost Video Performance announced the closing of an $8 million financing round with investors including Ansonia Holdings, and strategic participation by Switzerland’s Infront, a leading sports marketing company.  They were joined by existing investor, Gilad Shabtai.  The funding will help continue to develop its AI-powered solutions and accelerate global expansion in order to meet growing customer demands for best-in-class video technology. has raised a total of $12 million in funding to date. offers a comprehensive suite of products for content creators and publishers.  The company’s offerings include: Top Videos, which automatically aggregates top performing video articles and presents internal video recommendations to consumers; mobile-first, Stories By; and Automated Preview Video (APV), which generates highly effective video teasers to increase click-through-rate (CTR) by more than 37%.  The video teasers were utilized to great effect during the 2018 World Cup Russia, growing live stream audiences significantly.’s offerings are supported across all platforms to trigger audience engagement and provide new revenue opportunities.

Tel Aviv’s is a leading AI-driven video enhancement solution, offering a comprehensive set of tools that empower content creators and publishers.  Founded in 2014, has innovated the industry’s only real-time highlights creator for live-stream broadcasting.’s solutions automatically analyze hundreds of videos in seconds, extracting the most compelling five seconds from any video to create superior, thrilling teasers. seamlessly blends crowdsourced data and artificial intelligence using deep/machine learning to provide invaluable insights into video performance and engagement. A pioneer in dynamic video optimization.  ( 25.07)

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2.2  Better Juice to Build Pilot Plant for Low-Sugar Orange Juice

Better Juice and Citrosuco Brazil, one of the largest orange juice producers worldwide, are teaming up!  The new collaboration aims to set up a pilot plant to reduce sugars in orange juice. Citrosuco is providing some of the funding plus technical and operational expertise.  Fruit juices contain vitamins, minerals, and many other beneficial nutrients, but this natural drink comes with three types of sugars.  Better Juice’s game-changing enzymatic technology naturally transforms all types of fruit sugars into prebiotic and other non-digestible fibers and sugars.

Better Juice’s device use non-GMO microorganisms to convert the sugars, and provides orange juice manufactures a ready opportunity to meet the trends and claims for reduced sugars, all while keeping the juicy flavor of the beverage.  Their proprietary technology can be tuned to reduce between 30% to 80% of all the sugars in orange juice.  The collaboration with Citrosuco is a vote of confidence in Better Juice’s leading technology and its capabilities for reducing sugar in orange juice.

The startup won the “Most Innovative Technology” award at the 2018 Startup Innovation Challenge at Health ingredients Europe in Frankfurt for its sugar reduction technology, which it developed in conjunction with The Hebrew University in Rehovot, Israel, and The Kitchen Hub incubator, Ashdod, Israel.

Better Juice, Ltd., was founded December, 2017, by a team of food professionals, including a biochemist and microbiologist of The Hebrew University in Jerusalem with extensive experience in product development. The company received its seed investment and is supported by The Kitchen Hub – Strauss Group’s food-tech incubator.  (Better Juice 29.07)

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2.3  Cervello Raises $4.5 Million

Cervello has raised $4.5 million in a seed funding round.  The company says that the investment will accelerate development of its technology and its expansion into international markets.  Among the investors are North First Ventures of Israel and Awz Ventures of Canada, and Comsec Group founder Nissim Bar-El.  An alarming railway-hacking trend in recent years may lead to catastrophes such as trains derailment, taking over trains for ransom, and publicly embarrassing operators. Cervello’s deep technology creates a proactive coverage of the critical assets, securing the core of the rail operation and safety measures, by delivering live network status and notifications of any cyber activity in the operator’s signaling system.

Tel Aviv’s Cervello is a leading provider of comprehensive and proven solutions to protect railways against cyber-attacks.  Cervello enables security and operations teams to perform with full visibility and control of railway critical assets, signaling systems activity and operational procedures.  By delivering the simplest, most mature, effective and safe cyber security platform, Cervello provides best-in-class threat detection and response, asset management, and continuous monitoring of rail and metro operational networks.  (Cervello 25.07)

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2.4  Parfois Fashion Accessory Chain Opening in Israel

Portuguese fashion accessories retail chain Parfois is entering Israel and will open its first store in the Azrieli Center in Tel Aviv at an investment of NIS 2 million.  The new store, which will have 100 square meters on the first floor of the mall, will replace a store of the Enter chain.  Parfois is currently in talks to open three more stores in Israel.   Parfois, a fashion accessories chain, will compete with similar chains already operating in Israel, such as Accessorize and TopTen.  The City Time Israel group received the local franchise to operate the chain, is currently in the midst of expansion.  It imports and markets brands such as Pandora jewelry, the Furla fashion brand, Tommy Hilfiger watches and jewelry, and others.

The Parfois chain, which offers women’s fashion accessories, is widely deployed in Europe, especially in Portugal and Spain, with a presence in France and Italy.  Parfois, which was founded in Portugal in 1994, markets products at discount prices.  The chain has 900 stores in 65 countries, and is expanding aggressively, opening over 100 stores a year.  Parfois offers bags, purses, watches, shoes, clothing, jewelry, hair accessories and hats, scarves and sunglasses.  (Globes 29.07)

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2.5  Lightricks Raises $135 Million in Series C Funding from Goldman Sachs

Lightricks has raised $135 million in Series C funding at a $1 billion valuation in a round led by Goldman Sachs Private Capital Investing with participation from additional investors including Insight Partners and ClalTech.  The latest financing brings Lightricks’ total funding to $205 million to date.

The investment will be used to accelerate development of more powerful, cutting-edge AI enhanced content creation tools, by making strategic acquisitions and expanding the company’s offices around the world.  Lightricks aims to significantly grow its current team of 250 across Israel, the UK and opening a third office in Germany.

Lightricks was one of the first app developers to pioneer the subscription model on the App Store, demonstrating that consumers will pay for and subscribe to apps when significant value is offered.  Lightricks’ seven apps have over 180 million downloads worldwide and nearly three million paying subscribers.  The company’s apps have won awards including Best of Google Play, three Apple’s App of the Year awards and the prestigious Apple Design Award.

Jerusalem’s Lightricks is the creator of several popular, award-winning photo and video editing apps.  Since Lightricks hit the ground running with its flagship product Facetune, the company has built an arsenal of powerful content creation apps used by millions worldwide.  Products also include the Enlight creative apps Photofox, Videoleap, Quickshot, Pixaloop and its newest product, Swish.

Lightricks is on a mission to democratize creativity, a field previously limited to experts with expensive software.  Whether you’re sharing photos with friends on social media, or an artist passionate about creating digital art, or a business owner looking to tell your story online, Lightricks has a fun & powerful app just for you.  (Lightricks 31.07)

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2.6 Raises $150 Million as it’s Changing the Face of Work Software announced it raised a $150 million Series D round, bringing total funding to $234.1 million.  Silicon Valley-based venture capital firm, Sapphire Ventures, led the round with participation from Hamilton Lane, HarbourVest Partners, ION Crossover Partners and Vintage Investment Partners.  As continues along its rapid growth trajectory, it is democratizing effective management practices in creating the first fully customizable team management platform. is a centralized hub for all work processes.  From project management to tracking tasks, HR processes to projecting sales, marketing planning to event coordination, and anything in between, the platform is truly customizable to any team’s needs.  With widespread appeal across over 200 business verticals, including tech-savvy and non-tech savvy teams alike, counted in’s active paying customers are Carlsberg, Discovery Channel, Glossier, Hulu, Phillips, WeWork, and Zippo, with hundreds of Fortune 500 companies and over 80,000 others.

Earlier this year, added transformative functionalities to the platform upon releasing automations and integrations.  These new features empower teams with the ability to connect unlimited cloud apps to, establishing monday as the central work hub for any organization.  What was once only attainable by trained developers, can now be achieved by every team around the world with a simple click.  Users now have the ability to integrate every tool they need into, such as JIRA for development needs, Typeform for surveying, Mailchimp for email outreach, or Slack for chat, to automate millions of workplace actions so they can focus on what really matters.  This ability streamlines work and gives teams the power of their own personal assistant that always works. is projected to have 200 integrated apps by the end of 2019, with plans to add hundreds more next year.

Tel Aviv’s is a team management platform designed to connect people to processes while creating an environment of transparency in business.  As a web-based SaaS company, facilitates a more efficient and intuitive way to manage teams and entire operations.  ( 30.07)

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2.7  Amazon Purchases E8 Storage

Amazon has acquired Israeli storage tech startup E8 Storage.  The acquisition will bring the team and technology from E8 in to Amazon’s existing Amazon Web Services center in Tel Aviv.  Sources in the market estimate that the deal is for $50-60 million although others estimate that the acquisition was for a lower price.

E8 Storage’s particular focus was on building storage hardware that employs flash-based memory to deliver faster performance than competing offerings, according to its own claims.  How exactly AWS intends to use the company’s talent or assets isn’t yet known, but it clearly lines up with their primary business.

Tel Aviv’s E8 Storage develops flash storage installations based on software, which according to the company is ten times faster than existing hardware solutions on the market, while costing less.  E8 Storage’s solution is designed for enterprises interested in building a private internal organizational cloud infrastructure, or to speed up performance for cloud suppliers such as AWS.  Using storage installations allows companies to locate their storage drives away from their local servers in large data centers without forfeiting capabilities with an emphasis on the speed of transmitting data.  The combination of software and hardware enables the creation of flexible data centers that can adjust their speed and effectiveness to the customer’s required scale of storage.  (Various 31.08)

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2.8  Illusive Networks Selected for Swiss Kickstart Innovation Program

Illusive Networks was chosen to participate in Switzerland’s Kickstart program.  Kickstart is an ecosystem innovation platform, located in Zurich, bridging the gap between startups, corporations, cities, foundations, and universities to accelerate deep technical innovation.  As a participant in the highly competitive program, Illusive will engage with select Kickstart partners to work on innovation partnerships.  Among the partners are Mobiliar, Swiss Post, PostFinance, AXA, Swisscom, Coca-Cola Switzerland, Credit Suisse, PwC Switzerland, and many more. Several of these organizations have partnered with Kickstart for years.

Tel Aviv’s Illusive Networks empowers security teams to reduce the business risk created by today’s advanced, targeted threats by destroying an attacker’s ability to move laterally toward critical assets.  Illusive reduces the attack surface to preempt attacks, detects unauthorized lateral movement early in the attack cycle, and provides rich, real-time forensics that enhance response and inform cyber resilience efforts.  Agentless and AI driven, Illusive technology enables organizations to proactively intervene in the attack process, avoid operational disruption and business losses, while functioning with greater confidence in today’s complex, hyper-connected world.  (Illusive Networks 01.08)

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2.9  Avis Partners with Otonomo to Unlock the Potential of Its Connected Car Data

Avis Budget Group announced a partnership with Otonomo to unlock new avenues for value creation from the data generated by its connected fleet.  The fleet will cover an estimated 4 billion road miles this year and is anticipated to generate over 7 billion road miles of data with its fully connected fleet in 2020.

The Otonomo Automotive Data Services Platform will help Avis Budget Group gain new and actionable insights from its connected cars, which span a diverse range of makes, models and telematics technologies.  By reshaping this disparate connected car data for new users, Avis Budget Group will gain insights to streamline operations, reduce costs and improve customer satisfaction.  The Otonomo Platform also provides Avis Budget Group with new opportunities for collaboration with cities and other partners that benefit its customers and the general public.

With the help of Otonomo, Avis Budget Group can explore additional “data for good” opportunities that can make smart cities smarter, roads safer, traffic flow and parking more efficient, and driving more enjoyable.  Data from the Avis Budget Group fleet could significantly improve smart city applications such as planning, road hazard identification, or advanced traffic management. In time, this could translate to reduced emissions, accident prediction and prevention, and an overall better experience for all travelers.

Herzliya Pituah’s Otonomo Automotive Data Services Platform fuels a network of 15 OEMs and more than 100 service providers.  Their neutral platform securely ingests more than 2 billion data points per day from over 18 million global connected vehicles, then reshapes and enriches it, to accelerate time to market for new services that delight drivers.  Privacy by design is at the core of the platform, which enables GDPR and other privacy-regulation-compliant solutions using both personal and aggregate data.  (Avis 31.07)

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3.1  WeWork to Launch First UAE Location in Early 2020 at Hub71

On 24 July WeWork announced the launch of its first location in the United Arab Emirates, scheduled for early 2020 at Hub71, a global tech ecosystem based in Abu Dhabi Global Market Square at Al Maryah Island.  Alongside Hub71, WeWork will open over 5,000 square meters of collaborative and inspirational workspace tailored to tech companies, VCs, universities, corporates and startups.  The space will span across three floors, in what is also known as Abu Dhabi’s financial district.

Abu Dhabi can look forward to having a slice of New York at their doorstep at Hub71, which is already home to world-leading accelerators such as Techstars, Starburst and Plug and Play ADGM, bringing a whole ecosystem to life.  WeWork at Hub71 will offer the ability to choose from a wide range of products and services – from hot desks to private, noise-controlled office spaces, all starting at $400 per desk per month.  As the Ghadan 21 program continues to accelerate Abu Dhabi’s new world economy, Hub71 is bringing global partners together to create an optimal environment for startups.  Mubadala Investment Company leads the tech hub in partnership with Microsoft and SoftBank Vision Fund along with Abu Dhabi Global Market, creating a pioneering global ecosystem.  (MAGNiTT 24.07)

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3.2  DIFC Furthers Collaboration with India and Signs Deal to Support Fintech Startups

A Dubai International Financial Centre’s (DIFC) mission to India has secured several deals to back local FinTech startups.  In the mission’s visit to Maharashtra, officials took part in high-level strategic meetings in Mumbai and surrounding regions of the state.  Through these meetings, DIFC showed itself as the ideal destination for Indian startups looking to expand their operations across the MEASA region.  These meetings were set up to discuss DIFC’s strategic plans for further collaboration and to explore mutually beneficial partnerships with Indian firms and financial institutions.

Another milestone of utmost significance was the Memorandum of Understanding (MoU) signed by DIFC and the Government of Maharashtra.  The memorandum outlines plans for both entities to support Fintech startups based in their respective markets.  Furthermore, the institution intends to support the growth of Indian companies through tailored solutions.  DIFC also engaged key business and industry leaders from across a variety of sectors including infrastructure development, construction, logistics, and more in collaboration with Phillip Capital.  During the session, the center discussed market opportunities for family offices and DIFC’s plans to provide comprehensive regulation and supportive business ecosystems to help family businesses operate successfully in the region.  (DIFC 29.07)

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3.3 Raises Seed Round from Wa’ed Ventures to Launch Traffic Monitoring Solutions announced a Seed round of an undisclosed amount from Saudi Aramco’s Wa’ed Ventures.  This is’s first funding round and Wa’ed Ventures is the sole investor in this round.  The financing will be used to further invest in the proprietary Computer Vision platform developed by and to help it reach global markets.  The startup won the Product Innovation Award at Gulf Traffic 2018, which is a leading traffic industry event held in Dubai.

Founded in 2017 in Mecca, is leveraging on advances in Computer Vision and Machine Learning for the traffic analytics and enforcement industry. is building advanced traffic cameras with the capability to detect dangerous driving behavior through video analysis.  ( 01.08)

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3.4  Zid Raises $2 Million led by Elm VC

Zid announced a $2 million pre-series A investment led by Elm VC and joined by regional and international VCs, as well as super angel investors.  The company has witnessed 5-fold growth year-on-year in number of orders by the e-commerce businesses they support, with sales valued at over 140M Saudi Riyals.  This investment will allow Zid to focus on attracting new segments in the retail industry and expanding into new geographical markets.

Riyadh’s Zid is an e-commerce-in-a-box solution that allows offline retailers or first-time sellers to setup an online presence and expand their customer reach.  The Zid community provides services beyond basic technical hosting and payment, with over 20 ecosystem partners contributing their services in a plug-and-play manner, as well as Zid Academy which provides educational programs to improve merchant performance across sectors.   Established in 2017, the company’s team is focused on the single mission: Enabling merchants to scale their sales using online and digital channels.  (MAGNiTT 24.07)

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4.1  Turkey Wastes 15% of National Income

Turkey is wasting about 15% of its national income, according to the Turkish Foundation for Waste Reduction (TISVA), a non-governmental initiative established to ensure efficient and effective use of resources and prevention of waste, including food waste in the community.  The waste in many consumption items such as energy, water, fruits, vegetables, and bread reached TL 555 billion ($97 billion) a year, which corresponds to 15% of national income, the report prepared by TİSVA said.

Of this figure, TL 214 billion wasted were items of food.  Some 25-40% of 49 million tons of vegetables and fruits grown in Turkey each year goes to waste, said the report, which corresponds to TL 25 billion.  Also, waste in bread is striking.  On average, 6 million loaves of bread go to the trash every day in Turkey.

Another contribution to waste was unnecessary consumption of electricity. According to the report, each household has the potential of saving 35% on its electricity bill. In total though, Turkey has the potential of saving 25% of its energy consumption, the report said.  The report also said that dripping taps cause 3 cubic meters of water waste per year.  Assuming that 10% of Turkey’s 19 million households have dripping taps, the cost of this is around TL 11 billion to the nation, the report said.

The waste of one person brushing their teeth twice a day for one minute without closing the tap is 8 tons of water loss per year.  Assuming that 20% of the population behaves in such a way, this causes a loss of TL 13 billion in Turkey’s resources, said the report.  (HDN 25.07)

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4.2  Turkey’s Zero Waste Campaign Extended To Food & Textiles

Turkey’s ambitious Zero Waste Campaign initiated in 2017 and embraced nationwide in two years, will now cover recycling food waste and textile products.  The Ministry of Environment and Urbanization, which oversees the massive recycling campaign, will also focus on the recycling of food and unused, old or faulty textile products.  The project, which was first applied in the Beştepe Presidential Complex as well as ministries, later spread to municipalities all across Turkey and started taking hold in private companies and public buildings, from hospitals to schools.  The next stage in the award-winning campaign will be run by the Turkish Red Crescent, the country’s leading charity, which will oversee efforts for food and textile recycling.  It will involve a partnership between public and private companies to establish a waste collection system for collecting excess food and textile products.

The charity already launched pilot projects in İzmir and Ankara for recycling food waste.  It collects food before it is dumped into dumpsters.  The Red Crescent will launch a nationwide campaign next year.  Officials say food worth TL 250 billion is wasted every year.  Some 500,000 tons of bread, a staple of Turkish diet, also go to waste every year.  More than 2,500 tons of clothes and fabric and similar leftovers from textile production go to waste daily too.  The Red Crescent will collect excess clothes people do not wear and often throw away.

Turkey, late to the recycling trend and efficient waste management except in big cities, strives to end landfills whose numbers have considerably decreased in recent years.  Turkey has started to prioritize waste management, over concerns of rising environmental damage, with municipalities responsible for garbage collection upgrading their waste management systems.  The country also managed to recycle more than half of the plastic bottles in the market in 2017.  Turkey also seeks to spread compost-making equipment used in businesses for converting food waste to compost for home use.  The country, which lags behind European Union countries in terms of recycling, aims to increase recycling rate to 35% in the next five years.  (DS 30.07)

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4.3  Cyprus Edging Toward Zero-Energy Buildings

While reports have Cyprus failing to meet the majority of its EU 2020 and 2030 environmental targets by large margins, it would appear that the country is performing better in reducing energy consumption of buildings.  Buildings are responsible for 40% of energy consumption in the European Union and 30% in Cyprus.

Cyprus has incorporated into its national law an EU Directive (2010/31 / EU) which aims to improve the energy performance of buildings while taking into account the external climatic conditions and indoor climate requirements.  A series of laws imposed on the construction of new buildings combined with the installation of photovoltaic systems in homes, business and government buildings have significantly contributed to Cyprus coming closer to meeting its goals set regarding energy consumed by buildings.

After a series of laws and amendments introduced by parliament, new buildings built after 31 December 2018 will have to be issued an Energy Performance Certificate classifying them as Energy efficiency class B.  This means that buildings will have to be built with materials insulating the interior while being obliged to generate part of their energy needs from renewable energy sources.  Housing units built after the end of 2018 should be producing up to 25%, blocks of flats 3% and other building types 7%.  Come 2020, however, criteria for constructors to obtain a building license will become even tougher, with all buildings having to be classified as class A.  This entails high-performance thermal insulation (walls, ceilings, windows, exposed floors) and very low heating requirements.  Also, to have a primary energy consumption of under 100 kWh per m2 on an annual basis, to ensure the minimum shading on the building windows and produce at least 25% of their primary energy consumption with the use of RES.  (FM 23.07)

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4.4  Greece’s Ministry of Health Moves on Smoking Ban

Taking the first step in its bid to finally enforce a ban on smoking in public places that was introduced a decade ago, on 29 July, Greece’s Health Ministry sent a circular to regional and inspection authorities, instructing them to intensify checks.  It asks them to boost their inspections, focusing on public buildings including Parliament, ministries and those used by utilities such as Public Power Corporation as well as all public and private health and educational services, chiefly hospitals and schools.  Inspectors have also been asked to monitor kindergartens, crèches, playgrounds, gymnasiums and sports centers. Next on the list are office blocks, restaurants, bars, clubs, airports and public transport services.  Inspections will even extend to private vehicles in the event that children under the age of 12 are passengers.

The Panhellenic Medical Association also welcomed the drive by Prime Minister Kyriakos Mitsotakis to enforce the ban, describing both active and passive smoking as “a major issue for public health.”  One in four deaths in the male population in Greece is attributable, directly or indirectly, to smoking, it said.  (eKathimerini 29.07)

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5.1  Average Annual Lebanese Inflation Rate Stands at 3.26% in First Half

Lebanon’s average consumer prices rose by 3.26% year-on-year (y-o-y) in H1/19 compared to an annual uptick of 6% recorded in H1/18, according to the Central Administration of Statistics (CAS).  The rise in prices during H1/19 mainly came on the back of annual rises seen across all components of the consumer price index (CPI), except Transportation and Health.

The breakdown of the CPI revealed that the average costs of Housing and utilities (including: water, electricity, gas and other fuels) which grasped a combined 28.4% of the CPI, climbed by a yearly 3.10% by June 2019.  In fact, average Owner-occupied rental costs (constituting 13.6% of the category) grew by an annual 2.69%.  In turn, the average prices of water, electricity, gas, and other fuels (11.8% of housing & utilities) recorded a yearly uptick of 3.53% over the same period.  Moreover, the average prices for Food and non-alcoholic beverages (20% of the CPI) and Education costs (6.6% of CPI) registered yearly upticks of 5.56% and 5.15%, respectively, in the first quarter.  In turn, average prices of Clothing and Footwear (5.2% of the CPI) also rose by 14.09% y-o-y in the first half of the year.  However, the average consumer prices of Health (7.7% of the CPI) and Transportation (13.1% of the CPI) recorded the respective downticks of 0.61% and 0.90% y-o-y.  The latter most probably slipped as a result of the retreat in average oil prices which slipped by a yearly 3.77% to $65.78/barrel by June 2019.  (CAS 29.07)

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5.2  Jordan’s Health Minister Presents Plan to Develop Comprehensive Health Centers

Jordanian Minister of Health Dr. Saad Jaber presented the Ministry’s plan to establish and develop comprehensive health centers aimed at solving many of the problems facing the health sector and facilitating access to health services.  Jaber said that typical comprehensive health centers approved and prepared for this purpose were selected across the Kingdom’s Governorates, including Amman, Madaba, Zarqa, Mafraq, Karak and Aqaba.  He added that the ministry will deploy eight comprehensive health centers in the rest of the Kingdom’s Governorates to provide health services to citizens within goals and objectives for which it works to reduce the burden on citizens and provide a comprehensive health service.  The Ministry aims to achieve the goal of solving 95% of simple and non-urgent health problems experienced by citizens in remote areas far from hospitals.  (Petra 29.07)

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►►Arabian Gulf

5.3  Kuwait’s Budget Deficit Narrows to $11 Billion on Oil Prices & Revenues

Kuwait’s budget deficit narrowed to KD3.35 billion ($11 billion) in the last fiscal year, down 31% from a year earlier on higher-than-anticipated crude prices and a rise in non-oil revenue, the Finance Ministry announced.  The shortfall last year was Kuwait’s fifth consecutive deficit.

Revenue in the year ended 31 March rose to KD20.56 billion, while spending increased 13.5% to KD21.85 billion.  Non-oil revenue jumped 24% to KD2.13 billion while oil revenue rose 29% to KD18.4 billion.  Non-oil revenue grew for the second consecutive year, while capital expenditure remained at 14% and is expected to reach 17% during the current fiscal year to stimulate economic growth, said Finance Minister Nayef Al-Hajraf.  Wages and subsidies accounted for 75% of all spending.  The budget gap will be financed by withdrawals from the state’s treasury.  (AB 29.07)

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5.4  UAE Remains the Fastest-Growing E-Commerce Market in Arab Middle East

The Dubai government and Visa conducted a joint study and revealed that e-commerce transactions in the UAE are expected to reach a total of $16 billion by the end of 2019 and are predicted to grow 23% annually between 2018 and 2022.  According to the report, the UAE has the fastest growing e-commerce market in the MENA region.

Another earlier study conducted by Visa stated that the online retail market of the UAE has developed, with nearly two-thirds of small retailers in the Emirates reporting higher revenues after accepting digital payments.  Indeed, global giants like Samsung Pay, Google Pay and Apple Pay have played a vital role in increasing the use of mobile wallets in the UAE, along with local organizations like Etisalat Wallet, Beam Wallet and local banks.

According to a report from TechSci Research in the US, the UAE’s mobile wallet market will grow at a compound growth rate of 24% and will reach $2.3 billion by 2022.  Cashless payments and digital commerce are among the top priorities of the Vision 2021 and the Smart Government initiative aims to turn the country into a cashless society by 2020.  The latest Visa study has also shown that e-commerce penetration in the UAE overcame MENA and GCC averages, with 4.2% of total sales.  On the other hand, MENA and GCC averages were 1.9 and 3% accordingly.  According to The National, the higher growth numbers were fueled by higher internet penetration, a younger population eager to embrace tech-driven solutions, and an advanced digital infrastructure.  (The National 24.07)

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5.5  UAE VAT Collection Set to Grow by 30% to Dh35 Billion in 2019

Greater compliance due to new legal aspects such as country-by-country reporting and Base Erosion and Profit Shifting (Beps), increased spending for Expo 2020, and more companies listing for value-added tax (VAT) will help the UAE to increase its revenues through VAT by up to 30% this year, say tax experts.  The UAE’s VAT collection is expected to increase by Dh8 billion or 30% in 2019 to reach Dh35 billion as compared to Dh27 billion last year.

The Federal Tax Authority’s latest figures showed that the number of businesses and tax groups registered for VAT surpassed 307,000, while the number of those that registered for excise tax totaled 724.  The user base for the tax system is expanding rapidly, hence the clearing and forwarding companies increased to more than 123 while accredited tax agents increased to 395.  The UAE and Saudi Arabia levied 5% VAT on goods and services from 1 January 2018 as part of a framework agreed upon by GCC members.  The UAE collected Dh27 billion through VAT revenues last year, surpassing its last year’s target of Dh12 billion and event 2019 target of Dh20 billion in the first, thanks to high compliance ratio and awareness campaigns by the Federal Tax Authority and ICAI.  Dubai received the largest share of VAT receipts at 42% followed by 30% for federal government, 18% for Abu Dhabi, 6% for Sharjah and 4% for other northern emirates.  (KT 30.07)

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5.6  Abu Dhabi’s GDP Grows by 3.3% to $61.5 Billion in First Quarter

Abu Dhabi’s gross domestic product (GDP) at current prices for the first quarter of 2019 rose by 3.3% to AED226 billion ($61.5 billion) compared to the year-earlier period.  Statistics Centre Abu Dhabi said that oil GDP made up 39.8% of the emirate’s overall GDP in the first quarter of 2019, reaching AED89.9 billion, an 11.6% increase.

The government is working to consolidate public-private partnerships through the launch of various programs as part of the Ghadan 21 plan, a AED50 billion three-year initiative driving economic development, innovation, ease of doing business and liveability in the UAE capital.  One of the key tenets of the program is to develop infrastructure, including transportation, communication and urban development.  The emirate’s GDP growth for the first quarter of the year followed a series of moves taken to stimulate the business environment, including an exemption from license fees for two years.  (AB 26.07)

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5.7  Saudi Arabia’s Budget Deficit Widens to $8.9 Billion in Second Quarter

Saudi Arabia’s budget deficit widened in the second quarter as capital spending increased while oil and non-oil revenue fell.  The budget gap of SR33.5 billion ($8.9 billion) compared to SR7.4 billion in the same period last year, the Finance Ministry said on 30 July.  Oil revenue dropped 5% year-on-year while non-oil revenue declined 4%, despite a significant rise in tax revenue.  Spending rose 5% compared to the second quarter last year, with a 27% increase in capital expenditures and a 71% jump in subsidies.  Officials have been trying to stimulate the economy of the world’s largest oil exporter since it contracted in 2017, promising to inject cash into the government-dependent private sector.  (AB 30.07)

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5.8  Saudi Economic Growth Forecast Revised Downward on Oil Output

Saudi Arabia’s economic growth is likely to be less than previously forecast due lower than expected oil production in the Gulf kingdom, according to new research by Jadwa Investment.  Its forecast for the kingdom has been revised downward wholly on the account of developments related to the oil market.  It previously expected overall growth to hit 2% in 2019, but a downward revision in oil sector GDP means that it now sees growth at around 1.6%.

Lower than previously forecasted Saudi oil production will push oil GDP to a slender 0.3% growth in 2019, Jadwa said, adding that on the non-oil side, it sees higher growth at 2.7% compared to 2.3% previously.  Within this forecast, Jadwa said it expects to see non-oil private sector growth to improve to 2.4%, compared to 1.7% in 2018.

Jadwa added that lower yearly Brent oil prices and crude oil production will result in lower government revenue than previously forecasted.  As a result, it sees a widening of the fiscal deficit to SR196 billion (6.4% of GDP) in 2019.  Overall, it seems that the consolidation of efforts in striving towards the goals of the Vision 2030 (Vision), as well as the targets set under the National Transformation Program (NTP) have paved the way for pick up in momentum for the Saudi economy.  That said, exogenous factors have become more prominent in relation to the kingdom’s immediate economic outlook.  Specifically, global economic developments, in particular with regards to the US and Chinese trade dispute, as well as regional geopolitical tensions, stand out as the main risks to our forecast.  Saudi Arabia recorded a surplus of SR27.8 billion in Q1/19, driven by both oil and non-oil revenues.  The results marked the first time since 2014 that the kingdom posted a surplus.  (AB 27.07)

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5.9  Saudi Oil Exports to China Reach Record Levels

Saudi Arabia’s crude oil exports to China soared to 1.74 million barrels per day (b/d) in July, while shipments to the US fell to 161,000 b/d compared with 1.03 million b/d a year earlier.  In July, Saudi oil shipments declined to 6.7 million b/d, about 200,000 b/d less than in June.  It worth noting that Saudi oil production decreased by the same amount in July to 9.6 million b/d.

Saudi crude flows to markets east of the Suez Canal stood at 5.1 million b/d in July.  On the other hand, Saudi flows west of the Canal have dropped to about 1.1 million b/d.  However, Saudi oil exports to India, Japan and South Korea also declined last month.

Data shows that Chinese oil imports from Saudi Arabia reached a record level, while flows to the US decreased during the same time.  The Saudi Kingdom has compensated China, the largest crude oil buyer in Asia, for the shortage of crude oil supplies that resulted from the US-imposed sanctions on Iran.  Saudi production remains below the maximum level allowed by the production cut agreement, sponsored by the Organization of the Petroleum Exporting Countries (OPEC), at 10.3 million b/d. Saudi Arabia has expressed commitment to the output cut deal until the end of Q1/20.  (SWACO 04.08)

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5.10  Annual Consumer Prices in Saudi Arabia Show Decline

Consumer prices in Saudi Arabia dropped in June compared to figures for the same month last year, but month-on-month the consumer price index (CPI) showed a slight increase.  Government data revealed the CPI index fell 1.4% in June year-on-year in the kingdom, but rose by 0.2% in comparison to May.  The General Authority for Statistics said that food inflation, which accounts for around 20% of the CPI basket, dropped from 1.8% y-o-y in May to 1.3% last month.  Housing inflation, meanwhile, which accounts for a further 25% of the CPI basket, increased for another consecutive month, from -7.5% y-o-y in May to -7.2% in June.

Transport inflation also rose last month.  The continued easing of deflation shows that stronger activity in the non-oil sector is causing price pressures to build.  The main risks to the inflation outlook continue to lie to the upside.  In particular, if oil prices are expected to stay low, the authorities are likely to take steps to rein in the budget.  The International Monetary Fund (IMF) recently said that authorities should consider raising the VAT rate from its current level of 5%.  (AB 28.07)

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►►North Africa

5.11  IMF Disburses Final $2 Billion Tranche to Egypt to Finish the $12 Billion Loan Package

The International Monetary Fund (IMF) approved the disbursement of the final $2 billion tranche to Egypt, completing a $12 billion loan package.  The decision comes a few weeks after Egypt implemented a fresh round of fuel subsidy cuts, which raised domestic prices between 16 to 30%, bringing them in line with their real cost.

Egypt first reached a staff-level agreement with the IMF in August 2016 over the loan after the IMF endorsed the Arab nation’s fiscal reform program, which the government embarked on in 2014 in an attempt to curb the growing state budget deficit, estimated at 12.2% of the GDP in 2015/16.

Last month, Egypt said that it is in talks with the IMF for a non-loan program and hopes to reach an agreement by October.  Egypt is set to begin repaying the loan in tranches after five years of receiving the first tranche of the $2.75 billion in November 2016, shortly after it floated its currency in an unprecedented move.  Relying heavily on imports, Egypt suffered from an acute foreign currency shortage following the 2011 revolution and the ensuing unrest, which spooked investors and tourists before its economy started to recover.  (Ahram Online 24.07)

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5.12  Egypt’s Suez Canal Zone Achieves Record Revenues

Chairman of the Suez Canal Economic Zone (SCZone) Mamish said the SCZone received the highest revenues for the second year in a row, noting that the zone is working to maximize its revenues since it is considered the driving engine for the development of the Egyptian economy.  Mamish pointed out in a statement that total revenues achieved by the zone in fiscal year 2018-2019 reached around EGP 3.69 billion while its net profit recorded EGP 2.198 billion.  The SCZone will sign new contracts with major local and international companies willing to invest in the economic zone in Ain Sokhna, a step that will help create new job opportunities for Egyptian youth within the next two years.  (MENA 27.07)

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5.13  Egypt Signs Four Assistance Agreements with USAID Worth $59 Million

On 4 August, Egypt and the United States, through the United States Agency for International Development (USAID), signed four bilateral assistance agreements worth $59 million.  The agreements are meant to support Egypt’s development priorities in health, higher education, trade, investment, science and technology, as well as boost inclusive, enterprise-driven development in line with Egypt’s Vision 2030 Sustainable Development Strategy.  The agreements will be used to support SMEs and entrepreneurship, improve technical and vocational education and to boost the work force, adding that there is cooperation between Egypt and the US in transportation.

The healthcare agreement builds on USAID’s longstanding support for Egypt’s health priorities through the development agency’s partnership with the Ministry of Health and Population.  Together, the focus will be on improving healthy behaviors, enhancing the quality of health services, and supporting research, monitoring, and training in key areas such as voluntary family planning.  The science and technology agreement maintains US commitment to joint research between US and Egyptian scientists.  USAID’s work in this area addresses development challenges and promotes economic growth, with a focus on applied scientific research and technology commercialization.  (DNE 04.08)

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5.14  King Mohammed VI Announces Development Commission for Morocco

Morocco’s development plans were among the core issues highlighted in King Mohammed VI’s Throne Day speech on the evening of 29 July.  The King first focused on Morocco’s achievements over the past year.  He affirmed that Morocco “made a quantum leap in infrastructure development, whether it is highway construction, the high-speed railway, major ports, renewable energy facilities, or urban development and revamping.”  The King also highlighted Morocco’s advances in consolidating rights and freedoms, stressing its importance “for a strong and healthy anchoring of democratic practice.”  Nevertheless, the King pointed out that infrastructure and institutional reforms, important as they are, are not enough. Therefore, the King attached “particular importance to human development programs, social policies, and the need to respond to Moroccans’ pressing concerns.”

The speech echoed a previous call in October 2017 when the King gave the opening speech of the autumn parliamentary session.  He called for the adoption of a new model of development, “balanced and equitable, guaranteeing the dignity of all, generator of income and employment.”  This evening, he once again called for the re-evaluation and updating of the model.  He said that it has been unable to meet the growing needs of citizens, and emphasized the need to reduce social inequalities.

The King announced the decision to set up a special commission in charge of the development model.  The commission will be established at the beginning of the next school year.  The commission will be neither a second government nor a parallel official institution.  It is an advisory body with a specific time-bound mission.  It is expected to improve sectors such as education, health, agriculture, investment, and the tax system.  (MWN 29.07)

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5.15  US Report Says Morocco Emerges as Hub for Foreign Investment

The US Department of State has issued its 2019 Investment Climate Statements, which generally showcased a positive stance on Morocco’s business.  In its overview, the report extolled Morocco’s geographic location and its strategy for attracting international investors.  The executive summary of the report said that Morocco enjoys political stability, robust infrastructure, and a strategic location, which have contributed to its emergence as a regional manufacturing and export base for international companies.

The Government of Morocco has implemented a series of strategies aimed at boosting employment, attracting foreign investment, and raising performance and output in key revenue-earning sectors, such as the automotive and aerospace industries.  With several ports and investment zones, Morocco has attracted renowned international operations specialized in several fields, including the automotive and infrastructure industries.  The automotive and aeronautical industries are significant assets as they play an intrinsic role in Morocco’s economy.

The aeronautic sector is active with more than 120 companies, generating direct annual revenues of more than $1 billion in 2015.  The sector also creates more than 11,000 direct job opportunities, a number that contributes 8.5% to Morocco’s total employment.

Despite the reforms and the political stability, the report acknowledged that the country faces challenges in several fields, including the insufficient skilled labor and unemployment.  Press releases from the High Commission for Planning (HCP) state that unemployment was 9.8% at the end of 2018.  Unemployment among youth aged 15 to 24 hovers around 40 % in some urban areas.  (ICS 25.07)

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5.16  Moroccan Export Growth Rate Drops in First Half of 2019

According to the Moroccan Exchange Office figures for June 2019, during the first half of 2019 Moroccan exports increased by 3.1%, while imports increased by 3.8%.  Morocco’s trade deficit has therefore increased compared to the same period last year.  Morocco’s trade deficit reached MAD 102.460 million, up from MAD 97.7 million last year.

According to the Exchange Office, the increase in the rate of imports is due to an increase in the imports of capital goods, in particular the acquisition of airplanes (airport import rates increased by 9.9%).  Import rates of finished consumption products (including synthetic fabrics and plastic products) and half-finished consumption products (including steel threads and bars, and other metal products) also increased by 3.2% and 5.7% respectively.

The Exchange Office identifies that the slowdown in exports is due to a slowdown in automobile exports, phosphate exports, and textile and leather exports.  Export growth rates for finished vehicles dropped by 4.8% in the first half of 2019. According to a statement by the Exchange Office in April, this drop is due to a global slowdown in automobile demand.  However, vehicle cabling exports increased by 6.9%, indicating a strong performance in the broader vehicle supply chain ecosystem.  A number of international cabling companies are present in Morocco including French group Nexans, German company Kromberg & Schubert and Japanese company Yazaki.  German group Prettl Automotive entered Morocco’s cabling industry market this year.  The group opened an 8600 square meter cabling factor in Tangier in April, employing up to 600 people.  (MWN 02.08)

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6.1  Turkey’s Annual Inflation Rate in July Stood at 16.65%

Turkey saw a 16.65% annual hike in consumer prices last month, the Turkish Statistics Institute (TUIK) reported on 5 August.  The annual inflation in July rose by 0.93% from 15.72% previous month.  The highest price increase on a yearly basis was seen in miscellaneous goods and services with 26.93% in July.  Furnishing and household equipment with 25.41%, hotels, cafes and restaurants with 19.85%, alcoholic beverages and tobacco with 19.23% and food and non-alcoholic beverages with 18.21% were the other main groups where high annual increases were realized, TUIK said.

Over the past five years, annual inflation saw its lowest level in April 2016, with 6.57%, and its highest level last October with 25.24%.  As laid out in Turkey’s new economic program announced by the government last September, the country’s inflation rate target is 15.9% this year, 9.8% next year and 6% in 2021.

TUIK data on 5 August showed that on a monthly basis, the consumer prices went up 1.36% in July.  The highest monthly decline was 3.2% in clothing and footwear, as the highest monthly increase was seen in transportation, up 4.46%.  Food prices declined by 1.11% in July from June while communication costs increased 0.83%.  The 12-month average hike in consumer prices was 19.91% in July, according to TUIK.  (TUIK 05.08)

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6.2  Turkish Households Spend Most on Rent, Food and Transportation

Most of households’ spending in 2018 went to housing/rent, food and transportation, data from the Turkish Statistics Institute (TÜİK) showed on 26 July.  Housing and rent had a 23.7% share in people’s overall spending last year, down from 24.7% in 2017 while food and non-alcoholic beverages and transportation had 20.3% (19.7% in 2018) and 18.3% (18.7%) shares, respectively.  The monthly average consumption expenditure of households was TL 2,181 ($386) last year, up from the previous year’s TL 1,854.  Household expenditure on health and educational services had the lowest share with 2.2% and 2.3%, respectively, TÜİK showed.

The share spending on hotel and restaurants in total expenditure inched up to 6.5% in 2018 from 6.2% in 2017.  The corresponding figure for communication spending was 3.8% which was slightly lower than last year’s 3.4%.  The share of alcohol and tobacco spending declined to 4% last year from 4.5% in 2017.  TÜİK data also showed that the highest income group spent 21.6% of its budget on transportation (23.9% in 2017) while for the lowest income group the largest spending item was housing and rent with a 31.4% share (31.9% in 2017).  (TUIK 26.07)

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6.3  Food Prices in Ankara Rise by 28% This Year

A study conducted in the Turkish capital Ankara by a public workers’ union found an increase of 28% in food prices in the first seven month of the year and a rise of 59% in the last 12 months.  The union gathers prices from supermarkets and markets regularly and uses a selection of 77 basic foodstuffs to monitor food prices and inflation.  The July study shows a total increase of 28% from in food prices this year, with dairy prices increasing 37% and fruit prices 42%.  According to the Turkish Statistical Institute’s (TÜİK) 2018 Household Consumption Expenditures Survey, food makes up 20% of spending for the general population, with the poorest 20% spending 29% of their income on food and the richest 20% spending 15%.  (Ahval 30.07)

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6.4  Turkey’s Foreign Trade Deficit Shrinks by 63.6% in First Half of 2019

Turkey’s foreign trade gap narrowed by 63.6% to $14.85 billion in the first half of 2019, down from a $40.8 billion deficit in the same period last year, according to the Turkish Statistical Institute (TurkStat).  The country’s exports in the first half of 2019 rose 1.9% to reach $83.7 billion and imports dropped 19.8% to $98.56 billion. Turkey’s exports to the EU, making up nearly half of the country’s exports, amounted to $41.4 billion from January to June.

The manufacturing sectors’ share of total exports was 94.4% or $79 billion during the first half, while the agriculture and forestry sector and the mining and quarrying sector took 2.9% and 2% shares, respectively.  While the ratio of high-tech products in manufacturing industry exports was 3.5%, its share of imports in June was 13.9%.  While intermediate and consumption goods dominated the country’s exports with shares of 46.8% and 40.9%, respectively, 75.8% of imports during the six-month period were intermediate goods.  Last year, the country’s exports hit a historic high of $167.9 billion, with imports of $223 billion.

As for the last month, Turkey’s foreign trade deficit dropped sharply, falling 42.5% to $3.17 billion year-on-year, down from $5.5 billion in June 2018, the statistical body said.  The country’s exports ($11.08 billion) and imports ($14.26 billion) both dropped in June, by 14.3% and 22.7%, respectively, on a yearly basis.  The exports-to-imports coverage ratio rose to 84.9% last month, up from 66.8% the previous June.

Germany remained Turkey’s top export market by country, receiving some $1.07 billion worth of Turkish goods, or a 9.6% share of total exports, followed by the U.K. ($684.6 million), France ($639.6 million) and Italy ($613.1 million).  On the import side, Russia made the lion’s share of imports to Turkey in the month, with over $1.5 billion.  It was followed by China, Germany and the U.S. with $1.27 billion, $1.19 billion and $919 million, respectively.  (TurkStat 01.08)

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6.5  Turkish Tourism Growth Improves in Second Quarter

Turkey’s revenue from tourism increased at a faster pace in the second quarter of the year as the number of visitors to the country grew.  Tourism income rose by an annual 13% to $8 billion in the three months to June, the Turkish Statistical Institute said.  Revenue had increased by an annual 4.6% to $4.63 billion in the first quarter of the year.

Turkey is seeking to bolster its returns from tourism to help offset an economic downturn brought on by a currency crisis last year.  The economy contracted on a quarterly basis for two-straight quarters in the second half of last year, signifying a recession, before growing in the first three months of this year.  The fall in the value of the lira makes Turkey a cheaper place to visit.  Visitors increased by an annual 15% in the second quarter to 12.8 million people, the institute said.  The number of arrivals had risen 8.5% to 6.64 million in the first quarter.  Average expenditure of the visitors fell by 1.7% to $625 per head, the figures showed.  (Ahval 31.05)

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6.6  World Banks Feels Turkey Needs Higher Productivity for Continual Growth

Sustaining growth and improvements in living standards in Turkey will require higher productivity, the World Bank said on 24 July.  The World Bank highlighted that economic integration and innovation have boosted firm-level productivity, though reforms could further accelerate these positive impacts.  The group said that while construction and services have expanded rapidly, they also exhibit low and falling productivity.  The World Bank also noted that growth and development required more productive companies to compete in the current world market, which can be enabled through structural reforms.  The group concluded that Ankara could adopt reforms to promote productivity growth in firms and allocate resources more efficiently.  Further economic integration, for instance, would increase the connectedness of Turkey’s firms with international business and global value chains, precipitating fresh gains in productivity.  Well-targeted public incentives for innovative firms, including young enterprises, could also encourage new business lines, new technology, and more efficient processes, it added.  (WB 24.07)

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6.7  Greece’s State Revenues Record Major Slump in June

The primary budget surplus for the year’s first half was curtailed by the drop in revenues in June, according to figures published by Greece’s State General Accounting Office.  State revenues posted a decline of €605 million at the end of the month before the general election, resulting in the primary surplus for the January-June period shrinking to €382 million, against €916 million in the year’s first five months.

In June the sum of net budget revenues reached €3.264 billion, against a target for €3.896 billion.  At the same time there was also a significant reduction in state expenditure because of the incomplete execution of the Public Investments Program.  The new leadership of the Finance Ministry is now eagerly awaiting the figures for July, the first month with income tax payments, as this will point to whether or not the budget will be executed as projected.  (eKathimerini 25.07)

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6.8  Greek Capital Controls set to be Fully Lifted by the End of September

The Bank of Greece will propose the full elimination of capital controls at the end of September in a step aimed also at encouraging credit rating upgrades for Greece, with the goal being investment grade.  The government and the central bank agree that conditions now allow for the final step to be taken, more than four years since the restrictions were imposed in June 2015 by Alexis Tsipras’ government.  Sources say preparations for lifting the capital controls have already begun, as consultations with the country’s creditors are required, as well as legislative intervention, with the final decision resting with the government.

The full removal of controls is expected at end-September, after the negotiations with the creditors who will be coming to Athens in mid-September to prepare their fourth post-bailout enhanced surveillance report; this will focus on the 2020 budget preparation, and if the outcome of the talks is positive, it will also favor the full lifting of the capital flow restrictions.  Controls have already eased considerably, as there are no restrictions to cash withdrawals domestically and transactions with entities abroad up to €100,000 are also allowed without the approval of the central bank.  (eKathimerini 25.07)

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7.1  ‎Tisha B’Av to Be Observed on 10/11 August

Tisha B’Av will be observed this year from Saturday evening, 10 August, until the nightfall on 11 August.  ‎Tisha B’Av (or the Ninth of Av) is an annual fast day in Judaism, named for the ninth day (tisha) ‎of the month of Av in the Hebrew calendar.  Tisha B’Av is the culmination of a three week period ‎of increasing mourning, beginning with the fast of the 17th of Tammuz.  The fast ‎commemorates the destruction of both the First Temple and Second Temple in Judaism’s ‎holiest site, Jerusalem, which occurred about 656 years apart, but on the same Hebrew ‎calendar date.  Accordingly, the day has been called the “saddest day in Jewish history”.  ‎While the day recalls general tragedies which have befallen the Jewish people over the ages, ‎the day focuses on commemoration of five events: the destruction of the two ancient Temples in ‎Jerusalem, the sin of the ten spies sent by Moses, who spoke disparagingly about the Land of ‎Israel, the razing of Jerusalem following the siege of Jerusalem in 70 CE and the failure of Bar ‎Kokhba’s revolt against the Roman Empire.‎

The fast lasts about 25 hours, beginning at sunset on the eve of Tisha B’Av and ending at ‎nightfall the next day.  In addition to the prohibitions against eating or drinking, observant Jews ‎also observe prohibitions against washing or bathing, applying creams or oils, wearing leather ‎shoes, or having marital relations.  In addition, mourning customs similar to those applicable to ‎the shiva period immediately following the death of a close relative are traditionally followed for ‎at least part of the day, including sitting on low stools, refraining from work and not greeting ‎others.  The Book of Lamentations (Eicha) is traditionally read, followed by the kinnot, a series ‎of liturgical lamentations.  ‎
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7.2  Eid Al-Adha – Feast of the Sacrifice to Begin on 11 August

The first day of the Islamic holiday Eid al-Adha will fall on 11 August.  Eid al-Adha is a ‎religious festival celebrated by Muslims worldwide as a commemoration of Ibrahim’s willingness ‎to sacrifice his son Ishmael for Allah.  It is one of two Eid festivals that Muslims celebrate.  Eid al-Adha begins with a short prayer followed by a sermon.  Eid al-Adha is usually three ‎days long and starts on the 10th day of the month of Dhul Hijja of the lunar Islamic calendar.  ‎This is the day after the pilgrims in Hajj, the annual pilgrimage to Mecca in Saudi Arabia by ‎Muslims worldwide, descend from Mount Arafat.  It happens approximately 70 days after ‎the end of the month of Ramadan.  This year, many Moslem countries will observe the entire week of 11 August as a work holiday.

Men, women and children are expected to dress in their finest clothing and perform the Eid ‎prayer in any mosque.  Muslims who can afford to do so sacrifice their best domestic animals ‎‎(usually sheep, but also camels, cows and goats) as a symbol of Ibrahim’s sacrifice.  The ‎sacrificed animals, called udhiya, also known as qurbani, have to meet certain age and quality ‎standards or else the animal is considered an unacceptable sacrifice.  Generally, these must be ‎at least 4 years old.  At the time of sacrifice, Allah’s name is recited along with the offering ‎statement and a supplication as Muhammad said.  A large portion of the ‎meat has to be given towards the poor and hungry people so they can all join in the feast which ‎is held on Eid al-Adha.  The remainder is cooked for the family celebration meal in which ‎relatives and friends are invited to share.  ‎

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7.3  Arya Joins Most Popular Names in Israel In 2018

Muhammad remained the most popular Israeli name in 2018, both overall and among Muslims, but the perennial favorite appears to be slightly in decline, according to figures released by the Central Bureau of Statistics on 30 July.  According to the list, 2,646 boys were named after the Prophet of Islam, while the most popular boy’s name among Jews was David, at 1,447.  The most popular name for girls among Jews was Tamar, with 1,289 babies receiving it, while 523 Muslim babies were named Miriam.

The second most popular name for Jewish boys was Ariel at 1,323, followed by Noam.  The second and third most popular Muslim boys’ names were Ahmad and Adam.  David was the most popular Jewish name in Jerusalem, while Eitan was the favorite in Tel Aviv.  Maya was the most popular name for girls in Haifa, Tel Aviv, Beer Sheva, Ra’anana and Rishon LeZion.  Sixty-seven newborns were named after Game of Thrones character Arya Stark.  (CBS 30.07)

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7.4  Saudi Arabia to Let Women Travel Abroad Without Permission

Saudi Arabia will allow women to travel abroad without approval from a male “guardian”, the government said on 1 August, ending a restriction that drew international censure and prompted extreme attempts to flee the kingdom.  The landmark reform erodes the longstanding guardianship system that renders adult women as legal minors and allows their “guardians” — husband, father and other male relatives — to exercise arbitrary authority over them.  The decision, following years of campaigning by activists, comes after high-profile attempts by women to escape their guardians despite a string of reforms including a historic decree last year that overturned the world’s only ban on female motorists.

The regulation effectively allows women over the age of 21 to obtain passports and leave the country without their guardian’s permission.  The changes also grant Saudi women what has long been a male entitlement – the right to officially register childbirth, marriage or divorce and to be recognized as a guardian to children who are minors.  The reform comes as Saudi Arabia faces heightened international scrutiny over its human rights record, including an ongoing trial of women activists who have long demanded that the guardianship system be dismantled.  (AB 02.08)

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7.5  Morocco Accredits New Private School Majors

The global list of Morocco’s state-accredited private institution majors now includes additional options.  The ministry accredited the new majors and renewed established courses after their expiry.  The global list now includes Business Management (SIST), Entrepreneurship and Economic Intelligence (ESTEM), Graphic and Digital Design (ESDAV), to name a few.  The accreditation of the new majors, published in the Official Bulletin on 18 July will expire either in the 2019-2020 academic year or the 2025-2026 year (in the case of private medical schools).

Major accreditation means that the related training programs become state-approved.  Once all its majors are accredited, the institution can apply for state-recognition of their degree.  The application for accreditation is submitted by the owner of the institution to the department in charge of higher education according to a set of specifications.  The accreditation procedure is carried out according to a number of conditions.  The institution must have a Scientific Council and at least 30% of its teaching staff must be permanent.

For management, commerce, and communication majors, one teacher for every 40 students is required for accreditation.  One teacher for each 25 students is required for the science and technology majors, while paramedical majors require one teacher for each 10 students.  The institutions must also respect national pedagogical methods.

Morocco has 202 private institutions for higher education.  In the academic year of 2015-2016, 1,231 students graduated from Moroccan private universities such as Mundiapolis or Universiapolis.  The universities had 7,032 students already enrolled and 2,153 new students for the same year.  In 2016-2017, 6093 students graduated from private schools all around Morocco.  New students registered in private schools to study Business and Management, Science and Technology, and Health Sciences increased from 7,912 in 2010-2011 to 10,623 in 2016-2017.  (MWN 25.07)

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8.1  Better Juice Reduces All Types of Sugar in Juice

Ashdod’s Better Juice has developed innovative technology to reduce the load of simple sugars in orange juice.  The patent-pending enzymatic technology uses all-natural ingredients to convert monosaccharides and disaccharides (fructose, glucose, and sucrose) into prebiotic and other non-digestible fibers and sugars, while keeping the juicy flavor of the beverage.

Better Juice’s process harnesses a natural enzymatic activity in non-GMO microorganisms to convert a portion of the simple fructose, glucose, and sucrose sugars into fibers and other non-digestible natural sugars.  The process works on all types of sugars.  However, the process also preserves the flavor and the full complement of vitamins and other nutrients inherent in the fruits.  The technology was developed in collaboration with Hebrew University Department of Agriculture in Rehovot, Israel.

Better Juice conducted several trials with different beverage companies and succeeded in reducing sugars in orange juice from 30%, up to 80%.  The start-up can now provide proof of concept for orange juice.  The company will market an advanced device with the unique technology to fruit juice producers and, eventually, to cafés and restaurants.

Mono-and disaccharides ‑ often called “simple sugars” ‑ are easy for the body to digest and thus quickly metabolized.  If the energy they provide can’t be used, it is converted to fat and stored.  But when these individual sugar molecules link up, they become prebiotic fibers that are non-digestible.  The shorter of these fibers, called oligo-saccharides, are still sweet yet have been shown to bestow a number of health benefits, from protecting against disease to helping manage weight. There are other natural monosaccharides that are not easily digested.  These sugars have no glycemic index and low caloric values.  (Better Juice 30.07)

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8.2  Magenta Medical Closes Funding Led by NEA in Its First Life Sciences Investment in Israel

Magenta Medical announced a financing round led by global venture capital firm New Enterprise Associates (NEA), with participation from existing investors, including Pitango Venture Capital, JVC Investment Partners and a group of private investors led by Prof. Jacques Seguin (CoreValve, ReCor).  The financing will be used to advance the development of the company’s two products and support Magenta Medical towards its first FDA approval.

Heart failure is a global public health epidemic and a leading cause for hospitalization, with over one million admissions each year in the US alone.  Magenta Medical’s technology aims to improve the outcomes of patients admitted with acute heart failure, whether they suffer from cardiogenic shock or from volume overload and systemic congestion.

Magenta Medical’s second product is intended to be used in patients undergoing high-risk coronary interventions and admitted patients with cardiogenic shock, a severe manifestation of acute heart failure where the failing left ventricle is unable to adequately deliver blood, oxygen and nutrients to vital organs.  Given the well-documented limitations of existing treatment methods, there is a growing appreciation that temporary unloading of the left ventricle is an important recovery tool for the heart.  Magenta Medical’s device, a percutaneous Left Ventricular Assist Device (pLVAD), is a miniaturized catheter-mounted arterial pump that moves blood from the left ventricle into the aorta, unloading the failing left ventricle for hours to days and serving as a robust bridge-to-recovery.

Kadima’s Magenta Medical is a privately-held company dedicated to the development of heart failure solutions based on its proprietary miniaturized blood pump technology.  Magenta’s current pipeline includes: a percutaneous device intended to decompress the kidneys of patients with acute venous congestion and volume overload; and a percutaneous left ventricular assist device intended to support patients undergoing high-risk coronary interventions and treat patients with cardiogenic shock.  (Magenta Medical 29.07)

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8.3  Therapix Biosciences’ TheraPEA (CannAmide) Product Issued Canadian License  

Therapix Biosciences announced the issuance of a product license for its proprietary Palmitoylethanolamide (PEA) oral tablet CannAmide by Health Canada’s Natural and Non-prescription Health Products Directorate (NNHPD) for the recommended use as an anti-inflammatory and to help relieve chronic pain.  This license is issued by Health Canada under the authority of the Natural Health Products Regulations.  Dosage form of the described natural health product is tablets composed of 400 mg. PEA with a recommended dose of 1 tablet 3 times daily.  CannAmide was approved for the use as an anti-inflammatory to help relieve chronic pain.

CannAmide is a cannabimimetic compound that regulates endocannabinoid levels by enhancing receptor sensitivity and inhibiting their metabolism, and is particularly attractive therapeutically as it appears to have a very high safety profile with low or no abuse liability.  Although numerous clinical trials have shown the favorable effect of PEA, as an analgesic agent it has low solubility.   Using their proprietary CannAmide, Therapix offers an immediate release formulation to improve bioavailability.

On 23 July, Therapix announced the signing of a letter of intent for a proposed merger with Alberta’s Destiny Bioscience Global Corp.  The transaction will create a combined company that focuses on Therapix’s proprietary IP and related technology, and assets pertaining to all clinical stage pharmaceutical applications and Destiny’s genomics-based breeding techniques and development capabilities.  The product license issuance for Therapix’s CannAmide furthers the joint strategy that Therapix and Destiny are pursuing.

Givatayim’s Therapix Biosciences is a specialty clinical-stage pharmaceutical company led by an experienced team of senior executives and scientists.  Their focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid pharmaceuticals.  (Therapix 31.07)

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8.4  Stero Biotechs Starts Clinical Trial of Cannabidiol-Based Formulation for Crohn’s Disease

Stero Biotechs received its second Helsinki approval to move forward with a second Phase 2a clinical trial.  The trial will be a randomized, double-blind, placebo-controlled, multicenter study of ST-SDCD-01, a CBD based solution in an effort to lower the steroid dosage in patients with Steroid Dependent Crohn’s Disease (SDCD).  The purpose of the study will be to evaluate the tolerability, safety, and efficacy of the formulation as a steroid-sparing therapy in SDCD patients.  Up to 30 participants with SDCD will be included in the study with a 2:1 CBD: placebo treatment ratio.

Crohn’s disease is an incurable form of Irritable Bowel Disease that can cause severe chronic symptoms that are most often treated with immunosuppressant and steroid medications.  Chronic use of such medications are associated with a number of serious side effects including bone loss/fractures, weight gain, hypertension, mood disturbances, cataracts, glaucoma, diabetes, increased risk of infection and more.  CBD was shown to have immunosuppressive and anti-inflammatory effects and may provide a path to reducing steroid treatment dose and duration for SDCD patients.

Bnei Brak’s STERO Biotechs, founded in 2017, is a clinical-stage company committed to the research and development of novel Cannabidiol (CBD) based treatment solutions that will potentially benefit millions of patients by reducing the side effects and the need for steroid therapy.  STERO was granted a U.S. patent on over 130 potential indications and is planning to commence more clinical trials in 2019 on various indications.  (Stero Biotechs 23.07)

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8.5  MetoMotion Receives $1.5 Million Investment for Its Greenhouse Robotic Worker (GRoW)

MetoMotion, a portfolio company of The Trendlines Group, has completed an investment round of $1.5 million, which was led by a leading Netherlands-based company in the greenhouse industry.  Greenhouses today face two critical problems, both of which contribute to economic damage: (1) increasing labor shortages and (2) a lack of skilled labor.  With labor costs accounting for up to 50% of total greenhouse production costs, growers are looking to technology to solve the labor crunch.  Greenhouse equipment companies are keen to make technological developments fit their product offerings.

Misgav’s MetoMotion has developed a multipurpose robotic system, GRoW, for labor-intensive tasks in greenhouses to reduce the reliance on and high costs of human labor in greenhouse vegetable production.  The Company’s first application for its GRoW system is harvesting greenhouse tomatoes.  GRoW incorporates state-of-the-art robotics and automation technology including advanced 3D vision system and machine vision algorithms to identify and locate the ripe fruit, multiple, custom-designed, robotic arms, an end-effector for damage-free harvesting, and an onboard boxing system.  The autonomous vehicle is designed for seamless integration with existing greenhouse infrastructure.  The company’s capabilities include adapting its robotic technology to other labor-intensive greenhouse tasks such as pruning, pollination, de-leafing and data collection for cultivation analysis.  (MetoMotion 31.07)

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8.6  DarioHealth Launches New Blood Pressure Monitoring System

DarioHealth Corp. announced the addition of a new digital monitoring solution on its Dario app platform that will allow patients to monitor their blood pressure throughout the day, in addition to their blood glucose levels.  The Dario Blood Pressure Monitoring System assists patients with hypertension and is a critical part of DarioHealth’s strategy to go beyond diabetes to reach patients with a variety of chronic conditions.

The Dario Blood Pressure Monitoring System is a medical device composed of a digital monitor and a blood pressure cuff that synchronizes with the Dario mobile app which allows users to track their blood pressure and a variety of health markers, along with the daily actions that influence them.  Combining the Dario Blood Pressure Monitoring System, with the Dario Blood Glucose Monitoring System, creates a harmonized digital health solution, enabling users to better monitor their health and make data driven choices.

Caesarea’s DarioHealth Corp. is a leading Global Digital Therapeutics (DTx) company revolutionizing the way people manage their health across the chronic condition spectrum.  By delivering evidence-based interventions that are driven by precision data analytics, high quality software, and personalized coaching, DarioHealth have developed a novel approach that empowers individuals to adjust their lifestyle in a unique and holistic way.  DarioHealth’s cross functional team operates at the intersection of life science, behavioral science, and software technology to deliver seamlessly integrated and highly engaging therapeutic interventions.  (DarioHealth 30.07)

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8.7  Foamix Announces $64 Million Capital Financing by Perceptive Advisors and OrbiMed

Foamix Pharmaceuticals has secured up to $64 million in financing from Perceptive Advisors and OrbiMed.  The financing consists of term loans of up to $50 million under a Credit Agreement, with $15 million provided immediately upon satisfaction of certain closing conditions, $20 million available upon the achievement of certain regulatory milestones and $15 million available upon the achievement of certain revenue milestones.  Additionally, the Company will receive $14 million in gross proceeds from Perceptive Advisors through a direct registered offering of the Company’s ordinary shares.  Proceeds from the transactions are expected to be used to fund the Company’s filing of a New Drug Application (NDA) with the FDA for FMX103 for the treatment of papulopustular rosacea as well as, assuming FDA approval is received, the anticipated product launches of FMX101 for the treatment of moderate to severe acne and FMX103, as well as for working capital and general corporate purposes.

Rehovot’s Foamix is a specialty pharmaceutical company focused on the development and commercialization of proprietary, innovative and differentiated topical drugs for dermatological therapy.  Their leading clinical stage product candidates are FMX101, our novel minocycline foam for the treatment of moderate-to-severe acne and FMX103, their novel minocycline foam for the treatment of rosacea.  Foamix continues to pursue research & development of proprietary, innovative foam technologies for the treatment of various skin conditions.  (Foamix 30.07)

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8.8  Can-Fite to Distribute Piclidenoson for the Treatment of Psoriasis in South Korea

Can-Fite BioPharma has signed a distribution agreement with Kyongbo Pharm Co. to distribute Can-Fite’s lead drug candidate, Piclidenoson (CF101), for the treatment of psoriasis in South Korea, upon receipt of regulatory approvals.  Under the terms of the distribution agreement, Kyongbo Pharm, in exchange for exclusive distribution rights to sell Piclidenoson in the treatment of psoriasis in South Korea, is making a total upfront payment of $750,000 to Can-Fite, with additional payments of up to $3,250,000 upon achievement of certain milestones.  Can-Fite will also be entitled to a transfer price for delivering finished product to Kyongbo Pharm.

Can-Fite is currently enrolling over 400 patients in Europe, Canada, and Israel for its Phase III Comfort trial of Piclidenoson in the treatment of psoriasis.  The study is designed to establish Piclidenoson’s superiority as compared to placebo and non-inferiority versus Otezla in patients with moderate-to-severe plaque psoriasis.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction.  The Company’s lead drug candidate, Piclidenoson, is currently in Phase III trials for rheumatoid arthritis and psoriasis.  Can-Fite’s liver cancer drug, Namodenoson, recently completed a Phase II trial for hepatocellular carcinoma (HCC), the most common form of liver cancer, and is in a Phase II trial for the treatment of non-alcoholic steatohepatitis (NASH).  The company is investigating additional compounds, targeting A3AR, for the treatment of sexual dysfunction.  These drugs have an excellent safety profile with experience in over 1,000 patients in clinical studies to date.  (Can-Fite 01.08)

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8.9  iCAN: Israel-Cannabis & Citrine Establish iBOT: Israel Botanicals

iCAN: Israel-Cannabis, Israel’s leading cannabis incubator, and Citrine Biotech and Cannabis Investment Funds are pleased to announce the establishment of iBOT: Israel Botanicals, a botanical nutraceutical company located in central Israel.  iBOT completed the acquisition of a GMP-certified contract manufacturer of white label botanical formulations with over 20 years of formulation experience

iBOT announced full certification by the Israeli Ministry of Health and ISO certification bodies accrediting iBOT to GMP, ISO 9001 and HACCP standards.  iBOT will continue to serve existing customers with a range of vitamin and herbal formulations in tablets, capsules, syrups and tinctures.  iBOT looks forward to introducing a wide range of new products with a focus on quality and innovation.  These full-spectrum botanical supplements will be developed together with leading research scientists and herbal formulators to provide the local and global supplement market with the highest of quality products developed and manufactured in Israel.

With the acquisition of the botanical facility now complete, iBOT will begin the process of licensing the facility by the Yakar (the Medical Cannabis Unit of the Ministry of Health) for the production and distribution of IMC-GMP cannabis products for the local and global market.

Beit Shemesh’s iCAN: Israel-Cannabis is building the Global Cannabis Ecosystem.  iCAN is committed to accelerate Israel’s CannaTechnology industry, capitalizing on Israeli innovation and a leading cannabis regulatory environment to bring premier products to market.  Tel Aviv’s Citrine is a leading technology-focused investment group that enables Israeli entrepreneurs to materialize global breakthrough companies.  Citrine Biotech and Medical Cannabis investment funds have already invested in several promising Cannabis companies and are in the process of entering additional investments.  (iBOT Israel Botanicals 01.08)

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8.10  Cardiovascular Systems Acquires Gardia Medical’s WIRION Embolic Protection System

St. Paul, Minnesota’s Cardiovascular Systems, a medical device company developing and commercializing innovative interventional treatment systems for patients with peripheral and coronary artery disease, has acquired the WIRION Embolic Protection System and related assets from Gardia Medical, a wholly owned Israeli subsidiary of Allium Medical Solutions.

The device, which received CE Mark in June 2015 and FDA clearance in March 2018, is a distal embolic protection filter used to capture debris that can be associated with all types of peripheral vascular intervention (PVI) procedures.  Physicians typically use embolic protection devices in vessels located above the knee with long lesions, high plaque burden and poor run off.  The WIRION System is easier to use and more versatile than other available embolic protection systems because it can be used with any .014” guidewire and for all types of peripheral interventions.  In addition, the WIRION System is the only embolic protection device indicated for use with any atherectomy system.  The WISE LE study also demonstrated a major adverse event (MAE) rate of 1.9%, which is lower than any other previously reported rates with other embolic filters.  Importantly, no clinically significant distal embolization was observed when the WIRION System was used.

CSI plans to commercialize the WIRION System in the United States following the transfer of manufacturing from Gardia Medical.  CSI expects the manufacturing transfer to be completed after a 12- to 15-month transition period.  Gardia will retain the rights to the WIRION System for angioplasty and stenting procedures in the carotid arteries.

Caesarea’s Gardia Medical develops specialized catheter-based delivery systems to Deliver, Lock and Deploy devices on any guidewire, anywhere on the wire, in minimally-invasive interventional procedures.  Allium Medical Solutions develops, manufactures and markets minimally invasive products internationally in various medical disciplines.  These innovative products serve the need for minimally invasive interventions benefitting the patient by improving their recovery process and shortening it.  Allium Medical Solutions’ products are used by physicians to treat a wide range of diseases and patients worldwide.  (CSI 26.07)

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8.11  RenalSense Obtains CE Mark for Clarity RMS Critical Care System for Urine Flow Monitoring

RenalSense has obtained CE Mark approval for its Clarity RMS system for real-time monitoring of urine flow in the critical care and peri-operative setting.  The CE Mark approval allows RenalSense to commercialize its technology in the European Union (EU), where Fresenius Medical Care (Bad Homburg) is its distribution partner.  In addition to obtaining the CE Mark approval, RenalSense also received ISO:13485:2016 certification for its quality management system.

Jerusalem’s RenalSense is a privately owned medical device company dedicated to real-time renal diagnostics.  The company’s first product, Clarity RMS, provides continuous, automatic monitoring of urine flow, enabling better patient care and ICU economics.  RenalSense’s next generation products will provide additional real-time parameters and expanded diagnostic capabilities, to further improve critical care management in the ICU and peri-operative setting.  (RenalSense 05.08)

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8.12  Foamix Submits NDA to FDA for FMX103 for the Treatment of Papulopustular Rosacea

Foamix Pharmaceuticals has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) seeking approval for FMX103 for the treatment of moderate-to-severe papulopustular rosacea in patients 18 years of age and older.

The NDA submission is supported by the previously communicated results from two Phase 3 clinical trials, FX2016-11 and FX2016-12.  In these trials, FMX103 achieved both co-primary endpoints, demonstrating statistically significant improvements in inflammatory lesion count and Investigator Global Assessment (IGA) treatment success.  In both trials, and in the long-term safety extension study FX2016-13, the safety profile of FMX103 was shown to be generally favorable and consistent throughout the clinical development program.  The NDA submission also incorporates information on chemistry manufacturing and controls, and data from non-clinical toxicology studies.

Rehovot’s Foamix is a specialty pharmaceutical company focused on the development and commercialization of proprietary, innovative and differentiated topical therapies to treat dermatological diseases.  Their leading clinical stage product candidates are FMX101 and FCD105 which are intended for the treatment of moderate-to-severe acne vulgaris and FMX103 which is intended for the treatment of papulopustular rosacea.  (Foamix 05.08)

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8.13  OWC Receives a Permit for a Cannabis Based Ointment Efficacy Trial

OWC Pharmaceuticals Research Corp. announced that on 18 July 2019 it received long-awaited approval from the Israeli Medical Cannabis Agency to perform an efficacy study with OWC topical ointment on psoriatic patients.  Currently, the study is planned to be conducted at the Kaplan Medical Center, an academic medical center in Israel.  OWC believes this is the first time that the Israeli Medical Cannabis Agency has issued a permit for the treatment of psoriasis with a cannabis-based product.  The study will be divided into the following two consecutive stages: (1) a pilot efficacy and dosage study; and (2) based on the results of the first stage, a double blind, placebo-controlled study.

Ramat Gan’s OWC Pharmaceutical Research Corp. conducts medical research and clinical trials to develop cannabis-based pharmaceuticals and treatments for conditions including multiple myeloma, psoriasis, fibromyalgia, PTSD, and migraines. OWCP is also developing unique and effective delivery systems and dosage forms of medical cannabis.  (OWC 05.08)

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8.14  CollPlant Developing 3D-Bioprinted Implants for Regeneration of Breast Tissue

CollPlant announced that it is developing 3D bioprinted implants for regeneration of breast tissue and has successfully produced first prototypes. The implants will be comprised of CollPlant’s proprietary type I recombinant human collagen and additional materials.  Loaded with fat cells taken from the patient, these implants are intended to promote breast tissue regeneration.  Eventually, the scaffold is designed to degrade and be replaced by newly grown natural breast tissue, which is free of any foreign material.

Rehovot’s CollPlant is a regenerative medicine company focused on 3D bioprinting of tissues and organs and medical aesthetics.  Their products are based on our rhCollagen (recombinant human collagen) that is produced with CollPlant’s proprietary plant based genetic engineering technology.  The products address indications for the diverse fields of organ and tissue repair, and are ushering in a new era in regenerative medicine.  (CollPlant 05.08)

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8.15  Tel Aviv University Scientists Develop a Vaccine for Skin Cancer

Researchers at Tel Aviv University have developed a novel nano-vaccine for melanoma, the most aggressive type of skin cancer.  So far the vaccine has been proven effective in mice in preventing the development of melanoma and in treating primary tumors and metastases that result from the disease, the researchers said in a study, revealed in the 5 August issue of Nature Nanotechnology.  The vaccine still hasn’t been tested on human beings, only on human tissue.

The researchers used tiny particles, about 170 nanometers in size, made up of biodegradable polymers. Within each particle, they “packed” two peptides – short chains of amino acids, which are found in melanoma cells.  They then injected the nanoparticles (or “nano-vaccines”) into mice that had melanoma.  The researchers demonstrated the effectiveness of the vaccine under three different conditions: as a preventive measure in healthy mice; to treat a primary tumor in mice in conjunction with immunotherapy, and to treat tissues taken from patients with melanoma brain metastases.  The study shows that it is possible to produce an effective nano-vaccine against melanoma and to sensitize the immune system to immunotherapies.  The researchers believe that their “nano-vaccine” approach could be expanded beyond melanoma.  (IH 06.08)

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8.16  SofWave Medical Closes $8.4 Million Financing Round

SofWave Medical, an aesthetic medical company developing Non-Invasive Fractional Ultrasound Technology for skin tightening, announced the closure of an $8.4 million financing round.  SofWave Medical’s Fractional Ultrasound Beam Treatment is based on proprietary technology developed by the company over the last four years.  This unique technology enables very accurate targeting of layers within the skin (dermis) or deeper layers using an array of Ultrasound transducers that cause controlled thermal injury, resulting in tightening of the skin, reduction of wrinkles and better-looking skin.  A 60 patient clinical study performed by SofWave Medical with leading US dermatologists, has shown excellent clinical results with no down-time to patients and an exceptional safety profile.  This study was used as part of the 510K FDA submission of the company.  Recently the company obtained a CE Mark for the product which will enable commercialization outside of US markets.

Yokneam’s SofWave Medical brings a novel approach to skin tightening and wrinkle reduction using proprietary Fractional Ultrasound.  SofWave Medical’s breakthrough technology brings a new standard of care to aesthetic treatments, providing physicians with smart yet simple, effective and safe aesthetic solutions for their patients.  (SofWave 06.08)

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9.1  Foresight’s Successful US Technological Demonstrations Sells Quadsight Prototype

Foresight Autonomous Holdings announced an additional sale of a prototype of its QuadSight four-camera vision system targeted for the semi-autonomous and autonomous vehicle market.  The prototype system was ordered by the American subsidiary of a leading global Tier One automotive supplier.  Revenue from the prototype system sale is expected to total tens of thousands of dollars.

The American supplier participated in a technological roadshow that took place in the Silicon Valley area at the beginning of July.  The roadshow consisted of live, real-time demonstrations of the QuadSight system to vehicle manufacturers and Tier One suppliers.  Different scenarios were tested, simulating obstacle detection in challenging weather and lighting conditions.  Customer satisfaction following initial installation may lead to additional orders of QuadSight systems by the American supplier, to be integrated into cars of leading vehicle manufacturers.

Ness Ziona’s Foresight Autonomous Holdings, founded in 2015, is a technology company engaged in the design, development and commercialization of sensors systems for the automotive industry.  Through the company’s wholly owned subsidiaries, Foresight Automotive and Eye-Net Mobile, Foresight develops both “in-line-of-sight” vision systems and “beyond-line-of-sight” cellular-based applications.  Foresight’s vision sensor is a four-camera system based on 3D video analysis, advanced algorithms for image processing, and sensor fusion.  (Foresight 25.07)

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9.2  Bezeq Displaces All-Flash Array with Excelero Nvmesh for Data Warehouse Architecture

Excelero announced that telecommunications company Bezeq is deploying Excelero NVMesh as the centerpiece of a new scale-out storage architecture behind its mission-critical data warehouse.  Replacing a high-end all-flash array with the simplicity and scale of an architecture using Excelero NVMesh along with Fujitsu servers and Mellanox 100 Gbps Ethernet switches, Bezeq achieved a 2x to 3x throughput improvement and cut database run times by up to 90%.  Bezeq’s results with Excelero typify the advantages that NVMe over Fabrics architectures deliver in superior throughput, ultra-low latency, scalability and flexibility.

The new infrastructure incorporates Excelero NVMesh running on a Fujistu RX4770 server, featuring 96 cores and 1TB memory, and Fujitsu RX2540 storage nodes with 4 TB NVMe drives – totaling 48 TB.  The servers are connected with Mellanox 100 Gbps Ethernet switches and NICs.  A key benefit of NVMesh was the flexibility to choose the most suitable and cost-effective commodity hardware for Bezeq’s requirements, eliminating vendor lock-in.  Early trials showed that in contrast to the maximum 8 GB/s throughput of the Fusion IO devices, the NVMesh environment delivered 16-23 GB/s – well above Bezeq’s requested 15 GB/s throughput.  The Excelero storage also reduced run times by an average of 30% compared to the legacy all-flash array environment, and in some workloads, reduced run times up to 90%.  Replacement was simple and while formal metrics weren’t established, Bezeq’s IT team detected reduced CPU demand, helping it squeeze maximum compute power from existing resources.

Tel Aviv’s Excelero delivers low-latency distributed block storage for web-scale applications such as AI, machine learning and GPU computing.  Founded in 2014 by a team of storage veterans and inspired by the Tech Giants’ shared-nothing architectures for web-scale applications, the company has designed a software-defined block storage solution that meets the low-latency performance and scalability requirements of the largest web-scale and enterprise applications.  (Excelero 25.07)

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9.3  Optibus Releases Multi-Route Planning Capabilities for Public Transit

Optibus launched a new set of multi-route planning capabilities within the Optibus cloud-native platform.  The new capabilities enable transportation agencies and operators to plan multiple routes at the same time, making it easier for them to prioritize passenger needs for reliable, frequent and high-quality bus service while increasing operational efficiency and reducing costs.  With Optibus’ multi-route planning, transit agencies and operators are able to rely on a high-tech, user-friendly solution to plan multiple routes at the same time.  This allows transit providers to get a view of the entire transit corridor at once and coordinate trip times that would benefit passengers traveling through the corridor.

Optibus’ multi-route planning capabilities are part of an advanced planning and scheduling platform powered by a tech stack that includes powerful optimization algorithms, artificial intelligence (AI) and distributed cloud computing.  These can also be used to improve a bus network’s appeal to riders. For instance, Optibus uses AI to evaluate historic on-time performance and then assess and predicts the likelihood that buses in any given schedule will arrive and depart on time.  These pioneering, easy-to-use solutions enable transportation agencies and operators around the world to quickly and flexibly plan mass transportation on one cohesive platform, including route and timetable planning, vehicle and crew scheduling, and roster building.

Tel Aviv’s Optibus‘ software-as-a-service (SaaS), cloud-native planning and scheduling platform leverages artificial intelligence and powerful algorithms to rapidly reduce labor, fuel and vehicle costs as well as improve passenger service and grow ridership for mass transportation operators and agencies.  With the most intelligent platform in the industry, Optibus ensures an improved rider experience through expertly planned and controlled core operations.  Optibus has been chosen by more than 300 cities to drive some of the most complex and large-scale transportation operations worldwide, streamlining operations while reducing congestion, emissions and costs.  (Optibus 25.07)

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9.4  My Size Signs License Agreement With Penti for Smart Measurement Application MySizeID

My Size has signed a license agreement for its MySizeID smart measurement solution with Penti, a Turkish company that is taking vigorous steps to become a global brand with a total of 550 retail stores in more than 35 countries.  Penti is backed by the Carlyle Group, one of the world’s largest global investment firms.

The MySizeID app is a turnkey solution that helps merchants’ customers choose the appropriate apparel size for that brand, based on the shopper’s real measurements.  My Size’s innovative technology enables consumers to measure themselves using their smartphone and then be matched with a brand-specific apparel item in their size.  Within the retail channel, sales associates can now be equipped with a tool to quickly and accurately measure customers to enhance the shopping experience.

Airport City’s My Size has developed a unique measurement technology based on sophisticated algorithms and cutting-edge technology with broad applications including the apparel, e-commerce, DIY, shipping and parcel delivery industries.  This proprietary measurement technology is driven by several algorithms which are able to calculate and record measurements in a variety of novel ways.  (My Size 25.07)

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9.5  OptimalPlus Launches Lifecycle Analytics Solution for ADAS

OptimalPlus launched their new Lifecycle Analytics Solution for Advanced Drivers Assistance System (ADAS) cameras.  The new offering provides the manufacturers of ADAS with real-time data insights based on big data and machine learning to optimize production and increase product quality.  A cornerstone of the technologies being developed for autonomous and semi-autonomous vehicles, ADAS cameras are electro-optical systems that aid vehicle drivers and are intended to increase car and road safety.

Assembling ADAS cameras relies on a complicated supply chain to provide electronic and optical components from different geographical locations, all with different methods of ensuring and monitoring reliability, and with manufacturers relying on separate silos of product data and information, it is exceedingly difficult to ensure that these components will perform up to the required standards.  OptimalPlus addresses these issues by providing unprecedented visibility throughout the supply chain, connecting supplier data to field performance, enabling a full overview of production, increasing efficiency and enabling preemptive actions to find problematic products earlier in the manufacturing cycle and preventing unreliable products from being deployed or removing them in real-time from the factory floor, reducing scrap rates and avoiding costly recalls.

OptimalPlus is able to accomplish this level of insight by combining big data with machine-learning algorithms on a global data infrastructure to drive real-time product analytics that extracts hidden insights across data silos throughout the supply chain, enhancing all measurable production metrics.  The ADAS camera solution is part of OptimalPlus’ growing role in the automotive industry, where the company is working with OEMs and Tier-1s to optimize their production methods for mechanical and electronic systems.

Holon’s OptimalPlus is the global leader in lifecycle analytics solutions for the automotive, semiconductor, and electronics industries, serving tier-1 suppliers and OEMs.  Analyzing data from over 100 billion devices annually, OptimalPlus enables enhancements in key manufacturing metrics such as yield and efficiency, improves product quality and reliability, and provides full supply chain visibility.  Seamlessly integrated with other already existing tools, the OptimalPlus Open Platform combines machine-learning with a global data infrastructure to provide real-time product analytics and to extract insights from data across the entire supply chain.  (OptimalPlus 25.07)

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9.6  Nano Dimension Introduces DragonFly LDM for Lights-Out Digital Manufacturing of Electronics

Nano Dimension introduced its new DragonFly Lights-Out Digital Manufacturing (LDM) printing technology, the industry’s only comprehensive additive manufacturing platform for round-the-clock 3D printing of electronic circuitry.  The initial deployment took place at the Munich premises of sensor and defense electronics provider HENSOLDT.  The unique DragonFly LDM system is designed for Industry 4.0 and manufacturing for the Internet of Things and is the extension of the successful DragonFly Pro precision system, which is dedicated to printing electronic components such as multilayer Printed Circuit Boards (PCBs), antennas and sensors.  The DragonFly LDM is already available through Nano Dimension’s global sales channel.  In Germany, the launch of the DragonFly LDM was already initiated by Nano Dimension’s reseller, Phytec New Dimension.

The Lights-Out Digital Manufacturing (LDM) is a manufacturing methodology in which systems run with little to no human intervention, around the clock. In the case of additive manufacturing,  LDM means DragonFly users can 3D-print more functioning electronic circuitry faster, extending the DragonFly’s rapid prototyping capabilities and increasing opportunities for short-run, small volume manufacturing of printed electronics.  Nano Dimension’s DragonFly LDM extends 3D printing for printed electronics beyond prototyping to true in-house, lights-out digital manufacturing, enabling one-off prototypes as well as low-volume manufacturing of printed electronics.

Ness Ziona’s Nano Dimension is a leading electronics provider that is disrupting, reshaping, and defining the future of how cognitive connected products are made.  With its unique 3D printing technologies, Nano Dimension is targeting the growing demand for electronic devices that require increasingly sophisticated features.  (Nano Dimension 25.07)

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9.7  Safe-T Announces First Tier-1 Collaboration for its IP Proxy Product with Korean ISP

Safe-T Group announced a first collaboration agreement with a tier-1 Internet Service Provider (ISP), in Korea.  Safe-T’s enterprise IP proxy network service is based on its deployment through ISPs, using collaboration agreements which enable the installation of the Company’s carrier-grade technology at the core network of the ISPs who join the global network.  Deployment in larger ISPs enables broader coverage of the network, and as a result increase the number of potential customers, while preserving the stability and the speed of the service.  To date, the Company has similar agreements with more than 100 ISPs in more than 25 countries, and is in negotiations with numerous additional potential collaborators.

Herzliya’s Safe-T Group is a provider of Zero Trust Access solutions which mitigate attacks on enterprises’ business-critical services and sensitive data, while ensuring uninterrupted business continuity.  Safe-T’s cloud and on-premises solutions ensure that an organization’s access use cases, whether into the organization or from the organization out to the internet, are secured according to the ‘validate first, access later’ philosophy of Zero Trust. This means that no one is trusted by default from inside or outside the network, and verification is required from everyone trying to gain access to resources on the network or in the cloud.  With Safe-T’s patented reverse-access technology and proprietary routing technology, organizations of all size and type can secure their data, services and networks against internal and external threats.  (Safe T Logo 29.07)

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9.8  Videocites AdTrack Revealing the True Reach of Promotional Videos

One of the biggest challenges in measuring the actual reach of a video Ad is the ability to track all of its re-uploads together with their views and engagement. Using its AI-based video tracking technology, Videocites AdTrack is now offering advertisers and brands with the ability to measure the true Ad exposure across the social/video platforms, hence providing access to priceless data that was unreachable until now.  AdTrack provides comprehensive analytics for both official and organic boosts copies, including copies and viewership breakdown per platform through time, true effective media value, performance report of affiliates and potential new influencers/opinion leaders, audience interests and demographics, comments analysis and other engagement-relevant metadata that derives from all tracked copies.

Netanya’s Videocites is an AI-based video tracking and analytics company, using a proprietary video fingerprinting technology to provide robust Live and VOD content tracking services throughout the web and other video repositories regardless of metadata, language, audio or severe video manipulations.  Videocites is already a leading solutions provider for the anti-piracy and security domains, serving major Hollywood studios, TV Networks, Homeland Security Agencies, as well as Sports and Live events.  (Videocites 30.07)

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9.9  Teltonika Cooperates with NanoLock Security for Powerful Router Cyber Defense

NanoLock Security announced that Lithuania’s Teltonika, a leading manufacturer of IoT connectivity solutions, has partnered with NanoLock Security to provide additional optional security layer for its RUT955 professional cellular router.  Teltonika’s routers are often deployed in remote locations in the public domain and are recognized by the market as highly secure devices. However, as more and more critical infrastructure gets connected into unified systems, security threats become increasingly relevant, therefore, require strong protection from internal and external cyberattacks.  To achieve this high level of security, Teltonika has cooperated with NanoLock’s revolutionary cloud-to-flash technology to implement an optional additional security layer.

NanoLock Security provides cloud-to-flash protection for IoT and connected devices, such as routers, blocking access to firmware, boot images and critical code through a hardware-root-of trust in the flash memory.  This approach places the root of trust in the flash memory of devices, effectively securing connected edge devices from persistent attacks such as VPNfilter and enabling trustworthy remote management and control of devices.  NanoLock protects and monitors connected edge devices from the moment they are created on a factory floor.  Through secure, over-the-air (OTA) upgrades, NanoLock protection continues when the devices are in operation and exposed to vulnerabilities, extending monitoring and protection throughout the device’s entire lifecycle.  This approach is both processor and operating system agnostic and requires virtually zero processing power or additional energy.

Nitzanei Oz’ NanoLock Security provides the industry’s only cloud-to-flash defense for connected edge devices.  NanoLock creates a powerful solution that secures the entire chain of connected devices vulnerability—from deeply embedded endpoints in the device, to the cloud, with no additional costs or computing power.  Securing a HW-root of trust, NanoLock is disrupting edge device security with hermetic protection, secured firmware updates, and a unique cost structure that shifts security investments from CAPEX to OPEX.  NanoLock’s solution provides tremendous savings in cyber spending through robust protection and tight control of the entire connected edge network that is crucial to the success of industries like telecom, smart cities, automotive.  (NanoLock 30.07)

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9.10  Karamba Security Teams with Cypress to Provide Embedded Cybersecurity

Karamba Security announced a collaboration with San Jose, California’s Cypress Semiconductor Corp. to enhance security hardening for the automotive industry.  Karamba’s embedded cybersecurity solutions for connected systems are used by tier ones and OEMs to protect vehicles and reduce vulnerability exposures.  Karamba and Cypress will leverage the Cypress Semper Flash in-memory compute capabilities for connected systems hardening, using standard flash memory form factors, to reduce cybersecurity risks.  Cypress Semper NOR Flash architecture allows users to add advanced cryptographic capabilities to the flash in addition to superior performance and industry-leading functional safety and reliability.  With Karamba’s focus on performance excellence, end-to-end security of connected systems is possible with a zero-trust approach to cybersecurity.  Karamba’s technology automatically hardens the full image of the connected system and prevents modification of the factory settings.

Hod HaSharon’s Karamba Security provides industry-leading embedded cybersecurity solutions for connected systems. Product manufacturers in automotive, Industry 4.0, IoT, and enterprise edge rely on Karamba’s automated runtime integrity software to self-protect their products against Remote Code Execution (RCE) cyberattacks with negligible performance impact. After 32 successful engagements with 17 automotive OEMs and tier 1s, product providers trust Karamba’s award-winning solutions to increase their brand competitiveness and protect their customers against cyberthreats.  (Karamba 05.08)

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10.1  Israel Rises to Top 10 on the Global Innovation Index

Israel has been listed in the Global Innovation Index top 10 for the first time – ranked tenth for innovation in 2019 after being ranked 11th in 2018 and 17th in 2017.  Switzerland topped the innovation ratings again this year, followed by Sweden.  The US advanced from fourth place in 2018 to third place this year.  The rating, published by Cornell University in the US, the INSEAD School of Business, and the UN World Intellectual Property Organization (WIPO), is composed of 80 different indicators measuring various aspects of innovation.

Israel was in 17th place in innovation inputs and eighth place in innovation outputs, which the report’s authors say shows that Israel excels in producing innovation with relatively little investment.  In business sophistication, Israel was ranked in third place.  This ranking is composed of high secondary indicators, such as cooperation between industry and higher education (second place worldwide), foreign investments in R&D (third place), and participation by women in the highly trained labor force (third place). Israel led the world in investments in R&D, research talent, Wikipedia editing, creating applets and exports of high-tech services.

Israel has poor rankings in infrastructure and institutional indicators (31st and 33rd place, respectively). Israel was particularly low in government investment per student (56th place) and the cost of layoffs resulting from streamlining (111th place).  The index authors note that Israel is the leading country in innovation in North Africa and Western Asia, and stands out in the ratio of innovation to investment.  Jerusalem and Tel Aviv were rated in 23rd place on the index of the world’s largest innovation centers.  (Globes 25.07)

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10.2  Israel’s Unemployment Rate Rises to Over 4%

The Central Bureau of Statistics announced on 31 July that the unemployment rate in Israel among those age 15 and older rose to 4.1%, compared with 3.7% in the preceding month.  Unemployment in the second quarter, however, was still lower than in the first quarter of the year.

The unemployment rate among men rose to 4.2%, compared with 3.5% in the preceding month, while the rate among women rose from 3.9% in the preceding month to 4.1% in June.  The employment rate, consisting of the proportion of employment in the general population age 15 and older, dipped from 61.1% in the previous month to 60.9% in June.  The rate fell from 65.2% to 64.9% among men and from 57.3% to 57% among women.

The number of full-time employees (working 35 or more hours a week) declined by 0.8% in June, a loss of 20,000 jobs, while the number of part-time employees was 5.9% higher than in the preceding months (58,000 additional part-time jobs).  The number of employees temporarily absent from their jobs in the week of record rose 7.5% above the preceding quarter, representing 29,000 additional employees.

Despite the increase in June, the unemployment rate in the second quarter among those age 15 and older declined in most districts, in comparison with the preceding quarter.  The rate fell from 4.1% in the first quarter to 3.9% in the second quarter in Jerusalem, from 4.8% to 4.1% in the northern district, from 4.2% to 4.1% in the Haifa district, from 3.6% to 3.3% in the Tel Aviv district and from 4.1% to 3.8% in the Tel Aviv district, while increasing from 4.0% to 4.1% in the southern district.  The proportion of participation in the labor force among those age 15 or older declined in most districts.  (CBS 31.07)

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11.1  ISRAEL:  S&P Reaffirms Israel’s AA- Credit Rating with a Stable Outlook

On 2 August, Standard & Poor’s (S&P) reaffirmed Israel’s credit rating at AA- with a stable outlook.  S&P raised Israel’s rating to its current one, the highest rating awarded to the country to date, in August 2018, and reaffirmed it in February.

In its most recent research note, S&P stated Israel’s economy is showing continuous strong growth.  This growth is expected to weather internal political volatility, with a second election in just under six months coming up in September, the various criminal investigations against Prime Minister Benjamin Netanyahu, and the external instability caused by the slowing of many of the world’s leading economies and by global trade tensions.

Israel’s economy, which S&P defines as “diversified, competitive, and resilient,” is expected to grow annually by 3% on average until 2022.  While higher than the OECD average, this still represents is slower growth than Israel has experienced over the past few decades.  The country has not faced recession in the last 15 years, S&P wrote, and its GDP has increased by 60% since 2010 in U.S. dollar terms, combined with historically low unemployment rates.

“Growth will stem from private consumption on the back of a strong labor market, continued corporate investment activity,” and Israel’s strong services export, S&P wrote.  In 2020, the Leviathan gas field is expected to start operations and boost the economy further, S&P said.

The agency is expecting Israel’s political institutions to withstand the country’s political fragmentation, as it is not a new situation, but state that it could prevent the chosen government from making changes necessary to solve long-term structural issues such as weak labor market participation, a problematic real estate market, infrastructure gaps, bureaucratic red tape, and the low skills of specific population groups.

The two main restraints on Israel’s credit rating are geo-political risks and Israel’s government debt.  The central government deficit reached 3.9% in June 2019, compared to an annual target of 2.9%, an even weaker fiscal outcome than S&P expected.  Due to the dissolution of the Knesset, only minor budget changes will be possible until perhaps even 2020, leading the S&P to revise its general government deficit forecast upwards to 3.6%.

“Now that the business cycle is maturing, fiscal performance will, in our view, likely deteriorate as the significant cyclical contribution—to government revenue in particular—fades away,” S&P wrote.  However, the agency said, there is no reason to be very concerned about Israel’s fiscal and macroeconomic stability, as over the past decade government debt has actually decreased by over 10% and fiscal tightening will likely be on the agenda of the next government no matter the political outcome.  The agency therefore expects net general government debt to stay below 60% of Israel’s GDP through the forecast horizon.  (Various 05.08)

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11.2  ISRAEL:  Tel Aviv’s Tech Hub Ranks 6th in New Startup Ecosystem Report

As reported by NoCamels, Startup Genome’s 2019 Global Startup Ecosystem Report (GSER), one of the world’s most comprehensive reports on startup ecosystems and subsector trends, firmly states that there will be no “next Silicon Valley.”  Instead, there will be 30 “next” hubs throughout the world that don’t quite achieve the density of the Bay Area, but do go beyond “critical mass” driven by regional or sub-sector leadership, the report explains.

Among them – in sixth place overall – is Tel Aviv, Israel’s finance and tech capital, which has helped earn the country’s reputation as the “Startup Nation” with more startups per capita than anywhere in the world.  The report dubs Tel Aviv and other cities in the top seven as “leaders,” noting they have “strong performance across many ecosystem success factors, each of them creating at least $30 billion in ecosystem value, with a median of $56 billion.”

Tel Aviv received top marks for a number of “success factors,” ranking in the top tier for connectedness, referred to in the report in terms of links the city has to other top global ecosystems, and knowledge, as a result of “a culture of founders helping founders, frequent events, and entrepreneurs getting meaningful help from local experts and investors.”  Tel Aviv’s abundance in tangible IP, in the form of patents, research, and favorable policy environments leads to its strong performance in the knowledge category, according to the survey. In the IP commercialization sub-factor, Tel Aviv scored 10 (out of 10).

The city also ranked in the second tier for performance, talent, experience, funding and market reach.  Since Tel Aviv operates within a small local market, the ecosystem sells to global customers at high rates – over 50% of Tel Aviv’s startups’ customers are foreigners, the report says.  A small local market facilitates an ecosystem’s totality and scale.

In a number of sub-factors, Tel Aviv also scored high including in funding access (nine out of 10) and quality (seven out of 10), global reach (eight out of 10), startup output (eight out of 10), and startup success (seven out of 10).  The city received lower marks for sub-factors such as infrastructure (four out of 10), which the report says is a “Life Sciences-focused measure of accelerators and incubators, research grants, and R&D anchors in the ecosystem (e.g., top research hospitals and R&D corporate labs),” and scaling experience (four out of 10).  The comprehensive report also notes that Tel Aviv has sub-sector strengths in AI, Big Data, and analytics, as well as cybersecurity.

In Cyber, Israel ranks second, with exports of some $6.5 billion in cybersecurity products per year, according to the report and exits of $2.81 billion in 2018. Israel is also the first country in the world to offer a PhD in cybersecurity and is home to six university cybersecurity research centers.  In AI, Tel Aviv ranks third in the world for its ecosystem, with the report highlighting Google’s launch in March 2018 of a startup accelerator focused on artificial intelligence and machine learning.  It was the first such accelerator launched outside the US. Later that year, US tech giant Nvidia opened a research center in Tel Aviv to focus on AI. And AI chip developer Habana Labs raised $75 million in Series B funds with Intel Capital as a lead investor.  Finally, retail giant Walmart acquired AI startup Aspectiva in early 2019 for an undisclosed sum.

The report, released in May this year and published annually since 2012, is a joint effort between Startup Genome, a management consulting firm that advises startups, and the Global Entrepreneurship Network (GEN), a producer of projects and platforms for entrepreneurs in 170 different countries. Startup Genome has collaborated with more than 300 partner organizations for over a decade and has collected data on over a million companies across 150 cities.  The index is in its 12th edition and this is Israel’s first time in the top 10.  (NoCamels 29.07)

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11.3  ISRAEL:  The Monetary Policy Report for the First Half of 2019


On 27 July, the Bank of Israel released its monetary policy report for the first half of 2019.

Monetary policy: This report reviews the monetary policy in the first half of 2019 and in the beginning of the second half of 2019.  In the first half of 2019, the Monetary Committee kept the interest rate unchanged, after increasing it to 0.25% at the end of the previous half year.  The Committee’s decisions kept the forward guidance, which stated that the Committee assesses that the rising path of the interest rate in the future will be gradual and cautious, in a manner that supports a process at the end of which inflation will stabilize around the midpoint of the target range, and that supports economic activity.  In the period reviewed, the Bank of Israel bought a small amount of foreign exchange – $86 million.

 The inflation environment: The 1-year inflation rate was slightly above the lower bound of the target range during the entire reviewed period (the CPI for January through May), similar to its level in most months in the previous half year, and one-year inflation expectations, based on most sources, were as well.  Inflation expectations for medium and long terms remained well entrenched within the target range throughout the half year.  With regard to the inflation environment, the Monetary Committee members noted that for a notable period of time there had not been a significant change in it.  Inflation in non-tradable goods prices (an approximation of the domestic component of inflation) was above 2% throughout the half year, and the inflation rate in tradables became slightly negative in some of the months, as opposed to the previous half year, but afterwards it returned to being positive.  After the end of the period reviewed, the CPI for June, which was lower than expected, was published, and the 12-month inflation rate in June was slightly below the lower bound of the target range.

Real domestic activity: The data on real activity published during the reviewed period supported the assessment that activity is converging to growth at a pace slightly lower than its potential of approximately 3%, and that data on the previous half year indicated a transitory slowing in the second and third quarters of 2018 that derived from supply constraints.  This assessment is supported mainly by the tight labor market and the continued increase in wages, primarily in the business sector.

Fiscal policy: During the course of the half year reviewed, the marked uncertainty in the fiscal sphere was discussed, among other things in view of the general elections that were held during the period: this derived from the possible ramifications of the coalition-forming negotiations, from the steps that the future government might take in order to deal with the expected deficit and from their possible effects on economic activity and on the inflationary path.  In any case, the fiscal uncertainty is expected, in the Committee’s assessment, to continue for some time.

 Capital market developments: Telbor market-based expectations with regard to an interest rate increase declined for all ranges during the course of the half hear, and they reflect a relatively high probability of no change in the interest rate in the coming year, in contrast to forecasters’ assessments and the Research Department’s staff forecast.  In the half year reviewed, a downward trend in nominal and real yields in Israel for all ranges was seen, similar to their declines worldwide.

The housing market: Data published toward the end of the period reviewed indicated an increase in home prices of 1% in the past 12 months, following a year over year decline of more than 2% in some months of the previous half year.  This is in parallel to the marked increase in the number of transactions.  Despite the increase in home prices, the Committee members agreed that it is still too early to assess if the trend of rising prices is renewing or if their decline will continue.  There has been a continued moderate rising trend in new mortgage volume since the end of 2017, against the background of a slight decline in the weighted real interest rate on mortgages, which started in the beginning of 2019.

The global economy: The Committee discussed the global economy – the moderation of activity, the uncertainty and the risks, as well as the downward revision of growth forecasts and the expected change in the interest rate path and in monetary policy worldwide.  In the US, a lower interest rate path than before, and even an interest rate reduction, is expected, and in Europe, the expected date of the beginning of raising the interest rate was deferred.  The Committee members assessed that the decline in world trade is expected to continue to impact on activity in Israel.  The Committee discussed additional risk factors that impact on the global economy, including the possible US-China trade agreement and the uncertainty regarding Brexit.

The shekel exchange rate: During the half-year reviewed, the shekel strengthened markedly against major currencies, after it had depreciated in the fourth quarter of 2018.  From the beginning of the half year, the shekel strengthened in terms of the nominal effective exchange rate, the dollar, and the euro; it appreciated by 5.4% in nominal effective exchange rate terms.  The Committee members noted that the appreciation is the main factor delaying the continued increase of the inflation rate toward the midpoint of the target.

Research Department staff forecast: The Research Department’s staff forecast did not change markedly during the period reviewed.  Based on the forecast compiled by the Research Department and published with the interest rate decision on 8 July 2019, GDP is expected to grow by 3.1% in 2019 and by 3.5% in 2020, a downward revision of 0.3% for 2019 (compared with the forecast compiled in January 2019).  Inflation is expected to be 1.6% in 2019 (an upward revision of 0.3% for 2019 vis-à-vis the forecast in January) and 1.6% in 2020 (a downward revision of 0.2% for 2020 vis-à-vis the forecast in January).  According to the forecast, the Bank of Israel interest rate is expected to increase to 0.5% toward the end of the third quarter of 2019 and to continue to increase gradually to 1% by the end of 2020 (a downward revision of 0.25%age points for 2020, compared with the forecast compiled in January 2019).  Since the publication of the forecast, there were two developments in relatively significant parameters that impact on it: the CPI for June surprised to the downside, and there was a slight increase in the probability ascribed by the markets to monetary accommodation soon in the US.  (BoI 25.07)

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11.4  LEBANON:  Lebanon’s Air Pollution Nears an Alarming Level

Nicholas Frakes noted in Al-Monitor on 26 July that under new austerity measures and budget cuts, Lebanon’s Ministry of Environment was forced to close its air monitoring stations across the country, raising the concerns of experts amid high levels of pollution.

As the Lebanese government continues to discuss austerity measures, the Ministry of Environment saw its funding cut following the passing of the 2019 budget on 20 July, causing air monitoring stations throughout the country to be shut down even as air pollution continues to reach dangerous levels.

The national air monitoring network, which measures pollution levels in Lebanon and allows the Ministry of Environment to regulate pollutants in the air, was established over two phases starting in 2013 with the opening of five stations after Lebanon received a $1.64 million grant from Greece, with around $400,000 of that going toward the air monitoring stations.  The second phase was launched with an EU grant of around $8.9 million and saw an additional 21 stations built in 2017 with around $1.68 million of the funding.  All of these stations were connected to a central network at the Ministry of Environment and were the same type of stations used in the United States and the EU and met international standards.

Following the 9 July announcement that the monitoring stations were to be closed due to budget cuts, the delegation of the European Union to Lebanon told Al-Monitor, “The EU delegation was recently informed that the Ministry of Environment is not in a position to continue financing for the maintenance of the stations monitoring air pollution in the country.  This network was partly funded by the EU as one of the main donors to environmental programs in Lebanon.”

The EU said it was regrettable that “the current budget does not allow the Ministry of Environment to maintain this network essential to monitor the implementation of the national strategy” for air quality management and called “for the allocation of adequate resources for this important issue.”  The EU said the cutback is happening “after the parliament passed the law on air quality in 2018, the government subsequently adopted the national strategy for air quality management (2015 – 2030), and the international community assisted Lebanon to strengthen its national capacities.”

UN resident coordinator Philippe Lazzarini also expressed regret that the monitoring stations were closed, while saying the UN “understands it is a result of the ministry’s inability to renew the maintenance and operation contract to upkeep these stations due to austerity and financial challenges.  Securing the needed financing for the maintenance and operation of these stations is essential for the continuation of data production and monitoring to address air pollution.”

Lazzarini added, “Discussions in setting the annual budget to reduce the fiscal deficit should take into account the impact of the work of the government on people’s well-being.”  He cited the environment as a priority of The Lebanon We Want program, which was coordinated by the UN resident coordinator’s office, the Lebanese government and civil society experts to develop goals to tackle issues such as the environment, education, poverty, health, infrastructure, the economy and the security situation and to create a better future for the country and its people.

Bassel Monzer of the Air Quality Department at the Ministry of Environment told Al-Monitor that this was the first time the ministry had to fund the maintenance for all of the stations, as it had previously only needed to fund the five from the first phase with the remaining stations having been funded through the EU.  He also said the stations’ closure is only temporary if the necessary funding is received.  “Stations for air quality can only sustain a determined period without regular maintenance,” Bassel said.  He said that because of a lack of a new maintenance contract, “the technicians’ advice was to shut down to prevent damages and problems.”  He said this is a temporary closure until new funding for maintenance is received.

He said the ministry was working to combat air pollution through efforts such as enforcing Law 78/2018, which aims to protect air quality, issuing new emissions limits that are “more stringent than before” and trying to get funding for the monitoring stations.  He said that without the stations, “We cannot be assertive about the level of pollution in the ambient air where stations are located — and of course — for the criteria pollutants.”

The closure was especially troubling for St. Joseph University professor of atmospheric chemistry Charbel Afif, who said the monitoring stations and air pollution should be a priority for the government.  “They are closed simply due to lack of funding,” Afif told Al-Monitor.  “They need around $500,000 a year to maintain them to get accurate and reliable results.  The Ministry of Environment has a budget of around $9 million.  Having the budget cut by more than 20%, for them it’s a huge amount.  However, it should be a priority for the government.”  He said the measurements are needed to determine how Lebanese policies are working.  “We can’t do that by saying, ‘Oh yeah, it might be decreasing.’  No, we need numbers; we need to know how things are really working.  With this shutdown, we have no idea now.”

Afif added that while it would be a huge step forward if the government implemented and enforced policies that pertained to limiting and preventing air pollution, there is still the need to have the monitoring stations because “we would not know what the impact is quantitatively.”  Afif said the main sources that are causing the increase in air pollution in Lebanon are traffic, power plants and various industries that release particulate matter into the air.  He said, “There are three main forms of air pollution in Lebanon on the national level: carbon monoxide, nitrogen dioxide and volatile organic compounds.  The main source of these is traffic. Then we have sulfur dioxide and particulate matter.  The sulfur dioxide is mainly due to power plants and the PM [particulate matter] is mainly caused by industries on the national level.”

While these are the three main causes for air pollution, private generators also have been one of the biggest polluters as they are located in residential areas and have a greater potential to create health problems for residents.  As air pollution increases, there are also increased health risks for people who breathe in the polluted air on a regular basis.  This can result in minor diseases, the development of coughs and even premature deaths and cancer.

While Lebanon’s air pollution levels have not reached the dangerous levels such as those in China or India, the country is well on its way to catastrophic levels.  Afif said this could happen in less than a decade.  Currently, Beirut has a fine particle pollution level (PM2.5) of around 32 micrograms per cubic meter while the level in Delhi, India, is 122.

While Afif said pollution will reach catastrophic levels if nothing changes, the likelihood of it reaching the point where people need to wear masks outside such as in Beijing is slim.  He said the situation could get very bad “in seven to 10 years if we have the same amount of emissions, if we still have the power plants running on heavy fuel oil, if we still have all of the private generators inside the neighborhoods and so on.  The demand on electricity is getting higher. There isn’t any public transportation and, therefore, [there] are more cars and law enforcement for industries is not very efficient.”

The economic and health costs are also proving to be steep.  A World Bank study estimated that air pollution in Lebanon caused the deaths of more than 1,800 people in 2013 and a loss to society of around $2.6 billion.

Afif said, “Solutions are known.  We’re not going to reinvent the wheel.”  He added, “We know that we need to have [less-polluting] natural gas, we need to have public transportation — just getting the cars that are hybrid and electric cars won’t solve the problem.  We need to decrease the number of vehicles on the road and that can’t happen unless you have a real efficient public transportation.”  This public transportation system would involve trains and, most importantly, buses that run on a schedule and have planned routes and stops rather than the informal system of buses that exists today throughout Lebanon.  Under such a system, ideally not as many people would drive and instead take public transportation, which would help decrease the pollutants emitted by cars.

“The environment isn’t just the problem of the Ministry of Environment,” Afif said.  “It’s not the Ministry of Environment that would regulate the traffic and the public transport system.  That’s the Ministry of Public Works and Transport.  It’s their duty to have a proper system in order to mitigate the environment [risks].  It’s the duty of the Ministry of Energy and Water to have power plants that emit less and to stop all of the private generators. It’s [also the duty of] the Ministry of Justice.”  He said that environmental crimes are being committed, and that he Ministry of Justice needs to take action, saying prosecutions are “not just for killing someone or robbing a bank.”

Nicholas Frakes is a freelance journalist and photojournalist based in Lebanon. He covers the Middle East for multiple outlets, including the New Arab and Public Radio International.  (Al-Monitor 26.07)

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11.5  IRAQ:  IMF Executive Board Concludes 2019 Article IV Consultation with Iraq

On 19 July, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Iraq.

An improved security situation and the recovery in oil prices have improved near-term vulnerabilities.  Large fiscal and current account surpluses – around 8 and 6% of GDP, respectively – were recorded in 2018, allowing the government to retire domestic debt and accumulate fiscal buffers.  Gross international reserves reached $65 billion by end-2018.

However, post-war reconstruction and economic recovery have been slow.  Non-oil GDP rose by only 0.8% year-on-year in 2018 in a context of weak execution of reconstruction and other public investment.  Overall GDP contracted by around 0.6% as oil production was cut to comply with the OPEC+ agreement.

The 2019 budget implies a sizable fiscal loosening that will reverse the recent reduction in vulnerabilities.  Current spending is expected to increase by 27% year-on-year, in part due to a higher public sector wage bill, while revenues will be dampened by the abolition of non-oil taxes.  As a result, the budget is projected to shift to a deficit of 4% of GDP in 2019, and reserves are projected to decline.

The fiscal and external positions are expected to continue to deteriorate over the medium term absent policy changes – with reserves falling below adequate levels and fiscal buffers eroded.  Although the level of public debt will remain sustainable, gross fiscal financing needs will increase.  Non-oil GDP growth is projected to reach 5½ in 2019 but subside over the medium term.

In a context of highly volatile oil prices, the major risk to the outlook is a fall in oil prices which would lower exports and budgetary revenues, leading to an even sharper decline in reserves or higher public debt.  Geopolitical tensions, the potential for social unrest in a context of weak public services and lack of progress in combatting corruption pose further risks.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal.  They were encouraged by the recent strengthening of Iraq’s economy but recognized that the country continues to face daunting challenges.  Social conditions remain harsh, post-war reconstruction progress is slow, development needs are large, and institutional weaknesses are significant.  Volatile oil prices and a difficult regional and geopolitical environment pose additional difficulties.  Directors encouraged the authorities to seize the opportunity presented by the improved security situation and higher oil prices to implement policies and structural reforms aimed at ensuring macroeconomic and financial stability, tackling long-standing social problems, and promoting sustainable and inclusive growth.

Directors emphasized that building a robust fiscal framework is essential to maintain fiscal and macroeconomic stability and strengthen buffers.  They encouraged the authorities to adopt a risk and rules-based approach to fiscal policy as part of broader reforms to manage oil revenue more effectively, reduce tendencies for pro-cyclicality, and shift to a more growth-friendly composition of expenditure.  Directors supported scaling up reconstruction and development expenditure gradually in line with improving absorptive capacity.  They underscored the need to strengthen public financial management to ensure public spending is appropriately monitored and to reduce vulnerabilities to corruption.  In this context, Directors welcomed the newly adopted General Financial Management Law and encouraged its full implementation.

Directors emphasized that gradual fiscal adjustment, including containing current primary spending and boosting non-oil revenues is essential for maintaining fiscal and debt sustainability.  They recommended that spending measures should give priority to containing the growth in wage bill and lowering subsidies to the electricity sector.  Directors emphasized that the poorest and the most vulnerable must be protected from the adjustment process.

Directors underscored that an overhaul of the banking sector is necessary to maintain financial stability.  They encouraged the authorities to restructure the large state-owned banks, enhance their supervision, and implement other reforms to increase financial intermediation.  Directors highlighted the benefits of increasing financial inclusion, especially for the SME sector, which has a large potential to absorb entrants to the labor market.

Directors agreed that building public institutions and enhancing governance is key for success, and highlighted the scope for IMF capacity development to support these efforts.  They welcomed progress in developing an anti-corruption framework and called for further modifications to the legal regime for combatting corruption coupled with stronger coordination between the relevant government agencies, while continuing to strengthen the framework for Anti-money laundering and combatting the financing of terrorism (AML/CFT).  Directors also recommended strengthening Public Investment Management framework to ensure that spending is well directed and that donor funds targeting reconstruction are put to the most efficient use.

Directors looked forward to continued close engagement between the authorities and the Fund in the context of post program monitoring.  (IMF 26.07)

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11.6  IRAQ:  Fitch Affirms Iraq at ‘B-‘; Outlook Stable

On 25 July, Fitch Ratings affirmed Iraq’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Stable Outlook.

Key Rating Drivers

Iraq’s rating is constrained by commodity dependence, weak governance, high political risk, and an undeveloped banking sector, while the rating is supported by GDP per capita above the ‘B’ median, robust FX reserves, a low level of debt service obligations and international financial support.

Higher oil prices in 2018 boosted Iraq’s credit metrics.  A 33% increase in the Iraqi crude oil export price pushed the budget into surplus, estimated at 8% of GDP, following five years of deficits.  We estimate that government debt fell below 50% of GDP from a recent peak of 66% of GDP in 2016.  Increasing oil revenue also buoyed the current account surplus. FX reserves excluding gold reached $61 billion at end-2018, up from $46 billion the previous year.  International reserves including gold represented more than nine months of current external payments and are also large in the context of the government’s external debt service (forecast at roughly $2.5 billion-$2.8 billion annually in 2019-21).

We forecast that lower oil prices will lead to a renewed worsening of public and external finances in 2019-2021.  Commodity dependence is among the highest of all Fitch-rated sovereigns.  Oil accounts for 85%-90% of fiscal revenue and almost all export revenue.  We assume the price for Brent crude to average $65/barrel in 2019 and around $61/barrel in 2020-2021, with the average Iraqi oil price $3-3.25/barrel lower.  We forecast a return to budget deficits and a renewed increase in government debt, above 54% of GDP in 2021, as well as a decline in reserves to $55 billion in 2021.  This assumes little progress with fiscal and structural reforms, while a renewal of Iraq’s IMF program could foster better outcomes.

Oil price and volume sensitivities for Iraq are significant.  For each $5/barrel change in the oil price, government revenue changes by approximately $6.5 billion (3% of GDP), assuming stable export volume.  In terms of budget sensitivity to export volumes (currently 3.3million barrels/day), an extra 100,000 barrels/day of exports add $2.3 billion a year, or 1% of GDP, assuming constant oil prices.

The 2019 budget, approved in February, plans for a deficit of IQD19 trillion ($16 billion or 7% of our forecast GDP) on the back of a 30% increase in current spending and a doubling of capex.  We expect under-execution of spending, largely related to non-oil capex and the partially-functioning oil sharing agreement with the Kurdistan Regional Government (KRG), to contain the budget deficit to around 2% of GDP.

Budgeted capex has increased to IQD33 trillion, from IQD25 trillion allocated in 2018, to address infrastructure deficiencies including chronic shortfalls in the electricity supply.  The execution of capex has been weak in recent years owing to insecurity and financing constraints.  We assume 70% of planned capex is implemented in 2019, which may be on the high side.

The sharp increase in budgeted current spending highlights the lack of public finance reforms which were a central focus of Iraq’s Stand-by Arrangement (SBA) with the IMF.  The SBA has been dormant since the end of 2017 because of the relief provided by higher oil prices and given the context of the parliamentary elections in May 2018.

Iraq continues to receive international financial support, even though the $5.3 billion IMF program has lapsed.  The 2019 budget incorporates around IQD6 trillion ($5.1 billion or 2.3% of GDP) of bilateral, multilateral and development agency financing related to non-oil capital projects.

Iraq’s total debt stock includes an estimated $41 billion of debt lent to Iraq by GCC countries during the 1980-1988 Iran-Iraq war, which the authorities do not face pressure to repay or service.  If this debt were restructured on the same terms as Paris Club debt was restructured in 2004-06, government debt/GDP would be around 33% in 2018, significantly lower than the current ‘B’ peer median (57%).  The majority of remaining external debt is owed to the Paris Club and multilateral and bilateral institutions.

Political risk and insecurity in Iraq remain among the highest faced by any Fitch-rated sovereign.  Iraq scores the lowest of all Fitch-rated sovereigns on the composite World Bank governance indicator.  This reflects not only insecurity and political instability but also corruption, government ineffectiveness and weak institutions.  Nevertheless, the bulk of oil production facilities and export infrastructure are located away from the areas that have presented the highest security risk.

The security situation has improved since end-2017 when Iraq reclaimed territory from the so-called Islamic State, but the risk has increased of spillovers from escalating tensions between the US and Iran, which has strong links to political and armed groups in Iraq.  In a tail risk scenario in which hostilities close the Straits of Hormuz, Iraq would suffer given its lack of other export routes for southern oil production.  A one-month closure could hit oil earnings by $6.5 billion, close to 3% of GDP.  The impact of a partial closure would be mitigated to some extent by higher oil prices.

Tighter US sanctions against Iran also present difficulties for Iraq, which remains dependent on imports of Iranian electricity and gas as an input for electricity generation.  Iraq has managed to secure short-term sanctions waivers from the US, but the government has said it could take years to eliminate its need for Iranian gas.

The banking sector is under-developed and fundamentally weak.  It is not in a position to provide much domestic financing to the government.  Private sector credit to GDP is one of the lowest of any Fitch-rated sovereign.  The two large state-owned banks, Al-Rafidain and Al-Rasheed, which have high non-performing loans and exceptionally low capital adequacy, dominate the sector.  The government has appointed auditors as required by the IMF, but it remains unclear how the banks will be restructured.

Rating Sensitivities

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

-An improvement in Iraq’s public and external finances, for example stemming from a period of higher oil prices, particularly if combined with higher oil production and exports.

-Improvements in the cohesion and credibility of economic policymaking, including reforms of the public finances.

-A sustainable improvement in the country’s security that allows for stronger non-oil economic development, together with enhancements to governance and institutional quality.

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

-Heightened risks to fiscal and external financing.

-Deterioration in the country’s security, particularly if insecurity hinders oil production and exports.

Key Assumptions

Fitch forecasts Brent crude to average $65/b in 2019, $62.5/b in 2020 and $60/b in 2021.  We assume that Iraqi oil sells at a consistent discount to Brent.  Fitch forecasts Iraqi oil exports (excluding exports from the Kurdish region) to average 3.65m b/d in 2019-21.

Limited Information

Data on Iraq’s international investment position stops at 2014 and the IMF highlights deficiencies in the balance of payments data.  This complicates external debt estimates and projections.  The availability of reliable data on reserves mitigates these weaknesses.  Fiscal performance is hard to track during the year given weak availability and inconsistencies in published data.  We obtain annual data from the Ministry of Finance and cross reference with the IMF.  (Fitch 25.07)

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11.7  ARABIAN GULF:  China’s Gulf Investments Reveal Regional Strategy

On 29 July, Jonathan Fulton observed in the Arab Gulf States Institute in Washington that a unique pattern of provincial or regional consortia from China are deeply engaged in marquee Belt and Road Initiative projects that are shaping the future of China’s power in the Gulf.

On 23 July, Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan ended a three-day trip to China, signing numerous economic, trade, and other cooperation agreements ahead of the UAE-China Economic Forum.  As China becomes an increasingly important actor in the Middle East, there is a corresponding rise in analysis of its approach to the developing relationships in the region.  The Belt and Road Initiative, the most important foreign policy initiative ever undertaken by the People’s Republic of China, offers a useful blueprint but suffers from a lack of clarity:  Everything, it seems, is part of the BRI.  There are two types of BRI projects being implemented in the Gulf states – those that support Gulf domestic development programs and those that build regional connectivity, and the latter type demonstrates more about what Beijing wants to achieve in the Middle East.

Since it was announced in 2013, the BRI has become the central pillar of China’s foreign policy.  It is a series of hard and soft infrastructure projects consisting of the Silk Road Economic Belt, an overland route across Eurasia, and the Maritime Silk Road Initiative traversing the Indian Ocean region.  Of the two, the Gulf monarchies feature in the Maritime Silk Road Initiative, although Kuwait’s Madinat Al Hareer could eventually be linked to the Silk Road Economic Belt.  Conceived as a means of addressing a shortage of infrastructure investments in Asia, the BRI is expanding China’s influence and power across Asia and into the Middle East, Africa, and Europe.  As its assets and interests increase in states where it has traditionally played a relatively insignificant role, China’s foreign policy is no longer that of a regional power but rather one with global interests.

Among the first type of BRI projects – those that support the Gulf “Vision” plans – there is a range of Chinese state-owned enterprises and private firms contracted to several projects across the Gulf region, building upon a recent history of construction that predates the BRI; the Heritage Foundation estimated that Chinese companies had tendered $30 billion worth of contracts in the Gulf Arab states between 2005 and 2014.  There are many examples of these domestic development projects. In Saudi Arabia, the light railway connecting Jeddah to Mecca and Medina, the Yanbu refinery, and the Middle East’s largest power plant were all undertaken in cooperation with Chinese firms.  In Qatar, Lusail Stadium, the opening and closing venue for the 2022 FIFA World Cup, is a joint project with China Railway Construction Corp and a Qatari company, and Chinese firms have won contracts for a Doha port expansion project and the construction of a mega-reservoir.  In Dubai, a Chinese-Saudi bid was awarded the contract to build an extension for the Mohammed bin Rashid Al Maktoum Solar Park and the China State Construction Engineering Corporation is building Dubai’s Motor City residential development.  All over the Arabian Peninsula Chinese firms are involved in major projects supporting Gulf states’ infrastructure and construction plans.

While this type of project is important in building commercial relations, it is the second type that deserves a deeper look.  Here, there is a unique pattern of provincial or regional consortiums from China that are deeply engaged in marquee BRI projects in the Gulf states that are part of a strategic approach to building a Middle East presence in which the Arabian Peninsula features significantly.  These projects are aligned with official policy documents about the BRI and China’s approach to the Arab world, and also feature in initiatives such as an under-discussed initiative, the “Industrial Park-Port Interconnection, Two-Wheel and Two-Wing Approach” to China-Middle East cooperation.  Rather than cooperation in the pursuit of commercial benefits, these are shaping the future of China’s power in the Gulf as it builds a physical presence that enhances its political, economic, and eventually military capacities.

The park-port approach has identified four industrial parks and ports – two of which are in the same complex – where Chinese multinationals plan to link supply chains and build business clusters.  The industrial parks are Khalifa Industrial Zone Abu Dhabi, the China-Oman Industrial Park in Duqm, Saudi Arabia’s Jazan City for Primary and Downstream Industries, and the TEDA-Suez Zone in Ain Sokhna, Egypt.  The four ports are Khalifa Port Free Trade Zone (also in Abu Dhabi), Oman’s Duqm Special Economic Zone Authority, the People’s Liberation Army Support Base in Djibouti, and Port Said in Egypt.  These form a horseshoe starting from the Gulf, continuing along the Arabian Sea, up the Red Sea, and into the Mediterranean Sea.  At the same time, they collectively underscore the importance of regional connectivity in the BRI and indicate the shape of China’s expanding influence and interests in the Middle East.

An interesting feature in the Abu Dhabi and Duqm port and park complexes has been the role of Chinese regional or provincial business groups.  China’s Duqm Special Economic Zone Authority projects are being developed by Oman Wanfang, a consortium of six private firms from Ningxia Hui Autonomous Region, in China’s north.  Given Ningxia’s landlocked geography, it would seem more likely that Ningxia would be involved with the Silk Road Economic Belt rather than the Maritime Silk Road Initiative.  However, the autonomous region has a large Muslim Hui population and as such has featured prominently in Beijing’s efforts to build relations with Arab states and societies.  Ningxia’s capital, Yinchuan, is home to the annual China-Arab States Expo and has become a hub for China-Arab trade.  With nearly $11 billion committed to the Duqm Special Economic Zone Authority, the Chinese government has designated it as one of the “Top Overseas Industrial Parks.”

In Abu Dhabi’s Khalifa Port complex, much of the early momentum has come from the Jiangsu Provincial Overseas Cooperation and Investment Company.  The group of companies from Jiangsu, an eastern coastal province, has invested over $1 billion into the Khalifa Industrial Zone Abu Dhabi and its chairman described the initiative as “an important cornerstone in China and the UAE’s bilateral industrial agreement.”  In September 2018, an investment promotion conference was held in Nanjing, the provincial capital, where a delegation from the Khalifa Industrial Zone Abu Dhabi and Abu Dhabi Ports was met by more than 180 government agency representatives and 90 Chinese companies looking to invest in Abu Dhabi.  The recent announcement that East Hope Group is considering a $10 billion investment in the Khalifa Industrial Zone Abu Dhabi indicates that the Jiangsu cooperation is not the only Chinese player in Khalifa port, but its established presence will continue to provide a platform for deeper cooperation between the UAE and China.

Saudi Arabia’s Jazan City for Primary and Downstream Industries has not seen the same level of attention or investment yet.  Thus far the only major investment has been a petrochemical plant, valued at nearly $4 billion, from Guangzhou’s Pan-Asia PET Resin Co. If the Duqm and Khalifa Industrial Zone Abu Dhabi pattern holds, more firms from southern Guangdong province are likely to begin hanging their shingles in Jazan.

The scope and scale of the BRI combined with fuzzy definitions of what constitutes a Belt and Road project adds to the perception of it as a catch-all slogan for opportunistic state-owned and private companies to latch on to.  For many Chinese companies operating in the Gulf designating a project as part of the BRI seems like a branding exercise.  These park-port complexes, however, show the growing relevance of the BRI on the Arabian Peninsula and suggest the building of a much deeper level of Chinese engagement and influence in the region.

Jonathan Fulton is an assistant professor of political science at Zayed University in Abu Dhabi, UAE, and the author of “China’s Relations with the Gulf Monarchies.”  (AGSIW 29.07)

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11.8  QATAR:  Qatar’s HVAC Maintenance Service Market

The “Qatar HVAC Maintenance Service Market by HVAC Type, by End-User, by Maintenance Type, by Region – Market Size, Share, Development, Growth and Demand Forecast, 2013-2023” report has been added to‘s offering.

Qatar HVAC maintenance service market is anticipated to reach $291.8 million by 2023, the growth of the market will primarily be attributed to upcoming major events in the country and the growing construction industry propelling the growth of HVAC industry.

On the basis of HVAC type, the Qatar HVAC maintenance service market is segmented into heating, ventilation and cooling, of which cooling, the largest HVAC type in terms of revenue in 2017, is further segmented into variable refrigerant flow (VRF), ducted split/packaged unit, split units, chillers, and room ACs.  Of these categories, ducted split/packaged unit accounted for majority of the revenue share in 2017, in the country.

Ducted as well as packaged units usually provide an extensive service maintenance guide.  A large chunk of maintenance cost of ducted split/packaged unit is comprised of labor charges, filters and fan blades require replacement at regular intervals.  Also, every routine service requires checking for leaks and blocked drain openings making it a cumbersome and time-consuming process.

On the basis of end-user type, the Qatar HVAC maintenance service market is segmented into commercial, industrial and residential, wherein commercial is further split into commercial offices/buildings, hospitality, supermarkets/hypermarkets, government, transportation and healthcare.  Of these, commercial offices/buildings category held the highest market share in 2017.

Moreover, Qatar’s hospitality industry is witnessing unprecedented year-over-year growth, as the country gears-up for Vision 2030 and FIFA World Cup 2022.  There are 106 hotels in Qatar and 62 proposed hotels, including 4-star, 5-star, and 7-star and 13,733 guestrooms are under-construction, which is projected to be completed by 2020.  With construction of around 16 proposed malls underway in the country, these facilities are set to proliferate in the coming years and would further bolster the demand for HVAC maintenance market in hospitality sector.

The country is poised to witness positive growth in the construction market due to major upcoming event FIFA World Cup 2022.  This would assist in boosting HVAC installation in the country thereby positively impacting Qatar HVAC maintenance service market.  Also, refurbishment of preinstalled units in the stadiums is also driving the demand for HVAC maintenance service in the country.  Qatar is spending over $10 billion on stadiums and training grounds for the upcoming events.

Moreover, events such as World Athletics Championships to be held in 2019 in Doha is further expected to offer lucrative market opportunities for HVAC maintenance service market players.  These events would attract major tourists and further propel the construction of new hotels.  These events would attract major tourism in the country, coupled with overall growth in food and beverage industry. These factors would further propel Qatar HVAC maintenance service market growth.

The Qatar HVAC maintenance service market is highly fragmented with large number of players operating in the market.  Moreover, the country’s populace is brand conscious; especially the large enterprises, in oil & gas industries, and large corporate buildings, which is resulting in huge adoption of HVAC maintenance service from Europe-based brands due to their superior quality of service offerings.

Some of the major players operating in the Qatar HVAC maintenance service market are Toshiba Carrier Corporation, Mitsubishi Electric Corporation, Al-Ta’adhod Group, Daikin Industries, United Technologies Corporation, Ingersoll-Rand plc, Leminar Air Conditioning Co., Johnson Controls International, Cayan Facilities Management (FM), Standard Services Qatar, Crafter Qatar, Mitsubishi Electric Corporation, Metri Engineering Services (MES) Qatar, EMCO Qatar and Electromechanical Maintenance Services (EMS).  (R&M 26.07)

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11.9  UAE:  Diversified Investment in UAE Shaping China’s Economic Role in the ‎Gulf

Robert Mogielnicki reported on 29 July in the Arab Gulf States Institute in Washington that despite a large appetite among Gulf Arab states for Chinese investment and trade, the ‎UAE has emerged as China’s primary economic partner in the region.‎

Abu Dhabi Crown Prince Mohammed bin Zayed al-Nahyan’s three-day state visit to ‎Beijing reaffirmed the United Arab Emirate’s central role in shaping China’s economic ‎influence in the Gulf.  The UAE-China Economic Forum, which the UAE Ministry of ‎Economy organized to take place alongside the state visit, led to the signing of 16 ‎memoranda of understanding.  Mohamed Alabbar, the forum’s guest of honor and ‎chairman of the Dubai-based Emaar Properties, announced that his firm will implement ‎an $11 billion project with the Beijing Daxing International Airport over the next 10 ‎years.  The Abu Dhabi National Oil Company and the China National Offshore Oil ‎Corporation agreed to boost collaboration on upstream, downstream, and liquefied ‎natural gas activities.  This flurry of commercial agreements came three months after ‎Mohammed bin Rashid al-Maktoum, the UAE’s vice president and prime minister as ‎well as ruler of Dubai, traveled to Beijing, where he led an Emirati delegation at the ‎Second Belt and Road Conference for International Cooperation.‎

Other Gulf Arab states are vying for China’s attention: Saudi Arabian Crown Prince ‎Mohammed bin Salman visited Beijing as part of his Asia tour in early 2019; Oman ‎continues to court Chinese investors for the Duqm megaproject; and Kuwait hopes that ‎Chinese investment will generate momentum for its Silk City initiative.  Despite a large ‎regional appetite for Chinese investment and trade, the UAE has emerged as China’s ‎primary economic partner in the Gulf.  Chinese investments and contracts in the UAE ‎totaled $8.16 billion in 2018 – eclipsing the second-largest recipient, Saudi Arabia, by ‎nearly $3.4 billion, according to the American Enterprise Institute’s China Global ‎Investment Tracker.  Bilateral trade between China and the UAE reached $53 billion in ‎‎2018; comparatively, trade between China and Saudi Arabia was around $32 billion, ‎according to the U.N. International Trade Statistics Database.  The combination of robust ‎emirate-level linkages with China and strong complementarities between the two ‎countries suggests that the UAE will be China’s main economic partner in the Gulf over ‎the coming years.‎

Source: China Global Investment Tracker, AEI (‎*Figures not reported on tracker)

Emirate-Level Linkages

The foundations of the economic relationship between Abu Dhabi and China rest on the ‎supply and demand of hydrocarbon commodities.  Crude oil, natural gas, refined ‎petroleum, and other petrochemical products comprised approximately 95% of the ‎UAE’s exports to China in 2017.  More recent commercial agreements between the two ‎countries reflect the continued significance of the energy industry for this relationship.  ‎In addition to its agreement with the China National Offshore Oil Corporation, ADNOC ‎also signed a partnership framework with China’s Wanhua Chemical Group – worth as ‎much as $12 billion – for collaboration in refining, sales, and shipping operations.‎

Economic relations are becoming more diversified.  Substantial Chinese investments ‎increasingly position Abu Dhabi as a “pivot city” in the Belt and Road Initiative, ‎according to Jonathan Fulton, an assistant professor of political science at Zayed ‎University in Abu Dhabi.  These investments span the industrial, shipping, and even ‎financial sectors.  Etihad Credit Insurance, an export credit agency owned by the national ‎and emirate-level governments, signed strategic agreements with three Chinese ‎financial institutions at the UAE-China Economic Forum.  The Chinese state-owned ‎Industrial Capacity Cooperation Financial Group Limited aims to manage $2 billion in ‎investments and promote Chinese enterprises through Abu Dhabi Global Market, the ‎emirate’s financial free zone.  In early 2019, the Chinese tire manufacturer Roadbot ‎invested around $614 million to construct a plant in the Khalifa Industrial Zone Abu ‎Dhabi.‎

Source: The Observatory of Economic Complexity

‎*“Hydrocarbon” refers to crude oil, natural gas, refined petroleum, and other ‎petrochemical products ‎

Dubai stands to benefit disproportionately from the nonhydrocarbon elements of the ‎growing economic alignment between the two countries.  Bilateral trade between Dubai ‎and China reached $9.8 billion in the first quarter of 2019, and China has served as the ‎emirate’s top trading partner since 2014.  During his Beijing trip in April, Mohammed ‎bin Rashid announced $3.4 billion in Belt and Road Initiative investments in Dubai.  The ‎projects included a $2.4 billion storage and shipping station in Jebel Ali Free Zone and a ‎‎$1 billion food processing and packaging plant.  Following the April conference, Dubai ‎Holding, a global investment company owned by Mohammed bin Rashid, signed a ‎commercial agreement with the state-owned China North Industries Corporation to ‎collaborate in the industrial and mining sectors.  Dubai also hosts Dragon Mart – the ‎largest trading hub for Chinese products outside mainland China.‎

There are several examples of Chinese development and trade-related projects in the ‎UAE’s smaller emirates.  Indeed, the Sharjah Investment and Development Authority, ‎the Fujairah Free Zone Authority, the Ajman Chamber of Commerce and Industry, and ‎the Ras Al Khaimah Economic Zone Authority participated in the Beijing economic ‎forum in July.  These emirates offer an avenue for smaller Chinese firms to invest in the ‎UAE and alternative tourist destinations.  Sharjah contains approximately 18% of ‎the 4,000 registered Chinese firms in the UAE, and the emirate aims to boost the ‎number of Chinese tourists to 200,000 by 2021, from 68,000 in 2018.  The Ajman ‎government permitted the Gulf Chinese Trading Corporation to retain free zone status ‎for a China Mall operating outside the Ajman Free Zone.‎

Overlapping Interests

Complementarities in the areas of free zone development, technological innovation, and ‎logistics and infrastructure expertise further encourage economic alignment between the ‎UAE and China.  The development trajectory of the UAE’s expansive free zone sector, ‎which consists of more than 40 free zones, possesses many similarities with China’s ‎development of special economic zones in the country’s coastal regions.  Both countries ‎launched economic zones during the late 1970s and early 1980s to implement a ‎controlled form of economic liberalization.  This process enabled foreign participation ‎in the economy without major disruptions to prevailing economic, political and social ‎systems.‎

The Jiangsu Provincial Overseas Cooperation and Investment Company Limited began ‎operations in the Khalifa Port Free Trade Zone in 2018 with an estimated $1 billion of ‎investments.  A subsidiary of the company is currently developing a nearly square-mile ‎area of the free trade zone and retains the option of expanding operations to incorporate ‎almost 5 square miles.  The Dubai Multi Commodities Centre free zone hosts around 10% of the Chinese firms in the UAE and has signed memorandums of understanding ‎with multiple provincial-level agencies in China, including the Department of ‎Commerce of Shandong Province in Qingdao and the Hangzhou China Council for the ‎Promotion of International Trade.‎

E-commerce presents an opportunity for greater collaboration between the two ‎countries.  Dubai contains one operating e-commerce free zone, CommerCity, and state-‎owned developer Dubai South is building a similar zone, EZDubai.  The e-commerce ‎firm, which is headquartered in Dubai, partnered with the Chinese ‎technology company Neolix to experiment with autonomous vehicle deliveries in the ‎UAE and Saudi Arabia.  Meanwhile, major Chinese e-commerce firms like Alibaba and ‎ have expanded global shipping infrastructure to target an international ‎consumer base.  The UAE’s nascent e-commerce platforms can shape how this ‎expansion unfolds across the Gulf.‎

Broader state-led efforts to transform the UAE into a knowledge economy and China’s ‎technological research and innovation capabilities form a natural nexus.  While a state-‎led focus on cultivating indigenous tech sectors is apparent across the Gulf, the UAE ‎has wagered substantial political capital in this domain.  The country has a minister of ‎state for artificial intelligence and the UAE Artificial Intelligence Strategy 2031 – two ‎examples of a concerted government effort to position the country as a “global ‎incubator” for AI and other advanced technologies.  Yet private-sector firms have, for ‎the most part, not opted to relocate their research and development departments to the ‎UAE. China could help to bridge this gap.  Chinese universities play a dominating role in ‎the global production of inventions related to distributed AI, machine learning ‎techniques and neuroscience/neurorobotics.  Moreover, China is among the top global ‎spenders on cognitive and AI systems, behind the United States and Western Europe.‎

The implementation of hard and soft infrastructure projects under China’s BRI requires ‎forming local partnerships with firms demonstrating port management and logistics ‎expertise.  State-owned firms in the UAE, such as DP World, can serve as useful ‎facilitators and commercial conduits in this regard.  The embeddedness of Emirati firms ‎‎– as well as a military presence – in the Horn of Africa, in particular, reflects an ‎attractive proposition for provincial investment groups seeking to develop an integrated ‎network of Asian, Middle Eastern and African markets as part of the Maritime Silk ‎Road Initiative.  The linkages exist in both directions: Dubai-based Emaar plans to ‎expand its business operations in China by opening a new office in Beijing.‎

Emirati policymakers are betting that a rising Chinese economic tide will lift all boats ‎in the country.  For the moment, the UAE is well positioned to attract the largest share in ‎the Gulf of trade and investment flows from China.  However, global trade tensions and ‎neighboring Gulf Arab states with similar interests in attracting Chinese trade and ‎investment may constrain the UAE’s ability to control the depth and direction of this ‎relationship in the coming years.‎

Robert Mogielnicki is a resident scholar at the Arab Gulf States Institute in Washington.  (TWI 29.07)

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11.10  EGYPT:  IMF Completes Fifth Review under Extended Fund Facility (EFF) for Egypt

On 24 July, the Executive Board of the International Monetary Fund (IMF) completed the fifth and final review of Egypt’s economic reform program supported by an arrangement under the Extended Fund Facility (EFF).  The completion of the review allows the authorities to draw the equivalent of SDR 1,432.76 million (about $2 billion).  This brings total disbursements to SDR 8,596.57 million (about $11.9 billion or 422% of quota), which is the full amount approved by the Executive Board on 11 November 2016 to support the authorities’ economic reform program.

Following the Executive Board discussion on Egypt, Mr. David Lipton, Acting Managing Director and Chairman of the Board, said:

“Egypt has successfully completed the three-year arrangement under the Extended Fund Facility and achieved its main objectives.  The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform program and decisive upfront policy actions.  Critical macroeconomic reforms have been successful in correcting large external and domestic imbalances, achieving macroeconomic stabilization and a recovery in growth and employment, and putting public debt on a clearly declining trajectory.

“Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits.  Core inflation appears to be well contained, but the central bank should remain cautious until disinflation is firmly entrenched.  Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness.

“The 2018/19 primary surplus target of 2% of GDP was met, helping to anchor a further decline in the public-debt-to-GDP ratio.  It will be important to maintain primary surpluses at this level over the medium term to keep public debt on a downward trajectory.  The elimination of most fuel subsidies, which are regressive, will encourage energy efficiency, help protect the budget from unexpected changes in oil prices, and free up fiscal space for social spending. Improved revenue mobilization is also essential to create room for spending in health, education and social protection.

“The outlook remains favorable and provides an opportune juncture to further advance structural reforms to support more inclusive private-sector led growth and job creation.  The authorities have launched important reforms of competition policy, public procurement, industrial land allocation, and state-owned enterprises, and sustained implementation will be essential to ensure that statutory changes achieve meaningful results in the business climate.  Deepening and broadening of effective reforms is critical to underpin the positive outlook for growth and unemployment.”  (IMF 24.07)

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11.11  EGYPT:  Egypt Evaluates Digital Upgrades, Prepares for More

Amira Sayed Ahmed posted in Al-Monitor on 29 July that the Egyptian government is reporting advances toward achieving its goal of digital transformation in all sectors.  Egypt is making progress in implementing its national goal of streamlining administrative procedures and turning itself into a hub for digital innovation.

On 17 July, the Ministry of Planning, Follow-up and Administrative Reform released a report highlighting the government’s advances in this regard.  One of the successes outlined is its campaign against hepatitis C.  The campaign has been going on for years but a program launched in October is coming to fruition.  The project has provided more than 10,000 digital tablets containing citizens’ data to medical units and helped modernize 197 local medical units in various provinces by introducing modern technology and providing computers.

“Digital transformation has become inevitable. It will help the country move from one era to a completely new era,” Sherif Hashem, head of the executive office of the government-affiliated Egyptian Supreme Cybersecurity Council, told Al-Monitor.

The government is still working on rolling out an electronic platform announced in December to assess the performance of government agencies.  As Egypt is moving ahead with this strategy, many questions are being raised about how it might help curtail corruption and what challenges it will face.  The project, called Egypt’s Performance System, is expected to boost economic growth and help with implementing Egypt’s Vision 2030 for sustainable development.  On 1 July, the Egyptian Planning Ministry held a workshop attended by representatives of several ministries to discuss the digital transformation mechanisms.  Achieving digital transformation is “a must,” Hashem said. “Egypt has an ambitious, realistic plan to achieve it in all sectors.”

Digital transformation started to make headlines in Egypt in 2017 when President Abdel Fattah al-Sisi issued a decree to establish the National Council for Payments.  The council seeks to regulate all issues related to the banking and payment system. It develops electronic payment systems and policies that improve access to financial opportunities and services (financial inclusivity).  The council is authorized to reduce the use of banknotes and spread the use of e-payment methods. In May, the government started implementing the most important steps in the field of financial inclusion by launching an electronic system to collect fees, such as electricity bills and taxes.

Since such progress requires huge infrastructure changes at a hefty cost, the Egyptian government has signed cooperation protocols and fostered partnerships with international information technology (IT) companies.

In December, Sisi and Prime Minister Mostafa Madbouli met with Cisco Systems CEO Chuck Robbins to discuss the US company’s support of digital transformation in Egypt.  The meeting produced a signed memorandum of understanding with the company with the aim of financially and technically supporting digital transformation.

Belal Mohamed, a programmer at a major IT company in Egypt that he preferred not to name, told Al-Monitor there are many challenges facing digital transformation in developing countries in general, and Egypt in particular.  “The idea of digital transformation in Egypt has been delayed because of people’s beliefs.  They don’t want to leave the traditional methods.  Therefore, training cadres and raising awareness among people on how to use modern technology is of paramount importance,” he said, adding that more training centers are needed.

Boosting investments in the IT sector should be given top priority to ensure the transition’s success, Mohamed said.  “Health and transport are among the promising sectors that can make the best use of digital transformation.  Egypt has already taken many steps in these fields. So, developing the investment atmosphere is essential.”

Regarding the electronic performance assessment system, Mohamed said not all public employees may feel comfortable with it.  For example, each government entity assesses workers annually, and currently, their performance is rated at 95% to 100% as a matter of routine.  “This has become a tradition regardless of their performance.  The new system will accurately assess workers based on their productivity,” Mohamed said.  “It may take time to spread digital transformation in all sectors, but it’s not impossible,” he concluded.

Amira Sayed Ahmed is a Cairo-based freelance journalist and full-time editor of local news at The Egyptian Gazette, Cairo’s oldest English-language daily.  She has been involved in writing about political, social and cultural issues in Egypt since 2013.  (Al-Monitor 29.07)

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11.12  EGYPT: Egyptian Car Market in Limbo

Egyptian passenger car sales were down by 10% during the period from January to May 2019, according to the July report of the Automotive Market Information Council (AMIC), with about 41,000 cars sold compared to more than 45,000 in the same period of 2018.  Weak sales over the past seven months prompted car dealers to cut prices.

The decline in sales is widely believed to be due to calls by a campaign called “Let it Rust” to boycott purchases until car dealerships and distributers lower their profit margins.  The campaign is currently urging consumers to wait until September when newer car models are introduced, which might force some dealers to lower the prices of 2019 models further.  The campaign started on social-media networks at the end of 2018 to protest against the high prices of cars in Egypt.  Its Facebook page has attracted some two million followers.

Price cuts and promotions to entice customers to purchase have continued over the last few months, but the head of sales at one of Cairo’s car dealerships believes the campaign is contributing to the slowdown in sales.  “Price cuts on models make more consumers reluctant to buy, as they hope for more price decreases,” he said, adding that the small drops in prices are not necessarily related to the boycott campaign, but could be due to the exchange rate of the Egyptian pound against the dollar.  The value of the dollar against the Egyptian pound has fallen over the last few months from about LE18 against the pound to reach LE16.5 last week.

According to the monthly report by AMIC, total vehicle sales during the first five months of 2019 dropped by 8.5%, recording around 60,000 vehicles, compared to about 63,000 vehicles in the same months of 2018.  Although sales are weak, car imports are steady.  According to the Ministry of Finance, the Alexandria Customs, the main port for receiving car imports, released some 7,100 passenger cars worth LE1.97 billion in June.

Sales of imported cars are better than sales of locally assembled vehicles, with a 0.7% increase in the first five months of 2019 compared to the same period last year, according to AMIC.  About 25,500 cars were sold this year, as opposed to approximately 25,300 in 2018.

The ministry said in a press statement that about LE500 million was collected as taxes on the imported vehicles, and that an additional LE700 million was saved by importers as a result of the exemption of customs duties that is part of the Egypt-EU Association Agreement.  The agreement, which came into effect in January 2010, promised a 10% annual decrease in customs duties on cars from the EU until they reached zero tariffs in January 2019.  (Al-Ahram 25.07)

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11.13  ALGERIA: Between Radical Change and Superficial Reform

Zine Labidine Ghebouli posted in the Fikra Forum on 24 July that since 22 February, Algeria has been witnessing what has been described as the largest political movement since its independence in 1962.  Over the past four months, this popular movement has been able to force changes that most political analysts previously thought to be unachievable in a country such as Algeria.

Bouteflika’s resignation after twenty years of ruling the country was indeed a major event in the modern political life of Algeria.  However, the past few weeks have shown that his resignation was just the beginning of a series of unexpected political events, creating what has now turned out to be an even more complex political climate.

Although Algeria’s protests are entering their fifth month, many expect that the country will still need time to find stability, either through elections, as is prescribed by the constitution, or consensus on a political transition period, as demanded by some social and political forces.  This political ambiguity is the result of both stagnation on the side of the military and a lack of organization among the protesters.  A clearer comprehension of both sides’ motives will help clarify what to expect over the next few weeks in Algerian politics.

The System’s Thirst for Urgent Elections

After the resignation of Bouteflika, the Algerian political system found itself rushed into a situation it could not control.  For the military junta, the real power holder in Algeria, the departure of the former president has unmasked the ruling boite noire and put the military leadership in a direct line of confrontation with those in the streets.  It is for this reason that the army’s chief of staff, Ahmed Gaid Salah, has repeatedly called for presidential elections as soon as possible.  The Algerian military junta rules behind the scenes and is therefore impatient to impose, as usual, its own civilian façade through the next elections.

For the military leadership, organizing elections is the only strategy that would potentially allow the old regime to reconsolidate power.  In order to avoid potential changes outside of their control, the military leadership has passed a series of symbolic but substantive reforms.  As a result, Algeria has witnessed a series of arrests targeting former high officials from both the military and civilian apparatuses on corruption and security-related charges over the past month, many of whom had been seen as symbols of the Bouteflika administration.  The intention of the arrests was to appease Algeria’s popular movement and obtain its trust as it dismantled the Bouteflika ‘clan.’  Yet several political and social actors have labeled the arrests as “political” and “arbitrary.”

Protesters’ lack of trust of the Algerian establishment has derailed this and other attempts to impose the system’s roadmap onto transition in Algeria.  Gaid Salah has also attempted to divide the popular movement along ideological and ethnic lines by evoking Berber identity and labeling the Berber flag a threat to national unity.  Instead, the speech was widely regarded as racist and insulting to one of the major symbols of Algerian identity.  Despite propaganda efforts, protesters remain unconvinced of the military junta’s roadmap and fear that elections without prior systemic change would simply allow the old system to regenerate in a new form.

In response, the Algerian system has returned to its earlier repressive mechanisms; over the past few days, numerous activists and peaceful protesters have been put in provisional detention.  Even during Bouteflika’s rule, with all its restrictions on human rights and freedom of expression, Algerian authorities’ current actions appear more arbitrary and authoritarian.  Today, Algeria appears to be witnessing the regeneration of a military dictatorship.

Additionally, Algeria has witnessed a reshuffling of its security apparatus leadership as Interim President, Abdelkader Bensalah, dismissed four military regions’ chiefs, the commander of the National Gendarmerie, and the director of the Cherchell military academy.  For many observers, this move is considered highly controversial—bearing in mind Bensalah’s constitutional term ended on 9 July.  This reshuffling of military leadership in Algeria is meant to consolidate power within the hands of Gaid Salah and neutralize any potential opposition within the military leadership.

Protester Demands and the Pursuit of Consensus

In contrast, Algeria’s popular movement is demanding a complete removal of the elites of the Bouteflika era from Algeria’s political structure, since protesters view all those who served Bouteflika’s agendas over the past twenty years as responsible for the current crisis.  Though Bouteflika was certainly a significant component of the corrupt political system, he does not carry sole responsibility.

The first initiative took place on 15 June in the form of an inclusive civil society conference.  Approximately forty different organizations, associations, and syndicates came together in order to discuss the political crisis, with the conference concluding that a transitional period of one year was required before the country headed to elections.  During this transitional period, the conference established that a consensus figure or entity should lead the country while an independent body is established to organize future elections.

While the political platform that emerged out of this initiative is commendable, the body lacks recommendations regarding the practical measures that should be taken to ensure a peaceful and smooth transition of power.  Moreover, after twenty years of Bouteflika dismantling community organizations, civil society needs more time to restructure itself in order to become a real alternative to traditional leadership.  While the conference itself served as a noteworthy platform for dialogue during such sensitive times in Algeria, the current unorganized status of civil society made it harder for participants, who rarely used to work collectively, to reach consensus.  Such a political crisis requires mutual trust between the different civil society actors; even though this conference is a good start, the structuration of the civil society will build bridges between its various actors, making the process of building trust easier.

The second initiative was a forum on 6 July focused on establishing the grounds for an inclusive dialogue between most political and social actors.  Unlike the first initiative, the National Forum for Dialogue raised concerns due to its inclusion of former figures of the political system.  Many activists have expressed their concern that the Forum could break the national movement and rejuvenate the old system.  While there was brief discussion of some fundamental issues, such as the release of political prisoners, the rhetoric seems to have mainly adopted the same tone as the Algerian interim head of state, Abdelkader Bensalah.  Open dialogue was emphasized, but no clear or practical conditions for moving forward were advanced.  It is unlikely that any form of dialogue will take place unless major concessions from the Algerian political system are made.  Some of these conditions include the departure of the system’s remaining symbols, lifting the different restrictions on media and civil society, the release of all political prisoners in addition to respecting Algerians’ right to freedom of assembly.

Aside from these main initiatives, several calls and roadmaps have been presented over the past few months, but political and social actors still lack the tools to transform the popular movement into a structured entity.  This lack of leadership and vision is leaving the popular movement without many options and has led to calls for civil disobedience as a last resort.  While most protesters firmly understand the risks of a sustained transitional period, a form of peaceful radicalization of the movement is already taking place.  For the protesters, the departure of the head of state and the government is becoming an essential condition for fair elections.

The Road Ahead

As this political impasse continues to loom over Algerian life, compounded by regional instability along the Algerian border, a peaceful and smooth transition of power is more important than ever.  The success of this transition is, however, conditional upon two major factors: a more structured popular movement and the emergence of dialogue between the political system and the protesters.

It would be naïve to believe that the popular movement, in its current unorganized shape, would be able to serve as an alternative to the extant political leadership.  Despite its capacity to mobilize and its willingness to push the system for more concessions, the movement remains unable to generate clear institutional structures.  Any attempt to push the current political system into departure without an alternative in place would only result in a dangerous power vacuum.  Some of its leaders have begun to understand the urgent need to organize the movement and consolidate the popular demands in a clear, and most importantly, pragmatic roadmap, but building an alternative requires providing the proper and logistical conditions for fruitful discussions to take place.

In addition to conversations within the popular movement itself, another round of dialogue between the rulers and protesters is bound to occur at a certain point.  In his latest speech, Algerian interim head of state Bensalah has reiterated the system’s commitment to open and inclusive dialogue, led by independent figures, that would lead to presidential elections as soon as possible.  Yet protesters see the prospect of such a dialogue as conditional to the release of political prisoners and the departure of the remaining leadership from the Bouteflika era.  Moreover, the military institution has repeatedly expressed its unwillingness to participate in any dialogue, hinting that the military junta is adopted a mechanism of “ruling behind the curtains.”  In order for any successful dialogue, the commitment of the military junta to remain politically neutral even behind the scenes is a necessity.  However, an understanding of the Algerian military’s historic involvement in political affairs suggests that the military leadership is unlikely to engage in a direct and official dialogue with the popular movement unless the latter reaches a solid level of organization and is able to provide an alternative.  Only a real new balance of powers would push the military leadership into dialogue.

What to Expect:

As the country enters its fifth month of protests, it is clear that the transition to a new leadership is unavoidable.  The outcome of this transition is still unclear, but three main scenarios are most likely.

If the protesters can learn to organize themselves, the popular movement will have both energy and a legitimate structure. In such a case, the political system will be forced to sit down and negotiate its departure terms at a certain point.  These terms will undoubtedly include the resignation of Algeria’s old guard and a firm reform of the security apparatus to ensure the dismantling of the military junta and the constraining of the military institution to its constitutional duties.  This is an optimistic scenario, but it is the most likely option for preventing the country from entering into authoritarian rule or violent escalation.

If protesters cannot organize effectively, it is likely that the military junta will be able to impose its presidential candidate and vision for Algerian politics.  Though this scenario may grant a certain short-term stability, such a situation will prevent the economic, political, and social reforms that the country desperately needs from being implemented.  Algeria will return to a fake stability that will end with a potentially violent uprising and overall chaos.  Allowing the system to regenerate itself will only delay the implementation of highly needed reforms that will eventually extract a much higher cost.

If neither the popular movement nor the political system are able to reach their ultimate goal and consolidate power, Algeria will enter a constitutional void.  A prolonged transition period without meaningful restructuring could ultimately result in a violent and chaotic insurgency.  With the difficult situation in Libya and the Sahel, a constitutional void and weakened national security apparatus may grant armed groups relatively easy access to the country.  Several foreign powers, especially the historical strategic ally of Russia, will also seek to protect and advance their interests.  This will turn the country into a new competition field for international and regional powers.

Now is perhaps the most pivotal moment in the last fifty years of Algerian history; there is a golden opportunity for radical change but also the real risk of a sustained period of political chaos.  The situation in Algeria should not only be concerning to the Algerian people but also to its neighboring countries and any international powers with significant interests in the region.  There is an urgent need to agree on a consensus roadmap that satisfies the protesters’ demands according to a realistic time frame. It is essential that the younger generation is given its opportunity to govern, but this must be accomplished in a way that would not compromise the longevity of the state’s institutions.  The challenges facing Algeria both internally and regionally require changing the system of governance rather than reforming and recycling its civilian façade.  The military junta is inherently incapable of bringing peace and stability to Algeria in the long-term.

Zine Labidine Ghebouli is an Algerian student at the American University of Beirut.  He is engaged on political, security, and socioeconomic issues in the MENA region with a focus on Algerian affairs.  (Fikra Forum 24.07)

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11.14  MOROCCO:  Twenty Years Under King Mohammed VI – Domestic Developments

Sarah Feuer and Reda Ayadi posted in TWI‘s PolicyWatch 3155 on 25 July that Morocco has made significant economic progress since 1999, but grievances regarding social issues and political reform continue to pose a challenge.

On 30 July, Morocco’s fifty-five-year-old ruler Mohammed VI commemorated twenty years on the throne.  In 1999, he inherited a kingdom of twenty-eight million citizens facing considerable socioeconomic challenges, including a lack of basic necessities in rural areas, high poverty, a labor market and GDP too reliant on agriculture, and unemployment hovering around 14% nationally and nearly double that among youths.  Moreover, his father’s four-decade reign had been marked by severe political repression and human rights abuses, albeit capped by a controlled opening of the political system and civil society shortly before succession.

In the twenty years since then, Morocco has made significant strides in several areas of economic and human development.  At the same time, Mohammed has largely adopted his father’s preference for limited political openings, eschewing the deeper liberalization many hoped he would introduce.  In the coming decades, Morocco’s ability to remain a stable exception to the chaotic regional rule will likely depend on the viability of this implied bargain.

Schools, Solar Panels and Sufis

Mohammed’s scorecard includes a number of noteworthy economic achievements.  Morocco’s GDP rose from $42 billion in 1999 to $110 billion by 2017 (in 2017 U.S. dollars); economic growth, while still beholden to variable weather effects on agriculture, has averaged 3-4% annually, with the IMF recently predicting an improved economic outlook in the medium term; and the country now ranks second in the region after the United Arab Emirates on the World Bank’s Ease of Doing Business Index.  Signaling a shift from his father, Mohammed invested in Morocco’s long-neglected north early on, one result of which was Tanger Med, the largest port on the Mediterranean Sea and in all of Africa.

Additional bright spots have appeared in school enrollment, women’s advancement and poverty reduction.  In 1999, fully one-third of primary-age children were not attending school.  Following a series of reforms, primary school enrollment now stands at 97%, with the biggest gains among young girls.  In 2004, the monarchy reformed the code of family law (mudawanna), granting women the rights to divorce, child custody and self-guardianship while raising the minimum marriage age to eighteen.  Poverty has fallen substantially since 1999, when roughly 16% of the population and 30% of rural inhabitants were living at or below the poverty line; today those figures are 4% and 19%.  Notwithstanding their higher poverty rates, nearly 100% of rural communities now have access to electricity, compared to only 18% in 1999.

Following the push toward mass electrification, Morocco embarked on a major renewable energy development project, partly to reduce its reliance on hydrocarbon imports and partly to mitigate the adverse effects of climate change.  One result has been the development of the Noor solar power plant, the largest such complex in the world and one that could ultimately make Morocco an energy exporter to Europe and Africa.

The kingdom is also a regional outlier in its approach to countering Islamist extremism.  Four years into Mohammed’s reign, Morocco was rocked by the worst terrorist attack in its history, with twelve suicide bombers blowing themselves up at various tourist and Jewish sites in the capital, killing thirty-three civilians.  The attack prompted the king—who as “Commander of the Faithful” is also the country’s chief religious authority—to launch comprehensive reforms such as bringing mosques and Islamic schools under tighter state control, stripping religious education curricula of extremist content, promoting Sufism and other streams of Islam believed to promote moderation, and establishing an imam training academy for students from North and West Africa and, increasingly, Europe.

These reforms have not immunized the kingdom from homegrown extremism, as attested by the estimated 2,000 Moroccans who joined the Islamic State and other jihadist groups in Syria between 2012 and 2016.  Still, through a blend of heightened security measures and religious reforms, the country has evidently contained the threat of extremism better than most of its regional peers.

Gradualism or Gridlock?

If the Casablanca attack fueled a push to counter religious extremism, it also slowed the momentum toward political liberalization implied in Mohammed’s pledge to rule differently than his father had.  After a series of early initiatives distributed approximately $185 million to over 16,000 victims of King Hassan II’s so-called “Years of Lead,” many expected civil liberties to expand under his son.  But the 2003 bombings spurred a sweeping antiterrorism law that human rights groups condemned for enshrining an overly broad definition of terrorism and enabling the government to obstruct ostensibly peaceful political activity.  Today, press freedom and other civil liberties remain restricted, and Morocco’s Freedom House ranking of “partly free” hasn’t budged in twenty years.

Frustration with the pace of reforms boiled over in 2011, against the backdrop of “Arab Spring” uprisings throughout the Middle East. In response to nationwide protests demanding greater political rights and an end to corruption and high unemployment, Mohammed organized a constitutional referendum and called for new elections.  The main results of these initiatives were partial empowerment of the legislative branch, formal recognition of minority ethnic identities and a new parliament dominated by the Justice and Development Party (PJD).  This mildly Islamist party, with roots in the Muslim Brotherhood, had been active in Morocco’s political landscape for decades and had long since dropped its formal opposition to the monarchy. (The country’s other main Islamist organization, al-Adl wal-Ihsan, advocates eliminating the monarchy and is thus banned.)

At the same time, the 2011 constitution reserved considerable powers for the king, and his allies have since built new parties to counteract the PJD.  The resulting dynamic largely reproduced the contours of a political system long familiar to Moroccans: a monarchy unwilling to cede much power governs alongside (or, rather, above) political parties that are unable to advance shared legislative goals.  A decentralization program was initiated to grant more discretion and responsibility to regional governments, but the process has largely stalled.  Meanwhile, corruption remains rampant; youth unemployment, a driving factor behind the 2011 protests, stands at 22% nationally and 43% in urban areas, a sobering figure given that nearly half of Morocco’s 34 million citizens are under age twenty-four; economic inequality, as reflected in annual measures of Morocco’s Gini coefficient, remains at pre-1999 levels or worse; and access to decent healthcare and education is limited.

Such conditions fueled a series of protest movements in the years following Morocco’s “Spring.”  In 2016-2017, mass demonstrations broke out in the traditionally restive Rif region after a local fishmonger was crushed to death by a garbage truck as he sought to retrieve his confiscated catch.  More than 150 protestors were arrested in the ensuing crackdown on the al-Hirak al-Shaabi movement, whose leaders are currently serving twenty-year jail sentences.  In 2018, an unprecedented boycott targeted three of the kingdom’s leading companies in protest of longstanding links between business and political elites.  Notably, two of the companies are run by individuals with known ties to the palace.

According to the latest Arab Barometer poll, 49% of Moroccans want rapid domestic change (the highest percentage of any Arab country polled), and 70% of adults under age thirty wish to emigrate.  Adequately addressing the frustrations behind such figures will be a central challenge for Mohammed as he enters his third decade of rule.

Considerations for Washington

The United States has a clear interest in helping Morocco preserve its relative stability, particularly given the uncertainties gripping Algeria next door.  That stability largely depends on Rabat’s ability to continue implementing reforms in a way that reduces the drivers of social unrest while avoiding the chaos and authoritarian regression seen elsewhere in the region.  Washington can boost the kingdom’s chances of success by more actively engaging it in the development arena.

Targeted U.S. assistance has already yielded substantial results under Mohammed VI.  For example, a five-year Millennium Challenge Corporation grant of $697 million in 2008-2013 reportedly facilitated Morocco’s poverty reduction efforts.  A second MCC “compact” of $450 million went into effect in 2017, rightly targeting job creation and land productivity.  But the Trump administration has repeatedly sought to reduce its annual aid package, perhaps reasoning that Morocco’s relative calm obviates the need for assistance.  Given the kingdom’s ongoing economic woes and growing indicators of social frustration, the administration should reconsider this stance.

One area that warrants greater attention—and to which Rabat would be especially receptive—is investment in Morocco’s private sector.  Specifically, the Trump administration should consider creating a Moroccan-American Enterprise Fund, based on the highly successful model established by previous administrations with various Eastern European allies.  Such a fund would spur much-needed private-sector growth in the kingdom and could even create opportunities for joint business ventures with American firms.

Of course, any engagement with Morocco will be hampered to the extent that Washington’s diplomatic presence remains limited.  Accordingly, sending an ambassador to Rabat remains an urgent priority.

Sarah Feuer is an associate fellow with The Washington Institute, where Reda Ayadi was a research assistant from 2018 to 2019.  (TWI 25.07)

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11.15  MOROCCO:  Twenty Years Under King Mohammed VI – Foreign Policy Developments

Sarah Feuer and Reda Ayadi posted in TWI‘s PolicyWatch on 29 July that Morocco’s king has invested considerable diplomatic capital in Africa, Europe, the United States and China, but the longstanding Western Sahara dispute remains a source of tension with neighboring Algeria.

Over the past two decades, King Mohammed has reduced Morocco’s footprint in the Middle East, preferring to invest in new relationships across Africa, fortify alliances in Europe, maintain productive ties with Washington, and seek investments from China.  Hostile relations with Algeria remain a bleak spot, though, and while Mohammed has arguably registered successes on the Western Sahara portfolio, resolving the dispute remains elusive.

From the Gulf to Africa and Europe

Under the previous king, Morocco devoted considerable energy to developing ties with wealthy Persian Gulf states and mediating in the Israeli-Palestinian conflict.  Although Mohammed is keen to continue attracting Gulf investments, Morocco has been largely absent from the peace process since he came to power in 1999, and has sought to avoid undue entanglement in Middle Eastern affairs.

Several recent examples are instructive.  In 2015, Morocco joined the initial Saudi-led military intervention in Yemen, but then shortly drew down its involvement after one of its F-16s was reportedly shot down by Houthi rebels.  In 2017, the kingdom pointedly did not pick a side in the Gulf dispute over Qatar, despite Rabat’s ostensibly close ties with Riyadh and longstanding reliance on Saudi investments.  Two years later, Morocco suspended its participation in the Yemen war altogether after the Saudi-owned television outlet Al-Arabiya aired a documentary seen as criticizing Rabat’s position on Western Sahara.  As for the Israeli-Palestinian conflict, U.S. advisor Jared Kushner recently visited the kingdom to solicit its support for last month’s multilateral peace conference in Bahrain.  Ultimately, however, Morocco sent only a low-level Foreign Ministry staffer to the event.

In short, Rabat’s Middle Eastern presence has not flourished under Mohammed.  Instead, the king has focused his diplomatic energies on building ties across Africa and strengthening traditional alliances in Europe.  The former effort is perhaps the most significant shift from his father’s reign, and it has begun to yield dividends.  The kingdom has increased its access to African telecom, mining, banking, and insurance markets, and expanded its regional clout following its readmission into the African Union in 2017.  Morocco had left the organization in 1984 after the membership decided to admit the Sahrawi Arab Democratic Republic (SADR), the name given to Western Sahara by the Algeria-backed Polisario Front, Rabat’s main adversary in that still-disputed territory.

The palace also has ample reason to deepen ties with Europe, where over 50% of the Moroccan diaspora community (around 4-5 million citizens) currently resides.  In 2000, Mohammed inked an EU-Morocco Association Agreement that significantly expanded trade.  Since then, the relationship has broadened to include parliamentary exchanges, EU assistance (€200 million per year in 2014-2017 alone), and cooperation on security and migration.  The latter issue has become especially pressing given last year’s closure of central Mediterranean migration routes and the growing number of people seeking entry into Europe through Morocco.

Relations suffered a setback in 2015-2018 following a European Court of Justice decision to exclude Western Sahara from EU-Morocco trade agreements covering agricultural, agro-food and fisheries products.  Earlier this year, however, the European Parliament adopted a series of amended agreements incorporating the disputed territory, and relations have largely recovered.

Great Power Engagement

Though not as robust as its European alliances, Rabat’s ties with the United States have made important advances since Mohammed ascended the throne.  In 2004, Washington designated Morocco as a “Major Non-NATO Ally”; a year later, the two countries launched Flintlock, an annual regional military exercise focused on counterterrorism.  Indeed, Rabat has established itself as a key counterterrorism partner in West Africa and the Sahel, where jihadist groups such as al-Qaeda in the Islamic Maghreb have sought to exploit failing states in Mali and elsewhere.  The kingdom is a member of the Trans-Sahara Counterterrorism Partnership, a U.S. program that helps regional governments strengthen their capacity to contain and defeat local terrorist organizations.  Rabat was also instrumental in forming the Global Counterterrorism Forum with Algeria, Egypt, Jordan, Qatar, Saudi Arabia and the United Arab Emirates.

Meanwhile, Morocco and the United States have conducted an annual bilateral military exercise since 2008 known as African Lion, focused on improving interoperability.  Since 2012, they have convened a Strategic Dialogue focused on enhancing military, economic, and counterterrorism cooperation.  The kingdom was the first Maghreb country to join the U.S.-led coalition to defeat the Islamic State.  In 2018, the U.S. Navy conducted Lightning Handshake with Morocco’s navy and air force, the most sophisticated bilateral military exercise ever conducted with an African partner.

On the economic front, Washington and Rabat signed a free trade agreement in 2006, the only one of its kind between the United States and an African country.  The FTA has been something of a disappointment to Morocco insofar as the trade deficit with America has only grown.  Still, the agreement had a substantial secondary effect of signaling a hospitable investment climate, and major U.S. companies such as Boeing have committed to projects in the kingdom as a result.

Such relations have not precluded Moroccan engagement with U.S. rivals, chiefly China.  The king’s 2016 meeting with President Xi Jinping led to several accords spanning the tourism, education and infrastructure sectors.  Earlier this July, Morocco’s BMCE Bank and the state-owned China Communications Construction Company agreed to build a high-tech city near Tangier, which if completed could create 100,000 jobs and attract investments estimated at $10 billion.  Yet a previous deal in 2017 largely floundered, fueling skepticism about whether the new agreement will translate into actual investments on the ground.

Stubborn Sahara

Of all the king’s foreign policy goals, the most highly prized yet most elusive has been international recognition of Moroccan sovereignty in Western Sahara.  In 2006 – a full fifteen years after a UN peacekeeping force began monitoring a buffer zone separating the Moroccan-controlled territory from Algeria and Mauritania – Rabat presented an autonomy plan in which Western Sahara would govern itself under the kingdom’s sovereignty.  France endorsed the proposal, while the United States deemed it “serious, realistic, and credible.”  The Polisario rejected the plan, as did its longtime backer, Algeria, and their subsequent talks with Morocco largely petered out in 2012.

Since then, Mohammed has continued seeking support for his autonomy proposal wherever he can find it.  Much of his outreach to Africa, for example, reflected a calculation that it would bring not only economic benefits but diplomatic progress as well.  In some respects, the approach has worked – since the late 1990s, twenty countries worldwide have withdrawn their recognition of the SADR and thirty-five African nations still do not recognize it.  Furthermore, domestic policy initiatives like the “advanced regionalization” program have incorporated Western Sahara into Morocco’s existing governance structures, tilting realities on the ground in Rabat’s favor.

In other respects, however, Mohammed’s Western Sahara diplomacy has come up short, as evidenced by tensions with Europe following the EU court decision on trade, and the African Union’s insistence on allowing SADR participation in its summits.  Washington has strongly hinted at its own frustration with the status quo, with National Security Advisor John Bolton expressing opposition to open-ended peacekeeping missions, and Rabat consequently facing UN pressure to return to the negotiating table.  Meanwhile, Morocco’s relations with Algeria have remained largely hostile, further precluding resolution of the territorial dispute. Still, Mohammed probably deserves much of the credit for keeping tensions in Western Sahara from erupting into large-scale violence.

Sarah Feuer is an associate fellow with The Washington Institute, where Reda Ayadi was a research assistant from 2018 to 2019.  (TWI 29.07)

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11.16  TURKEY:  Turkey’s Current Account Deficit Shrinks, But Budget Gap Widens

Mustafa Sonmez posted in Al-Monitor on 26 July that Turkey’s chronic current account deficit has fallen to a 16-year low, but this ostensible improvement is hardly the outcome or harbinger of sound economic headway.

For the first time in a long time, Turkey’s current account has shown a surplus on a monthly basis, bringing the 12-month current account gap to a 16-year low, according to Central Bank data released on 11 July.  With the $151 million surplus in May, the current account deficit — or foreign-currency deficit — shrank to $2.4 billion year-on-year, heralding that a chronic problem of the Turkish economy was at least temporarily curtailed.

Only three days later, however, fresh economic data showed another problem, a sharp increase in the central government budget deficit.  The deficit stood at TL 78.6 billion ($13.8 billion) in the first half of the year, widening nearly 72% from TL 46 billion in the same period last year.

Deficits in the current account and central government budget are among the basic economic indicators of a country.  When both gaps reach significant levels, economists speak of a “twin deficit,” which means the country is in a deep trouble.

The current account deficit befalls countries when their foreign-currency spending, which goes mostly to imports, exceeds significantly their foreign-currency revenues, derived mostly from exports and the tourism industry.  For emerging economies such as Turkey, current account deficits are considered a chronic problem.  Major countries plagued by current account gaps in times of economic growth include Argentina, Brazil, Chile, Czechia, India, Indonesia, Mexico, Poland, Russia and South Africa.

In emerging economies, growth often relies on imported inputs, including machinery and energy.  The import-reliant production goes largely to domestic consumption, bringing in little foreign exchange.  Foreign-currency revenues from exports, tourism and some services such as shipping fall short of covering foreign-currency spending, leading to current account gaps. To finance such gaps, countries need to secure external funds, which is not always an easy task.

To attract foreign investors, a country’s basic economic indicators, especially inflation, and political climate need to inspire confidence.  Above all, emerging countries are expected to maintain fiscal discipline and keep their budgets sound.  The maestros of the global system, the International Monetary Fund (IMF) in particular, would often advise governments to steer clear of big budget deficits, with current account gaps often condoned.

A budget deficit coming atop a current account deficit is seen as the sign of a government struggling to manage the economy, bereft of sound tools to battle crises — an outlook that scares foreigners away.  Consequently, while the country struggles to lure external funds to bridge the current account gap, hard currencies begin to appreciate and its own currency nosedives.  This, in turn, increases the cost of imported inputs, stoking inflation, while the soaring prices curb domestic demand, causing the economy to slow and even shrink.  Economic contraction results in a decrease in imports, meaning that the current account deficit begins to shrink as well.  This might even result in a period where export and tourism revenues surpass the money spent on imports, leading the country to appear as having a foreign-currency surplus.

In the 2003-2018 period under the Justice and Development Party, Turkey’s economy managed to grow with an average current account deficit of 4.8% of gross domestic product (GDP).  The rate peaked at 8.9% in 2011, when growth was especially high, and fell to 1.8% in 2009, which was a crisis year.

Current account deficits as big as almost 5% of GDP are a rare occurrence in emerging economies.  Turkey managed to sustain that for 16 years before stumbling in the second half of 2018, when external funds fell short of financing the current account gap, causing a spike in hard-currency prices and, ultimately, an economic contraction and crisis.

The economy’s decreasing demand for imports closed the current account deficit before turning it into a surplus in May.  The IMF expects the Turkish economy to contract nearly 3% this year and post a current account surplus of some $5 billion, amounting to 0.7% of GDP.  Yet it expects the deficit to reappear down the road as economic revival begins.  The forecast for 2020 involves a 2.5% growth rate and a current account deficit of $3.4 billion, or 0.4% of GDP.

When economies come to the brink of crisis, governments would use treasury funds to try to cushion the turmoil and limit the damage.  Amid Ankara’s repeated use of budget funds in a bid to manage the crisis, the gaps in the budget have widened sharply since the second half of 2018, with the hemorrhage going on.  Last year, the budget deficit amounted to 2% of GDP, up from 1.5% in 2017 and 1.1% in 2016.  The rate appears on course to easily reach 2.5% this year. Remarkably, the primary balance — the fiscal balance net of interest payments — is showing a deficit for the first time in 16 years.

To rein in the budget gap, Ankara has been scrambling for one-off revenues, with tax revenues falling short of being a remedy.  Standing out among such attempts are the funds generated from paid exemptions from military service and an amnesty for illegal construction.  In an even more controversial step last week, the government pushed through parliament an amendment that allows it to use money from the central bank’s legal reserves — a sum set aside by law for use in extraordinary circumstances — in the budget.  Despite all those measures, however, the budget’s borrowing need has not eased.

To start growing anew, the Turkish economy needs external funds. Foreign investors, for their part, need confidence in the country’s economic balances, especially inflation, and political prospects.  Turkey, however, continues to be a high-risk country amid a lingering crisis with the United States over its purchase of Russian weaponry and a mounting row with the European Union over gas exploration in the eastern Mediterranean.  Such tensions prevent a robust inflow of external funds to spur a fresh growth momentum.  As things stand today, the Turkish economy resembles a punctured ball that has hit rock bottom, unable to bounce back.

Mustafa Sonmez is a Turkish economist and writer. He has worked as an economic commentator and editor for more than 30 years and authored some 30 books on the Turkish economy, media and the Kurdish question.  (Al-Monitor 26.07)

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11.17  GREECE:  Fitch Affirms Greece at ‘BB-‘; Outlook Stable

On 2 August, Fitch Ratings affirmed Greece’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BB-‘ with a Stable Outlook.

Key Rating Drivers

Greece’s ‘BB-‘ rating is underpinned by high income per capita levels, which far exceed ‘BB’ and ‘BBB’ medians.  The profile of Greece’s general government debt stock is exceptionally favorable and fiscal performance over the last three years has been stronger than ‘BB’ rated peers.  Governance indicators are also significantly stronger than in most sub-investment-grade peers.  These strengths are set against weak medium-term growth potential, extremely high level of non-performing loans in the banking sector and high stocks of general government debt and net external debt.

Parliamentary elections held on 7 July saw the center-right New Democracy party returning to power after more than four years in opposition, winning 158 out of 300 seats.  The last Greek election that left one party commanding an overall majority was in 2009.  The advent of a single party majority government should help cement the improvement in political stability seen in recent years.  This could also underpin swift implementation of New Democracy’s policy agenda.

The government (led by Prime Minister Kyriakos Mitsotakis) was sworn in on 8 July.  It is too early to assess government effectiveness and policy implementation.  However, in our view, the policy agenda could further underpin Greece’s economic recovery.  The government’s key economic priorities include a broad reduction in tax rates, an acceleration of the privatization program and a commitment to reduce bureaucracy.  The aim is to improve the business climate and attract private investment to sustain the economic recovery and boost medium-term GDP growth potential.

On 30 July, parliament approved a first set of measures including a reduction in the property tax (ENFIA), which the government expects will cost €205 million (0.1% of GDP) in 2019.  A scheme to settle outstanding tax and social security payments in instalments was also approved.  In September the government plans to present a broader economic package containing tax cuts for both households and corporates to be introduced gradually from January 2020.  Measures are likely to include a gradual cut in corporate income tax to 20% from 28 over two years, a cut to the lowest income tax rate to 9% from 22%, a suspension of capital gains tax on property sales and suspension of VAT on construction activity.  It is too early to assess the overall impact of these measures on GDP growth and public finance outturns but we expect to have more information by September when the 2020 draft budget will be presented.

The government appears to have prioritized acceleration of privatizations and addressing the banking sector asset quality issues.  The oversight of banking sector policies is now the sole responsibility of the Ministry of Finance (as opposed to the previous joint responsibility with the Ministry of the Economy and Ministry of Justice) and the privatization program is overseen by the Ministry of the Economy. In our view, this is a positive development that could lead to swifter policy implementation in these areas.

Public finances continue to improve.  Greece posted a headline budget surplus of 1.1% of GDP in 2018, up from 0.7% a year earlier, driven by higher than budgeted revenues, expenditure restraint and under-execution of capital spending.  This implied a primary surplus of 4.4% of GDP, well above the ESM program target of 3.5% of GDP.  We expect fiscal policy to remain sound and project primary surpluses of 3.5% and 3.4% of GDP in 2019-20.  General government gross debt has peaked at 181.1% of GDP in 2018 and we expect it to decline firmly to 161% of GDP by 2021, on the back of sustained primary surpluses, average real GDP growth of 2% and low nominal effective interest rates.

Although the stock of general government debt will remain high, there are mitigating factors that support debt sustainability.  Greece’s cash reserves are high at €26.8 billion (14% of GDP) in December 2018 and have remained undrawn since the end of the ESM program (August 2018).  Gross financing needs are low and our estimates (which assume full rollover of T-bills) indicate that Greece could be fully funded until 2022-23, providing a significant backstop against any financing risks for a prolonged period.

The concessional nature of Greece’s public debt implies that debt servicing costs are low; 90.8% of general government debt stock is at fixed interest rates (which implies low sensitivity to interest rate shocks), and the average maturity of Greek debt (21.1 years) is among the longest across all Fitch-rated sovereigns.  Interest payments to revenue at 7.2% are slightly below the current ‘BB’ and ‘BBB’ medians of 7.3%.  The nominal effective interest rate on Greece’s general government debt stock is well below that of most Eurozone peers.

In Fitch’s view, the current fiscal policy mix may not be sustainable over the medium term.  The fiscal adjustment since 2016 has relied heavily on tax revenues and under-execution of capital spending.  The new government inherits the challenge of rebalancing the fiscal policy mix without hampering the commitment to the fiscal targets agreed with the official creditors.  The repeal by the previous government of the reduction in the personal income tax threshold would make it harder to rebalance fiscal policy while meeting the primary surplus targets (3.5% of GDP annually until 2022), particularly when taxes are being cut.

New Democracy has said that it would eventually like to reduce the primary surplus targets by at least 1% of GDP, which would still involve running large primary surpluses.  The government has committed to meet the current targets for 2019 and 2020 but will aim to renegotiate them from 2021 onwards.  The government has indicated that it will seek the reductions as part of an agreed process with the ESM that would take account of the implementation of other reforms, and fiscal and growth outturns. This reduces risks of deterioration in relations with the creditors.

Greece continues to make progress towards the resumption of regular bond issuance.  Yields on Greek government bonds fell sharply after the July snap elections.  The sovereign took advantage of the favorable market conditions and on 16 July 2019 placed a new benchmark €2.5 billion seven-year bond with a yield of 1.9%.  The yield was well below 3.45% for the €2.5 billion five-year bond issued in January and the lowest since Greece joined the Eurozone.

We have revised our 2019 real GDP growth forecast to 1.9% from 2.3%, on the back of a weaker than expected Q1/19 outturn, owing to a marked slowdown in export growth and weaker public consumption.  We expect growth to recover to 2.2% in 2020 and 2.0% in 2021.  Pent-up investment demand, declining unemployment rate, rising disposable income and moderate fiscal loosening are set to support domestic demand.  The EC economic sentiment index rose to an 11-year high in July (to 105.3 from 101.0 in June) indicating a post-election rebound in both business and consumer confidence.  The unemployment rate is declining at a steady pace, declining to 17.6% in April 2019 (a seven-year low) and employment grew by 2.4%.

Asset quality is improving but remains weak. Non-performing loans (NPLs) were 45.1% of total loans at end-March 2019, down from 48.5% at end-March 2018.  While the stock is declining at a faster pace (-13.5% y-o-y), the ratio to total exposures declines more slowly due to ongoing loan contraction (-7% y-o-y).  The economic recovery, the gradual rebound in real estate market prices, increased non-performing exposures (NPE) sales, greater use of electronic auctions and, to a lesser extent, out-of-court workouts should help banks meet new NPE targets submitted to the Single Supervisory Mechanism for 2021 (marginally below 20%).  The recently approved Main Residence Protection Law should also provide a more effective mechanism to work out the most problematic NPEs.  The two-large scale NPE reduction schemes proposed by the Hellenic Financial Stability Fund and the Bank of Greece could help banks reduce NPE more rapidly.  However, there are still uncertainties regarding the timeframe, compliance with state aid rules and the use of such schemes by the banks.

The banks’ funding profiles have improved, helped by deposit inflows and debt issuance in wholesale markets. Piraeus and National Bank of Greece (NBG) recently issued subordinated notes (T2 debt) to increase their respective total capital buffers.  Specifically, Piraeus issued €400 million at end-June 2019 (coupon 9.75%) and NBG issued €400 million in mid-July 2019, after the elections (coupon 8.25%).  At end-March 2019, total Eurosystem funding for the four systemic banks decreased to €8.4 billion from EUR33.7 billion at end-2017, reflecting significant improvements in their funding profiles.  This was only made of ECB funding as banks had fully repaid the emergency liquidity assistance by end-February 2019.  We expect remaining capital controls to be lifted by the end of the year, taking into account the improvement in banks’ funding and liquidity profiles and improved access to financial markets for the sovereign and the banks.

Rating Sensitivities

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

-Track record of reduction in general government indebtedness and greater confidence that the economic recovery will be sustained over time.

-Track record of prudent economic and fiscal policy underpinned by an orderly working relationship with official sector creditors and a stable political environment.

-Lower risks of crystallization of banking sector risks on the sovereign balance sheet.

-Developments that could, individually or collectively, result in negative rating action include:

-A loosening of fiscal policy that undermines confidence in general government debt sustainability.

-Adverse developments in the banking sector increasing risks to the real economy and the public finances.

-Re-emergence of sustained large current account deficits, further weakening the net external position.

Key Assumptions

Our long-run general government debt sustainability calculations are assumptions of average primary surplus of 1.9% of GDP over 2019-40, real GDP growth that averages 1.4% over the same period and GDP deflator converging towards 2%.  Under these assumptions, public debt declines steadily to 125% of GDP by 2030 and 111% of GDP by 2040 from 181% of GDP in 2018.  (Fitch 02.08)

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