Fortnightly, 7 September 2016

Fortnightly, 7 September 2016

September 7, 2016


7 September 2016
4 Elul 5776
6 Dhul Hijjah 1437




1.1  Fifteen Housing Projects to be Completed in Arab Towns
1.2  Ministry of the Economy to Support New Meat Producers
1.3  Transport Minister Inaugurates Jezreel Valley Railway


2.1  SkyGiraffe Raises $6 Million
2.2 Partnered with CyberStep
2.3  DoD Approves Israeli Radar for US Iron Curtain Testing
2.4  Pointer Telocation Acquires Cielo Telecom in Brazil for $6.5 Million in Accretive Transaction
2.5  South Carolina-Israel R&D Award Announced
2.6  Freight Marketplace Freightos Acquires WebCargoNet
2.7  Cronus Cyber Security Raises $3.5 Million
2.8  Second Murata Hackathon to Be Held in Israel
2.9  Appsbuyout Snaps Up True Contact Caller ID App
2.10  Nano Dimension to Open New Ink Production Facility in Israel


3.1  Empire State Realty Trust Announces $622 Million Investment by Qatar Investment Authority
3.2  State Department to Sell Qatar Mk-V Fast Patrol Boats
3.3  World’s Largest Indoor Theme Park Opens in Dubai
3.4  Six Flags Planning World’s Biggest Roller Coaster in Dubai
3.5  PKL Services Gets $495 Million Saudi F-15 Support Contract
3.6  Elevation Burger Announces Plans For 20 New Restaurants In Egypt


4.1  Haifa Chemicals Slapped With NIS 3.6 Million Fine for Air Pollution
4.2  Saudi Plastic Bag Use is 20 Times Global Average


5.1  Aqaba Welcomed Nearly 280,000 Tourists During First Half of 2016

♦♦Arabian Gulf

5.2  GCC Hospitality Market Forecast to be Worth $36.7 Billion by 2020
5.3  Kuwaiti Gov’t Sets $1 Billion Budget for Hospital Bills of Nationals Abroad
5.4  Qatar’s First Quarter GDP Growth Slows to Lowest Level Since 2011
5.5  Sheikh Mohammed Approves UAE Bankruptcy Law
5.6  Dubai-UK Trade Totals $1.82 Billion in First Quarter of 2016
5.7  Dubai Launches Smart System to Track Water Container Refills
5.8  Saudi Inflation Rate Falls to Year-Low in July
5.9  Saudi Food Inflation Turns Negative for First Time Since Jan 2010
5.10  Russia & Saudi Arabia Agree Cooperation on Oil Price But Not On Freeze

♦♦North Africa

5.11  Egypt’s Parliament Approves VAT at 13% in 2016/17
5.12  Egypt’s Tourism Falls by 41.9% in July
5.13  Egypt’s Minister of International Cooperation Discusses Future Plans With Canada
5.14  Suez Canal Sees 2% Decline in July Revenues
5.15  4.2 Million Tourists Visited Morocco in First Half of 2016
5.16  Morocco’s Energy Bill Down 29.9% as of July 2016
5.17  Morocco Ranks in Top Five of World Olive Oil Producers


6.1  Turkey’s Exports Rise Some 7% in August Due To Sharp Rise in Car Sales



7.1  Eid Al-Adha – Feast of the Sacrifice to Begin on 12 September
7.2  Millions of Students Begin School in Israel
7.3  Number of Arab Teachers in Jewish Schools Rises by 40%
7.4  Space Education Program Expands Orbit to 100 Schools
7.5  For Second Straight Year, Druze Town Has Top Matriculation Rate


7.3  Eid Al Adha Break for UAE Private Sector is 11 – 13 September
7.3  New Bill Increases Jail Terms as Female Genital Mutilation Becomes a Felony in Egypt
7.3  Tunisia’s Youngest Premier Since Independence Sworn in
7.3  Turkey Cuts Length of Military Officers’ Service After The Attempted Coup


8.1  BioLineRx & I-Bridge Capital Establish a New Drug Development Joint Venture in China
8.2  Leap Therapeutics & Macrocure Announce Definitive Merger Agreement
8.3  Exalenz Collaboration with Conatus for BreathID Monitoring Patients with Cirrhosis Associated with NASH (Nonalcoholic Steatohepatitis)
8.4  Kamada & Kedrion Seek FDA Approval of Human Rabies Immunoglobulin as a Post-Exposure Treatment
8.5  Gordian Surgical Receives CE Clearance for TroClose1200


9.1  Checkmarx Announces Federal Information Processing Standards (FIPS) Support
9.2  Telematics Wireless to Implement Smart City Technology in Montréal
9.3  Reporty App Live-Streams Emergency Situations From Your Smartphone To First Responders
9.4  Mellanox Ethernet Offload Engines Enable New Levels of Application Efficiency with VMware vSphere
9.5  Supermassive Games Compiles its Games 4 Times Faster With IncrediBuild
9.6  Mellanox Ethernet Solutions Accelerate Germany’s Most Advanced Cloud Data Center
9.7  Cronus Releases New Versions for the CyBot Pro and Enterprise Solutions
9.8  Datumate Unveils DatuFly, A Professional Imagery App for Drones


10.1  Finance Ministry Says 2016 Economic Growth Better Than Expected
10.2  OECD Says Israel 4th Worldwide in Meat Consumption
10.3  New Israeli Car Deliveries Up 30% in August


11.1  ISRAEL: The New Normal: Today’s Arab Debate Over Ties with Israel
11.2  LEBANON: Outlook Revised To Stable on Resilient Financial System & Deposit Inflows
11.3  JORDAN: IMF Approves $723 Million Extended Arrangement for Jordan
11.4  IRAQ: Republic of Iraq Ratings Affirmed at ‘B-/B’; Outlook Stable
11.5  QATAR: Qatar Ratings Affirmed At ‘AA/A-1+’; Outlook Stable
11.6  EGYPT: The Gulf’s Entanglement in Egypt
11.7  SAUDI ARABIA: Fitch Affirms Saudi Arabia at ‘AA-‘; Outlook Negative
11.8  EGYPT: Egypt Resorts to Drastic Proposals to Solve Dollar Crisis
11.9  GREECE: Fitch Affirms Greece at ‘CCC’


1.1  Fifteen Housing Projects to be Completed in Arab Towns

Israel’s Ministry of Construction and Housing announced on 25 August that it was completing the signing of development agreements with the local authorities in Yafia, Sakhnin, Tira and Nazareth for planning and marketing hundreds of housing units and commercial and industrial zones.  The Ministry of Construction and Housing said that these plans would supplement 15 plans signed with large Arab Israeli communities within a six-month period.  Agreements will later be signed with 50 more local authorities.

The agreements are the first implementation of Cabinet Resolution No. 922, passed last January, in which the government will aid in the development of minority communities through 2020.  The Ministry of Construction and Housing will provide NIS 1.41 billion during this period for housing solutions in the Arab Israeli sector.  One clause in the plan for aid to the sector focuses on encouragement of the planning and marketing of thousands of high-density construction housing units on state land, and on the removal of barriers for thousands more housing units on private land in those communities.  The Ministry of Construction and Housing will subsidize development costs in these communities for this purpose, subject to increasing the density of construction, in line with the cabinet resolution.

The plan also mentions increasing the budget for public buildings already under construction and new construction; planning approval for over 30,000 housing units on private land and state land in Yafia, Sakhnin, Nazareth and Tira; budgeting detailed plans on private and state land; budgeting plans for registration and regulatory purposes; use of a pool of building management companies to promote planning, help the local authorities, and finance outline and detailed plans for high-density construction.

As part of the agreements, the Ministry of Construction and Housing has formulated a multi-year working plan that will include needs and budgeting for development and construction of public institutions in the sector according to the size and needs of the community.  This working plan outlines the budgets totaling NIS 710 million for public institutions in each of the agreements to be signed with all the communities included in the cabinet resolution.  (Globes 25.08)

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1.2  Ministry of the Economy to Support New Meat Producers

After opening the market to imports of fresh meat from Poland without customs duties, the Ministry of Agriculture is announcing that it will grant tens of millions of shekels to new players and small players in the meat market in Israel in order to bolster competition in the sector.  The initiative was started by the Ministry of the Economy and Industry Investment Promotion Center, which published a new track designed to encourage the entry of players into the meat products market with the aim of operating a slaughtering, separating into sections, packaging, and marketing system for meat.

According to the Ministry of the Economy and Industry, companies complying with the regulations will be granted aid amounting to 30% of the total approved plan, up to a ceiling of NIS 15 million, for the purpose of constructing, moving, or expanding a system including a kosher slaughterhouse and a separation and packing plant for kosher fresh beef.

The process of producing fresh beef for marketing to consumers consists of four main segments: supplying cattle, fattening, slaughtering and marketing.  Today, there are few slaughterhouses capable of supplying meat separated into parts in vacuum packages for supermarkets, butcher shops, and plants for producing meat products, and consumer prices are high.  The two main players are Dabbah and Tuna Food Industries through Adom.

The new track is designed for players whose sales turnover in beef is at most NIS 15 million a year, and other players in the food market whose business turnover is at most NIS 300 million a year.  A clear preference in allocation will be given to the shortest timetables undertaken by the bidders for construction and providing kosher fresh beef to consumers.  (Globes 23.08)

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1.3  Transport Minister Inaugurates Jezreel Valley Railway

After 65 years the Valley railway line is reopening: Israel’s Minister of Transport Yisrael Katz took an inaugural journey on the new line between Haifa and Beit Shean, in which NIS 4 billion has been invested.  The new 60 kilometer line will have five stations – Haifa, Kfar Yehoshua-Yokneam, Migdal Ha’Emek-Kfar Barukh, Afula and Beit Shean.  Two new stations will be added in the future at Haifa Bay and Nesher.  The journey will take 50 minutes.  The Valley Railway is operating using electricity, which is quieter, cheaper and cleaner than on other lines.  In the future, the line will be extended eastwards to the Sheikh Hussein Bridge and border terminal with Jordan and will link up with the Jordanian railway system.  The plan is for cargo trains to transport goods between Europe and Jordan via Haifa Port and the Valley Railway.  A goods depot is being built near Kibbutz Sde Nahum, west of Beit Shean.

The original Valley Railway was built in 1905 by the Ottoman Turks and linked Haifa with Damascus via Tzemach.  The line fell into disuse after the re-establishment of Israel in 1948, though it was used occasionally for tourism and transporting troops until its final closure in 1951.  (Globes 29.08)

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2.1  SkyGiraffe Raises $6 Million

SkyGiraffe closed a $6 million Series B financing round.  The investment was led by SGVC with participation from Trilogy Equity Partners, and also included angel investments from enterprise mobility and security veterans.  The latest funding will be used funding to expand the capabilities of SkyGiraffe’s platform among other initiatives.  To that end, the company has announced expanded functionality to provide a single, secure endpoint for developers to build on top of the SkyGiraffe platform, enabling read and write access from enterprise applications such as SAP, Oracle, Salesforce and ServiceNow.  SkyGiraffe provides developers with the full, secure access to the backend data on top of which they need to build applications. The REST endpoint can be integrated into popular third-party front-end applications like Slack, Office365, Skype, and Google Sheets.  SkyGiraffe has open-sourced the code, which can be accessed via GitHub.

Ramat Gan’s SkyGiraffe is an enterprise-grade mobility platform that simplifies how companies interact with their corporate systems.  Their end-to-end platform opens up access to your critical business workflows via our no-code native front-end, custom front-ends built on our SDK, or any third-party SaaS application your employees already use.  Global 2000 companies use SkyGiraffe to streamline their business processes and empower employees to be productive anywhere, anytime, on any device.  The company is based in San Mateo, Calif. with R&D in Israel.  (SkyGiraffe 25.08)

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2.2 Partnered with CyberStep announced its new partnership with CyberStep, a Tokyo based world leading game developer and a globally-renowned publisher of interactive entertainment.  CyberStep joins other big name game publishers such as Ubisoft, Smilegate, OnlineSoccerManager (OSM), Artix Entertainment and Aeria Games, who are already using’s technology to monetize their users across the world.’s solutions help game publishers to become more profitable by monetizing the users that are not paying for in-app goods. offers gamers free in-game currency in favor of watching videos, completing surveys from well-known market research firms and engaging with unique brand activities.

Ness Ziona’s is a global performance marketing agency with offices in Israel, Korea, Ukraine and Germany.’s platform helps developers monetize their apps with a wide range of monetization solutions.’s proprietary technology also helps developers advertise their apps and acquire targeted users, based on a risk-free models at scale, worldwide.  (  24.08)

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2.3  DoD Approves Israeli Radar for US Iron Curtain Testing

The Pentagon has given Herndon, Virginia-based defense solutions company Artis approval to integrate Israeli radars from Rada Electronic Industries into its Iron Curtain close-in active protection system (APS) for evaluation by the US Army.  On 29 August, Netanya, Israel-based Rada announced it would provide its Compact Hemispheric Radar-based RPS-10 radar to support Artis’ active protection against rocket-propelled grenades (RPG) and other shoulder-launched threats.  Optimized to detect fire from RPGs and anti-tank, guided missiles, the compact, multi-mission Rada radar has been validated dozens of times in live-fire tests of another hard kill system, the Israeli-developed Iron Fist by state-owned IMI Systems.  Both the Artis Iron Curtain, which now uses a radar from L-3 Mustang Technology, and the IMI Iron Fist, based on the Rada radar, are being evaluated under parallel Pentagon programs.  Integration and testing of the Israeli radar on the Artis APS is planned for the first quarter of 2017..  (DID 30.08)

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2.4  Pointer Telocation Acquires Cielo Telecom in Brazil for $6.5 Million in Accretive Transaction

Pointer Telocation has signed a binding agreement to acquire Cielo Telecom, a fleet management services company based in South Brazil.  Cielo Telecom manages fleet customers covering approximately 16,000 trucks.  The closing of the agreement is subject to the fulfillment of certain precedent conditions.  In consideration for this acquisition, Pointer will make a cash payment of approximately BRL 21 million (approximately $6.5 million).

Rosh HaAyin’s Pointer Telocation is a leading provider of technology and services to the automotive and insurance industries, offering a set of services including Fleet Management, Mobile Asset Management, Stolen Vehicle Recovery, Vehicle Diagnosis and a comprehensive solution in the field of Internet of Things. Pointer has a growing list of customers and products installed in 50 countries.  Cellocator, a Pointer Products Division, is a leading AVL (Automatic Vehicle Location) solutions provider for stolen vehicle retrieval, fleet management, car & driver safety, public safety, vehicle security and more.  (Pointer Telocation 29.08)

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2.5  South Carolina-Israel R&D Award Announced

SCRA and the Israeli Innovation Authority, on behalf of the Office of the Chief Scientist (OCS) in the Israeli Ministry of Economy, announced the recipient for the fourth research and development award.  The bilateral projects are a result of the collaborative industrial research and development program established in October 2013 between the State of South Carolina and the Government of the State of Israel.  The first two projects were awarded in September of 2014; the third project was awarded in October 2015.

The current project will develop a fully-automated echocardiogram (echo) examination and reporting system.  The South Carolina partner is VidiStar, located in Greenville, S.C. and the Israeli partner is DiaCardio, located in Beer Sheva, Israel.

This project will develop an innovative system that will solve the growing market need for an automated, precise and objective tool that will handle most aspects of the echo examination.  The echo exam includes the detection of different heart elements, measuring the most important values (ejection fraction, strain, and wall motion evaluation) and presenting them automatically in a unique report.  Automating this process allows the cardiologist or doctor to obtain all needed data in a glimpse, and invest his/her efforts and time in the actual patient care and diagnosis rather than in the technical aspects of performing the examination.

The South Carolina – Israel Industrial R&D Program seeks to stimulate generation and development of new or significantly improved products or processes for commercialization in global markets.  The program is being managed by SCRA on behalf of the state of South Carolina, and by the Israeli Innovation Authority on behalf of the state of Israel.  The program has an open “call for proposals” in which teams from South Carolina and Israel may submit funding applications at any time.  The next round of program applications will be accepted through 1 March 2017.

Chartered in 1983 by the state of South Carolina, SCRA fosters South Carolina’s innovation economy. SCRA improves the development and growth of South Carolina’s innovation ecosystem by supporting entrepreneurs, facilitating university research commercialization and connecting industry to innovators.

Israel’s Office of the Chief Scientist [OCS] in the Ministry of Economy is charged with execution of government policy for support of industrial R&D.  The goal of the OCS is to assist in the development of technology in Israel as a means of fostering economic growth, encouraging technological innovation and entrepreneurship, leveraging Israel’s scientific potential, enhancing the knowledge base of industry in Israel, stimulating high value-added R&D and encouraging R&D collaboration both nationally and internationally.  The Israel Innovation Authority is Israel’s central agency to manage the country’s governmental support of the resources for innovation.  (SCRA 30.08)

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2.6  Freight Marketplace Freightos Acquires WebCargoNet

Jerusalem’s Freightos, the world’s online freight marketplace, announced the acquisition of Montreal, Quebec’s WebCargoNet, the world’s largest air cargo rate management provider.  This acquisition creates the world’s largest database of air, ocean, and land freight rates with hundreds of millions of international and domestic rates and routes, enabling SMEs and freight forwarders alike the ability to conduct business online with ease.  WebCargoNet will retain its independent brand, bringing air cargo rates online worldwide, complementing the Freightos’ AcceleRate freight rate management solution and the Freightos Marketplace.  There will be no immediate changes to current offerings of either company.  Over time, strategic synergies will be leveraged to provide more comprehensive and innovative online solutions to carriers, forwarders, and shippers.  The acquisition involved both cash and Freightos shares.

Freightos, with WebCargoNet, has accumulated well over 200 million freight pricing data points, establishing the largest freight rate database in the world.  The convergence of data from both companies will make it simpler and faster than ever before for carriers and forwarders to sell their services and for importers and exporters to buy, resulting in smoother world trade.  (Freightos 31.08)

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2.7  Cronus Cyber Security Raises $3.5 Million

Cronus Cyber has raised $3.5 million.  According to figures from the IVC database, the company has raised $6.2 million since it was founded, including the current round.  Cronus’s financing round included US fund Janvest Capital Partners, a European investor and a strategic investor from Hong Kong.  The company previously received funding from the Ministry of the Economy and Industry Chief Scientist.

Founded in 2014, the Haifa based company also does business in the UK, Germany and Hong Kong.  The money raised is expected to enable Cronus to expand its business to the US.  Cronus is also active in the local market, and notes that its product is currently installed at a series of financial concerns, including First International Bank of Israel.  The company adds that its solution is also installed at large organizations, including some appearing on the Fortune 1000.  (Globes 04.09)

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2.8  Second Murata Hackathon to Be Held in Israel

Murata Electronics Europe is partnering with Samurai Incubate of Tokyo to host the 2nd Murata Hackathon, an event that seeks new business ideas in IoT, from 14 – 15 September in Israel.  With the world of the Internet of Things or “IoT” expanding at a rapid pace, there is demand for the birth of unprecedented and innovative products.  Murata is therefore targeting the creation of new business in IoT and following last year’s event, it will host the 2nd Murata Hackathon in Israel.  The event is aimed at developing new applications by integrating Murata’s state-of-the-art parts, especially sensors and communication modules, with original ideas from Israel, a country known for its software development expertise.

The Elegant Monkeys is excited to start a highly ambitious and strategic cooperation with Murata, made possible as a result of winning their 1st Israeli Hackathon last year.  They believe that the combination of Japanese top-quality hardware innovation alongside the Israeli software and algorithm expertise, will lead to a new industry standard of products.  This joint venture is a big step for the Israeli-Japanese collaboration towards global technological advancements.

Jerusalem’s The Elegant Monkeys is an Israeli-based startup company, specializing in Software, Mobile, IoT (Internet of Things) and Healthcare Technologies.  TEM is pursuing the vision of translating human emotions to digital signals in order to improve quality-of-life for the modern society through technological innovations.  (Murata 05.09)

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2.9  Appsbuyout Snaps Up True Contact Caller ID App

Vienna, Austria’s Appsbuyout, the destination for successful Android developers looking to sell their apps, has acquired leading caller ID and spam block Android mobile app True Contact from Israel based developer Eugene Hanikblum.  The deal represents a noteworthy cash-out for an app in the mid-sized Android app segment.  True Contact is a significant app in the Caller ID space, with 3.5 million installs and a 4.1 Google Play rating, placing it in the top-1% of Google Play apps.  In addition to the user-base, True Contact brings Appsbuyout a 500-million item phone data base.

Israel’s True Contact provides users with an impressive number of call-and-contacts management features. In addition to smart caller ID, including the caller’s name, address and picture, users can save resolved contacts to their phone book and keep existing contacts’ details up to date. The SPAM Blocker feature enables unwanted calls to be blocked with a single click.  (Appsbuyout 06.09)

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2.10  Nano Dimension to Open New Ink Production Facility in Israel

Nano Dimension announced today that its wholly owned subsidiary, Nano Dimension Technologies Ltd., will open a production facility for the company’s unique nano-ink products.  The facility is located in Ness Ziona, in the same building as the company’s headquarters.  Nano Dimension plans to completely renovate the space to suit its needs and upon completion, the new facility will have the capability to provide ink for hundreds of printers.  The facility is expected to transform Nano Dimension’s ink development capabilities for commercial production, ensuring that the company will be able to meet future clients’ expected nano-ink supply needs.  The facility will feature advanced technological solutions in the chemistry and production fields, will meet high quality control standards and will cover an area of approximately 8600 square feet.

Ness Ziona’s Nano Dimension, founded in 2012, focuses on development of advanced 3D printed electronics systems and advanced additive manufacturing.  Nano Dimension’s unique products combine three advanced technologies: 3D inkjet, 3D software and nanomaterials.  The company’s primary products include the first 3D printer dedicated to printing multi-layer PCBs (printed circuit boards) and advanced nanotechnology-based conductive and dielectric inks.  (Nano Dimension 06.09)

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3.1  Empire State Realty Trust Announces $622 Million Investment by Qatar Investment Authority

Empire State Realty Trust, a real estate investment trust with office and retail properties in Manhattan and the greater New York metropolitan area, announced that an affiliate of Qatar Investment Authority (QIA) has acquired a 9.9% interest in the Company on a fully diluted basis (currently 19.4% ownership of Class A shares) through a new $622 million investment.

QIA purchased 29,610,854 newly issued Class A common shares of Empire State Realty Trust at $21.00 per share, equivalent to a 9.9% economic and voting interest in the Company on a fully diluted basis.  QIA’s entire 9.9% Company interest is in Class A shares which represents a 19.4% ownership of Class A shares; however, QIA can only vote shares equivalent to 9.9% of all voting securities, with the balance of their shares to be voted by ESRT in accord with the votes of all other voting securities.

Qatar Investment Authority was founded by the State of Qatar in 2005 to strengthen the country’s economy by diversifying into new asset classes.  Building on the heritage of Qatar investments dating back more than three decades, its growing portfolio of long-term investments help complement the state’s huge wealth in natural resources.  Headquartered in Doha, and now with a subsidiary in New York called Qatar Investment Authority Advisory (US) Inc., QIA is structured to operate at the very highest levels of global investing.  (ESRT 23.08)

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3.2  State Department to Sell Qatar Mk-V Fast Patrol Boats

The State Department has made a determination approving a possible Foreign Military Sale to Qatar for Mk-V Fast Patrol Boats, equipment, training and support.  The estimated cost is $124.02 million.  The Defense Security Cooperation Agency delivered the required certification notifying Congress of this possible sale on 19 August 2016.  The Government of Qatar has requested eight M2HB .50 Caliber Machine Guns and Mk-V Fast Patrol Boats, Forward Looking Infrared (FLIR) Systems, MLG 27mm Gun Systems, 27mm ammunition, 27mm target practice ammunition, .50 Caliber ammunition, support equipment, publications, technical documentation, personnel training, U.S. Government and contractor engineering, in-country support, technical and logistics support services.

The State Department believes this proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country.  This proposed sale will provide Qatar with military capabilities to protect its critical sea-based infrastructure and maritime security. Qatar will have no difficulty absorbing this equipment into its armed forces.

The principal contractor will be United States Marine Incorporated (USMI) in Gulfport, Mississippi.  There are no known offset agreements proposed in connection with this potential sale.  Implementation of this proposed sale will require multiple trips by U.S. Government and contractor representatives to participate in program and technical reviews, system integration, as well as training and maintenance support in country for a period of five (5) years.  (DoS 23.08)

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3.3  World’s Largest Indoor Theme Park Opens in Dubai

IMG Worlds of Adventure, the world’s largest indoor theme park, opened its doors for the very first time on 31 August.  Wholly owned by the Ilyas and Mustafa Galadari Group and managed by IMG Worlds, it is the first international mega-themed park to open in Dubai.  Spanning 1.5 million square feet, equivalent to 28 football fields, IMG Worlds of Adventure is the first global theme park to feature international brands Marvel and Cartoon Network, in addition to two proprietary brands, IMG Boulevard and Lost Valley – Dinosaur Adventure.  It also includes a range of roller coasters and attractions, complemented by 28 F&B offerings and 25 retail outlets.  (AB 31.08)

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3.4  Six Flags Planning World’s Biggest Roller Coaster in Dubai

US-based Six Flags has reportedly pledged to build the world’s biggest roller coaster ride in Dubai.  Today, the tallest roller coaster in the world is in New Jersey and operated by Six Flags, while the world’s fastest roller coaster is in Abu Dhabi at Ferrari World.  Both Abu Dhabi and Dubai are encouraging the development of theme parks to help boost foreign tourist arrivals as oil prices slump, causing an economic slowdown in the region.  Earlier this year, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum exempted Saudi Arabia from a GCC theme park deal, allowing the Gulf kingdom to pursue plans with Six Flags.  (AB 23.08)

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3.5  PKL Services Gets $495 Million Saudi F-15 Support Contract

California’s PKL Services has been awarded a $495 million U.S. Air Force contract for work on the Royal Saudi Air Force’s F-15 fleet.  The indefinite-delivery/indefinite-quantity contract covers maintenance, upgrade and training of the Saudi Strike Eagle S- and SA-type fighters.  Work will be performed and has an estimated completion date of August 2021.  The contract is 100% foreign military sales to Saudi Arabia.  The 338th Specialized Contracting Squadron is the contracting activity.  The Royal Saudi Air Force has flown the F-15S fighters since the 1990s.  The F-15SA was rolled out in 2013 and featured improved performance and increased survivability at a lower life-cycle cost.  It also features two additional wing stations for increased payload and capability.  (UPI 02.09)

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3.6  Elevation Burger Announces Plans For 20 New Restaurants In Egypt

Arlington, Virginia’s Elevation Burger, the first and only 100% organic better burger franchise concept, announced the signing of a multi-unit development agreement with Essam Abu El Hassan to open 20 restaurants throughout Egypt.  Currently, the brand has 23 restaurants in the Middle East including Dubai, Saudi Arabia, Kuwait, Qatar and Bahrain.  Abu El Hassan is new to the Elevation Burger family and was attracted to the brand’s philosophy – to be more than just a burger restaurant.  The company is dedicated to offering authentic and sustainably-prepared food that is better for consumers and the environment.  Also notable, all of Elevation Burger’s meat is halal.

From fresh and flavorful food made with the highest quality ingredients to friendly and inviting restaurants built with sustainable materials, Elevation Burger strives to deliver an elevated experience that is “Above and Beyond Good.”  The concept was founded in 2005 and began franchising in 2008.  Currently, there are more than 60 U.S. and international locations.  Elevation Burger is loved by loyal customers for its burgers made from 100% organic, grass-fed, free-range beef and fries cooked in heart-healthy Bertolli olive oil.  The brand also offers organic chicken, as well as vegetarian and vegan burgers.  (Elevation Burger 05.09)

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4.1  Haifa Chemicals Slapped With NIS 3.6 Million Fine for Air Pollution

On 1 September, the Environmental Protection Ministry imposed a NIS 3.6 million ($950,000) fine on Haifa Chemicals after the company failed several pollution inspections.  Haifa Chemicals is an international conglomerate considered a global leader in producing and supplying potassium nitrate and special plant nutrients for advanced agriculture in various climates, weather and soil conditions.  It also produces controlled-release fertilizers for agriculture, horticulture, ornamentals and turf. The company operates three factories and has 11 subsidiaries.

The fine was imposed after Environmental Protection Ministry spot checks discovered four violations of the Haifa facility’s emission permit guidelines.  The inspections took place between November 2015 and March 2016.  In all four cases, the facility’s four stacks exceeded permitted emission values during the production of potassium nitrate.  According to the Environmental Protection Ministry, air pollution is one of the gravest issues plaguing the Haifa Bay area, with measurements often findings its air quality to be the poorest in Israel.  The ministry is working to reduce air pollution in the Haifa Bay area through several programs, and its data indicates that over the past five years emission levels have decreased dramatically.  (IH 01.09)

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4.2  Saudi Plastic Bag Use is 20 Times Global Average

Saudi Arabia uses 40 kg. of plastic bags each year – almost 20 times the global average measured by the European Union (EU), according to reports from the kingdom.  Research by Riyadh Exhibitions Company (REC) claimed that Saudi Arabia’s per capita plastic bag consumption is the highest in the Middle East and double the rate for other countries in the GCC.  Meanwhile, plastic waste generated in the kingdom each year is equivalent to the weight of around 2 million cars, the REC research reportedly showed.  It claimed a rising population and increasing income levels have led to a sharp increase in consumption and waste.  Global individual consumption of plastic bags averages between 2-5 bags a day, or around 500 bags per year, while bag production totals 600 billion a year, according to figures from the EU.  The Saudi Gazette said the kingdom recently announced proposals to modify plastic products to reduce waste. It is understood those have yet to come into force.  (SG 05.09)

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5.1  Aqaba Welcomed Nearly 280,000 Tourists During First Half of 2016

Some 278,423 tourists visited the port city of Aqaba during the first six months of 2016, Petra reported on 7 September.  The average hotel stay was 2.07 nights, while hotel occupancy rates stood at 35.53 per cent in Aqaba, 330km south of Amman, in the first half of the year.  April was the busiest month, with 89,176 tourists, followed by May, with 54,491 tourists, and March, when 48,190 people visited the coastal resort.

Among foreign tourists, the largest number — 23,788 — came from Russia, followed by 5,884 Saudis, 5,320 Americans, 4,302 Brits and 3,912 Germans.  Some 160,412 Jordanian tourists visited Aqaba during the same period.

Meanwhile, the visitors’ center at Wadi Rum welcomed 368,550 tourists.  A total of 28,059 tourists entered Jordan at the Wadi Araba crossing between January and July, of whom 23,832 were part of tour groups.  The authorities are promoting Jordan’s “golden triangle of tourism” — Aqaba, Petra and Wadi Rum, encouraging visitors to enjoy Aqaba’s beaches, Wadi Rum’s desert landscape and Petra’s culture.  (JT 06.09)

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►►Arabian Gulf

5.2  GCC Hospitality Market Forecast to be Worth $36.7 Billion by 2020

Fundamentals in the Gulf’s hospitality sector remain strong despite recent falls in hotel room rates amid muted demand caused by economic slowdown, according to Alpen Capital’s GCC Hospitality Industry report.  Despite the drop in oil prices and currency depreciation is currently affecting demand, the sector’s long-term outlook remains stable.

According to Alpen Capital, the GCC hospitality market is expected to grow by 7.6% annually from an estimated $25.4 billion in 2015 to $36.7 billion in 2020, despite a slowdown in 2016.  It said the market is anticipated to recover in the long-term with upcoming events, robust fundamentals and government efforts, driving the continual rise in tourist arrivals and a robust pipeline of hotels and serviced apartments.

The key operating metrics of the sector is expected to remain under pressure in the short-term, mainly in the UAE and Qatar, but is likely to rebound in the long-term supported by growing demand, the report said.  During the forecast period, occupancy rates at hotels and serviced apartments are anticipated to grow by 3% to 70% while average daily rates (ADR) are likely to rise by 1.4% annually.  As a result, the aggregate revenue per available room (RevPAR) in the GCC is projected to grow by 2.3% annually to $133 by 2020.  Alpen said from 2015 to 2020, the hospitality markets of Qatar and the UAE are expected to demonstrate the fastest annualized growth of over 10%.

During the forecast period, the total room supply in the GCC is expected to grow at a 4% per year, slower than 5.7% expansion in international tourist arrivals.  The GCC region holds one of the largest hotel development pipelines in the world.  Dubai is likely to witness an addition of nearly 57,000 rooms in hotel and serviced apartments in the five years to 2020, while Saudi Arabia has a pipeline of over 47,000 rooms.  (AB 27.08)

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5.3  Kuwaiti Gov’t Sets $1 Billion Budget for Hospital Bills of Nationals Abroad

As part of Kuwait’s overseas treatment program, its government has approved a budget of more than $1 billion (KD320 million) for hospitals bills of nationals receiving treatment abroad.  This comes as the government is struggling with $500 million (KD150 million) worth of delayed payments to European and American hospitals abroad where Kuwaitis are being treated.  The unpaid dues may be the work of 11 independent financial controllers that the government is currently investigating for irregularities in documents of overseas treatments.  The finance ministry said the irregularities may have been caused by mismanagement by the health ministry.

However, the health ministry said all funds were spent following approvals from the financial controllers.  The overseas hospitals are likely to resort to legal action if the dues are not paid by Kuwait, sources told the newspaper.  From January to August this year, almost $1 billion (KD 300 million) has been spent on overseas treatments of Kuwaitis, despite the government having approved only $500 million (KD 150 million) for the year as part of its budget deficit.  (AB 29.08)

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5.4  Qatar’s First Quarter GDP Growth Slows to Lowest Level Since 2011

Preliminary first-quarter GDP data for Qatar, adjusted for inflation, has showed annual growth at its lowest level since at least 2011.  Qatar’s Ministry of Development Planning and Statistics said GDP rose by 1.1% in Q1/16, 2.7% lower than the previous quarter.  The data showed mining and quarrying sector, which includes oil and gas, shrank 3% year-on-year and decreased 2.5% quarter-on-quarter.  The rest of the economy% grew 5.5% from a year earlier but shrank 2.7% from the previous quarter.

Qatar, the world’s biggest liquefied natural gas exporter, is one of the richest of the Arabian Gulf states but like its neighbors, it has been pushed into austerity measures this year in an effort to stabilize its finances.  In June, the ministry predicted Qatar’s economy would grow 3.9% this year, down from a previous 4.3% forecast. It expects growth of 3.8% next year and 3.2% in 2018.  Earlier this year, Fitch Ratings said growth in Qatar’s non-oil economy is forecast to slow this year to 6% from an estimated 8% last year.  The ratings agency said in a statement that average non-hydrocarbon growth in Qatar has been 10% over the past five years.  It said the slowdown will be a result of a less benign fiscal environment, where a contraction in current spending and a focus on fiscal efficiency leads to a slowdown of both private and public consumption growth.  (AB 26.08)

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5.5  Sheikh Mohammed Approves UAE Bankruptcy Law

On 4 September, the UAE cabinet approved the country’s long-awaited draft law on bankruptcy.  The new law paves the way for ailing companies to restructure – something that is not currently available in the UAE.  Industry bodies including the UAE Banks Federation have been lobbying for such a law for several years. They claim the absence of formal bankruptcy legislation in the country hinders the growth of small-to-medium-sized businesses in particular – a sector the government is keen to develop.  Under existing legislation, unpaid debt or a bounced check can wind businesses in jail.  Recently, economy minister Sultan Saeed al-Mansouri was reported to have said the legislation may be finalized by the end of this year, to help companies weather challenging economic conditions.  (AB 05.09)

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5.6  Dubai-UK Trade Totals $1.82 Billion in First Quarter of 2016

Dubai – UK trade totaled AED6.7 billion ($1.82 billion) in Q1/16 and Dubai Customs says it is looking at ways of expanding bilateral trade.  Imports accounted for AED4.6 billion in the first quarter, exports totaled AED393 million and re-exports AED1.66 billion.  It added that total trade for 2015 was AED29.7 billion.  (AB 23.08)

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5.7  Dubai Launches Smart System to Track Water Container Refills

Dubai Municipality has agreed a deal with Swiss secure identification company SICPA to ensure five-gallon water bottles are not refilled too many times.  The system enables consumers to scan goods to confirm their origin and detect potential uncertified products.  The contract will initially focus on water bottles and also the tracking of halal products.  SICPA’s smart track and trace technology, called SICPATRACE, guarantees goods are authentic and they conform to accreditation standards.  The smart labels used for tracking functions can be applied to a variety of products such as packaged foods, cosmetics, pharmaceuticals, dairy products and food supplements.  SICPA facilitates identity protection, secure transactions and product integrity on more than 80 billion products a year.  (AB 23.08)

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5.8  Saudi Inflation Rate Falls to Year-Low in July

Saudi Arabia’s inflation rate fell to its lowest level this year in July, according to new figures released by the Saudi Central Department of Statistics.  The data showed that consumer inflation dropped to 3.8% last month, from 4.1% in June, but was up from 2.2% compared to July 2015.  Transport costs jumped 9.4% from a year earlier after the government raised gasoline prices in late December as an austerity measure.  Prices of housing and utilities rose 7.5% after utility fees were raised in December, but food and beverage prices edged down 0.1%.

Saudi consumer confidence score remained flat in the second quarter of 2016 at 104 but remained one of just 12 countries globally to reach or exceed a score of 100, which is the optimism benchmark, according to Nielsen.  The latest Nielsen Consumer Confidence Index said that job prospect sentiment improved 2% (50%), personal finance sentiment remained bright (64% favorable) while immediate spending intentions reduced by 4% (45%).  (AB 26.08)

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5.9  Saudi Food Inflation Turns Negative for First Time Since Jan 2010

Food inflation turned negative in Saudi Arabia in July for the first time since the start of 2010, according to new official figures analyzed by Jadwa Investment.  Consumer price index data for July showed a deceleration in prices to 3.8% year-on-year compared to 4.1% in June, the four consecutive month of declines.  Jadwa said in a statement that the decline was, in part, the result of the subdued level of economic activity so far in 2016.  It added that it maintains its forecast for annual average inflation of 3.9% for 2016.

While food inflation turned negative for the first time in more than six years, housing inflation remained as the main contributor to overall inflation during July.  The contribution of housing prices to overall inflation rose to 49.4%, its highest since December 2011, while core inflation saw its contribution decline to 51%, down from 53.6% recorded in the previous month.  Jadwa said.  Housing inflation recorded an acceleration in July to 7.5%, up from 7.2% in June as rentals rose to 3.4% year-on-year in July, up from 2.9% recorded in the previous month.

Nearly all subgroups of the core index posted a year-on-year slowdown in July. Year-on-year inflation for clothing, transport, and furnishings slowed to 4.2%, 9.4%, and 2% respectively.  Meanwhile the year-on-year deflationary trend in the restaurants and hotels subgroup continued with -1.6% in July.  (Jadwa 03.09)

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5.10  Russia & Saudi Arabia Agree Cooperation on Oil Price But Not On Freeze

Saudi Arabia and Russia, the world’s two biggest oil producers, said on 5 September that they had agreed to “act together” to try to stabilize oil prices, but failed to make headway on a production freeze.  The two nations “noted the particular importance of constructive dialogue and close cooperation between the largest oil-producing countries with the goal of supporting the stability of the oil market and ensuring a stable level of investment in the long term,” the energy ministers from both countries said.  Their comments came in a joint statement after a meeting at the G-20 summit in China.

Russia’s Energy Minister Alexander Novak described the announcement as marking a “new era” in cooperation between Russia and Saudi Arabia and insisted it would have a “critical significance” for oil markets, news agency Interfax reported.  But there were no details in the announcement on any elusive agreement to freeze oil output, just weeks before Moscow and OPEC meet in Algeria to discuss the crisis.

The oil market has been plagued by a stubborn supply glut that saw prices plunge to near 13 year lows below $30 at the start of 2016.  While it has recovered recently, it is still well off highs above $100 seen in mid-2014.  (AFP 05.09)

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►►North Africa

5.11  Egypt’s Parliament Approves VAT at 13% in 2016/17

On 28 August, Egypt’s parliament approved the long-delayed value added tax (VAT) at a rate of 13% for the 2016/17 fiscal year, but said it will rise to 14% the following year.  The parliament approved 30 articles of the VAT law out of 74.  The new tax is scheduled to be implemented in September.

The delayed VAT law is part of the government’s fiscal reform program, implemented in July 2014, through which energy subsidies are cut and new taxes are introduced to reduce the country’s ballooning budget deficit – estimated at 11.5% of GDP in fiscal year 2015/16.  A 118 page report prepared by the committees of legislative and constitutional affairs and the budget indicated that MPs were not able to reach an agreement on some of its articles, especially the VAT rate.  The parliament has been holding on to a VAT rate of 12%, while the cabinet is insisting on a 14% rate.

A 14% VAT rate was expected to generate EGP 32 billion in the 2016/17 state budget, according to MP Sayed Abdel-Al, who is a member of the Economic Committee in the parliament.  The VAT is aimed at avoiding tax evasion as it will be applied to each member of the production chain of goods and services to the final retail stage, instead of the current sales tax that is imposed as a one-off on the final sale to the customers.  The VAT that the consumer pays when the product comes on the market applies to the cost of the product minus the cost of the components that have already been taxed.

The government decided to slash its total subsidy bill in the current 2016/17 budget, which began in July, by 14% compared to the last fiscal year’s bill, estimated at EGP 154 billion.  The VAT may lead to price inflation ranging between 0.5% for low-income Egyptians and up to 2.3% for the upper class.  The VAT law is part of a government reform program that has been endorsed by the International Monetary Fund (IMF), and has led to an initial agreement between the government and the global lender on a $12 billion fund facility over three years, which is expected to be approved by the fund’s executive board in the coming weeks.  (Ahram Online 28.08)

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5.12  Egypt’s Tourism Falls by 41.9% in July

Egypt suffered a 41.9% drop in the number of incoming tourists in July compared to a year earlier, CAPMAS announced on 29 August.  A total of 529,200 tourists visited Egypt in July 2016, dropping from 911,600 in July 2015.  CAPMAS attributed its findings largely due to a 60% decline in incoming Russian tourists and a 17.5% slump in number of British tourists.  Moscow suspended all flights to Egypt pending an investigation into an October 2015 crash of a Russian jet above Sinai.  The UK also halted all flights to and from Sharm el-Sheikh following the crash.

Egypt’s finance minister said earlier in August that he expects tourism revenues in FY 2015/ 2016 to reach $4 — $4.5 billion, with losses in its last 10 months being “the worst in 15 years.”  Moody’s Investors Services also reported last month that tourism revenues fell in the first quarter of 2016 to record its lowest level since 1998.  According to the Moody’s report, tourism revenues fell to $551 million in the first quarter of 2016, the lowest since March 1998 and much lower than the third-quarter 2010 peak of $3.6 billion.  Egypt has been trying to revive the sector, a main source of hard currency, since a popular uprising in 2011 triggered years of political turmoil, taking a heavy toll on tourism.  (CAPMAS 29.08)

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5.13  Egypt’s Minister of International Cooperation Discusses Future Plans With Canada

Egypt’s Minister of International Cooperation Sahar Nasr met with the Canadian ambassador to Egypt Troy Lulashynk to discuss the cooperation between both countries, including future plans and projects, and to follow up on latest developments. Nasr also met executive chairperson of Bombardier and other officials from the company.  The projects between Egypt and Canada are well-aligned with the priorities of the Egyptian government, and its plans and programs for social development, Nasr said.

Also discussed were Bombardier’s investments in Egypt in the transportation sector, including the methods to fund the hanging monorail train project, which links 6th of October City and Giza.  The projects’ execution and implementation are easy, and that it will run on environmentally friendly energy.  It will also help in creating attractive investment and real estate development zones.  The new line is 35km long, and includes 10 stations with a daily capacity of 270,000 passengers, and a trip time of 38 minutes.

Nasr also confirmed that Egypt is keen on increasing the partnership with Canada through allowing the latter to support a number of small and medium-sized projects, which are meant to increase job opportunities for youth, women, and the underprivileged.  She additionally mentioned updating the vocational and technical training programs and increasing the capacity of Egyptian institutions.  This comes as part of Egypt’s framework of recruitment and its attempts of eliminating unemployment.  (DNE 01.09)

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5.14  Suez Canal Sees 2% Decline in July Revenues

Egypt’s Suez Canal Authority announced total revenues of $429 million in July from the canal, a decrease of almost 2% from the $437.7 million recorded in the same month last year.  Canal authorities also announced revenues of $2.919 billion in the first seven months of 2016, a 1.9% decrease from $2.977 billion in the same period last year, according to official data on the canal’s website.  Egyptian officials predicted Suez Canal revenues would increase following the inauguration of an additional lane to allow two-way traffic and works to deepen the main canal to allow the passage of larger vessels in August 2015, which cost upwards of around $4 billion.  Officials had claimed the new canal would more than double revenues to reach $13.2 billion in 2023.  However, falling oil prices and a slowdown in world trade led to a decrease in the canal’s revenues.  (Ahram Online 05.09)

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5.15  4.2 Million Tourists Visited Morocco in First Half of 2016

Some 4.2 million tourists visited Morocco in the first half of 2016, decreasing by 2.6% compared to the same period of 2015, according to figures by Morocco’s Tourism Office.  The number of foreign tourists was down 5.6% while arrivals of Moroccans living abroad posted an increase of 1.7%.  Tourist arrivals from the United Kingdom, Germany, France and Italy decreased by 8%, 7%, 5% and 5% respectively, while the number of tourists from Holland remained constant.  According to data provided by the professionals of tourist accommodation, overnight stays in tourist accommodation facilities decreased by 4% compared to the same period of 2015.  (MWN 22.08)

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5.16  Morocco’s Energy Bill Down 29.9% as of July 2016

Morocco’s energy bill decreased by 29.9% at the end of July 2016, reaching 29.42 billion dirhams, against 41.95 billion dirhams one year before, according to the Exchange Control Office.  The share of energy costs in total imports decreased by 6.3 points, that is 12.5% during the first seven months of 2016, instead of 18.8% at end of July 2015, noted the Office in the monthly indicators of foreign trade in July 2016.  This decrease is mainly due to the decline of petroleum crude oil supplies (-100%), and of oil imports of gas and other hydrocarbons (-2.9%), the same source noted.

Despite the drop in energy products, imports increased by 4.9% (234.58 billion dirhams against 223.67 billion dirhams at the end of July 2015), the Office said, adding that this increase is attributable to increased purchases of capital goods equipment (+21.8%), finished consumer products (+15.3%), food products (+15.5%) and semi-finished products (+7.2%).  During the first seven months of 2016, Morocco’s trade balance deteriorated by more than 9 billion dirhams, that is an increase in the deficit of 16.7% compared to the same period of last year, the same source added.  (MWN 05.09)

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5.17  Morocco Ranks in Top Five of World Olive Oil Producers

Morocco is the fifth largest producer and exporter of olive oil worldwide.  It is also among the top three countries with the lowest cost to produce.  Morocco’s average olive oil has reach an annual production 140,000 tons.  This figure represents an 87% increase as compared to the period of 2004-2008.  Thanks to the Maroc Vert (Green Morocco) initiated by the kingdom, Morocco has almost doubled its production of olive oil in the past six years.

The land usage of olive tree plantations has reach an annual average of 37,420 hectares.  In the last six years, new plantations have expanded to 224,500 hectares.  This expansion has had a positive effect on the production of oil in the past six years.  Fella trade, cited in the same news source, reveals that the average production of olive oil has reach 1,326,000 tons, 70 times higher than 2009, which averaged at 783,000.

The rise in olive oil production has positively impacted the price in the global market.  A study conducted by the International Olive Council places Morocco among the only three countries with an olive oil production cost that is below the average.  The study investigated the production cost in fifteen countries: Morocco, Greece, Uruguay, Lebanon, Algeria, Iran, Italy, Israel, Tunisia, Portugal, Turkey, Spain, Argentina, Albania and Jordan.  The two other countries with a production cost below the average of €2.63 kg. are Turkey and Tunisia.  (MWN 04.09)

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6.1  Turkey’s Exports Rise Some 7% in August Due To Sharp Rise in Car Sales

Turkey’s exports showed a year-on-year rise in August, with the car exports increasing 23% in the mentioned period, data from the Turkish Exporters Assembly (TIM) showed on 1 September.  Exports rose by 6.9% in August to $11.16 billion compared to the same month of 2015, marking the largest increase in exports in the last 28 months.

The automotive sector made exports worth over $1.68 billion in August, amounting to 15.1% of Turkey’s total exports, according to the TIM data, which excludes gold and jewelry data.  The sector was followed by the ready-made clothing sector with exports worth $1.61 billion and the chemical materials sector with exports worth $1.21 billion.  While Turkey’s total exports were announced as amounting to $92.6 billion in the first eight months of the year, marking a 3.1% decrease, its 12-month exports amounted to $140.9 billion, marking a 5% decline.

In the first eight months of the year, the automotive sector again topped the list with exports worth $15.14 billion, followed by the ready-made clothing and confection sector with exports worth $11.58 billion, and the chemicals sector with exports worth $9.17 billion.

Most Turkish exports went to Germany in August with a 17.4% of year-on-year increase.  Exports to the U.K. saw a 1.4% increase, to Iraq a 4.2% of decrease, to the U.S. a 19.6% of increase and to France a 8.3% increase.  Turkey’s exports to the EU rose by 12.7% in August compared to the same month of 2015.  Among the 20 countries to which the largest amount of exports were made, the highest increase was seen in Bulgaria in August with an 82.9% year-on-year hike. Turkey’s exports to Israel saw a 34.6% increase and exports to Iran saw a 23.6% increase.  (HDN 01.09)

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7.1  Eid Al-Adha – Feast of the Sacrifice to Begin on 12 September

The first day of the Islamic holiday Eid al-Adha will fall on 12 September.  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.  Like Eid al-Fitr, Eid al-Adha begins with a short prayer followed by a sermon.  Eid al-Adha is 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 to be approximately 70 days after the end of the month of Ramadan.

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.  According to the Quran 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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7.2  Millions of Students Begin School in Israel

On 1 September, approximately 2.2 million Israeli students returned to school, with 159,000 entering first grade.  Meanwhile, 123,000 are ending their K-12 career.  Approximately 180,000 educators work in the Israeli school system, including 9,000 of whom who are teaching for the first time; 4,000 will be primary school teachers, 2,600 will be high school teachers and 1,300 will be kindergarten teachers.  About 7,500 of the new teachers are women.

The new school year will start under the theme of “United Jerusalem,” and will include several statements by the education minister himself.  The new school year will see a new initiative to improve English education, and will see several of the Biton Commission recommendations be put into place.  There will also be more classes in high school about the history of Jews of Arab descent.  Students will also tour development towns and moshav locations.  (Ynetnews 01.09)

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7.3  Number of Arab Teachers in Jewish Schools Rises by 40%

The number of Israeli Arab teachers working in Jewish state schools has increased by 40% in recent years to reach 588 in the last school year, up from 420 just three years ago.  The jump is the result of an Education Ministry program to integrate Arab teachers of English, mathematics and science, among other subjects, into Jewish schools, reducing the surplus of teachers in the Arab sector and promoting coexistence.  The program, launched in 2013, is run jointly by the Education Ministry’s Teaching Personnel Department and the Merchavim Institute for the Advancement of Shared Citizenship in Israel.

According to Education Ministry figures, the school subjects with the biggest jump — 76% — in the number of Arab teachers are English, math and science.  The number of Arab teachers instructing Arabic language classes at state schools also increased by 40% from 2013 to 2016.  (Israel Hayom 29.08)

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7.4  Space Education Program Expands Orbit to 100 Schools

Thousands of Israeli middle school students will study space science and will even launch three experiments at the International Space Station as the Ramon Space Lab program expands to 100 schools in the coming school year, the Education Ministry announced.  The Ramon Space Lab program, which promotes space education among Israeli school students, was named after Israeli astronaut Ilan Ramon, who was killed in the space shuttle Columbia disaster in 2003, and his son Asaf, a fighter pilot who was killed in a training accident in 2009, and is a collaboration between the Education Ministry, the Israel Space Agency, and the Ramon Foundation.  As part of the program, students will meet with NASA astronauts and scientists and even see their own work launched into space.  The project-based learning program, which ran as a pilot in 12 schools over the past year, will this year include thousands of eighth- and ninth-graders in 100 Jewish and Arab schools.

Student teams will compete against each other to submit experiment proposals, and the three winning teams will send vials into space in February 2017, most likely with a Falcon 9 multi-use rocket.  An astronaut on the International Space Station will carry out the research on their behalf, and the students will analyze the results.  (YH 28.08)

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7.5  For Second Straight Year, Druze Town Has Top Matriculation Rate

For the second year in a row, the Galilee Druze town of Beit Jann beat other localities in Israel to achieve the highest rates of students passing the high school matriculation exam in 2015.  According to the Education Ministry, 99% of students in Beit Jann received their bagrut, or graduation certificates last school year, up 4.6% from 2014, and 7% from 2013.  The Arab village of Abu al-Hija, outside Karmiel, came in second nationwide with a 98% success rate, followed by Kiryat Ekron at 96%, and Givat Shmuel and Kedumim with 93%.

Among Israel’s bigger cities, Rishon Lezion led the way with 77%; followed by Haifa with 76%; Tel Aviv and Beersheba at 70%; and, way below, Jerusalem, with 47%.  Unsurprisingly, predominantly ultra-Orthodox communities and some poorer Arab towns had the lowest percentage of students passing the matriculation exams.

The ultra-Orthodox towns of Modi’in Illit and Kiryat Ye’arim (Telz-Stone) had the lowest overall rates with an unprecedented 0% pass rate.  In Bnei Brak, a mostly ultra-Orthodox city in central Israel, only 11% of students passed the exams, though the meager showing was a slight improvement from its 10% pass rate in 2015.  The comparatively low figures are in part due to minimal high school attendance rates in Israel’s ultra-Orthodox communities.  (ToI 29.08)

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7.6  Eid Al Adha Break for UAE Private Sector is 11 – 13 September

The Eid Al Adha vacation for UAE private sector workers will be take place from Sunday, 11 September to Tuesday, 13 September, according to the Ministry of Human Resources and Emiratisation.  Public sector workers will be on holiday from 11 to 18 September.  The first day of Eid Al Adha will fall on 12 September this year in the UAE.  Eid Al Adha comes a day after Muslim pilgrims stand on Mount Arafat in the outskirts of Makkah in western Saudi Arabia as part of their pilgrimage.  The ascent of Arafat is the first event associated with the five-day Haj.  (AB 04.09)

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7.7  New Bill Increases Jail Terms as Female Genital Mutliation Becomes a Felony in Egypt

Egypt’s cabinet approved on 28 August a draft bill designating the practice of female genital mutilation (FGM) a felony, raising prison terms for those convicted of performing the procedure, health minister Ahmed Emad announced.  Emad said that the new bill amends the law criminalizing FGM, currently a misdemeanor, by stiffening penalties to between five and seven years in prison instead of the current three months to two years for practitioners who perform the procedure.  Those who “escort” victims to the procedure can also face jail sentences ranging from one to three years.  The bill, which has been sent to parliament for ratification, also carries a stiffened penalty of up to 15 years imprisonment if the practice leads to death or a “permanent deformity.”

Although FGM by its very nature leads to deformity, Egyptian law does not consider the act in itself as leading to “permanent deformity.”  The health minister said that the current FGM rate in Egypt is 91%, despite the law passed in 2008 criminalizing the practice.  He added that the entrenched tradition can only be combated through laws criminalizing the practice, especially since the procedure is often performed by people who are not licensed medical practitioners.  There is a widespread belief in Egypt that women who do not undergo FGM are unable to control their sexual urges.  (Ahram Online 28.08)

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7.8  Tunisia’s Youngest Premier Since Independence Sworn in

Tunisia’s new Prime Minister Youssef Chahed and members of his Cabinet were sworn in on 27 August, the presidency said, after approval from parliament.  The prime minister and his 26 ministers swore to “work devotedly for the good of Tunisia” and to “respect its constitution and laws.”  Chahed, at 40, is the country’s youngest prime minister since independence from France in 1956.  He is also the seventh premier in less than six years since the 2011 uprising that toppled longtime dictator Zine El Abidine Ben Ali.  Parliament on 26 August approved the Cabinet line-up, with 168 out 195 lawmakers who attended the session voting in favor, 22 against and five abstaining.  The new Cabinet took office on 29 August after a hand-over ceremony from former premier Habib Essid.

Chahed was appointed by President Beji Caid Essebsi early this month after lawmakers passed a vote of no confidence in Essid’s government following just 18 months in office.  The new prime minister is a member of the president’s Nidaa Tounes Party and a liberal who was local affairs minister before his nomination.  He and his Cabinet — which includes women, “young” ministers, three members of the Islamist Ennahda Party and several independents — will have to tackle pressing economic and security challenges.

While Tunisia is considered a rare success story of the Arab Spring, the authorities have failed to resolve the issues of poverty, unemployment, regional disparities and corruption that preceded Ben Ali’s fall.  The North African country in January witnessed its worst social unrest since the 2011 uprising.  Tunisia has also been rocked by a wave of extremist attacks, including two that killed dozens of foreign tourists last year.  (AFP 27.08)

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7.9  Turkey Cuts Length of Military Officers’ Service After The Attempted Coup

Turkey’s Supreme Military Council decided on 30 August to reduce the length of military officers’ service to 28 years in order to reduce the accumulation of high-ranking officers, the defense ministry said.  It also said in a statement that the council, meeting for the second time within one month after the July 15 attempted coup, decided to put into retirement 586 colonels while extending the period of service of 434 colonels by two years.  (Majalla 24.08)

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8.1  BioLineRx & I-Bridge Capital Establish a New Drug Development Joint Venture in China

BioLineRx established a joint venture (JV) with I-Bridge Capital, a Chinese venture capital fund focused on developing innovative therapies in China.  The joint venture, named iPharma, will develop innovative clinical and pre-clinical therapeutic candidates originating primarily in Israel to serve the Chinese and global healthcare markets.  Under the terms of the JV agreement, each partner will provide seed capital of one million dollars to the venture.  BioLineRx will screen and identify promising early-stage drug candidates originating primarily in Israel with emphasis on therapeutic indications that are of special interest for the Chinese population.  These therapeutic candidates will then be in-licensed by iPharma for further development and commercialization in China and possibly in other countries as well.  After a critical mass of in-licensed projects is reached, iPharma intends to raise additional funds from Chinese investors to accelerate further development activities. Each partner is protected from dilution for a five-year period and the first project is expected to join iPharma’s pipeline within the next few months.

Modi’in’s BioLineRx is a clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates.  The Company in-licenses novel compounds, primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.  (BioLineRx 25.08)

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8.2  Leap Therapeutics & Macrocure Announce Definitive Merger Agreement

Massachusetts’ Leap Therapeutics, a clinical stage immuno-oncology company, and Macrocure announced the signing of a definitive merger agreement.  Under the terms of the agreement, Macrocure will become a wholly owned subsidiary of Leap, and Leap will become a public company.  In connection with the transaction, Leap will apply to have the shares of the combined entity listed for trading on NASDAQ upon completion of the merger.  Under the terms of the agreement, Macrocure shareholders will exchange their Macrocure shares for newly issued shares of Leap common stock.  In addition, existing Leap investors, including entities affiliated with HealthCare Ventures, have committed to invest an additional $10 million at the closing of the transaction.

The combination with Macrocure positions the organization as a leading immuno-oncology company with sufficient capital to advance their pipeline of first-in-class monoclonal antibodies through significant value-creating events.  Importantly, Leap anticipates achieving substantial clinical milestones over the course of 2016 and 2017.  They plan to present data and initiate randomized studies for DKN-01, our lead development candidate, which has demonstrated clinical activity in esophageal cancer and cholangiocarcinoma when combined with chemotherapy; and we expect to report data from a repeat-dose study of TRX518, a novel GITR agonist monoclonal antibody which is believed to enhance an immune anti-tumor response.

Petah Tikva’s Macrocure is a clinical-stage biotechnology company that was focused on developing a novel therapeutic platform to address chronic and hard-to-heal wounds.  (Leap 30.08)

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8.3  Exalenz Collaboration with Conatus for BreathID Monitoring Patients with Cirrhosis Associated with NASH (Nonalcoholic Steatohepatitis)

Exalenz Bioscience announced a collaboration with San Diego, California’s Conatus Pharmaceuticals to use the BreathID Methacetin Breath Test (MBT) to monitor patients in a planned Phase IIb clinical trial evaluating Emricasan.  Emricasan is an investigational treatment for patients with chronic liver disease, being developed by Conatus.  This collaboration is the latest addition to Exalenz’s growing clinical pipeline of investigational diagnostic applications utilizing BreathID® to diagnose serious liver diseases. In addition to three trials related to NASH diagnostics and monitoring, the company has ongoing clinical trials for detection of hepatocellular carcinoma (HCC), diagnosis of clinically significant portal hypertension (CSPH) and monitoring of acute liver failure (ALF).

Modi’in’s Exalenz Bioscience develops and markets diagnostic and monitoring systems that use the breath to diagnose and help manage gastrointestinal and liver conditions.  The company’s flagship BreathID Hp test detects the presence of the H. pylori bacteria, associated with various illnesses including gastric cancer and is in use in over 350 US medical centers.  (Exalenz 29.08)

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8.4  Kamada & Kedrion Seek FDA Approval of Human Rabies Immunoglobulin as a Post-Exposure Treatment

Kamada and Italy’s Kedrion announced the submission of a Biological License Application (BLA) which has been filed with the U.S. FDA for a post-exposure treatment for rabies, a life-threatening condition.  The human anti-rabies immune globulin (IgG) therapy was developed as a collaboration between the two companies.  Kamada and Kedrion have a strategic agreement for the clinical development and marketing of the anticipated new IgG rabies treatment in the U.S.  Kamada will hold the license for the approved product and Kedrion will exclusively market the therapy in the U.S., subject to receiving marketing approval from the FDA.

Kamada has been selling the product since 2003 in numerous territories outside the U.S. under the brand name KamRAB.  Kamada has sold more than one million vials of the product to date, demonstrating significant clinical and safety experience with the product.  Kamada and Kedrion expect a regulatory decision from the FDA on the BLA in mid-2017, and plan on launching the product soon after a favorable decision.

Ness Tziona’s Kamada is focused on plasma-derived protein therapeutics for orphan indications, and has a commercial product portfolio and a robust late-stage product pipeline.  The Company uses its proprietary platform technology and know-how for the extraction and purification of proteins from human plasma to produce Alpha-1 Antitrypsin (AAT) in a highly-purified, liquid form, as well as other plasma-derived Immune globulins.  AAT is a protein derived from human plasma with known and newly-discovered therapeutic roles given its immunomodulatory, anti-inflammatory, tissue-protective and antimicrobial properties.  The Company’s flagship product is Glassia, the first and only liquid, ready-to-use, intravenous plasma-derived AAT product approved by the U.S. FDA.  Kamada also leverages its expertise and presence in the plasma-derived protein therapeutics market by distributing more than 10 complementary products in Israel that are manufactured by third parties.  (Kamada 01.09)

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8.5  Gordian Surgical Receives CE Clearance for TroClose1200

Misgav Israel’s Gordian Surgical, a portfolio company of The Trendlines Group, received CE clearance for its TroClose1200, an innovative trocar with integrated closure system for the suturing of abdominal wall incisions during laparoscopic surgical procedures.  The Company announced the completion of registration and receipt of CE approval to begin marketing the TroClose1200.  Together with this certification, Gordian also received ISO13485 certification.

Gordian Surgical’s TroClose1200 acts both as a trocar, through which surgical instruments enter the abdomen, and to close internal incisions made during surgery, delivering “two-in-one” functionality.  Currently, surgeons insert sutures in a time-consuming and difficult process at the end of the procedure or they close internal incisions with the use of an additional device.  Using the TroClose1200’s uniquely designed release mechanism, sutures are inserted into the tissue at the beginning of the procedure and anchored to remain in place throughout the operation, allowing incisions to be closed easily and quickly upon removal of the TroClose1200.

Gordian has started human trials to demonstrate safety and efficacy and has, to date, performed 34 successful laparoscopic procedures using the TroClose1200, including hysterectomy, cholecystectomy (gallbladder removal), hernia repair, and sleeve gastrectomy.  The surgeries were performed by four different surgeons in two medical centers in Israel and abroad. Gordian expects to complete 50 additional procedures as part of the trial by the end of 2016.

Gordian Surgical has raised approximately $3 million from The Trendlines Group, Pirveli Ventures (a Canadian foundation operating in Israel), Chinese investment fund Virtus Inspire Ventures, Israel’s Office of the Chief Scientist, and private investors, including renowned Israeli and American surgeons.  (Gordian Surgical 06.09)

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9.1  Checkmarx Announces Federal Information Processing Standards (FIPS) Support

Checkmarx announced availability of its FIPS compliance CxSAST offering.  The new capability enables Checkmarx to comply with FIPS 140 regulations and maintain its strict guidelines across all Checkmarx implementations.  Organizations delivering services to the federal space and organizations within the federal space can now run Checkmarx CxSAST in a FIPS compliant mode.  This enables federal and government organizations bound by FIPS regulation to fully deploy Checkmarx solutions.  Government organizations deal with a high volume of sensitive information and details that need to be secure.  This new announcement and use of Checkmarx CxSAST will greatly improve processes and streamline security efforts from the initial coding until the rollout.

Ramat Gan’s Checkmarx develops solutions used by developers and security professionals to identify and fix vulnerabilities in web and mobile applications early in the development lifecycle.  It provides an easy and effective way for organizations to automate security testing within their Software Development Lifecycle (SDLC) which systematically eliminates software risk before applications are released.  (Checkmarx 24.08)

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9.2  Telematics Wireless to Implement Smart City Technology in Montréal

Telematics Wireless (Telematics), a leader in smart city control applications, has announced that its smart city technology has been selected for use in a new control and monitoring solution for 132,500 street lights in the City of Montreal, Canada.  As part of a C$28 million contract awarded to énergère Consultants for the supply and installation of an intelligent street lighting management solution, Telematics’ solution will include its 7-pin external Lighting Control Units (LCUs) and internal LCUs that will control the operation of the lighting fixtures.

énergère, who intends to provide comprehensive city-wide coverage via multiple smart city networks, has chosen Telematics’ T-Light Pro System for its highly robust wireless mesh multi-hop network that utilizes self-healing and cognitive radio algorithms.  Telematics’ solution for smart city applications enables reliable and secure two-way communications between lighting nodes and the Central Management Software (CMS) via a wireless network that uses a small number of gateways.  This energy-saving solution controls lighting levels and monitors the power and energy usage of lightings.  Street light outages are detected in real time, thus reducing maintenance costs and enhancing public safety.

Holon’s Telematics Wireless is a recognized global leader in the delivery of outdoor lighting control systems, as well as robust, reliable and advanced energy and water resource management systems based on RF wireless networks.  With almost 20 years of experience in Machine-to-Machine technologies, our solutions support a wide spectrum of smart city applications, increasing their efficiency, reliability, and cost-effectiveness.  The company has deployed tens of thousands of Light Control Units worldwide in dozens of cities.  (Telematics 24.08)

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9.3  Reporty App Live-Streams Emergency Situations From Your Smartphone To First Responders

Reporty provides rescue teams with the precise location and real-time information from your smartphone, including live video.  Reporty is a free app that facilitates the communication between people in emergency situations and public safety agencies, live-streaming video from your smartphone’s camera to the applicable authorities.  Once contacted, the dispatcher will also have access to relevant information, including the person’s name, location, needs, and more.  Using the power of the crowd, Reporty is revolutionizing the way first response and public safety agencies manage events in the field.

The US Federal Communications Commission (FCC) estimates that improving location accuracy could potentially save about 10,000 lives a year.  Now, Reporty offers precise location accuracy (1 meter).  When the app is on, the user can click on one of the assistance options on the user interface, which include different emergency services, such as medical assistance, police authorities and firefighters, in addition to local municipal authorities.  Once an option is selected, the app live-streams video from the smartphone’s camera, showing authorities exactly what is happening around the user. If the user is unable to speak, Reporty also allows for instant messaging.

The advantage of Reporty over simply calling 911, is that in many emergency situations, the ability to coherently explain the situation may be impaired or non-existent.  Furthermore, 911 dispatchers on the other side of the phone are completely blind over what is going on with the caller – that is, they literally cannot see where exactly the caller is, who’s around them, if they’re alone, and other general information about their surroundings.  Sometimes they won’t even be able to identify whether it might be a prank call or not.  By showing the incident to the dispatchers through the phone’s camera, these can give instructions to the person in need even before they physically reach his or her location.

Tel Aviv’s Reporty Homeland Security has set out to bridge the gap between the people and the resources designed to help them.  They are introducing the most innovative technology the public safety sector has ever seen.  Using the power of the crowd, Reporty is revolutionizing the way first response and public safety agencies manage events in the field.  Their ground-breaking communications platform shows the true nature of any event, emergency or non-emergency, as it unfolds.  Reporty has raised $1.8 million and attracted roughly 100,000 users in recent months.  In June, the startup won the Tel Aviv Startup Challenge competition run by StarTAU, Tel Aviv University’s entrepreneurship center.  (NoCamels 29.08)

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9.4  Mellanox Ethernet Offload Engines Enable New Levels of Application Efficiency with VMware vSphere

Mellanox Technologies announced software driver support for ConnectX-4 Ethernet and RoCE (RDMA over Converged Ethernet) on VMware vSphere, the industry’s leading virtualization platform.  Now, for the first time, virtualized enterprise applications are able to realize the same industry-leading performance and efficiency as non-virtualized environments.  The new vSphere software for ConnectX-4 delivers three critical new capabilities; increased Ethernet network speeds at 25/50 and 100 Gb/s, virtualized application communication over RoCE, and advanced network virtualization and SDN (Software Defined Networking) acceleration support.

Mellanox’s ConnectX-4 supports VMware vSphere clouds with Ethernet networks operating at speeds up to 100 Gb/s, enabling the compute and storage traffic to run over a single wire.  This greatly improves the return on investment of Hyperconverged infrastructure and enables multicore CPUs to achieve their full capacity to run applications.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage.  Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability.  (Mellanox 29.08)

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9.5  Supermassive Games Compiles its Games 4 Times Faster With IncrediBuild

BAFTA-winning independent British game developer Supermassive Games   has managed to compile its games 4 times faster, significantly shortening continuous delivery cycles, by using IncrediBuild, the leading solution provider of continuous delivery acceleration technology.  IncrediBuild dramatically shortens continuous delivery cycles by accelerating development processes such as compilations, tests, code analysis, packaging, and more.  This is achieved through running said processes in parallel across multiple cores within the network, using underused and unused CPU capacity.

Tel Aviv’s IncrediBuild is the leading solution provider of software acceleration technology.  IncrediBuild dramatically reduces build and testing times among other development processes.  IncrediBuild’s non-intrusive parallel computing tech empowers users to easily save hundreds of hours just minutes after installing the software.  Harnessing unutilized processing power across networks, IncrediBuild speeds the code build, Continuous Integration and delivery cycles.  With its unique process virtualization technology, IncrediBuild has become the de facto standard solution for code-build acceleration.  (Incredibuild 30.08)

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9.6  Mellanox Ethernet Solutions Accelerate Germany’s Most Advanced Cloud Data Center

Mellanox Technologies announced that SysEleven, a managed hosting provider located in Berlin, Germany, has selected the Mellanox Open Ethernet Spectrum and Cumulus solutions to build its new SDN-Based, fully automated cloud-based data center.  The Mellanox solutions include the Spectrum SN2410 and SN2700 25/50/100G Ethernet switches, ConnectX-4 Lx 25/50G Ethernet adapters and LinkX™ cables for inclusion into its fully-automated OpenStack, cloud-based data center.

The SysEleven solution consists of Mellanox’s ConnectX-4 Lx Ethernet 25/50G Ethernet adapters.  The solution has a complete layer three Border Gateway Protocol (BGP) from the server to top-of-rack and is fully automated and offer the best performance for a Quobyte SDS solution.  Mellanox Open Ethernet Spectrum SN2410 and SN2700 switches are also part of Mellanox’s complete end-to-end solution which provides 10, 25, 40, 50 and 100G Ethernet interconnectivity within the data center.  The switches introduce superior hardware capabilities including dynamic flexible shared buffers and predictable wire speed performance with no packet loss for any packet size.  Other devices in this solution include ConnectX-4 based network interface cards, and LinkX cabling. Flexible and fully scalable, the end-to-end hardware architecture is designed specifically to meet the market’s most advanced cloud/web 2.0 performance needs.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end Ethernet and InfiniBand intelligent interconnect solutions and services for servers, storage, and hyperconverged infrastructure.  Mellanox intelligent interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance.  Mellanox offers a choice of high performance solutions: network and multicore processors, network adapters, switches, cables, software and silicon, that accelerate application runtime and maximize business results for a wide range of markets including high performance computing, enterprise data centers, Web 2.0, cloud, storage, network security, telecom and financial services.  (Mellanox 31.08)

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9.7  Cronus Releases New Versions for the CyBot Pro and Enterprise Solutions

Cronus Cyber Technologies announced the availability of new versions for CyBot Pro and Enterprise.  The latest versions of CyBot Pro and Enterprise contain multiple improvements on previous versions and allow much faster and accurate predictions of attacks.  The CyBot Pro and Enterprise solutions enable organizations to predict attacks on their system, using a coherent and holistic dashboard that shows up-to-date status of the system at any given moment.  The System imitates the modus operandi of a human hacker and can create a link of vulnerabilities between systems, until the attacker reaches a critical asset.

Haifa’s Cronus Cyber Technologies is a global provider of predictive Attack Path Scenario (APS) solutions. We developed the CyBot product suite, a unique, patented software solution that imitates human hacker behavior to discover, predict, analyze, and mitigate the risk of sophisticated cyber-attacks – all in real time.  By deploying Cronus technology, organizations can accurately evaluate their resiliency against cyber threats; and proactively adjust their security protection strategies to mitigate the risks.  When deployed in global, multi-site enterprises, information can even be shared across sites to depict global attack path scenarios.  (Cronus Cyber 04.09)

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9.8  Datumate Unveils DatuFly, A Professional Imagery App for Drones

Datumate announced a new tablet app for effortless drone flight planning and automated, high resolution photo-shooting.  DatuFly app saves up to 80% of field surveying time and eliminates follow-up site visits.  Friendly, wizard type, user interface makes it super easy to select job type and the required outputs to achieve best results.  Area of interest is instantly marked on the map, including complex polygons, and the drone is ready for launch.  Flight and aerial photography, vertical or oblique, are entirely automatic and optimized per job type, such as topography, stockpiles, roads etc. Mission progress is constantly monitored on the tablet screen, including flight time, distance, way points and the required number of batteries.   Once the battery is exhausted, the drone automatically returns for a battery exchange and resumes flight and photo-shooting from where it left off.

DatuFly image-taking plan is executed based on the best practice requirements of DatuGram 3D, Datumate’s comprehensive field-to-plan software that automates surveyors’ field and office work, ensuring survey grade accuracy, high quality and quick results.

Yokneam’s Datumate is transforming the civil engineering, construction and architectural spaces by automating the entire field-to-plan process, using image-processing and drone technologies.  Datumate solutions dramatically reduce the amount of time surveying crews spend in the field, while maintaining professional, survey grade accuracy and substantially reducing risks.  Datumate’s intuitive, simple and automated solutions increase productivity by saving field and office time for surveying projects of roads, intersections, stockpile volumes, topography, piping, industrial facilities, bridges, property surveys, building facades, and more.  (Datumate 06.09)

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10.1  Finance Ministry Says 2016 Economic Growth Better Than Expected

Israel’s economic growth in 2016 so far has been better than expected, the Finance Ministry Chief Economist said on 31 July.  The economy’s performance in the second quarter of 2016 and its overall performance in the first half of the year indicate that “we’re on the right track.”  The positive trend is attributed to the result of increased private consumption, including on food, drinks, entertainment and especially overseas travel, which made up 80% of private consumption in Q2/16.  This component “continuously shows double-digit growth,” indicating that private consumption’s contribution to economic growth outweighs the contribution made by the economy’s productive elements.  (FM 31.08)

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10.2  OECD Says Israel 4th Worldwide in Meat Consumption

Israelis’ meat consumption is among the highest in the world, a new OECD study found.  According to the Organization for Economic Cooperation and Development, Israel is fourth in meat consumption worldwide, with a yearly average of 86.1 kilograms per capita.

Australia topped the list, with a yearly average of 90.3 kg of meat per capita; the U.S. came in second, with 90.1 kg; Argentina came in third with an average of 86.6 kg per capita.  After Israel, Brazil rounded up the world’s top-five meat consumers, with an average of 78 kg per capita.  India ranked last, with a mere 3.2 kg per capita.  In the EU, average meat consumption stood at 64.9 kg.

The study, focused on the consumption of chicken, beef, veal, and pork in 2014-2015.  It also included countries outside the OECD.  A closer look at the findings explains Israel’s high ranking, as Israelis ate the most amount of chicken in the world in 2015 – 57.7 kg per person.  Rivaling Israel’s chicken consumption were the U.S. (47.6 kg) and Muslim countries like Malaysia (41.4 kg) and Saudi Arabia, (41.2 kg).  The countries with the lowest chicken consumption – excluding India, where almost no meat is eaten at all – were Ghana and Mozambique, where consumption averaged 1.5 kg per capita.  The data also ranked Israel seventh place in beef consumption with 20.2 kg per capita.  Not surprisingly, Israel ranked very low in pork consumption — 29th on the list with an average of 1.6 kg per capita.  (Various 30.08)

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10.3  New Israeli Car Deliveries Up 30% in August

A record 220,000 new vehicles have been delivered in Israel in the first eight months of 2016.  August is usually a quiet month in Israel’s business sector but last month 27,490 new vehicles were delivered, up 30% from August 2012.  In the first eight months of 2016, a record 220,000 vehicles have been delivered, up 17% from 188,633 vehicles over the corresponding period of last year, which was also a record.  Colombil (Hyundai, Mitsubishi and Mercedes) remains Israel’s biggest vehicle importer with 47,127 deliveries in the first eight months of 2016, up 25% from last year.  (Globes 05.09)

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11.1  ISRAEL:  The New Normal: Today’s Arab Debate Over Ties with Israel

David Pollock wrote on 25 August in the Fikra Forum that a recent spate of reports in major Arab media about official and other contacts with Israelis — including very widely publicized Saudi and Egyptian visits to Israel in the past month – is generating renewed regional debate over the pros and cons of this phenomenon.  Much of this debate, however, obscures one key point:  Arab contacts with Israel, far from being brand new, actually have a very long history, with many ups and downs along the way.

In fact, official Arab-Israeli meetings and signed agreements date almost all the way back to Israel’s creation, with the Rhodes Armistice accords of 1949.  For nearly two decades thereafter, there were periodic if generally low-level official meetings about security incidents, water, refugees, and other issues – along with many private, higher level meetings.  The 1967 war produced the famous “three no’s” of the Arab summit conference in Khartoum: no peace, no recognition, and no negotiations with Israel.  But just a few years later, after the 1973 war, contacts resumed, culminating in the Egyptian-Israeli peace treaty of 1979.  Ever since, through all the turbulent decades until today, Egypt and Israel have maintained diplomatic, security, and economic relations.

It is true that most Arab governments, spearheaded by Saddam Hussein’s Iraq, attempted to isolate Egypt in response.  Yet within about a decade, after the liberation of Kuwait from Saddam’s occupation, the Madrid peace conference of 1991 brought many Israeli and Arab officials – including Syrians, Saudis, Palestinians, and others – publicly together again.

Exactly two years later, in September 1993, one of the most historic moments of dialogue and came with the first Oslo accord, with the Rabin-Arafat handshake and formal mutual recognition between Israel and the PLO.  This was followed in short order by a whole series of Arab-Israeli meetings, from the regional economic conferences in Casablanca, Amman, and Doha, to the Jordanian-Israeli peace treaty of 1994, to the Sharm al-Sheikh foreign ministers meeting of 1996.  At the latter event, Arafat, Shimon Peres, Saud al-Faisal, Amr Moussa and other leaders all appeared publicly with each other, and pledged to fight terrorism and work for peace together.

Ever since that time, despite some interruptions during the second intifada or other crises, many other high-level Israeli-Palestinian and Israeli-Arab summits, meetings, handshakes, and other contacts have occurred.  The Annapolis peace conference of 2007, the Netanyahu-Abbas meeting of 2010, and the various bilateral and multilateral meetings during Secretary Kerry’s peacemaking effort in 2013-14 all come to mind.  Meanwhile, at the security and intelligence levels, direct contacts between Israeli and Palestinian, Egyptian, Jordanian and other Arab officials have become so frequent and mutually useful as to be routine.

So some degree of practical dialogue with Israel is nothing new, notwithstanding continual controversy about it.  What is noteworthy today is that the issue is being actively and openly debated in major Arab media, with both proponents and opponents each having their say.  And that not just Egypt, Jordan, and the Palestinians, but other major Arab outlets including Saudi ones, are participating in this discussion.

Particularly noteworthy in this respect is a long article in the current issue of the popular and influential pan-Arab weekly al-Majallah, based in London but widely circulated and read in both print and online editions in the region.  This article not only reviews the long history of Arab-Israeli relations, but also cites statements about that by Israeli Ambassador to the U.S. Ron Dermer at great length.

Responses by Saudi writers are mixed, but some are very vocally in favor of dealing with Israel.  For example, Ahmed Adnan, writing in the website, even argues that Arabs should follow Turkey’s model:  “Ankara has ties with Israel, but no one can accuse Turkey of being biased against the Palestinians.”  His article was reprinted in the leading al-Arabiya website on 8 August.

Among Egyptian writers, the idea of regular dealings with Israel still excites fierce debate, even after nearly four decades of official peace.  The owner of the prominent independent daily al-Masry al-Yawm outspokenly advocates pragmatic close bilateral ties, in Egypt’s own interest.  But leading al-Ahram columnist Hassan Nafaa, in sharp contrast, argues strenuously against “free gifts” to Israel.

It is intriguing, however, that today even some Egyptian writers and academics most critical of ties to Israel acknowledge that the younger generation, turned against Iran, Hamas, and the Muslim Brotherhood both by their own experience and by their government’s changing positions, is losing some of its animosity toward their Israeli neighbors.  Examples of this discourse can be found in articles penned this year by Egyptian authors Muhammad Laithi in al-Watan and by Ahmed Hidji in al-Monitor, who cites three different Cairo professors lamenting their students’ growing openness to Israel.

All of this raises a delicate question:  Is this revived movement toward some kind of dialogue leading toward peace with Israel just a policy of certain Arab governments, or perhaps of an elite fringe?  In other words, does it enjoy any grassroots support?  Here the evidence is surprisingly clear, and also surprisingly positive.  While Arab publics overwhelmingly dislike Israel (and Jews), solid majorities in most recent surveys, on the order of 60%, nevertheless voice support for a “two-state solution,” which implies peace with the Jewish state.  And they do so even when the question is worded to call explicitly for peace with Israel, or for abandoning the struggle to liberate all of Palestine.  The exception that proves this rule, ironically, is the Palestinian public in the West Bank and Gaza, where support for a two-state solution has lately fallen to just below the halfway mark.

The combination of data points suggests that the majority support for eventual peace with Israel reflects not affinity but the converse:  common enemies, and therefore common interests.  Those include common concerns – as measured in the same surveys – about jihadi terrorism; about Iranian aggression, subversion, and nuclear weapons; and about perceived flaws in American policies toward all those issues.

As far back as 2010, even before the Saudi-Iran proxy wars in Syrian, Yemen and elsewhere, a reliable private poll showed that one-fourth of the Saudi urban public supported quiet military cooperation with Israel against the Iranian nuclear threat.  And in the past two years, polls not only in Saudi Arabia but also in Egypt, Jordan, Kuwait, and the UAE show that “the Arab street” is much more concerned about the conflicts with Iran, with Assad, and with Daesh than about the Israeli-Palestinian conflict.

The conclusion is clear:  today a broader regional approach to Arab-Israeli peacemaking, rather than a strictly bilateral Israeli-Palestinian one, offers somewhat better prospects of success – whether at the official, elite, media, or even popular levels.  Normalization with Israel remains controversial in Arab circles, but it is no longer taboo.  For an increasing number of Arabs, the Israeli “enemy of my enemy” may not be a friend, but could become a partner.  The next U.S. Administration would do well to ponder this unaccustomed situation, and to adjust its policies accordingly.

David Pollock is the Kaufman fellow at The Washington Institute and the director of Fikra Forum.  (Fikra 25.08)

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11.2  LEBANON:  Outlook Revised To Stable on Resilient Financial System & Deposit Inflows


-Banking sector deposit growth in Lebanon has remained resilient and sufficient to support the government’s debt-servicing capacity, in our view.

-On the other hand, we see little prospects for significant improvement in macroeconomic fundamentals.

-We are revising our outlook on Lebanon to stable and affirming our ‘B-/B’ sovereign credit ratings.

-The stable outlook reflects our view that continued deposit inflows will remain sufficient to support the government’s borrowing requirement and the country’s external financing gap.

Rating Action

On 2 September, S&P Global Ratings revised its outlook on the Republic of Lebanon to stable from negative.

At the same time, we affirmed our ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on Lebanon.


The outlook revision reflects our view that bank deposits in Lebanon will increase sufficiently to support the government’s borrowing requirement (26% of GDP in 2016) and the country’s external financing requirement (89% of GDP or 151% of current account receipts [CARs] in 2016).  We expect bank deposits will increase by at least 4% in 2016.

In our analysis, the Lebanese government’s debt-servicing capacity depends materially on the domestic financial sector’s willingness and ability to add to its holdings of government debt, which in turn relies on bank deposit inflows.  Domestic banks support the government debt market in two ways.  First, they buy Lebanese government debt directly. Banking system claims on the public sector account for about 20% of total banking system assets.  This means bank creditors hold about one-half of the total government debt.  Second, Lebanese banks buy certificates of deposit issued by the Banque du Liban (BdL; the central bank), which in turn buys government debt.  As of year-end 2015, the BdL held 37% of the government’s outstanding treasury bills, which amounted to 23% of total government debt.  Although we view the concentration of government financing from these sources as a structural weakness, at the current rating level these flows are an essential support.

The financial system is key in meeting the country’s external financing requirement.  Approximately two-thirds of Lebanese bank deposits are in foreign currency and nearly one-fourth is externally sourced, mostly from the Lebanese diaspora.  The banks induce the inflows by paying on average about 6% on Lebanese pound deposits and 3% on U.S. dollar deposits.  Last year, the inflows covered 2x net government debt issuance.  We note that, as a consequence, banks’ external positions have deteriorated.  We expect banks’ net external debtor positions will almost double in 2016 to $13 billion (44% of CARs), compared with $7 billion in 2013 and a net creditor position in 2010.

Nonresident retail deposits constitute the bulk of banks’ external liabilities (about 83% as of year-end 2015), the rest being cross-border interbank deposits.  To meet the 2016 gross external financing requirement, we expect banks and corporations will add to their external borrowings, and the government has returned to the Eurobond market.  We also note that BdL’s international reserves (excluding gold) decreased by about $2.4 billion in the 12 months ended June 30, 2016, to stand at $38.2 billion.  Additional drawings could be made to finance part of Lebanon’s 2016 $47 billion gross external financing requirement.

That said, there are ongoing risks to these deposit inflows.  Bank deposit growth slowed to about 5.2% annually at year-end 2015 from 11.5% at year-end 2010, as result of the civil war in Syria and, to a lesser extent, the economic slowdown in the Gulf Cooperation Council region (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates).  Inflows are sensitive to swings in confidence. In February 2016, the government of Saudi Arabia announced its curtailment of its $4 billion grant for military procurement for Lebanon, and the GCC states placed restrictions on their citizens’ travel to Lebanon.  Still, these measures seem to have had a softer impact on depositor confidence than the 2005 assassination of Prime Minister Rafic Hariri, which prompted nearly $2 billion in withdrawals from the banking system; or the 2006 war with Israel that triggered about $3 billion in withdrawals.  The withdrawals from these earlier, more perilous periods lasted only a few weeks, were in the low-single-digit percentages of total bank deposits, and were more than compensated by returning inflows.  If, however, deposit growth slowed or reversed, due to a more severe political shock than these past incidents or a redomiciliation, for example, the fiscal and external pressure on the ratings would mount.

We also see longer-term constraints on Lebanon’s deposit and economic growth, largely stemming from a divisive political environment organized along confessional lines.  The presidency has been vacant since President Michel Sleiman’s term ended in May 2014. Since then, the Lebanese parliament has failed on 43 consecutive occasions to elect a president, most recently in August 2016.  The parliament itself is led by a national unity government comprising both the March 14 and March 8 political alliances, which back opposing sides in the Syrian civil war.  The absence of a sitting president did not, however, prevent the parliament, whose term was due to end in June 2013, from extending its term twice, most recently in November 2014.  The next parliamentary elections are scheduled for May 2017.  The split political environment can thwart policymaking even on relatively minor issues, such as garbage collection, turning them into much larger social problems.

Nevertheless, we note that parliament passed some key laws at the end of 2015, such as legislation permitting the government to borrow in foreign currency in 2016.  In March 2016, the Lebanese government approved a temporary emergency plan to help partly solve the garbage crisis that started in July 2015 and led to a series of demonstrations.  Also, we note that municipal elections (the first local polls since 2010) were successfully held in May 2016.

We believe that Lebanon’s economic growth will remain relatively weak as long as the domestic political standstill persists and the Syrian civil war continues.  The Syrian crisis entered into its sixth year – without a resolution in sight – and we expect that Lebanon’s political, security and economic trajectories will remain entwined with those of its larger neighbor.  We therefore anticipate that Lebanon’s traditional growth drivers – tourism, real estate and construction – will remain subdued, despite favorable terms of trade.  We project economic growth over 2016-2019 at just over 2.3% on average.  In our view, the productive capacity of the Lebanese economy is below that of peers.  We estimate growth in real per capita GDP (which we proxy by using the 10-year weighted-average) at negative 2.3% during 2010-2019.  We estimate nominal per capita GDP at $8,600 in 2016.

We expect that the current account deficit will remain large, but narrow to average about 14% of GDP in 2016-2019, due to a smaller import bill stemming from lower oil prices and weaker domestic economic activity.  We note that the deficit may be overstated due to unrecorded public and private transfers and border trade.  The strengthening U.S. dollar (to which the Lebanese pound is pegged) will also reduce the cost of imports from the Eurozone, which accounts for about one-third of Lebanon’s imports.  On the other hand, exports, tourism and net remittances will remain constrained because of the Syrian crisis.  We note that the World Bank announced in July this year that its grant and loan program for Lebanon would reach $1.5 billion over the next three years.

We estimate Lebanon’s public- and financial-sector external assets will exceed the country’s external debt by an average 57% of CARs between 2016 and 2019, albeit on a declining trend.  We estimate that gross external financing needs will average 118% of CARs plus usable reserves over the same period.

The Syrian civil war and the flow of refugees to Lebanon continue to impose a heavy burden on Lebanon’s infrastructure.  Registered refugees reached 1.1 million, according to the UN High Commissioner for Refugees, but private estimates range up to about 2 million, compared with the estimated population living in Lebanon of about 5.9 million according to the government.

We expect the general government to post a modest primary fiscal surplus through the forecast horizon.  The broader deficit, however, will likely widen to 8.7% of GDP in 2016 compared with 6.2% in 2014.  We note that government revenues in 2014 benefited from a one-time receipt of about 2% of GDP due to exceptionally high telecom transfers.  The deficit includes transfers to the electricity company Electricite du Liban (EdL), estimated at about 2% of GDP in 2015 compared with 4% of GDP in 2014, with EdL requiring less government support due to lower oil prices.

In our view, Lebanon’s public finances and fiscal flexibility will remain constrained by structural expenditure pressures, including transfers to EdL.  Still, even without a fully functioning government, current expenditures were contained at about 23% of GDP in 2015, while capital expenditures were cut to 1% of GDP in the same year, notwithstanding Lebanon’s significant infrastructure needs.  Interest payments account for more than two-fifths of general government revenues.  Monetary conditions are tight and create headwinds for growth.  The real effective exchange rate has appreciated by about 30% between 2011 and 2015.  Real effective interest rates on government debt, as measured by the consumer price index, spiked in 2015 at over 10% due to an unexpected fall in prices.  We expect inflation to rise at a quickening pace through the forecast horizon and government debt to stabilize in 2017 at just under 130% of GDP, net of liquid fiscal assets.

Lastly, we note that there are substantial shortcomings and material gaps in the dissemination of macroeconomic data and reporting delays.  Official national accounts data for 2013 are the latest available and were published in December 2014. The availability and quality of official external data are also limited, in our opinion.


The stable outlook on Lebanon reflects our expectation that continued deposit inflows to the financial system will remain sufficient to support the government’s borrowing requirement and the country’s external financing gap, despite the difficult internal and external political environments.

We could lower our ratings on Lebanon if, over the next 12 months, deposit inflows significantly slowed or foreign-exchange reserves declined much further than we currently expect.  If the domestic political gridlock escalated to a more destabilizing situation, we could also lower the ratings.

We could raise our ratings if Lebanon’s policymaking framework became more predictable, supporting foreign capital inflows and improving the sustainability of public finances.  (S&P 02.09)

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11.3  JORDAN:  IMF Approves $723 Million Extended Arrangement for Jordan

On 24 August 2016, the Executive Board of the International Monetary Fund (IMF) approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Jordan for an amount equivalent to SDR 514.65 million (about $723 million, or 150% of Jordan’s quota) to support the country’s economic and financial reform program.  This program aims at advancing fiscal consolidation to lower public debt and broad structural reforms to enhance the conditions for more inclusive growth.

Following the Board’s decision, an amount equivalent to SDR 51.465 million (about $72.3 million) is made available for immediate disbursement, the remaining amount will be phased in over the duration of the program, subject to six reviews.  Following the Executive Board discussion on Jordan, Mr. David Lipton, First Deputy Managing Director, and Acting Chair, said:

“The Jordanian economy has performed favorably under a difficult external environment, including the hosting of a large number of Syrian refugees.  Macroeconomic stability has been maintained thanks to significant policy adjustment and reforms.  However, economic performance remains below potential and the hosting of Syrian refugees weighs on the economy and public finances.

“The authorities have developed a comprehensive economic reform program to enhance the conditions for more inclusive growth and preserve macroeconomic stability.  Early and decisive actions are expected to provide new economic opportunities, job creation, and bolster confidence under a difficult environment. While the domestic and regional conditions are challenging, the authorities’ strong commitment and their ownership of the program is welcomed.  Continued donor support through sufficient grants and concessional financing as stated in the Jordan Compact, will also be important to support program goals.

“Public debt needs to be put on a downward path through gradual fiscal consolidation over the medium term while preserving essential social spending.  To this end, it is critical to reduce the general sales tax and customs duty exemptions and to amend the income tax law.  The electricity company NEPCO needs to reach operational cost recovery and Water Authority of Jordan’s finances should be consolidated. Public financial management should be strengthened to enhance fiscal transparency and reduce fiscal risks.

“Monetary policy has been skillfully managed, and will continue to be anchored by the exchange rate peg and focus primarily on preserving an adequate level of reserves.  To further strengthen the regulatory framework, adoption of the amendments to the central bank law is a step in the right direction, and those for commercial banking law and of the secured lending and insolvency laws should be expedited.

“A swift implementation of the structural reform agenda would enhance the resilience and depth of the financial sector, the business environment, and help tackle challenges facing SMEs in terms of access to finance. Labor market reforms are needed to boost youth and female employment and lessen informality.”

ANNEX:  Recent Economic Developments

With the implementation of program supported by Stand-By Arrangement (SBA) that expired in August 2015, Jordan has managed to maintain macroeconomic stability and undertook significant policy reforms amidst a difficult external environment, high vulnerabilities, and the hosting of a large number of Syrian refugees.  However, important challenges remain: economic growth remains below potential; unemployment remains high especially among the young and women; gross public debt has risen to 93% of GDP; the refugee crisis is weighing on the economy and public finances; and the current account deficit is high.

To tackle these challenges, the authorities have formulated an economic and financial reform program that is underpinned by Jordan’s ten-year framework for economic and social policies (Vision 2025). This program aims at advancing fiscal consolidation and broad structural reforms to enhance the conditions for more inclusive growth.

Program Summary

The new program is designed in a flexible manner by pursuing gradual and steady fiscal consolidation to bring the debt down to safer levels while protecting the poor; and by advancing comprehensive reforms to enhance the conditions for more inclusive growth, particularly in light of the challenges posed by the regional conflicts on exports, investment, and the labor market.

Gradual and steady fiscal consolidation.  The authorities’ program aims at gradual fiscal consolidation to lower public debt to about 77% of GDP by 2021, while providing room for capital spending and preserving social spending.  Key measures include revenue-enhancing reforms to the tax system, such as reforming the tax exemptions framework and broadening the tax base;

Structural policies to promote growth and jobs. Structural reforms will be implemented in several areas to enhance competitiveness, job prospects and foster equality, fairness and good governance.  Such measures will aim at increasing labor force participation, particularly for women and youth; reducing informality; enhancing the business environment; ensuring sustainability in the energy and water sectors; preserving social spending, and improving public accountability and good governance.

Monetary and financial policies will remain focused on maintaining adequate reserves to anchor the exchange rate.  Furthermore, the authorities plan to advance several reforms to enhance the resilience and depth of the financial system, including to strengthen the regulatory framework; to enhance the Anti-Money laundering/Combating the Financing of Terrorism (AML/CFT) regime; to promote better supervision of the insurance and microfinance sectors.  (IMF 25.08)

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11.4  IRAQ:  Republic of Iraq Ratings Affirmed at ‘B-/B’; Outlook Stable

On 26 August 2016, S&P Global Ratings affirmed its ‘B-‘ long-term and ‘B’ short-term foreign and local currency sovereign credit ratings on the Republic of Iraq.  The outlook is stable.


Our rating on Iraq is constrained by its war with the militant group ISIS, by the sovereign’s political institutions, which are in an early stage of development, and by sectarian divisions between the Sunni, Shia, and Kurdish ethnic groups.

Iraq’s oil production and massive oil reserves underpin our rating. Iraq has the world’s fifth-largest proven crude oil reserves and is the second-largest oil exporter in the Organization of the Petroleum Exporting Countries (OPEC).  Oil dominates the Iraqi economy, contributing over 60% of GDP, 90% of government revenues and more than 95% of exports.

In recent months, the Iraqi forces and their allies have retaken some territories that ISIS had controlled, such as Ramadi (west of Baghdad), Baiji (the site of Iraq’s largest oil refinery), and more recently Fallujah.  All three cities are within 100 miles of Baghdad. ISIS previously controlled large areas along the Tigris and Euphrates Rivers north of Baghdad. ISIS’ territorial control of Northwest Iraq has shrunk significantly since our last review.  We understand that the Iraqi army is preparing the ground to retake Mosul – Iraq’s second largest city – before year-end.

Crucially, over 85% of Iraq’s oil fields and production are located in the south of the country close to Basra, the main port for crude exports.  These are Shia-controlled areas at some distance from ISIS-controlled areas and the conflict.  With our rating affirmation, we assume that the federal government will remain in control of these assets.  They are the key support for the rating.

In 2014, faced by the then-rising ISIS threat, Iraq elected a new government.  In September of that year, Haider Al-Abadi became prime minister.  Mr. Al-Abadi is viewed as more inclusive and secular in his approach than his predecessor, which is easing ethnic tensions and improving relations with the U.S., one of Iraq’s key allies.

In August 2015, Mr. Al-Abadi announced reform measures, including cuts in the size of government, in response to escalating social protests across the country spurred by electricity blackouts and unsatisfactory social services.  Many Iraqis believe that the government reforms have yet to bear fruit.  Also, Iraq faces significant corruption challenges.  The country scores among the worst countries on corruption perception and governance indicators in the world.  Corruption in Iraq is exacerbated by the ethnic-sectarian divide, lack of experience in public administration, and its weak capacity to manage the influx of aid money.  We believe that fighting corruption and Daesh represent Iraq’s major political and security challenges in the near term.  Combating corruption by strengthening governance, accountability, and transparency and repelling ISIS will help unlock Iraq’s economic potential and lead to improving creditworthiness, in our view.

After an estimated 6% growth in 2016 because of public investment in the oil sector, we project real GDP growth to fall below 2% in 2017-2019 owing to the headwinds from fiscal consolidation and weak domestic demand.  We think domestic demand will remain weak for at least two years, owing to the war against ISIS, internally displaced populations, and general social and political uncertainty.  In 2016, Iraq’s oil production is estimated at 4.2 million barrels per day (mbpd) in comparison with 3.5 mbpd in 2015.  We expect oil production to remain close to these levels in 2017-2019 owing to planned fiscal consolidation. Iraqi oil exports are projected at 3.6 mbpd in 2016, up from 3.0 mbpd in 2015 and 2.5 mbpd in 2014.

The internal and external shocks–the ISIS conflict and sharply lower oil revenues – that Iraq has faced since 2014 have hurt public finances.  We project the general government fiscal deficit will rise to 14% of GDP in 2015 and 15% in 2016 from a deficit of 6% in 2014.  Since our last review, the federal government’s fiscal position has become less flexible owing to the disagreements between the federal government and Kurdistan Regional Government (KRG) over their oil revenue sharing agreement.  This agreement represents roughly a sixth of the Iraqi general government budget.  The KRG, dissatisfied with the size of fiscal transfers from Baghdad, drastically reduced oil supply to the State Oil Marketing Organization (SOMO) and increased its independent sales to finance its expenditure.

Assuming the government enacts fiscal consolidation and freezes nominal spending at the 2015 level, we project budget deficits at 8% of GDP on average in 2017-2019.  Deficits will result largely from falling oil revenues and high military and humanitarian expenditures.  We think that the IMF’s Staff-Monitored Program, approved in December 2015, helped restore some order to public finances and paved the way to the $5.4 billion IMF financing agreed in July 2016.  Additional external financing of the budget is expected from the World Bank ($3 billion) and other bilateral creditors over 2017-2019.

Domestic issuance remains the main funding source for the 2016 government financing requirement.  We expect most of the debt will be taken up by Iraq’s commercial banks, led by the two largest: Raffidain Bank and Rashid Bank.  We anticipate that the banks will fund these purchases by incremental deposit growth and by repurchase operations with the Central Bank of Iraq (CBI).  In addition, the government has indicated its intention for a possible $2 billion Eurobond offering.  We project that general government debt will average 87% of GDP in 2016-2019, up from about 34% of GDP in 2014.  Our net general government debt average for the forecast period includes 20% of GDP of fiscal assets, which are mostly deposited with domestic commercial banks. Iraq’s debt stock has benefited from an 80% haircut that the government negotiated with its Paris Club creditors in 2003-2004.

Iraq’s current account has typically run a surplus thanks to the country’s large oil exports.  However, we expect the current account balance will turn to a deficit and remain so until 2019 because of the sharp drop in the oil prices.  We forecast Iraq’s current account deficit will average 5% of GDP in 2016-2019, compared with an average surplus of 10% of GDP in 2011-2014.  We expect that part of the regularization of public finances will entail the Iraqi government clearing approximately $2.6 billion of accounts payable with international oil companies in September 2016.  Iraq typically makes these payments in oil.  Although the clearing of these arrears will affect the 2016 current account deficit, we believe the payments will induce needed foreign direct investment that otherwise would have been stanched.  We expect that the current account deficits will be financed in part by a substantial drawdown of official foreign exchange reserves, and in part by external borrowing and investment.

We forecast external debt, net of public and financial sector external assets, at about 37% of current account receipts (CARs) in 2016, and we estimate gross external financing needs as a percentage of CARs and usable reserves at about 65%.

Inflation is currently staying low, with consumer price inflation in the low single digits (approximately 2.2% in 2014).  We expect that the CBI will maintain the dinar peg to the U.S. dollar, albeit with minor fluctuations, unless financing conditions are more difficult than we currently expect.  While the peg has helped control inflation, it limits the CBI’s monetary flexibility.  Net international reserves have fallen from 120% of the monetary base in 2013 to an estimated 109% at year-end 2015, and are projected to reach 83% at year-end 2017.  At the same time, the share of repo operations with domestic banks, which we regard as quasi fiscal in nature, is projected to increase substantially to reach 44% at year-end 2017 from 11% in 2015.  Moreover, although the liabilities and guarantees of the domestic banks appear high compared with the fair value of their assets, we view financial sector stability as a secondary issue compared with the country’s security and the consequences of negative terms of trade.


The stable outlook reflects our expectation that Iraq’s large fiscal and external deficits will be financeable, and that its conflict with ISIS will be contained. It also incorporates our forecast of an increase in Iraqi oil production and oil exports to 4.4 mbpd and 3.6 mbpd, respectively, by 2019, while the IMF program leads to gradual fiscal consolidation.

We could lower our rating on Iraq if the assumptions mentioned above do not hold.

We could raise the rating if Iraq’s security situation and its public finances improve substantially.  (S&P 26.08)

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

Rating Action

On 2 September, S&P Global Ratings affirmed its ‘AA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the State of Qatar.  The outlook remains stable.


Qatar is a wealthy economy.  The country holds the third-largest proven natural gas reserves in the world, and is the largest exporter of liquefied natural gas (LNG).  We expect Qatar’s reserves to provide many decades of production at the current levels.  GDP per capita is among the highest of rated sovereigns, estimated at $59,245 in 2016.  The hydrocarbon sector contributes about 50% of Qatar’s GDP, 90% of government revenues (oil and gas taxes and royalties, plus dividends from Qatar Petroleum), and 85% of exports.  We view Qatar’s economy as undiversified.

We now include re-based GDP data (from 2004 to 2013) in our analysis, as well as updated population statistics from official sources.  This results in a slight downward revision to our GDP per capita measure and also real GDP per capita trend growth, which, because of very high population growth, is strongly negative.  Qatar’s population grew by approximately 9% in 2015 according to census data, relating to the ongoing construction of significant infrastructure projects.  Our real GDP growth projections reflect these developments, with public sector capital investment contributing significantly to growth under Qatar’s $125 billion infrastructure investment program.  We expect the country’s economy to grow by about 4.0% during 2016-2019, in line with the pace of growth over the last four years.  We expect that population growth will slow over 2016-2019 as projects are completed.

Regarding the hydrocarbon sector, we expect that new production and refining facilities coming online over the next couple of years will also support manufacturing activity.  However, we do not expect a step change in production and the hydrocarbon sector will likely remain at broadly similar levels of output, albeit with some increase in gas output expected from 2017.  The moratorium on new projects in Qatar’s North Field will continue and will be reviewed only once gas prices begin to recover in the medium term, in our view.

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

Nevertheless, Qatar has one of the lowest costs of natural gas production, $1.60 to $2.00 per million British Thermal Units, and so we expect state-owned Qatar Petroleum – responsible for all phases of the oil and gas industry in Qatar – to remain profitable.  Its strategy has been to diversify into all major markets, adjusting the mix of destinations and contract types according to market needs.  Moreover, the majority of its gas exports are under long-term contracts, which provides some certainty regarding the volumes sold.

We expect that Qatar will maintain its cost advantage over many new projects in other countries.  In January 2016, the renegotiation of RasGas’ (Qatar’s second-biggest LNG producer) contract with Petronet LNG (India’s biggest gas importer) at a discount of almost 50% indicates an increasingly competitive environment for natural gas and LNG sellers over the medium term.  Existing LNG buyers committed to long-term contracts and other potential buyers may try to renegotiate or achieve similar commercial terms in an environment of persistently low prices.

Falling oil and gas prices and the government’s public investment program have led to a deterioration of the fiscal balance, beginning in 2014.  We expect the general government balance to average a deficit of about 5% of GDP in 2016-2019, after many years of surpluses.  Our outlook assumes that the sharp drop in hydrocarbon revenues will be somewhat offset by cuts in current spending, which was reduced by 9.5% in 2015 and is expected to fall further in 2016 as line ministries are closed or merged, slow moving projects are scrapped, subsidies removed, and certain taxes introduced, including an increase in stamp duty. Capital spending will likely continue to slightly increase as infrastructure projects advance.

We also project a further decline in government hydrocarbon income, namely in the financial transfers from Qatar Petroleum, which come to the government budget with a six-month lag.  We expect that the government will finance fiscal deficits through debt, both on the domestic and international markets, rather than by drawing upon its assets at Qatar Investment Authority (QIA), which are designated for future generations and not intended as a stabilization tool.  The government issued $9 billion of Eurobonds in May 2016 to this end.

Consequently, we expect that gross debt will increase to nearly 50% of GDP over the next few years, but actually decline on a net basis.  This is because we expect investment returns on Qatar’s substantial assets (which we base on various global indices’ performance) to improve in 2016, above the accumulation of new debt.  However, we note that the average change in debt over the coming years is high, which will add to interest costs as a proportion of fiscal revenues.  We also note high public sector indebtedness–reflecting the debt of various public enterprises–which we estimate at 85% of GDP in 2016.

Over the coming budget cycles, we understand that the government also intends to rationalize and outsource part of its operations and to award more projects to the private sector, though whether the desired level of private sector participation can be achieved remains to be seen, in our view.

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

Alongside government investments funded through the budget, public-enterprise and private-sector spending on the national development strategy is likely to be largely funded by borrowing from domestic financial institutions.  This may cause banks’ net external liability positions to widen and their loan-to-deposit ratios to rise, as we expect deposit growth in the Qatari banking system to continue decelerating due to low hydrocarbon prices.  The ratio of domestic credit to total deposits in the Qatari banking system was 127% at the end of the second quarter of 2016, up from 117% at year-end 2015.

We project Qatar’s external surpluses will worsen substantially in the medium term as export receipts fall sharply in 2016, while import demand will remain strong; however, 2015 data show current account performance to be better than we had previously expected, likely linked to the lag effect of falling prices feeding through long-standing contracts.  The transfer and income accounts of the current account will likely remain in deficit, the former due to remittance outflows as a result of the expatriate population and the latter due to payments to the foreign firms that partner with Qatari companies in the oil and gas industry.  We expect that foreign reserves will fall over the next year as net portfolio outflows, linked to QIA’s activities, are likely to remain strong thereby keeping the financial account in deficit.

Qatar’s net external asset position will remain strong, at about 290% on average of current account receipts in 2016-2019.  Qatar has accumulated considerable foreign assets over the past decade, as a result of developing its natural resources.  We forecast that the general government net asset position, estimated at about 130% of GDP in 2016, will also stay robust in 2016-2019.

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

In our view, the fixed exchange rate of the Qatari riyal to the U.S. dollar leads to limited monetary flexibility, and we expect the currency peg to be maintained.  Qatar’s real effective exchange rate has appreciated by 12% since early 2014. In our view, this represents a deterioration in international competitiveness of the country’s modest tradeables sector and a dampening of non-hydrocarbon GDP growth, absent any offsetting factors, such as improved efficiency or technological capacity.  Liquidity conditions in the Qatari banking system and banks’ borrowing costs are expected to further tighten amid falling public deposits, coupled with a modest increase in loans and future increases in U.S. interest rates.


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

We could lower the ratings on Qatar if developments in hydrocarbon production and prices, or in the banking sector, were to significantly weaken the country’s external or fiscal positions; for example, if the government’s gross liquid assets fall significantly below 100% of GDP, by our estimates, or if interest payments accounted for more than 5% of government revenues.

We could raise the ratings on Qatar if we saw domestic institutions mature faster than we expected, alongside significant improvements in transparency regarding government assets and external data quality.  (S&P 02.09)

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11.6  EGYPT:  The Gulf’s Entanglement in Egypt

Karen E. Young posted in the Arab Gulf States Institute in Washington (AGSIW) Market Watch on 25 August that if experience is any guide, President Abdel Fattah al-Sisi’s management of the Egyptian economy is in for a rough ride.  Sisi now contends that it is up to the Egyptian people to make meaningful economic reforms.  In an apparent admission that things have not gone according to plan, he said, “The fighter does not fight alone; his support system – the people – should fight with him.”

Egypt has finally pursued a loan agreement with the International Monetary Fund, after months of wishful thinking that the Arabian Gulf states would both deliver and extend the largesse they promised in 2013 in the aftermath of Sisi’s ascendance to power and the dismantling of the presidency of Mohamed Morsi.  Circumstances have changed since 2013, for both the Arabian Gulf states and Egypt.  Oil prices crashed dramatically in late 2014 and have since failed to rebound, putting all six GCC states into fiscal deficits.


Egypt has failed to implement meaningful subsidy reforms, or to attract foreign investment.  Arabian Gulf state investment in housing development and infrastructure promised as part of the very optimistic Sharm el Sheikh economic conference in March 2015 has not been delivered.  Terrorism has depressed the tourism sector and many of the proposed investments of Sharm el Sheikh have failed to materialize, including the massive new capital city plan.  According to The Economist, annual inflation is at 14% and rising, while youth unemployment is at 40%.


Egypt is nearing a breaking point and its recent shift in reliance on the Arabian Gulf, over the United States and multilateral lenders, could prove a serious miscalculation.  After 2013, Egypt relied heavily on Arabian Gulf donors and delayed making requests to international financial institutions for loans. In fact, Arabian Gulf aid and loans to Egypt (and many other Middle East and North Africa oil importers) has significantly replaced the traditional role of IFIs.  The problem with a reliance on the Arabian Gulf states is that, unlike multilateral banks and aid organizations, Egypt’s financial health comes second to their own in a time of reduced fiscal revenue.  To dig out of its current economic situation, Egypt (specifically Sisi) will need to mend ties with Western donors and IFIs, as well as continue to placate Arabian Gulf state donors and investment partners.

Caught between Lenders

One problem is that securing the IMF loan will require that Egypt negotiate additional funds from bilateral sources, most likely the Arabian Gulf states. Egypt’s financing needs are simply too big for one loan to cover.  The IMF has stretched its own lending capacity so that Egypt qualifies not just for a traditional Stand-By Agreement, where repayments are usually in shorter time frames of three to five years, but also an Extended Fund Facility, which will allow Egypt more time to repay the debt, as much as 10 years, and allow the amount of debt to increase above normal allotments in the fund’s drawing rights provisions.  According to a report by the bank EFG Hermes, the IMF loan is expected to be about $12 billion, though Egypt’s financing needs for the next three years are closer to $21 billion.  The World Bank and the African Development Bank are expected to lend part of the remaining $9 billion funding gap, but the Arabian Gulf states are being tapped for as much as $6 billion.  As of August 23, the United Arab Emirates had publicly acknowledged a deposit (though not confirmed by the Central Bank of Egypt) of $1 billion.  This is small change compared to the Arabian Gulf states’ deposits made in 2013 as well the promised investment and aid-in-kind announced.  Still undelivered is $4 billion committed by the UAE and Saudi Arabia three years ago.


Country 2011 2012 2013 2014 2015 2016
United Arab Emirates $3 billion (including $1.5 billion Khalifa bin Zayed fund for housing and SME support) Private reported aid: $22.8 million $3 billion (including $1.5 billion Khalifa bin Zayed fund for housing and SME support) Private reported aid: $22.8 million A grant of $1 billion and a further $2 billion deposit to the Central Bank of Egypt; in kind (petroleum and gas) $225 million $3.21 billion as investment in infrastructure development, and petroleum and agriculture sectors $4 billion aid package committed to Egypt: $2 billion to the Central Bank of Egypt and $2 billion project finance Recommitted support/not delivered: $4 billion – half as FDI  and half as a central bank deposit; $1 billion reported  Central Bank of Egypt deposit in August
Kingdom of Saudi Arabia $5 billion aid package: $1 billion cash grant, $2 billion in kind (petroleum and gas), $2 billion deposit to the Central Bank of Egypt $1 billion pledge to the Central Bank of Egypt; $3 billion investment pledge – thought to combine public and private enterprise, though they are unspecified in media accounts and not included in official ministry announcements Reported to receive $500 million cash grant as first payment of a $1.5 billion loan from KSA, part of a larger $25 billion package that includes an investment fund and infrastructure projects
Qatar $500 million cash grant, $2 billion Central Bank of Egypt deposit $1 billion cash grant; approx. $4 billion Central Bank of Egypt deposit
Kuwait $1 billion cash grant; $2 billion Central Bank of Egypt deposit $4 billion investment pledge

If the Arabian Gulf states had delivered on all of their aid promises to Egypt between 2013 and 2016, would Egypt be in its current financial crisis?  The answer is probably yes, and this is why the Arabian Gulf states have not delivered on expected deposits and investments.  They have considered it wasted money (and their own balance sheets have created domestic demands on spending as well).  Even if projects in real estate investment, including construction of the new administrative capital city, had proceeded as planned, there is little indication that these would have addressed problems of youth unemployment or low income housing demand.  The investor and public policy priorities were never fully aligned.  Add to that a government that was not interested in eliminating a bloated public sector and its affiliated business interests, the reform agenda was doomed to fail.  According to Sisi, the army and its Engineering Authority are managing the work of over 2,000 public and private companies in the mega-construction and infrastructure investment schemes.  The inability of the state, and the armed forces, to relinquish control over big and small market forces, including the price of meat and the delivery of foodstuffs, continues to stifle economic recovery.

IFIs and the donor community do not always get things right either.  The Arabian Gulf Cooperation Council replaced the role of IFIs in Egypt in the last three years.  The lack of conditionality on the aid and loans, and the volatility of the support is now very evident.  Moreover, the interests of Arabian Gulf states in promoting their own development agendas, hiring Arabian Gulf state-related entities to do construction and infrastructure projects inside Egypt, might not align with the long-term development needs of Egyptians.  When those projects are not deemed profitable, or the companies themselves are struggling, the development agenda becomes secondary to both Arabian Gulf state and corporate demands.

Calculations change and relationships evolve. Egypt is still important to the Arabian Gulf, and the Arabian Gulf states cannot afford Egypt in revolution, or simply financial free-fall.  As the Arabian Gulf states are more integrated into both regional and international economies, they also need Egypt to recover. Egypt’s stability hangs in the balance, with two essential demands: It must raise as much as $5 billion from the Arabian Gulf and the Sisi government must secure the remaining policy conditions through Parliament to finalize the IMF deal.  The first order of business is to stabilize the depreciation of the Egyptian pound, which continues to decline in value. Bankers expect a float or a major devaluation in the coming weeks.  Next, the government must be able to generate revenue internally through an effective tax regime and privatization of state-owned banks and petroleum businesses.  The Sisi government has thus far been unable to make meaningful value added tax or income tax reforms, in policy and enforcement.  Tourism continues to suffer, particularly as flights remain banned between Russia and Egypt.  Remittances from the Arabian Gulf have suffered as well, as layoffs in construction firms have hit Egyptian laborers hard.

The Arabian Gulf states, particularly the UAE, have pledged to continue to support Egypt, but not to the degree of their stated support in 2013.  Their priorities have shifted, as have their resources.  However, the region itself is more intertwined and the stability of Egypt will certainly have ramifications for the Arabian Gulf states.  It is in the interest of the Arabian Gulf states to invest in peace and stability in Egypt.  The question is how much will it cost, and is Sisi a credible manager of that investment.  There is also an opportunity for the Arabian Gulf states to work in partnership with IFIs like the IMF in Egypt’s recovery.  This could be an important learning process in the delivery, transparency, and institutionalization of Arabian Gulf aid and foreign direct investment, and serve to encourage better coordination among the GCC states in their respective economic statecraft objectives.

Market Watch is a blog conceived by AGSIW Senior Resident Scholar Karen E. Young seeking to provide insights from the crossroads of Arabian Gulf politics and finance.  (AGSIW 26.08)

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11.7  SAUDI ARABIA:  Fitch Affirms Saudi Arabia at ‘AA-‘; Outlook Negative

On 1 September, Fitch Ratings affirmed Saudi Arabia’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘AA-‘ with Negative Outlooks.  The Short-Term Foreign and Local Currency IDRs have been affirmed at ‘F1+’ and the Country Ceiling at ‘AA+’.

Key Rating Drivers

The Long-Term IDRs of ‘AA-‘ reflects the following key rating drivers:

The government’s balance sheet remains an important support for the ratings although it has continued to weaken as a result of lower international oil prices.  During the first seven months of 2016, overall government deposits at the Saudi Arabian Monetary Agency (SAMA) have declined SAR92b to SAR1,070b or around 46% of GDP.  Government bonds held by commercial banks increased SAR81b as a result of increased debt issuance.  The government also took on an international syndicated loan of $10b in May and is expected to issue its debut Eurobond later in 2016.  As a result, general government debt is likely to rise to 14.7% of GDP by end-2016, from just 1.6% in 2014 but still well below the ‘AA’-category median of 38.7%.

We expect the balance sheet to weaken further as the general government deficit, while shrinking from the peak of 13.8% of GDP in 2015, is forecast to remain high in 2016 and 2017, at 11.2% and 6.8% respectively, before falling to 2.4% in 2018.  The improvement of the deficit will primarily be the result of rising oil prices, but the government’s National Transformation Program (NTP), presented in June, will also have an important impact.

The NTP contains ambitious fiscal targets, including an increase in non-oil government revenues to SAR530b in 2020 (an increase by 15% – 20% of non-oil GDP) from SAR163b in 2015, a reduction in public payroll expenditure, a decrease in annual water and energy subsidies by SAR200b by 2020 and a reduction in expenditure on public sector salaries and wages to SAR456b from SAR480b.  An objective is to contain public debt to below 30% of GDP by 2020.

The economic impact of such a fiscal tightening would be so severe that in Fitch’s view the fiscal objectives will probably have to be scaled down.  In addition, the broad range of other social and economic objectives and the complexity of implementation may overwhelm the administrative capacity of the government.  However, the government has already re-prioritized investment spending, cancelling some projects, and raised visa fees.  It will raise ‘vice taxes’ on energy drinks, soda drinks and tobacco and is committed to introducing a value-added tax at a rate of 5% by 2018.

The NTP includes the goal of substantial privatization, although the time line and details are still highly uncertain.  The Chairman of the Council for Economic and Development Affairs, Deputy Crown Prince Muhammad bin Salman, indicated that up to 5% of Saudi Aramco would be sold in an IPO.  While this could raise some $100b, obstacles in terms of transparency, depth of local markets and reservations about governance remain large, so that privatization receipts are not included in our forecasts although they could help contain the rise in public debt.

Lower oil prices caused a sharp deterioration of the current account balance, to a deficit 8.3% of GDP and the deficit will remain broadly unchanged in 2016 but then should narrow to 5.8% in 2017 and 0.7% in 2018 on the back of higher oil prices and weakening import demand.  Sovereign net foreign assets will decline to 74.5% of GDP in 2018 from a peak of 113% in 2015.

Fiscal consolidation is likely to be the driver behind the expected slowdown in GDP growth to 0.9% in 2016, from 3.5% in 2015, with only a modest recovery to 1.1% in 2017 and 1.6% in 2018.  GDP growth is supported by a continued expansion in oil production, reaching a record high of 10.7m b/d in July, but non-oil GDP will contract as a result of fiscal consolidation measures, particularly as government investment in infrastructure has been scaled back.

The scaling down of infrastructure spending, combined with payment delays, has hit the construction sector hard, and the government may decide to bail out some of the large contractors.  The government hopes that bringing in private-sector participation in infrastructure development will help to provide some support but this is unlikely to be sufficient and will take time.

With a Fitch banking system indicator at ‘a’, weaker only than Australia, Canada and Singapore and unusually strong for emerging markets, banks have proved resilient despite the weakening macroeconomic environment.  Domestic liquidity has tightened as deposits in the banking sector have declined while credit to the private sector, while decelerating, is still growing and claims on the public sector are growing rapidly from a low level.  As a result, the loan-to-deposit ratio has reached 91% in July, slightly above the regulatory ceiling of 90% and the highest level on record.

The slowdown in private sector lending will lead to deterioration in asset quality, but non-performing loans as a share of total gross loans, at 1.2% in July, are still close to the record low, and the capital adequacy ratio, at 18% in July, is high suggesting sufficient buffer against a rise in non-performing loans.

Given its exposed position in a volatile region, geopolitical risks are high relative to ‘AA’ category peers.  Tensions between Saudi Arabia and Iran persist and Saudi Arabia, together with its coalition partners, is fighting a war against Houthi rebels in Yemen, with no clear prospect of an end to the fighting.  There are also sporadic terrorist attacks.

Given the high share of young people in the population, the labor force is growing rapidly and the economy will struggle to absorb this growth.  This and the fiscal consolidation measures may lead to rising disaffection, but widespread domestic unrest is unlikely.  While the line of succession has been clearly defined, tensions within the royal family could still be a cause for instability.  While income per capita measures are high, other structural indicators, such the World Bank indicators for governance and the business climate are both well below the medians for both ‘AA’ and ‘A’ rated peers.

Rating Sensitivities

The following factors, individually or collectively, could trigger a downgrade:

– Continued erosion of fiscal or external positions.

– A slower-than-expected narrowing in the fiscal deficit, for example as a result of a failure to implement fiscal reforms or due to a renewed fall in oil prices.

– Spillover from regional conflicts or a domestic political shock that threatens stability or affects key economic activities.

As the Outlook is Negative, Fitch does not anticipate developments with a high likelihood of triggering an upgrade. However, the following factors, individually or collectively, could lead to a revision of the Outlook to Stable:

– Fiscal consolidation sufficient to stem the depletion of fiscal and external buffers and put the budget on a path to a surplus.

– A sustained period of higher oil prices.

Key Assumptions

Fitch forecasts Brent crude oil prices to average $42/b in 2016, $45/b in 2017 and $55/b in 2018.  (Fitch 01.09)

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11.8  EGYPT:  Egypt Resorts to Drastic Proposals to Solve Dollar Crisis

Ismael El-Kholy posted on 26 August in Al-Monitor that the Egyptian economy has been suffering since the January 25 Revolution in 2011, in light of the US dollar supply shortage, which is controlling the Egyptian import market.  Last year, Egypt’s imports amounted to about $65 billion, underscoring its demand on foreign currency.  Egyptians are at odds over how to solve the country’s fiscal crisis, with parliament speaker Ali Abdul Aal calling for shutting down currency exchange companies.

Before January 2011, Egypt’s economy relied on several key sources, most prominently tourism and foreign investment — two sectors currently in sharp decline.  The political circumstances resulted in a severe decline in the Egyptian pound compared to the US dollar.  In January 2011, $1 was worth 5.818 Egyptian pounds.  Today, however, $1 is officially worth 8.88 Egyptian pounds, while the estimated price on the black market ranges from 12 to 13 Egyptian pounds.

Egypt is trying to obtain US currency by borrowing it, as well as trying to control the US dollar on the Egyptian black market.

This month, the Egyptian parliament approved a draft law amending some provisions concerning the Central Bank of Egypt and the banking system, whereby those who manipulate foreign exchange rates can be imprisoned for three to 10 years and fined 1-5 million Egyptian pounds.

At the same parliament session on 9 August, parliament Speaker Ali Abdul Aal said Egypt needs to quickly prepare a law to eliminate exchange companies, calling them “a cancer destroying the structure of the Egyptian economy.”  The suggestion was met with criticism from some Egyptian parties.  The Egyptian Democratic Party stressed that such a move would be “a danger to internal and external investment,” while the Justice Party said, “The government will face a crisis in controlling the banking market.”

An employee at a Cairo currency exchange company recently told Al-Monitor on condition of anonymity, “The elimination of exchange companies will lead to a further deterioration in the banking sector’s situation, and the black market will be even more active than it is today.”  He added, “I do not deny the fact that exchange companies do not abide by the official rate when buying and selling US dollars, but the employees refuse to sell at the rate determined by the state because it is not logical.  We need to provide the US dollar for those who need it, like importers and such, and sometimes a unified black market price is set by exchange companies.”

The employee continued, “If exchange companies are to be eliminated, this price will no longer exist.  Things will become more random, and the dollar will rise from 12 to 25 Egyptian pounds on the black market.”  He added, “The current crisis is present because Egyptians are dealing with the US dollar as a rare commodity, while the banks are not giving this currency to traders.  The demand is growing, and there is no solution.”

Ahmed Abdel Hafez, the head of the Department of Economics at October 6 University, said getting rid of the companies would only make things worse.  “The elimination of exchange companies is unreasonable and unacceptable. We have funding problems, and the elimination of these companies will double them,” Hafez said.  “The parliament did well by rationing and [increasing] penalties, but eliminating exchange companies would be hard,” he told Al-Monitor.  “Perhaps we can close them at a later stage, but not at the moment.  Egypt has entered into an agreement with the International Monetary Fund for a loan of $12 billion, which may solve the crisis.”

Abdel Hafez said, “It is possible to connect the exchange companies to the central bank through an online system, and the banks can even become contributors in exchange companies in order to control them, but closing these companies down will push their staff to sell the US dollar on the streets or in clothing and grocery shops.  It would be similar to drug trafficking; no matter how hard it tries, the state will fail to control the situation.”  He believes Abdul Aal does not really want to eliminate exchange companies, but “he was angry at these companies because they are hysterically raising the [US dollar] price.  Such a law cannot be passed.”

Meanwhile, Ayman Metwally, the chairman of the Egyptian Association for Financing and Investment Studies, believes that the solution to the current crisis does not lie in eliminating exchange companies but rather in revitalizing foreign currency sources.  “The dollar sources were foreign tourism, the Suez Canal and Egypt’s exports of oil,” he said.  “Tourism is suffering and so is the Suez Canal, and now Egypt has become a pure importer of oil rather than an exporter.”

Metwally thinks Egypt must determine the necessary imported goods and restrict goods deemed unnecessary, objectively, as long as the person sorting the imported goods is a specialist and not a government employee.  Only goods with no available alternatives would be imported.  Addressing the idea of closing exchange companies, Metwally said, “This is not a solution.  This will drag us back to the 1980s.  We will see a closed market, and the random exchange of currency will thrive.”  He added, “Some of the countries that closed their markets reopened them while others collapsed completely, such as the Soviet Union.”

Metwally excuses the governor of the central bank for this current crisis, despite the drop in foreign currency reserves, because the governor has to import primary goods every month.  Abdul Aal’s suggestion of eliminating exchange companies was fiercely criticized because some are concerned about the obviously negative repercussions.  Even if the proposal goes nowhere, Abdul Aal’s statements raise questions about the way the state is attempting to solve the crisis.  (Al-Monitor 26.08)

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11.9  GREECE:  Fitch Affirms Greece at ‘CCC’

Fitch Ratings on 02 September affirmed Greece’s Long-Term Foreign and Local-Currency Issuer Default Ratings (IDRs) at ‘CCC’.  The issue ratings on Greece’s long-term senior unsecured bonds have also been affirmed at ‘CCC’.  The Short-term Foreign and Local Currency IDRs and the rating on Greece’s short-term debt have all been affirmed at ‘C’, and the Country Ceiling at ‘B-‘.

Key Rating Drivers

The completion of the first review and approval in May of the second tranche (€10.3b, 6% of GDP) of Greece’s €86b European Stability Mechanism (ESM) program highlights improved relations with creditors, but in Fitch’s view implementation risks are still high.  The agreement was reached several months later than planned but the delay did not give rise to marked economic volatility.

The country’s 2015 primary surplus (program definition) was confirmed at 0.7% of GDP, better than the target of a deficit of 0.25%.  A run-up of government arrears during creditor negotiations led to a fall in general government debt, to 177% of GDP in 2015 from 180% of GDP in 2014, still the second highest of all Fitch-rated countries.  Fiscal performance so far this year is consistent with meeting the 2016 primary surplus target of 0.5% of GDP, but the remaining fiscal targets, of 1.75% of GDP in 2017 and 3.5% in 2018, will be progressively harder to meet.

In completing the first review, the government legislated as “prior actions” measures to meet the estimated fiscal gap of 3% of GDP to 2018, of which just above two-thirds come from pension and income tax reform.  Relatively weak domestic ownership of program policy, however, makes their full implementation difficult.  The agreement also includes a contingent fiscal mechanism retrospectively triggering further measures if a fiscal target is missed, as well as tax efficiency reforms on which the follow-through is less certain.

The second review is slated to commence in Q4/16, with labor reform expected to be the most contentious component.  Fitch estimates that the government will have sufficient buffers (cash, repos and possible arrears build-up) to last into Q2/17 without release of funds on completing the second review, which increases the likelihood of negotiations slipping into next year.  The nature of IMF participation is likely to hinge on the scope for relaxation of the medium-term fiscal targets and degree of commitment to debt relief.

So far the Eurogroup has set out only general parameters of a potential debt deal; namely that gross financing needs should remain below 15% of GDP “for the medium term” and below 20% thereafter, and that the more substantial relief such as interest rate caps, coupon deferrals and maturity extensions are conditional on successful program completion in 2018.  Delivering debt relief in stages and contingent on delivery could incentivize performance, but could have the opposite effect if it came to be seen by Greek politicians or the public as a distant or unattainable prospect.  Uncertainty around the likely outcome also limits the economic benefits through boosting confidence in the long-term sustainability of Greek debt.

Syriza has been losing ground in the polls to the center-right New Democracy, which has less ideological opposition to a number of the program policies but has argued for its renegotiation in particular on fiscal targets.  Despite a slim majority, we expect Prime Minister Tsipras to be able to continue to rely on votes from centrist parties, but the potential for political surprises remains.  Maintaining sufficient support to deliver on the demanding conditions through to 2018 is highly challenging, particularly in view of the track record of slippage under previous programs.

GDP contracted 0.75% (annualized) in H1/16 and Fitch expects a modest pick-up in the remainder of 2016 taking full year growth to -0.5%.  We forecast GDP growth of 1.8% in 2017, supported by an increase in investment and, to a lesser extent, private consumption, and a moderately positive net trade contribution.  Unemployment fell to 23.5% in May 2016 from close to 25.9% at the beginning of 2015 and we expect a further gradual fall, to an average 21.9% in 2018, still the highest in the Eurozone.  The low oil price and sharp import contraction following imposition of capital controls has taken the current account close to balance from a deficit of 2.1% of GDP in 2014.  Fitch expects small current account surpluses in 2016 and 2017, with net external debt remaining elevated at close to 130% of GDP in 2016.

Last year’s bank recapitalization helped stabilize the financial sector but consumer and investor confidence have been slow to recover.  Bank deposits have increased only 2% since their 25% (€38b) drop in H1/15, although the relaxation of capital controls in July, in particular the withdrawal of restrictions on new deposits, is expected to lead to some moderate pick-up in deposits in H2/16.  As a result, Greek banks continue to face very large funding imbalances, with Emergency Liquidity Assistance (ELA) accounting for 20% of system-wide funding. June’s ECB reinstatement of the waiver permitting Greek government bonds to be used as collateral will allow a fairly small share of ELA funding (estimated 7%) to be transferred to ECB’s regular financing operations at a 150bp lower interest rate.

The key challenge for the Greek banking sector is tackling non-performing exposures (NPEs) which remain extremely high at above 45% of gross loans.  Improvement has been made to the legal and institutional framework for resolving loans, but progress in working through problem assets has been relatively slow.  High NPEs, funding imbalances and weak credit demand continue to constrain net private sector lending, which Fitch forecasts will contract 2.8% in 2016 and 1.5% in 2017.

Key Assumptions

Any debt relief given to Greece under the ESM program will apply to official-sector debt only, and would not therefore constitute an event of default under the agency’s criteria.  (Fitch 02.09)

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