Fortnightly, 8 February 2017

The Greek, Israeli and Cypriot heads of parliaments on 26 January signed a memorandum of understanding to increase cooperation and enhance ties between the three allies. The signing took place at the Knesset, following a trilateral meeting between Knesset Speaker Edelstein, Cyprus House of Representatives President Syllouris and Hellenic Parliament President Voutsis. During the meeting, the three discussed ways to combat anti-Semitism and hate crimes and possible ways to help young entrepreneurs. (IH 29.01)

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1.2 Israel & Japan Bolster Ties and Sign Bilateral Investment Treaty

Israel and Japan on 1 February signed a bilateral investment treaty, in another move to strengthen diplomatic and trade ties between the two nations. Finance Minister Kahlon and Japanese Foreign Minister Kishida signed the treaty, negotiated between Jerusalem and Tokyo between May 2015 and December 2016, in a ceremony at the Finance Ministry in Jerusalem. Japan is the world’s third-largest economy by nominal gross domestic product and the world’s second-largest developed economy. Japan’s GDP in 2015 came to $4 trillion, and its GDP per capita adjusted by purchasing power parity came to $32,000. (IH 05.02)

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1.3 Health Ministry Introduces New Anti-Smoking Measures

New anti-smoking measures aimed at protecting non-smokers and discouraging the use of tobacco products were unveiled by the Health Ministry on 25 January. The new measures aim to limit the use of electronic cigarettes in public, impose new taxes on tobacco products, and lead to cigarette packs displaying graphic images of the potential health consequences of smoking. Planned legislation would outlaw advertising cigarettes on any platform, including online. It would also extend the current restrictions on smoking to electronic cigarettes to ensure that public venues, including sports facilities, zoos and public playgrounds, are cigarette-free. A separate initiative would increase taxes on electronic cigarettes and rolling tobacco products. The ministry is also poised to launch a new public awareness campaign, the first in years. Special emphasis will be placed on the Arab population, where it is estimated that 40%of the population smokes. (IH 24.01)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 S&P Reaffirms Israel’s A+ Credit Rating – Praising Thriving Economy

International financial services and credit ratings agency Standard & Poor’s on 3 February reaffirmed Israel’s international credit ratings and economic outlook, giving it an A+ score. The agency gave Israel a “stable” economic outlook, saying its analysts expected the Israeli government to maintain is cautious fiscal policies. S&P’s report noted the Israeli economy is “diverse and thriving,” saying it is characterized by a strong export industry, strong external accounts, and a flexible monetary framework. The Israeli economy’s main constraints are its high debt and the potential destabilizing effects of geopolitical threats, S&P warned, adding rising housing prices continue to be a risk factor, as they may lead to “negative economic effects.”

The credit ratings agency believes Israel’s economy could grow by an average 3.1% a year between 2017 and 2020. Growth would be private-consumption driven, and will also be fueled by corporate investments and the export of services, both of which are supported by monetary flexibility. (Various 05.02)

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2.2 Israeli Startups Raise Nearly $400 Million in 2016

In 2016, Israeli startups raised a record $4.8 billion, up 11% from $4.3 billion the previous year, according to IVC-ZAG. With some four weeks past of 2017, it seems that the same record pace of fund raising is being maintained. Globes has found that 17 Israeli companies have raised nearly $400 million so far this year.

In keeping with last year’s trend, it seems that fewer Israeli startups are raising more money, in later stage financing rounds. These include flash storage company Caminario, which raised $75 million, cyber security company SentinelOne, which raised $70 million, and mobile app tracking company AppsFlyer, which raised $56 million. Other significant sums were raised by cyber security company Transmit Security ($40 million), Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million) smart shirt company Healthwatch ($20 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), and power electronics company visIC ($11.6 million).

Cyber security remains the fastest growing startup sector and only yesterday three companies announced financing rounds – Secret Double Octopus ($6 million), Cybellum ($2.5 million) and illusive networks (undisclosed from Microsoft Ventures). Capital is also being raised by Israeli companies on stock markets. IC Power has filed to raise up to $389 million on the NYSE, and cyber security company CheckMarx is planning a NASDAQ secondary offering. Two biomed companies – Pluristem Therapeutics and Can-Fite BioPharma raised $15 million and $5 million respectively. (Globes 25.01)

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2.3 Feedvisor Raises $20 Million

Feedvisor has raised $20 million in a Series B financing round led by General Catalyst, which included participation from existing investors Square Peg Capital, Jal Ventures, Oryzn Capital and Titanium Investments. This latest round comes on the heels of consistent growth for Feedvisor. In each of the past three years, Feedvisor’s revenue and workforce have grown 100%. Today, Feedvisor has 100 employees and manages over $2 billion in GMV. The company plans to double its staff this year across all locations.

Ramat Gan’s Feedvisor is pioneering Algo-Commerce – the discipline of using Big Data and Machine Learning Algorithms to make business critical decisions for online retailers. Feedvisor’s cloud-based Algorithmic Repricing and Revenue Intelligence solutions power millions of pricing decisions daily; providing retailers with actionable insights to maximize profitability and drive their business growth. (Globes 31.01)

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2.4 Northforge Expands Its Software Development Services With New Israel Subsidiary

Ottawa’s Northforge Innovations, an expert software consulting and development company, announced the establishment of a new subsidiary, Northforge Innovations Israel, which will extend and expand the company’s efforts to advance the security, speed and intelligence of the communications infrastructure. The subsidiary, located near Tel Aviv, will provide Northforge with greater access to technologists with specialized network infrastructure expertise, particularly in cyber security. Northforge Innovations Israel is a growing group of engineers and technologists who are providing software consulting and development services to Northforge’s customers.

Northforge Innovations is an expert software consulting and development company focused on advancing the speed, security, and intelligence of the communications infrastructure. It helps customers bring innovation and quality to their network infrastructure, network security and multimedia systems products and services. (Northforge Innovations 30.01)

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2.5 Mindspace Raises $15 Million to Expand Its Co-working Business within Europe & into the US

Mindspace has raised $15 million in series A funding from private investors. As Mindspace continues its fast-paced global expansion, the company has also announced the planned opening of five new locations, bringing its total member count to 5,000 across nine locations that span over 350,000 square feet. Mindspace puts a strong emphasis on creating a lifestyle and community experience for its members. Each location boasts a beautiful boutique design concept, as well as diverse community events, activities and partnerships.

Mindspace’s prime and trendy locations attract professionals and creators who value the convenience created by dedicated services as well as access to a productive and diverse community. In addition, Mindspace supports business growth by providing a quick and cost effective solution for growing companies, offering flexible contracts designed for their needs.

Tel Aviv’s Mindspace is in the business of creating incredible co-working spaces and diverse communities by providing a high quality user experience through exquisite service, boutique approach and hip design. The company offers the office-as-a-service concept and aims to change the way people work. Mindspace was founded in 2014 and caters to corporations, startups and freelancers who expect more from their work environment. (Mindspace 25.01)

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2.6 Ryanair Boosts Operations in Israel

Low-cost Irish airline Ryanair officially released their new flight schedule for the current winter season on 1 February, with 19 regular routes to Israel. Seven new routes will service Tel Aviv’s Ben-Gurion International Airport, and eight new destinations will join the four existing routes servicing Eilat’s Ovda Airport, which fly to Bratislava, Budapest, Krakow and Kaunas. Ryanair’s Chief Commercial Manager said that the company will offer seats starting at €20 (about $22) for a one-way ticket to Paphos, Cyprus, to celebrate the launch of the 2017 winter flight schedule in Israel.

Ryanair’s new routes from Ben-Gurion Airport will provide service to Baden-Baden, Gdansk, Krakow, Poznan and Wroclaw twice a week, to Milan four times a week and to Paphos daily. The eight new routes from Ovda Airport will be twice a week to Baden-Baden, Berlin, Frankfurt, Brussels, Gdansk, Milan, Poznan and Warsaw. Israeli Transportation Minister Katz is due to speak with Ryanair about the option of establishing a base of operations at Ramon Airport in southern Israel, which is expected to open in October. (IH 05.02)

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2.7 Aperio Wins Innovation Prize at Cybertech 2017

Aperio Systems was selected as the most innovative startup in the Cybertech Startup Competition powered by YL Ventures held as part of the recent Cybertech 2017 Conference at the Tel Aviv Convention Center. This was the fourth time Cybertech, the world’s second-largest cyber technologies exhibition, took place in Israel. The conference brought together brought together hundreds of leading investors, entrepreneurs and cyber companies and thousands of visitors from around the world. Haifa’s APERIO Systems was founded to address the challenge of critical control systems by inventing a new paradigm. It develops critical control systems to defend users from external and internal cyber threats. They are a team of hackers, physicists and engineers inventing ways to implement smart resilience in control systems. (APERIO 05.02)

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2.8 BIRD Invests $900,000 in NovellusDx – Christiana Care Gene Editing Institute Collaboration

The Philadelphia-Israel Chamber of Commerce (PICC), a representative of the U.S.-Israel Binational Industrial R&D Foundation (BIRD) in Pennsylvania and Delaware, announced that the BIRD Foundation approved a $900,000 grant to a collaboration between the Helen F. Graham Cancer Center and Research Institute at Christiana Care and NovellusDx. This grant was part of a $7.2 million in funding for eight new projects between U.S. and Israeli companies.

The BIRD Foundation promotes collaboration between U.S. and Israeli companies in various industries for the purpose of advanced product development. In addition to providing conditional grants of up to $1 million for approved projects, the Foundation assists by working with companies to identify potential strategic partners and facilitate introductions. The PICC also represents the US-Israel Binational Industrial Research and Development Foundation (BIRD), which has made more than $10 million in industrial R&D grants regionally to U.S.-Israeli technology ventures. (PICC 31.01)

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2.9 Sodastream to Feature Israeli Flag on All Its Products

The SodaStream company has decided to feature an Israeli flag on all its products, which are sold in 45 countries. “The company management wants to send a message of national pride, particularly in days when many of us hide our Israeli identity from the world,” the company, which manufactures sparkling water makers for home use, said in a statement this week. The Israeli flag is accompanied by the English message reading, “This product is made by Arabs and Jews working side by side in peace and harmony.”

SodaStream International CEO Daniel Birnbaum said that “as a proud Israeli company, we have always taken care to keep our Israeli profile high, even if that means fighting for our place in the face of the European Union and economic terrorism from the boycott, divestment, and sanctions movement. Asked if the company was concerned that the move might hurt its sales, Birnbaum said: “We are not motivated by fear. SodaStream is a proud global Israeli company, and we believe that our flag and our values as Israelis are a source of pride.” (Various 07.02)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Lockheed Martin in $7 Million Iraq Support Contract

Lockheed Martin has been awarded a $7,702,239 cost-plus-fixed fee contract for contractor logistics support for the Iraq integrated air defense system. Work will be performed at Manassas, Virginia, and is expected to be complete by 31 January 2018. This contract is 100% foreign military sales to Iraq. Air Force Life Cycle Management Center, Hanscom Air Force Base, Massachusetts, is the contracting activity. (DoD 01.02)

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3.2 US Firm Wins $200 Million Iraq Defense Contract

Virginia’s Sallyport Global Holdings has been awarded a $200-million modification on a previously awarded contract for base life support, base operations support, and security for Iraq’s Balad Air Base. Work will be performed at Balad Air Base and is expected to be complete by 31 July 2017. Sallyport was founded in 2003 to support the post war reconstruction efforts in Iraq and has since expanded its operations to other countries. (DoD 30.01)

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3.3 Christian Cross Dropped from Real Madrid Logo in GCC Clothing Deal

The club crest of Spanish soccer team Real Madrid will not feature the traditional Christian cross on clothing sold in some Middle East countries under a regional deal. Marka, a retailing group in the UAE, has been granted exclusive rights to “manufacture, distribute and sell Real Madrid products” in the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman, the company said on 24 January. However, Marka said Real Madrid has two versions of the crest for the Middle East market and that Marka would use the one without the Christian cross due to cultural sensitivities.

The six Gulf Arab countries where Marka will sell and distribute Real Madrid products are all Muslim-majority. The redesigning of the crest would require only a minor change. The original features a very small Christian cross at the top of a crown on the crest. The agreement allows Marka to sell clothing such as t-shirts, polo shirts and swim wear featuring the Real Madrid name and crest. Sales will start by March. The deal does not cover replica jerseys, which are sold in Dubai featuring the cross.

This is not the first time the symbol has been altered. In 2014, Real Madrid removed the Christian cross from its crest when used by its sponsor the National Bank of Abu Dhabi. Dubai-based airline Emirates is Real Madrid’s main shirt sponsor, while the club is also sponsored by Abu Dhabi investment fund IPIC. (Reuters 24.01)

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3.4 Kuwait Set To Launch Stem Cell Research Center During 2017

The Kuwait Projects Company (KIPCO) has announced that it will hand over the pioneering Sheikha Salwa Sabah Al Ahmad Stem Cell and Umbilical Cord Centre in mid-September. The company said that 70% of the construction is now complete on the project. It is the Arabian Gulf’s first center to be dedicated to stem cell research and the storage of umbilical cords. The center is being built over a 12,000 sq m plot of land in the Al Sabah Health Zone, and includes a three-floor main building, a utilities building, in addition to external landscaping and parking. The facility includes testing and research laboratories, blood and cord storage banks, research and medical libraries, as well as a lecture theatre. (AB 28.01)

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3.5 WhatsApp & Facebook Named as Most Used Social Media in UAE

WhatsApp is the most popular social media app in the UAE, with 97% of population using the messaging service, according to the Federal Competitiveness and Statistics Authority. Facebook is the next most popular with 89%, followed by YouTube with 73%. Snapchat and LinkedIn are the least popular form of social media are, with 27% and 16% respectively. The UAE authority said, however, that LinkedIn is used mostly by the age group between 22 and 34 years old, while the age group with the highest rate of social media usage was aged between 18 and 21 years old. Abdullah Lootah, director-general of the Federal Competitiveness and Statistics Authority, said that with the level of technological growth in the UAE, it was important to learn about new developments in social media, the diversity of its audience and its new technological platforms. (AB 29.01)

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3.6 Dubai Laboratory Launches Service to Verify Halal Cosmetics

Dubai Central Laboratory (DCL) at Dubai Municipality has launched a new service to verify Halal cosmetics and personal care products. The Halal testing is being conducted with the help of the best technologies and international practices by DCL experts. Halal pharmaceutical and cosmetics continue to expand as awareness about ingredients rises and new product development, such as permeable nail polish, the development of Halal vaccines and new ranges of nutraceuticals. Muslim spend is expected to reach $213 billion by 2021 in aggregate. The service is being provided to protect the community from the “undesirable nature of ingredients and methods used in the manufacturing” of some cosmetic products. (WAM 25.01)

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3.7 Barilla Signs Partnership Deal for Saudi Expansion

Barilla, the world’s leading pasta brand, has announced regional expansion into Saudi Arabia in partnership with Mayar Foods for distribution of its Italian products through retailers across the kingdom. The pasta market size in Saudi Arabia is 55 thousand metric tons, with nearly 2 kg. consumption per capita per year and the numbers continue to grow. Barilla said it will be catering to the Saudi Arabia market through a diverse range of traditional pasta products that is expected to grow 5% in the next five years. The pasta brand is currently working with more than 2,000 retail stores, 5,000 restaurants and 5 airlines, across the GCC with majority of distribution in UAE, Qatar and Oman served by the Dubai headquarters via regional partners. Barilla’s regional expansion comes as a result to a shift in dietary preferences in the region, where the Mediterranean diet is becoming more popular and people are keen to try authentic Italian food.

In 2014, Barilla opened its regional headquarters in Dubai and has since announced expansion into North Africa and now Saudi Arabia. Barilla Restaurant Group, part of the Barilla family of brands, has also just opened its first restaurant in the region in Dubai and is planning further expansion in 2017. (AB 27.01)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 IDF’s Solar Farm to Provide Half of Ramon Airbase’s Electricity

The IDF is about to inaugurate its largest solar project yet when it begins running a solar farm at the Ramon Airbase, which is expected to produce half of the base’s electricity. This is a drastic increase from the currently low percentage of electricity (about 2%) that the IDF gets from solar energy, which mirrors the national figure.

The Ramon Airbase solar farm produces 5 MW. Its size is 50 dunams of which 30 dunams contain an active 16,000 solar panels, built with budgetary assistance from the US. The solar farm is part of an overall plan that the IDF is implementing to vary its power sources. In 2011, the military installed solar panels on the roves of army bases, and by 2011, nearly 20 such systems had been installed throughout the country with the Enlight Renewable Energy company. This works by the BOT method: Build-Operate-Transfer. In this framework, Enlight will maintain the infrastructure for about 15 years, and they will split the profits. Thus, the army also benefits from electrical consumption at no extra charge and also receives part of the proceeds from the Israel Electric Corporation for generating electricity. Today, 95% of the electric used by the defense establishment purchases is produced with gas. This project has saved the IDF millions of shekels since 2014. (Ynetnews 28.01)

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4.2 Saudi Arabia to Invite Bids for Green Energy Projects in April

Saudi Arabia will invite international and domestic companies to bid for renewable energy projects in April, the energy minister said on 1 February, adding that he expected to award the deals in September. Energy Minister Khalid al-Falih said the projects would include two new solar and wind power plants with a capacity to produce 700 MW of power. The projects are part of a major renewable energy supply program which is expected to involve investments of between $30 billion and $50 billion by 2023. (AB 01.02)

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5: ARAB STATE DEVELOPMENTS

5.1 Marginal Drop in Average Lebanese Consumer Prices for 2016

Data published by the Lebanese Central Administration of Statistics (CAS) revealed that average consumer prices declined by a mere 0.78% y-o-y by the end of 2016, as the average Consumer Price Index (CPI) contracted to 96.27 points by December 2016, from 97.03 points in the same period last year. The steepest decline of 8.35% y-o-y was recorded for average prices of water, electricity, gas & other fuels (11.9% of CPI) by December 2016. Average prices of food & non-alcoholic beverages, which constitute 20.6% of CPI, also dropped by 1.2% y-o-y over the same period. Similarly, transportation (13.1% of CPI), health (7.8% of CPI) and communication average prices fell by 3.62%, 2.04%, and 0.23% y-o-y, respectively.

However, as tourism activity picked up especially during the December festive season, clothing & footwear (5.4% of CPI), restaurants & hotels (2.6% of CPI), as well as recreation, amusement, & culture (2.3% of CPI) all registered average yearly advances of 4.97%, 2.6%, and 1.94%, respectively. As for the Actual rent sub-index for households (old and new rent), which constitutes 3.4% of CPI, it grew by an average of 4.41% y-o-y, while the Education sub-index that grasps 5.9% of CPI rose by 1.99% y-o-y on average by December 2016. (CAS 25.01)

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5.2 Lebanese Trade Deficit Widens by 3.56% y-o-y by December 2016

Data from the Lebanese Customs Administration revealed that the Lebanese trade deficit rose by 3.56% y-o-y to reach $15.65B by Dec. 2016, as imports climbed by 3.54% y-o-y to $18.7B, and exports increased by a yearly 3.45% to $3.1B. In terms of imports, the value of Mineral Products constituting 19.98% of total imports increased by 8.71% y-o-y to $3.73B. Products of the Chemical or Allied Industries grasping 10.85% of the total value of imports also rose by a yearly 4.41% to $2.03B. Moreover, Vehicles, aircraft, vessels, and transport equipment, which constituted 9.49% of total exports, rose by 0.99% to $1.78B. However, Machinery and Electrical Instruments, which constitute 10.07% of total imports, declined by 5.49% yearly, to stand at $1.88B by Dec.2016. By Dec. 2016, the lion’s share of Lebanon’s imports were from Greece, Russia, China, Italy and Kuwait, with the respective shares of 13.86%, 11.07%, 8.81%, 8.09%, and 5.49% of total imports. As for Exports, Pearls, Precious stones and Metals constituting 32.33% of total exports rose by 90.88% y-o-y to reach $828.53M by Dec. 2016, as the average price of Gold rose by 7.63% to stand at $1,247.95. However, Prepared foodstuffs, beverages, tobacco which made up 17.44% of total exports fell by a yearly 7.4% and settled at $447M by Dec.2016. Machinery and electrical instruments (13.69% of total exports) also declined from $413.81M by Dec.2015 to $350.97M by Dec. 2016. Similarly, Products of the chemical or allied industries (11.73% of total exports) decreased by 26.84% y-o-y to stand at $300.7M over the same period. By the end of 2016, Lebanon had mainly exported to: Turkey, Syria, Saudi Arabia, UAE and Kuwait, carrying the respective weights of 15.2%, 14.85%, 8.05%, 5.38%, and 5.2% of the total value of exports. (LCA 29.01)

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5.3 Lebanese Tourist Arrival Numbers Climb 11.23% for 2016

According to the Lebanese Ministry of Tourism, the number of tourist arrivals by the end of 2016 rose by a yearly 11.23% to 1.69M by December. This rise was partly due to the political breakthrough in Lebanon by the end of Q4/16 and partly due to the rise in the number of tourists from Europe, Arab countries, as well as North America, which altogether add up to 82% of total tourists arriving to Lebanon.

European visitors constituted 33.43%, the largest share of total visitors, rising by 11.72% y-o-y to 564,499 by December. Swedish tourists particularly rose by an annual 22.01% to 34,622. Visitors from Turkey and Germany also increased in number by 21.21% and 17.03% to 25,487 and 87,567, respectively, by December 2016.

Moreover, despite the ban imposed during Q1/16 by GCC governments discouraging nationals from visiting Lebanon in fear of political instabilities, total tourist arrivals from the Arab countries picked up by the end of the year, recording a yearly 8.78% uptick to 522,922, which constituted 30.97% of total tourist arrivals in 2016. However, it is worthy to note that the number of tourists from the UAE, Kuwait and Saudi Arabia were most effected by the ban, registering yearly falls of 74.33%, 19.72%, and 15.55%, respectively, to stand at, 2,114 Emiratis, 25,653 Kuwaitis, and 40,391 Saudis. Notably, Iraqis seeking refuge from their country’s political turmoil fled to Lebanon this year, raising the number of Iraqi visitors to 236,013, up 23.19% compared to the same period last year.

In their turn, visitors from the Americas constituted 17.58% of total tourist arrivals and increased by an annual 12.42% to 296,831 by December 2016. This boost of visitors from the region was mainly driven by the number of visitors from Venezuela, the US and Brazil which rose by 24.92%, 13.63%, and 11.54% to 13,208, 154,095, and 17,661 respectively in 2016. (MoT 03.02)

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►►Arabian Gulf

5.4 GCC Banks Forecast to Remain Resilient Amid Economic Slowdown

The weak economic environment will continue to weigh on the financial profiles of banks in GCC countries in 2017 and 2018, according to S&P Global Ratings. In a new report, S&P said it believes the three key risks are a difficult operating environment, a higher cost of risk and lower liquidity. However, it added that most GCC banks have built sufficient capital buffers to remain resilient to their weakened operating environment.

“The end of the commodities super-cycle has resulted in a significant decline in the economic prospects of the GCC region, implying lower growth opportunities for its banking systems and deteriorating liquidity,” said S&P global Ratings credit analyst Mohamed Damak. “The end of the commodities boom has also increased the pressure on GCC banks’ asset quality and profitability indicators.” He added: “Although we expect to see further weakening in some of these indicators in 2017-2018, we think that GCC banks have built sufficient buffers to make the overall impact on their financial profiles manageable.”

Rated banks in the GCC continued to display good asset quality indicators, profitability and capitalization in 2016 by global standards, albeit with signs of deterioration from 2015, S&P said. It added that over the past year, the agency has taken several negative rating actions on banks in the GCC. Most of these were concentrated in Bahrain, Oman and Saudi Arabia. “While we have taken a few negative rating actions in other GCC countries, these were primarily for idiosyncratic reasons. Overall, 31% of our rated banks in the GCC have negative outlooks or are on CreditWatch with negative implications,” it added. (AB 27.01)

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5.5 GCC Said to be Planning $240 Billion in Rail Investments

The total value of planned rail investments in the GCC stands at over $240 billion, with around $130 billion of projects in the pipeline in Saudi Arabia, it has been estimated. A recent report shows that Saudi Arabia is the GCC leader when it comes to planned railway expenditure, with the kingdom accounting for more than 50% of the total followed by the UAE with 18% ($30 billion of projects) and Qatar with 17% ($40 billion). Key projects expected to be awarded to contractors in Saudi Arabia in 2017 are Zulfi – Al Majmaah Passenger Railway, North South Rail, Waad Al Shimal, Turaif, Al Jouf (ST320), Makkah Mass Rail Transit (MMRT), and Makkah Metro. The UAE’s planned $30b of rail investments include Abu Dhabi Metro and Light Rail, skyTran Yas Island, the next stages of the Etihad Rail national network, the Dubai Metro extension for Expo 2020 and the new stages of the Al Sufouh Tram. (AB 06.02)

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5.6 GCC Countries Rank High in $26.9 Billion Remittances to Philippines

Overseas remittances to the Philippines reached $26.9 billion (AED98.72b) in January to November period, growing 5.1% year-on-year. The majority of these remittances come from Gulf countries – the UAE, Saudi Arabia and Qatar – and the United States, Bangko Sentral ng Pilipinas, the central bank, said. Remittances from overseas Filipinos reached $2.4b (AE654m) in November 2016, rising 18.4% from the year-ago level. Bangko Sentral ng Pilipinas said the increase in personal remittances was driven by the 7.8% expansion in transfers from land-based workers with work contracts of one year or more to reach $20.9b (AED5.69b). By country source, the bulk of cash remittances came from the US, Saudi Arabia, the UAE, Singapore, the United Kingdom, Japan, Qatar, Kuwait, Hong Kong, and Germany. Combined remittances from these countries accounted for more than 80% of the total cash remittances in the first 11 months of 2016, the bank said.

The World Bank estimated in October last year that weak global growth is likely to slow down remittances to developing countries, adding inflows from Filipinos abroad will reach the slowest pace in 10 years. It expected remittance flows to low- and middle-income countries to reach $442b (AED120.43b) in 2016, rising 0.8% than $438.6b (AED119.51b) in 2015. (AB 25.01)

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5.7 Kuwait Launches New Plan to Transform Economy by 2035

Kuwait has unveiled a new plan to transform the country into a regional financial and cultural hub by 2035 through 164 strategic development programs. The Government said the Kuwait National Development Plan, branded as “New Kuwait”, sets the nation’s long-term development priorities. The Kuwait National Development Plan’s short-to-medium terms objectives include positioning Kuwait as a global hub for the petrochemical industry and increasing direct foreign investment by 300%. It also aims to attract more than KD400 million to information technology, services, and renewable energy in the short-term medium term. It is organized around five themes, or desired outcomes, and seven pillars, or areas of focus for investment and improvement. Each pillar has a number of strategic programs and projects that are designed to have the most impact on achieving the vision of a New Kuwait.

The Kuwait National Development Plan also aims to develop the country’s tourism sector to generate additional revenue streams and create a new jobs market and plans to further develop the country’s transportation and power sectors by building on the recent success in IWPP and PPP projects. New Kuwait will build on the recent momentum in urban development and housing with the introduction of new master plan developments and cities while introducing social and economic empowerment programs and care targeting youth, women, SMEs and the elderly. Built into the plan are 20 key global indicators, and additional sub-indicators, each tracking and measuring Kuwait’s progress with the plan and its performance compared to other countries, the statement added. (AB 31.01)

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5.8 Qatar’s Foreign Trade Surplus Shows First 2016 Rise in December

Qatar’s December trade surplus increased 21.7% from a year earlier, its only monthly rise in 2016. The country’s surplus rose to QR10.7 billion ($2.9 billion) in December from QR9.7 billion in November and up from QR8.8 billion in December 2015. According to the latest data released by the Ministry of Development, Planning and Statistics, the increase was due to a sharp fall in imports in December. The data also showed that exports of petroleum gases and other gaseous hydrocarbons fell 6.6% to QR11.86 billion during the month.

The International Monetary Fund (IMF) has forecast that Qatar’s real GDP growth is expected to reach 3.4% in 2017 from about 2.7% in 2016 as the country effectively adjusts to the new reality of sustained lower energy prices. In a research note, the IMF said the rise in 2017 growth reflects an expansion in the non-hydrocarbon sector due to World Cup-related spending and supported by added output from the new Barzan gas project. It added that during 2017/8, the Gulf state will see further subsidy cuts, increase in public fees, a moderate recovery in global commodity prices and the implementation of a VAT which will drive inflation, which is expected to moderate back to low levels over the medium term. (AB 03.02)

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5.9 India Overtakes the UAE in List of World’s Leading Emerging Markets

The UAE has fallen one place to third in a global list ranking the world’s best emerging markets but still boasts the best business climate, according to the 2017 Agility Emerging Markets Logistics Index. The Index ranked China top while India moved above the UAE to take second spot compared to last year. In the business climate sector, the UAE was followed by Qatar in second place, Oman in third and Bahrain in fourth while Saudi Arabia ranked 7th and Kuwait 10th. The index also said the UAE had the best transport and logistics connections. It said Bahrain climbed five spots in the overall rankings to 23th, rebounding after years of social unrest that damaged its economy and dampened investment.

The index, now in its eighth year, offers an annual snapshot of industry sentiment and ranks the world’s leading emerging markets by size, business conditions, and transport infrastructure and connections. It includes a survey of more than 800 global logistics executives. The index looked at the strength of the service sector, urbanization, security, foreign investment, wealth distribution, and the levels of bureaucracy and regulation confronted by businesses. The index also highlighted the emergence of Iran after years of international isolation, leaping eight spots to 18th. (AB 24.01)

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5.10 UAE’s Non-Oil Foreign Trade Hits $320 Billion in First Nine Months of 2016

The UAE’s non-oil foreign trade totaled AED1.172 trillion ($320 billion) for the first nine months of 2016, up by 0.1% on the same period in the previous year. Preliminary data of the Federal Customs Authority (FCA) indicated that the share of imports in the UAE’s total non-oil trade amounted to AED721.2 billion, a rise of 1%. The FCA said that the UAE’s exports grew by 6% to total AED149.1 billion, with gold leading the list with AED43.3 billion, representing 29% of the total. Re-exports were valued at AED301.4 billion, with mobile phones the most traded commodity with a value of AED48.1 billion at 16% of the total re-exports.

According to the FCA, Asia, Australia and the Pacific region was the UAE’s top trade partners with a share of AED465.7 billion, equivalent to 42% of the total non-oil trade. It added that Saudi Arabia was the top Gulf partner with AED54.8 billion of trade recorded, 43% of the total non-oil trade with GCC countries. (AB 01.02)

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5.11 UAE & India Seek Action Plan to Increase Bilateral Trade by 60%

The UAE and India are to develop action plans by June in a bid to increase bilateral trade by 60% over the next five years. Indian Prime Minister Modi and Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi, agreed that the UAE and India must continue to cooperate closely in order to expand mutual trade and economic opportunities. They said that in order to develop a medium and long term strategy for increasing bilateral trade by 60% over the next five years, the two sides will conduct studies to come up with action plans by the middle of 2017. These will focus on identification of potential sectors and the impeding tariff and non-tariff barriers, exploring opportunities in services sector and formulating a sector-specific strategy to boost two way trade and investments. (AB 26.01)

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5.12 UAE Ranked World’s Top Halal Travel Destination

The UAE ranked first in the global assessment of travel destinations with the “best developed halal ecosystems” by the 2016-2017 Global Islamic Economy Report, developed and produced by Thomson Reuters. UAE was followed by Malaysia and Turkey in the global ranking system. The report evaluated the countries based on four criteria: inbound Muslim travel, the quality of their Halal-friendly ecosystems, awareness campaigns, and the sector’s contribution to employment.

Valued at $151 billion in 2015, the halal travel market is steadily expanding, marking a year-on-year growth of 4.9% – is higher than overall travel industry growth of 3%. The halal market, 72% of which originated from Organization of Islamic Cooperation (OIC) countries, is the second largest travel market next only to China ($168 billion) and ahead of the United States ($147 billion). (AB 24.01)

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5.13 UAE Approves Issuing of ‘Visa on Arrival’ for Russian Citizens

UAE prime minister Sheikh Mohammed has approved a cabinet decree that will see Russian citizens granted an entry visa at all entry points to the county. The visa will allow citizens of the Russian Federation an entry visa for 30 days for the first time, renewable one time only for another 30 days, as per UAE regulations. The decree is hoped to develop economic and tourism ties between the two countries, and strengthen the UAE’s international competitiveness as a vibrant economic, commercial, and tourist hub in the region. More than 600,000 Russian tourists visited the UAE during the past two years, aided by the 56 weekly flights between the two countries by UAE National carriers Emirates and Etihad Airways. The number of flights are expected to increaser on the back of this decree. The UAE also ranks first in the GCC states as Russia’s most important business partner, with non-oil trade reaching $2.45 billion (AED9b) in 2015. (AB 29.01)

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5.14 UAE Military Vehicle Maker Targets European Market Breakthrough

United Arab Emirates-based military vehicles maker NIMR Automotive is teaming up with Czech state defense equipment company VOP CZ to try to break into European markets in the coming years. NIMR, a subsidiary of state-owned Emirates Defence Industries Company (EDIC) and a leading military vehicles manufacturer in the Middle East, is on a push to expand its global reach and boost production of its light- and medium-weight 4×4 and 6×6 vehicles. It wants to get into European markets as the continent’s NATO military alliance members step up defense spending but will be entering a crowded market and competing with the likes of General Dynamics, France’s Nexter or Patria of Finland. NIMR expects a final agreement with VOP in the coming months. VOP is an integrator and supplier of defense equipment and services. It also maintains and retrofits military vehicles, and is already a NIMR supplier.

NIMR launched a new production facility last year. It has delivered almost 2,000 vehicles in the past three years. The UAE’s armed forces are its biggest customer and it has also a joint venture for production with Algeria. NIMR’s collaboration with VOP could lead to around 1,000 vehicles being produced in the next three to five years. The Czech defense ministry plans to buy armored vehicles in 2017, including Pandurs produced by General Dynamics and Titus 6×6 vehicles from Nexter. (AB 25.01)

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5.15 Abu Dhabi Set to Slow Down Spending Cuts in 2017, Says Fitch

The pace of fiscal adjustment in Abu Dhabi is forecast to slow in 2017, after large spending cuts in 2015-2016, according to Fitch Ratings. The ratings agency said in a research note that it expects a government deficit of 5.9% of GDP in 2017, based on Brent crude averaging $45 per barrel, nearly unchanged from 2016. In affirming Abu Dhabi’s long-term foreign and local currency issuer default ratings at ‘AA’ with a stable outlook, Fitch said that Abu Dhabi’s total spending could edge up by 3% in 2017, having contracted by 10.3% in 2016 and 18.1% in 2015.

Spending in 2016 is estimated to have been above budget. Non-oil revenue targets have been scaled back and will now be met largely by dividends from state-owned and government-related enterprises, it added. Fitch said the emirate’s hydrocarbon revenues have the potential to exceed forecasts, reducing the urgency for new policy measures.

“In 2018, we expect the government budget to post a surplus of 1.5% of GDP, as Brent recovers to $55/barrel and the introduction of VAT yields around 0.5% of GDP,” the statement said. “New taxes on hotel stays and rents paid by non-nationals were introduced in 2016 but the fiscal effect of these will be small. Earlier liberalization of fuel prices and hikes to utility prices should help rein in the subsidy as oil prices recover,” it added.

Fitch said it estimates that non-hydrocarbon growth slowed to around 3.5% in 2016 from 7.6% in 2015, reflecting lower public sector demand, weak economic sentiment, tighter banking sector liquidity and effective exchange rate appreciation. The agency expects non-oil growth to pick up to 4% in 2017 and 4.5% in 2018 as consolidation eases and oil prices recover.

In its forecast, the government faces a fiscal financing need of 11.8% of GDP in 2017 and 4.6% of GDP in 2018 – assuming that the government finances the deficit excluding income from Abu Dhabi Investment Authority (ADIA). ADIA’s assets are not officially disclosed, but Fitch estimates that strong returns helped propel their value to $639 billion in 2016, from $627 billion in 2015. Fitch expects the value of ADIA assets to be little changed by end-2018 as investment returns would offset drawdowns for financing. (AB 04.02)

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5.16 Oman’s Government Budget Deficit Swells to $12.8 Billion

Oman’s government posted a budget deficit of OR4.94 billion ($12.8 billion) in the first 11 months of 2016 compared with a deficit of OR4.07 billion a year earlier, according to latest official figures. It also rose month-on-month from OR4.81 billion in the first 10 months of 2016 as low oil export prices slashed its revenues, provisional Finance Ministry data showed. The government’s original 2016 budget plan envisaged state expenditure of OR11.9 billion and revenues of OR8.6 billion. Officials said their 2016 economic plans assumed an average oil price of $45 a barrel. Oman is imposing a series of austerity measures after it posted a budget deficit of about OR4.5 billion last year. Gasoline and diesel price subsidies have been cut and similar cuts are planned for electricity and liquid petroleum gas. In August, the World Bank said Oman’s subsidy bill is expected to fall by 64% this year as the government seeks to reform its finances amid lower oil prices. (AB 27.01)

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5.17 Saudi Arabia Approves Measures Ahead of VAT Launch

Saudi Arabia’s cabinet on 30 January approved the GCC agreement for imposing a value added tax (VAT) from next year. In a session chaired by King Salman in Riyadh, the council of ministers gave its official approval to the measure, confirming that the kingdom is ready to implement it. Under the plans, a 5% levy will apply to certain goods following an agreement signed by the six-nation Gulf Cooperation Council last June. The move is in line with an International Monetary Fund (IMF) recommendation for Arabian Gulf states to introduce further revenue-raising measures to help adjust to low oil prices that have hampered their economic growth. Many GCC countries have already agreed to impose taxes on cigarettes and soft drinks this year. Saudi Arabia’s 2017 state budget also recommended a five% VAT from 2018. (AB 31.01)

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►►North Africa

5.18 Morocco Rejoins African Union with Overwhelming Majority of AU Member Votes

An overwhelming majority of African Union (AU) member states voted on 30 January to admit Morocco to the pan-African organization after a 33 year hiatus. The historic decision, in which 39 of 54 member states voted in favor, is a crowning achievement for Moroccan King Mohammed VI’s diplomatic goals and vision for the continent.

Since ascending the throne in 1999, King Mohammed VI has made Africa a foreign policy priority, making 38 visits to African countries and signing more than 350 bilateral agreements on economic, political, security, religious, and educational issues. Morocco is the second largest African investor in the continent, and between 2003 and 2013, 51% of its foreign direct investment went to Sub-Saharan Africa, peaking at 88% in 2010. Meanwhile, Moroccan trade with the rest of Africa increased by 12% annually in that same period. In late 2013 the King established a program to train imams from across the continent in Morocco’s open, moderate form of Islam; and in June 2016, inaugurated the Mohammed VI Foundation for African Oulema with a mission of strengthening age-old historical and religious ties between Morocco and its African neighbors. With Morocco serving as the host country, the King also ensured that Africa’s interests on climate change policy were represented at the 22nd Conference of the Parties to the United Nations Framework Convention on Climate Change summit in Marrakesh in November 2016, hosting a special meeting for African leaders at the event. (MACP 31.01)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Political Rift Kills Turkey-Austria Engine Deal

Growing political tensions between Ankara and Vienna in recent months have resulted in the termination of an otherwise prospective deal between a Turkish and an Austrian company, both engine specialists. In October 2015, TUMOSAN, a privately owned Turkish engine maker, signed a deal with AVL List, an Austrian firm, for technical support for the engine that the Turkish company had been commissioned to develop. Under the deal, TUMOSAN would get technical support from AVL for the power unit of the Altay, Turkey’s first indigenous, new-generation main battle tank in the making. AVL also would provide know-how for the integration of the engine to the tank. The Turkish government insisted that the country should finally have the intellectual property rights and export licenses for each part of the engine.

In March 2015, TUMOSAN signed a €190 million (some $200 million) contract with the Turkish government to design an engine for the Altay. The program involves the indigenous design, development, prototype production, testing and qualification of an engine for the Altay. TUMOSAN also will design and develop a transmission for the tank and produce critical parts for its engine, including the diesel pump, electronic control unit and injector. With know-how from AVL, TUMOSAN hoped it would conclude the program within 54 months.

But TUMOSAN recently announced that it terminated its contract with the Austrian company due to unresolved disputes over export licenses. Under the AVL contract, the company had to provide the necessary Austrian government licenses within 90 days. After the company’s requests for extension for several times it became clear that the Austrian government insisted on issuing export licenses on conditions that it would be interfering with the domestic affairs of Turkey. After those conditions were rejected by SSM [Turkey’s procurement agency, the Undersecretariat for Defense Industries] TUMOSON canceled the Technical Support Provider agreement with AVL.

Turkey and Austria have had problematic relations in recent months after Vienna began to loudly criticize Turkey’s alleged democratic shortage, especially after Ankara announced an emergency rule in response to a failed coup last July. TUMOSAN’s deal with AVL was the first of its kind, ending up in failure due to political rift between Turkey and a western country. But it may not be the last. (DN 24.01)

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6.2 IMF in Disagreement Over Greek Bailout Measures

Greece’s government says members of the International Monetary Fund’s executive are in disagreement on bailout measures required for the debt-plagued country, further complicating efforts to break an impasse in talks. A government spokesman leveled the accusation on 7 February, hours after the IMF board issued a gloomy statement on Greece’s debt outlook. The Greek government, he said, is opposed to demands being made by the IMF, including a contingency austerity program after the current bailout program ends next year. Greece needs to agree with the IMF and its European creditors on more reforms in order to keep tapping its bailout program. Although Greece insists it doesn’t have pressing cash needs, without the money, it would eventually face the renewed possibility of default – something that nearly caused it to fall out of the euro bloc in 2015.

But negotiations over Greece’s reforms remain mired in disagreement. The Greek government opposes labor reforms and the IMF is at odds with European lenders over the extent to which the country’s massive debts should be eased. The IMF’s statement said that the proposed reforms were supported by “most directors” – suggesting disagreement within the fund. However, the document also noted: “Directors emphasized the need to preserve and not reverse existing labor market reforms … to bring Greece’s collective-dismissal and industrial-action frameworks in line with best practices.”

Unease over Greece’s bailout – and its future in the euro – has been heightened by more widespread political uncertainty in Europe, with anti-EU parties gaining popularity ahead of national elections in key countries, such as the Netherlands and France. (EKathimerini 07.02)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israelis’ Rising Life Expectancy Poses Health Care Challenge

On 30 July, the Ministry of Health announced that Israelis’ life expectancy has increased by two years over the past decade, essentially growing at a pace of five hours a day. Life expectancy for Israeli women rose from 82.2 years in 2005 to 84.1 years in 2015. Meanwhile, life expectancy for Israeli men has grown from 78.2 years in 2005 to 80.1 years in 2015. The data was published ahead of a conference on the health care costs associated with an aging population. According to the ministry’s projections, the number of Israelis aged 75 and older, which stood at 410,000 in 2015, will almost double to 811,000 in 2039.

This will have major ramifications on Israel’s state-run health care providers, as the budget they receive is based on the number of people they treat, not their age. The costs of treating Israelis 75 and up are four times as high as those associated with younger age groups, some NIS 23,000 ($6,100) compared to NIS 5,500 ($1,500). The ministry said that the number of Israelis aged 65 and up who seek medical treatment is triple the number of patients among younger Israelis. Likewise, the costs associated with their medication consumption is 2.6 times as high. (MoH 30.01)

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7.2 Israel’s Health Ministry Proposes New Anti-Smoking Laws

On 25 January, Director of Public Health Services Prof. Grotto submitted to the Knesset a list of proposed steps intended to reduce the number of Israeli citizens suffering from second-hand smoking. Israel has anti-smoking laws and smoking is forbidden in many public areas, though the laws are not always enforced. In practice, if a given municipality chooses not to enforce the laws, it is up to the private citizen to call the police – and often, by the time the police arrive, the smoker has already left the area.

These proposals and initiatives are things which the Health Ministry intends to advance, such as raising the tax on electronic cigarettes to match that of regular cigarettes, limiting tobacco advertisements in all media, enlarging the areas in which smoking is forbidden and others. They seek to also forbid smoking in public areas such as open stadiums and enlarge the no-smoking radius around preschools and playgrounds. Grotto also said these laws can be advanced quickly and without going through the usual legislative process. Even though smoking was on the decline in 2016, nearly 40% of Israelis are smokers by the time they finish their mandatory IDF service. (Arutz Sheva 25.01)

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7.3 Bank of Israel Unveils New Bill Designs

The Bank of Israel is moving towards replacing NIS 20 and NIS 100 bills. The portraits selected for the new bills will be poetess Rachel for the NIS 20 bill and Leah Goldberg for the NIS 100 bill. The Bank of Israel said that 90% of the NIS 50 bills in circulation had been replaced (the new bills were launched in 2014) and half of the NIS 200 bills (the new bills were launched in 2015). The Bank of Israel added that all of the old NIS 200 bills would be replaced by the end of the year.

According to the Bank of Israel, the new bills have security paper with an embedded watermark comprising the portrait and the denomination value; a security thread that changes color with three windows in which the portrait and denomination appear; raised ink on both sides of the banknote; tiny holes in the shape of the denomination; combination of shapes; microtext; KINEGRAM VOLUME security foil stripe; color changing ink; and transparent ink. (Globes 31.01)

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7.4 IDF Sees Rise in Number of Women Serving in Combat Units

The significant increase in the number of women in combat units of the Israel Defense Forces continues: This year, about 2,800 women will serve in combat roles. The number of women serving in combat roles in the IDF’s Homefront Command is up by 38%, the number of women combat soldiers in artillery units is up by 19%, the Israeli Navy has seen the number of women in combat roles increase by 93% and the number of women in combat service in the Border Police has doubled. These figures were reported in a meeting of the Knesset Foreign Affairs and Defense Committee devoted to the subject of female IDF soldiers in combat roles by the head of the Planning Brigade and Manpower Administration in the IDF Personnel Directorate. The army was working to establish its first-ever training base for mixed-gender battalions, including the fourth mixed-gender battalion that will be founded with the upcoming March draft.

Lt. Col. Dr. Lena Feldman-Koren, chief of medical services for the IDF ground forces, discussed the physiological differences between men and women that she says demand that training be adjusted to the needs of female soldiers. (IH 31.01)

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*REGIONAL:

7.5 Landmark Ruling in Lebanon Says Homosexuality Not ‘Illegal’

Lebanon’s Court of Cassation ruled on 26 January that homosexuality cannot be considered a criminal act, potentially setting a precedent for the LGBT community in the nation. Lebanon is considered one of the most progressive Arab nations when it comes to gay rights. In its ruling, the court said homosexual acts do not violate the country’s criminal code because they do not contravene the “order of nature.” The judges ruled that the defendants in the case, who were charged with having homosexual relations, were innocent because “homosexuality is a personal choice, and is not a punishable offence.” Similar cases in the past led to convictions and prison sentences, but the new ruling may now lead to legalizing homosexuality. Not long after the ruling, anti-gay Lebanese took to social media to protest the decision and called for severe punishment of the defendants. (IH 29.01)

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7.6 Kuwait Executes Member of Al-Sabah Royal Family

Kuwait hanged a prince in the ruling Al-Sabah family on 25 January for premeditated murder, in what appeared to be the first execution of a member of the royal family in the Arabian Gulf state. Sheikh Faisal Abdullah Al-Jaber Al-Sabah was hanged at Kuwait’s central prison alongside six other prisoners, including a woman convicted of killing dozens of people at her husband’s wedding to second wife. Al-Sabah’s crime was “premeditated murder and possession of a firearm and ammunition without a license,” the state news agency said. The prince was sentenced to death in 2010 for killing his nephew, another prince, according to Kuwaiti newspapers.

Nusra al-Enezi, a Kuwaiti woman found guilty of setting fire to a tent at her husband’s wedding as he married a second wife and killing over 40 women and children, was also executed. The other three men and two women hanged hailed from Bangladesh, Egypt, Ethiopia and the Philippines and were convicted of offences ranging from murder, attempted murder, kidnapping and rape. The executions were the first in Kuwait since 2013 and come amid a rise in the use of the death penalty throughout the Arabian Gulf. (Reuters 25.01)

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7.7 Abu Dhabi Chosen to Host 2019 Special Olympics World Games

Abu Dhabi will be the host of the 2019 Special Olympics World Games, the world’s largest humanitarian and sporting event – the first time the event has been held in the Middle East. The games will take place in venues throughout Abu Dhabi from 14-21 March 2019. The Special Olympic World Games celebrate the skills, talents and sporting achievements of athletes with intellectual disabilities from across the world. The last Special Olympics was held in Los Angeles in 2015.

About 7,000 athletes and their families, from 170 countries will compete in 22 sports, taking place at multiple venues throughout the city, including ADNEC, Zayed Sports City and the IPIC arena. Being awarded host city status further acknowledges Abu Dhabi’s longstanding commitment to encouraging social inclusion at home and across the Middle East, organizers said in a statement.

Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, has issued a resolution setting up the Higher Committee to host the Special Olympics in Abu Dhabi under the chairmanship of Mohammad Abdullah Al Junaibi. (AB 24.01)

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7.8 PwC Says UAE Needs 175,000 Extra School Places by 2020

The private school sector is expected to continue to drive the growth of the UAE’s education market to 2020, according to a new PwC study. Over 175,000 additional seats are predicted to be required in the K-12 segment in the next four years, and 90% of this will come from private school enrollees. The report also showed that based on historic demographic trends, Dubai is forecast to require 74,500 additional seats in 50 new private schools by 2020, while 62,000 additional seats in 52 new private schools in the same period will be needed in Abu Dhabi. Almost all of the UAE, led by Dubai, are witnessing growth in private K-12 enrolment, with the exception of Fujairah. However, as more quality schools are opening, efforts to attract and retain students will become a more pressing issue for school operators.

The report also noted that given the increasing number and quality of schools, parents have a better selection of schools in which to enroll their children. It added that cost will play a critical role in changing the supply-demand dynamic, with calls for Dubai to have more quality schools below the average annual tuition of AED40,000. The study said that in Dubai, UK and Indian curriculum schools continue to dominate while in Abu Dhabi, Indian and American curriculum schools are driving growth but British curriculum schools remain popular choices with parents considering admission to lower cost European higher education institutes. The data was released through a study published by PwC Middle East ahead of Global Education Supplies and Solutions (GESS) Dubai 2017. (AB 04.02)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 StemRad’s Cosmic Ray Suit Set for Mars Trial

An innovative protective suit against cosmic rays developed by Israeli startup StemRad is set to head for outer space. The Israel Space Agency and the Ministry of Science, Technology and Space signed an agreement with the German Aerospace Center for launching the Israeli company’s innovative suit as part of the next trial flight of NASA’s Orion satellite. The company’s suit is designed for the first manned flight by Orion to Mars planned by NASA.

The German Aerospace Center is responsible for research into the effects of deep space radiation on the human body. As part of this research, Orion will be sent to the moon in 2018 with dummies on its deck, some of which will be dressed in StemRad’s protective suit, while other dummies will remain exposed. With the return of Orion to the Earth a month later, the dummies, which will contain thousands of radiation detectors, will be checked under laboratory conditions and the level of radiation penetrating through StemRad’s suit and absorbed by them, if any, will be tested. The object is to make adjustments in the suit, if needed, in preparation for the manned mission to Mars scheduled for 2021.

The Israeli startup is cooperating in the innovative suit’s development with Lockheed Martin, which is also involved in NASA’s program for launching a manned flight to Mars. The main hazard to which astronauts flying to Mars will be exposed is radiation from solar flares. These flares are liable to continue for many days and Orion has limited space for its crew to protect themselves from dangerous radiation when solar flares are occurring. The function of the suit is to enable the satellite’s crew to function normally if a prolonged solar flare emitting large amounts of radiation takes place.

StemRad’s suit protects mainly bone marrow, the lungs, chest, stomach, intestine, and the ovaries among women. These organs are particularly sensitive to the formation of malignant tumors as a result of exposure to radiation. The suit itself is made out of hydrogen-rich materials and worn like a vest.

Ramat HaChayal, Tel Aviv’s StemRad‘s revolutionary technology, which ties together partial bone marrow shielding with the human body’s remarkable regenerative biological processes, brings about an expanded set of response possibilities to nuclear catastrophes. When exposed to high-levels of gamma radiation, the immediate concern to individuals is that of Acute Radiation Syndrome (ARS), also referred to as radiation sickness. In such cases, damage to the body’s bone marrow leads to fatal aplastic anemia, the hallmark of which is a severe lack of red blood cells, white blood cells and platelets. The pelvic bones contain the body’s largest concentration of bone marrow, so protecting them from the harmful effects of gamma radiation is crucial. The StemRad 360 Gamma is worn around the pelvic area, affording highly effective protection to the body’s “life factory.” In situations of exposure to high doses of gamma radiation this could mean the difference between life and death. Protection from gamma radiation, while at the same time allowing for full mobility, was not possible before StemRad developed the revolutionary 360 Gamma. (Globes 31.01)

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8.2 FDA Approval of Teva’s Two New RespiClick Maintenance Inhalers for Asthma Treatment

Teva Pharmaceutical Industries announced that the U.S. FDA approved two products for adolescent and adult patients with asthma. These products, AirDuo RespiClick (fluticasone propionate and salmeterol inhalation powder) and ArmonAir RespiClick (fluticasone propionate inhalation powder), include medication delivered via Teva’s RespiClick breath-activated, multi-dose dry powder inhaler (MDPI) which is used with other approved medicines in Teva’s respiratory product portfolio.

AirDuo RespiClick is a fixed dose combination product containing the same active ingredients as Advair. AirDuo RespiClick is a corticosteroid and a long-acting beta2-adrenergic agonist (LABA) indicated for the treatment of asthma in patients aged 12 years and older. ArmonAir RespiClick is an inhaled corticosteroid (ICS) containing the same active ingredient as Flovent, and is indicated for the maintenance treatment of asthma as prophylactic therapy in patients 12 years and older.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions used by millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,800 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 30.01)

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8.3 Degania Silicone & Control Flo Medical Make Patented ResQ Urological Catheter System

Birmingham, Alabama’s Control Flo Medical, a urological medical device company and developer of the ResQ Catheter System, announced a design and supply agreement with Degania Silicone of Kibbutz Degania Bet, Israel. The ResQ Urological Catheter System is a patented, revolutionary disruptive technology and a first-in-class urinary blockage and drainage catheter. The ResQ Catheter System represents a new disruptive technology for indwelling and intermittent catheter users.

Degania Silicone is one of the world’s leading groups specializing in the supply of indwelling medical catheters, silicone medical products and medical devices for critical care and operating rooms, as well as direct-to-customer products. Degania has six state-of-the-art production facilities located in France, India, Slovakia and Israel. (Control Flo Medical 26.01)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Israel to be the Fourth Country to Land a Vehicle on the Moon

Israel is scheduled to become the fourth country to land a spacecraft on the moon, with a launch planned for the end of 2017 by billionaire businessman Elon Musk’s company SpaceX. The scheduled launch is also set to send several satellites into space, but the Israeli spacecraft is the only one designed to continue to the moon. The dishwasher-sized spacecraft was built by the Israeli SpaceIL team for Google’s Lunar XPRIZE competition, which aims to promote space technology and interest in the private sector. Thanks to advanced innovation and engineering, the Israeli team was the first to reserve a spot for a space launch out of 33 teams that began the competition. Only five teams remain that have clinched spots on space launches, but all the others are set for after SpaceIL’s scheduled launch at the end of 2017.

After landing on the moon, the spacecraft is expected to take photos and videos of the moon and broadcast them to Earth. The spacecraft is designed to travel 500 yards across the surface of the moon by hopping, instead of roving like other spacecraft in the competition. If all goes as planned, SpaceIL will meet the conditions of Google’s XPRIZE competition and win $20 million. The team plans to use the prize money to promote science in Israel. (Israel Hayom. 26.01)

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9.2 IAI Introduces ADA- New System Designed for Hardening GPS Systems against Jamming

Israel Aerospace Industries (IAI) is unveiling ADA – an advanced system that protects avionic systems from GPS jamming. ADA has already been integrated into several systems and platforms operating both in Israel and abroad. The ADA system recently won a tender from Israel’s Ministry of Defense, for integration into one of the main platforms of the Israel Air Force. ADA was developed by IAI’s MALAM Division, a national center of excellence for Anti-Jamming protection of Global Navigation Satellite Systems (GNSS) receivers.

Under the terms of the project with the Israeli Air Force, IAI will deliver a turnkey solution based on its multi-channel Controlled Reception Pattern Antenna (CRPA) technology. The ADA integration will ensure the operational continuity of the aircraft fleet, allowing avionic systems which rely on satellite navigation systems to continue uninterrupted operation even under direct electronic attack, when the enemy uses GPS jammers or other methods of interference.

Based on an advanced electronic architecture and the implementation of sophisticated digital processing, the agile ADA system, developed by IAI MLM, protects a broad range of GNSS systems operating on manned and unmanned combat aircraft and helicopters. ADA variants are also used in land-based platforms such as main battle tanks and APCs, and on naval systems. Other derivatives of the system are integrated in various guided weapons.

Israel Aerospace Industries is Israel’s largest aerospace and defense company and a globally recognized technology and innovation leader, specializing in developing and manufacturing advanced, state-of-the-art systems for air, space, sea, land, cyber and homeland security. Since 1953, the company has provided advanced technology solutions to government and commercial customers worldwide including: satellites, missiles, weapon systems and munitions, unmanned and robotic systems, radars, C4ISR and more. IAI also designs and manufactures business jets and aerostructures, performs overhaul and maintenance on commercial aircraft and converts passenger aircraft to refueling and cargo configurations. (IAI 31.01)

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9.3 Mellanox Data Center Packet Processing Platform Based on Indigo Network Processor

Mellanox Technologies announced the IDG4400 Flex Network platform based on Indigo, Mellanox’s newest network processor (previously known as NPS-400). The Indigo high-end network processor is capable of sophisticated packet processing combined with unprecedented performance. Indigo’s L2-L7 packet processing solution offers powerful capabilities positioning it to become a world-leading platform for a wide range of applications, including router-type functions, intrusion prevention and detection, application recognition, firewall, DDoS prevention and more. Indigo hardware acceleration features, coupled with powerful software libraries, have demonstrated stateful packet processing at record rates of 500Gb/s and deep packet inspection (DPI) at 320Gb/s over millions of flows; 20 times higher versus other offerings at this scale.

A single IDG4400 network processor platform is capable of realizing the DPI processing capability of a full rack of servers. In addition, the Indigo platform may be used in conjunction with Mellanox’s Spectrum Ethernet switch systems for increased scalability. The Spectrum switch systems provide Ethernet connectivity of 10, 25, 40, 50 and 100Gb/s, and the deterministic zero packet loss performance and mega scale make it a most efficient data center building block. By combining Indigo IDG4400 and Spectrum Ethernet switching solutions, data center managers gain a cost efficient, comprehensive L2–L7 switching and packet processing solution capable of analyzing data in depth as it passes through the network.

Yokneam’s Mellanox Technologies is a leading supplier of end-to-end InfiniBand and Ethernet smart 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 offers a choice of fast interconnect products: adapters, switches, 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 and financial services. (Mellanox 31.01)

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9.4 mPrest Completes Project With Israel Electric Corporation

mPrest announced the completion of their Information Grid project – a platform enabling the Israel Electric Corporation (IEC) to optimize and further secure the management and control of all its disparate systems, process, assets, facilities and infrastructure. Using mPrest’s command, control and analytics product, tens of thousands of IEC’s sensors across 600 sites and mobile assets are now connected through a single platform, which aggregates, analyzes and outputs data while enabling real-time end-to-end processes and integration of IT and Operational Technology (OT) platforms. Adoption of the mPrest platform provided all IEC departments a holistic and aggregated, real-time picture of their operations. The project is a model for the services mPrest provides to other power utilities worldwide. mPrest’s current customers are spread around the United States, Asia-Pacific and Europe.

Petah Tikva’s mPrest is a global provider of mission-critical monitoring and control software for the utilities, Industrial Internet of Things (IIoT), security and defense sectors. With its expansive technology platform and a proven track record, mPrest delivers unrivalled flexibility to optimize asset performance and productivity, deliver operational and energy efficiency, and help large organizations reduce costs significantly. (mPrest 30.01)

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9.5 Avelacom Builds Network from London to Moscow with PacketLight Transport Solution

PacketLight Networks announced a partnership with Avelacom to build out their high speed network from London to Moscow with PacketLight’s optical transport solutions. Avelacom is one of the fastest growing international telecom/IT companies in Europe, and leveraged PacketLight hardware to reduce the network latency, allowing them to meet the growing demands of capital markets for low latency data transport across the continent. Avelacom selected PacketLight’s PL-1000GT muxponder/transponder solution, as well as the PL-1000IL, to meet the aggressive demands of building a 100G low latency DWDM long-haul network stretching 1100 km with full add/drop capability at all major sites. Their carrier-grade solution provided the necessary throughput rate of 100G in a compact, easy-to-configure 1U box, with full Optical Transport Network (OTN) integration and remote management and troubleshooting capabilities.

Tel Aviv’s PacketLight Networks offers a suite of Leading 1U Metro and Long Haul CWDM/DWDM and OTN solutions, as well as Layer 1 optical encryption for transport of data, voice and video applications, over dark fiber and WDM networks. Their products are known for their high quality, state of the art technology, reliability and performance with encryption capability at affordable prices. PacketLight products are distinguished by providing the entire optical layer transport solution within a highly integrated compact platform, designed to enable maximum flexibility, ease of maintenance, operation and provide real pay-as you-grow architecture. (PacketLight 07.02)

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9.6 LightCyber Introduces New Tools for Corporate Security Assurance

LightCyber announced new tools that equip enterprises to meet increasing demands for security accountability and compliance with internal and industry regulations, such as the General Data Protection Regulation (GDPR). LightCyber also introduced updated metrics from customer production systems and an online calculator so that prospective customers can quickly and easily assess current operational efficiency and the gains that they will receive from a LightCyber Magna deployment.

The new Security Assurance report from LightCyber Magna demonstrates the summary status of attack behavior, and can demonstrate when all anomalous attack behaviors are resolved or remediated. The report serves as an important component for security accountability in an age when most attacks can only be detected after the damage is done.

The new LightCyber Security Operations Center (SOC) OPEX Calculator helps quantify the accuracy and efficiency of security tools and their impact on security teams. The LightCyber SOC OPEX Calculator is based upon accuracy and efficiency metrics data aggregated and anonymized from customer production deployments. In the period from July 1, 2016 to December 31, 2016, LightCyber customers achieved a mean efficiency of 0.9 alerts per 1,000 endpoints per day. For example, a company with 5,000 endpoints would expect to receive 4.5 total alerts per day from LightCyber Magna. The mean accuracy reported for LightCyber customers is 99% for confirmed alerts and 61%% for all alerts, which is a measure of the alerts usefulness according to user classification.

Ramat Gan’s LightCyber is a leading provider of Behavioral Attack Detection solutions that provide accurate and efficient security visibility into attacks that have slipped through the cracks of traditional security controls. The LightCyber Magna platform is the first security product to integrate user, network and endpoint context to provide security visibility into a range of attack activity. Founded in 2012 and led by world-class cyber security experts, the company’s products have been successfully deployed by top-tier customers around the world in industries including the financial, legal, telecom, government, media and technology sectors. (LightCyber 01.02)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Unemployment in Israel Falls to New Low

Israel’s unemployment rate fell to 4.3% in December, according to figures published on 31 January by the Central Bureau of Statistics, breaking the previous record low of 4.5% set in November. As in the two preceding months, most of the increase in employment was in full-time jobs. The rate of participation in the labor force dipped slightly among men and rose among women.

The unemployment rate fell below 5% in 2016 for the first time, while the average salary rose by an annual 2.5-3% for the second straight year. The Central Bureau of Statistics’ annual figures show that the unemployment rate among those age 15 and up fell to 4.8% in 2016, compared with 5.3% in 2015. The unemployment rate among men age 15 and up dropped from 5.1% in 2015 to 4.7% in 2016, and the unemployment rate among women age 15 and up dropped from 5.4% in 2015 to 4.9% in 2016.

The rate of participation in the labor force in the 25-64 age bracket rose from 79.8% in 2015 to 79.9% in 2016. The rate among men in this age bracket fell from 85.1% in 2015 to 84.9% in 2016, while it rose from 74.7% in 2015 to 75.1% among women in this age bracket. The unemployment rate in the labor force in the 25-64 age bracket fell from 4.5% in 2015 to 4.1% in 2016, from 4.5% in 2015 to 4.1% in 2016 among men in this age bracket and from 4.6% in 2015 to 4.2% among women in this age bracket.

The number of employed people working full-time in Q4/16 (35 or more hours a week) rose 2.9%, compared with Q3 (72,000 more employees), while the proportion of those working part-time in Q4/16 (less than 35 hours a week), dropped 4.4%, compared with the third quarter (46,000 fewer employees). (CBS 31.01)

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10.2 Israel Made NIS 3 Billion in Natural Gas Royalties in 2016

Israel’s royalties from the production of natural gas came to NIS 3 billion ($798 billion) in 2016, Energy Minister Yuval Steinitz said on 2 February, during a media tour aboard the Atwood Advantage, an ultra-deepwater drill ship exploring the Tamar offshore gas field. Atwood Advantage is one of the three largest vessels of its kind in the world. It is expected to finish its work in Tamar by April 2017 and move on to the development of the nearby Leviathan offshore gas field.

Tamar, discovered some 80 kilometers (50 miles) off the Haifa coast in 2009, is believed to have reserves of up to 8.4 trillion cubic feet. Leviathan, discovered in 2010 roughly 130 kilometers (81 miles) from the Haifa coast, holds an estimated 22 trillion cubic feet of natural gas.

A delegation from the Turkish Energy Ministry visited for talks about a joint gas pipeline that would pump gas from Israel to Turkey and Europe. This was the third meeting between Israel and Turkish energy officials on the matter, and Steinitz described it as a sign of seriousness about promoting the joint project. He said Israel is also pursuing a similar pipeline venture with Italy, in a project that would involve Greece and Cyprus. According to Steinitz, Israel’s energy market currently consists of 60% gas and 40% coal. He said the goal is to reach a balance of 90% gas and 10% coal within a few years, which would also significantly improve air quality in Israel. (IH 06.02)

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10.3 Israel Ranks 28 in Global Corruption Index

Israel ranked 28th on the 2016 Transparency International Corruption Perception Index, marking a four-position improvement from 2015. The index ranked 176 countries based on public opinion, national assessments and academic research into political and public sector corruption. It uses a scale of 0 (very corrupt) to 100 (very clean). The lower the score, the more corrupt the country is perceived to be.

In 2015, Israel received a score of 61, placing 32nd out of 168 countries. Israel’s score in 2016 was 64, placing it 28th out of 176 countries. Denmark and New Zealand both ranked as least corrupt with scores of 90 each, followed by Finland (89), Sweden (88), and Switzerland (86). The three most corrupt countries in the world according to the index were North Korea (12), South Sudan (11), and Somalia, which scored 10 points, for the 10th year running.

Despite the improvement in its scores, Israel’s ranking is still low, as the 28th slot is in the bottom third for OECD members. Still, its overall ranking in the group has improved by two slots from 2015. Most Arab countries saw a sharp plunge, and 90%of them scored below 50. Iraq, Libya, Sudan, Yemen and Syria were marked as the most corrupt in the region due to political instability, war and terrorism. (Various 26.01)

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11: IN DEPTH

11.1 ISRAEL: State of Israel Ratings Affirmed At ‘A+/A‐1′; Outlook Stable

On 3 February 2017, S&P Global Ratings affirmed its ‘A+/A‐1’ long‐ and short‐term foreign and local currency sovereign credit ratings on the State of Israel. The outlook is stable.

Rationale

The ratings are supported by Israel’s prosperous and diverse economy, its strong external balance sheet, and its flexible monetary framework. The ratings are constrained by Israel’s relatively high debt burden and significant security and geopolitical risks.

Israel’s economy is prosperous and well diversified, with high value‐added manufacturing and service sectors, especially in the field of information technology. The information and communication sector occupies a 9.8% share of gross value added, and scientific and technical activities 2.8%. This is underpinned by high expenditures in research and development, exceeding 4% of GDP on average, the highest among member countries of the Organization for Economic Co‐operation and Development (OECD). We assume Israel’s economy will grow at an average rate of about 3.1% in 2017‐2020, which is a relatively high rate compared with peers with similar wealth levels. Growth will be driven by private consumption, continued corporate investment activity, and healthy service exports, and supported by loose monetary policy. In per capita terms, this equates to growth of around 1.4% per year, reflecting robust population growth.

The ruling coalition that was formed in May 2015 passed the biennial budget for 2017-2018 without internal quarrels. However, the coalition’s structure remains heterogeneous, which in our view may constrain the government capacity to substantially improve public finances and implement measures that boost economic productivity.

We believe the enhancement of infrastructure, especially in transportation, could help to engender the productivity gains that have been lacking in the Israeli economy. However, we expect the infrastructure gap to remain, given the capacity and administrative constraints facing the sector. We also expect only limited progress in tackling the other structural issues the Israeli economy is confronted by, including improvements in the business environment, because any controversial measures are unlikely to receive coalition support. Moreover, some previously implemented measures to boost educational achievements and labor supply have been reversed in order to secure support from the Ultra Orthodox party.

Stronger tax revenues have supported the general government’s fiscal performance for a second year in a row, with a fiscal balance averaging 2.2% of GDP in 2015-2016. However, given plans in the 2017-2018 budget to increase expenditures on health, education, and infrastructure, as well as potentially weaker revenue growth, we expect fiscal performance to weaken somewhat in the medium term, with the central government deficit approaching the recently increased legislated ceiling of 2.9% of GDP. Israel has a good track record of containing fiscal pressures and a very stringent fiscal framework, whose breach might lead to snap elections. Therefore, we do not expect any material fiscal slippage in our base-case scenario. The materialization of any contingent or security risks, along with continued relaxation of fiscal rules to accommodate expenditure pressures, could present a downside rating scenario, however.

High nominal GDP growth rates and low inflation (over 40% of Israel’s general government debt is linked to the consumer price index) have continued to push Israel’s gross government debt down. Subtracting liquid assets (mostly in the form of deposits at the central bank) from gross debt, we estimate that net general government debt to GDP declined to about 60.6% in 2016 compared with 61.3% a year before. Even without taking into account possible land sales and privatization proceeds, which could reduce government financing needs, we expect the net debt ratio will remain relatively stable as a percentage of GDP for the remainder of the forecast period through 2020.

As a result of Israel’s strong export performance, in particular as regards booming high value-added services exports, and sustained current account surpluses, its external balance sheet is strong and its net creditor position versus the rest of the world continues to grow. We forecast that Israel’s liquid external assets will outstrip its gross external debt over the forecast horizon. These dynamics are also lowering the country’s gross external financing needs, indicating low dependency on external financing.

In addition, we consider Israel’s monetary policy flexibility to be a credit strength. The Bank of Israel (BoI; the central bank) has been intervening more in foreign exchange markets, over and above its commitment to purchase foreign currencies to offset the impact of improvements in economic fundamentals, supporting the appreciation of the shekel, on the balance of payments, such as domestic natural gas production. We view the exchange rate regime as a managed float, which somewhat hampers monetary policy flexibility.

Additionally, the BoI is sticking to the accommodative stance of monetary policy, countering the strength of the shekel to maintain the competitiveness of Israeli exports. It has maintained the historical low of 0.1% as its key policy rate since March 2015, but the shekel has continued to appreciate against the currencies of Israel’s key trading partners owing to current account surpluses and strong net foreign direct investment (FDI). Over 2016, the shekel appreciated by 6.2% in terms of the nominal effective exchange rate. The exchange rate poses a pricing risk, adding to the need for continued innovation to remain externally competitive, in our view.

One of the key challenges to monetary policy continues to be Israel’s rising house prices. After years of relative stability, real house prices have increased by over 60% since the end of 2007. The BoI’s past attempts to dampen the housing market by raising interest rates delivered limited results, only pushing up the foreign exchange rate of the shekel significantly. The government has implemented a comprehensive set of measures to increase housing supply, including freeing up more land for development, changing the tendering criteria, and speeding up administrative processes for construction permissions. Given capacity constraints in the construction industry, the time needed to build houses, and continued growth in demand, we do not expect the government’s measures to fully address the supply shortage in the near term, however.

Israeli banks’ exposure to the local real estate sector, mainly to residential mortgage loans, has grown in recent years. The banking sector’s exposure to real estate and construction (including residential and commercial construction and infrastructure credit) is currently close to 20%, which is the BoI’s allowed maximum. Despite the fact that the tightening of macroprudential measures has reduced systemic risks to Israel’s banking industry, any abrupt correction in house prices could still have other negative economic effects.

Overall, institutional and governance structures in Israel are generally effective, with a satisfactory degree of transparency and accountability. However, we consider that the persistent territorial dispute with the Palestinians threatens political stability and weighs on policy predictability. That said, the ratings remain constrained by geopolitical risks. Repeated violent clashes with the Palestinians not only inflict social and economic costs, but also risk reactions by the international community. On the northern border, the conflict in Syria and Iraq, as well as instability in the Sinai region, pose medium‐term security risks. Any significant armed conflict could have a negative impact on the ratings if it materially deterred investment, weakened the economy’s growth potential, or strained fiscal flexibility. Shifts in the U.S. policy toward the region triggered by the recent change of the U.S. administration might also imply security risks for Israel, although there is currently little visibility on such potential developments.

Outlook

The stable outlook on Israel reflects our opinion that the government will stick to its prudent macroeconomic policies and ensure the stabilization of general government debt over 2017‐2020, despite expected weakening in fiscal accounts driven by spending pressures and likely weaker revenues. The stable outlook also factors in our expectation that security risks to the Israeli economy will not escalate and the impact from them will be contained.

We could consider raising our ratings in the next 24 months if government finance metrics improve beyond our expectations, for example, if the government delivered fiscal results comparable with those reported in 2015-2016 and/or if we observed a sustainable decline in net general government debt. Noticeable reduction in external security risks could also result in a positive rating action.

We could lower the ratings if the economic growth perspective were to weaken substantially, due to an abrupt correction in the housing market or unaddressed structural weaknesses. A downgrade would also become more likely if the government is unable to resist existing spending pressures for more social or security expenditures, which would result into much weaker fiscal and debt metrics than we currently expect. Moreover, if a perceived loss of international support were to further isolate the Israeli economy, we could lower the ratings. (S&P 03.02)

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11.2 ISRAEL: Record Private Equity Investment in Israel in 2016

In 2016, Israeli and foreign private equity funds invested a record $3.5 billion in 68 deals, 14% up from just under the $3.1 billion in 2015, and 29% up from $2.73 billion in 2014, IVC – Shibolet reports. The number of deals, however, dropped 17% in 2016, down from 103 deals in 2015, and 17% below the five-year average of 82 private equity deal.

The four largest deals closed in 2016 were all buyouts above $100 million each, accounting for $2.54 billion, or 72%, of proceeds. The buyout of Keter Plastic by BC Partners for $1.4 billion – the largest Israeli private equity deal recorded in five years – was followed by the $643 million buyout of Xura by Siris Capital. In third place was the $400 million buyout of Sintec Media by Francisco Partners, while FIMI carried out a $100 million buyout of G4S Israel.

Shibolet & Co. partner Omer Ben-Zvi said, “Israel experienced a substantial decrease in the number of private equity investment deals during 2016. This is in line with the decline in the US private equity market. However, the 2016 annual private equity deal amount – the highest ever recorded – was encouraging, as was the stable activity of foreign PE funds with another annual record. Another strength sign is the continued activity of the private equity technology sector. We therefore believe it is too early to conclude that we are witnessing the beginning of a slowdown in the Israeli private equity industry.”

He added, “We see positive signs in the continued fundraising by venture capital funds focusing on the Israeli high-tech industry and the increasing number of growth opportunities, as well as fundraising by Israeli PE funds and foreign PE funds expressing interest in Israel.”

In the fourth quarter of 2016, Israeli private equity deal-making decreased, as 16 private equity deals accounted for $412 million, 46% below the $757 million invested in 25 deals in the fourth quarter of 2015, and a 74% drop from the $1.6 billion invested in 14 deals in the previous quarter. Both the amount and number of deals were below the five-year average, a decrease of 38% and 24%, respectively.

Israeli private equity fund activity fell in 2016, with 30 funds investing $630 million, 18% of proceeds – the lowest share for Israeli PE fund investments in the past five years. This compared with the record $1.06 billion (34%) invested by 36 Israeli PE funds in 2015. The number of deals was also down – 28% with 38 deals, compared to the five-year average of 53 deals.

Three buyouts performed by Israeli PE funds in 2016 were above $50 million each, capturing 37% of total Israeli PE fund investments. FIMI led, with two prominent deals, both in the fourth quarter of 2016 – a buyout of G4S Israel for $100 million, followed by the $76 million buyout of Galam. Reality Fund acquired 65% of Arena Mall in Herzliya for NIS 90 million in the first quarter of 2016.

Foreign PE fund investments retained last year’s average activity levels, with 33 deals in 2016, despite the fact that the number of funds investing in 2016 dropped 26% – from 43 actively-involved foreign PE funds in 2015 to only 32 funds in the following year. However, in terms of capital, foreign private equity investments peaked, with $2.9 billion (82%), up from $2.03 billion (66%) invested in 2015. Three buyouts were responsible for this record amount, capturing 85% of foreign private equity investments in 2016, including the Keter Plastic, Xura and Sintec Media buyouts.

IVC research manager Marianna Shapira draws a direct line between the state of private equity fundraising and the decline in deal-making during the second half of the year: “Analyzing the notable slowdown in the number of investments made in 2016, we saw Israeli fund activity fall below average levels, and far more dramatically than foreign funds’ investments. This is not due to lack of opportunities in the Israeli market, nor a result of foreign competition, but rather seems to be related to the capital available for new investments. Both the number of active local PE funds, and the number of funds to raise new capital in 2016 dropped compared to previous years. With six funds currently in the process of raising capital, it seems that many major funds have been focused on their fundraising efforts, resulting in fewer deals made.”

There are currently 39 active Israeli private equity management companies monitored by IVC Research Center, with $12.12 billion under management, and an estimated $1.2 billion available for new investments. In 2016, four Israeli private equity funds raised $1.3 billion.

Technology deals kept a strong momentum in PE deals, with 44 transactions performed in 2016, the same as the five-year average, accounting for 65% of the deals, and generating $1.61 billion, or 46%, of capital volume. Two of the top buyouts mentioned – the Xura and Sintec Media deals, contributed. (Globes 07.02)

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11.3 LEBANON: IMF Executive Board Concludes Article IV Consultation

On 12 December 2016, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Lebanon. The protracted conflict in Syria continues to dominate Lebanon’s outlook, with registered refugees now comprising over one-quarter of the population. The refugee presence is straining local communities, adding to poverty and unemployment, and placing further pressure on the economy’s already-weak public finances and infrastructure.

Domestically, following a two-and-a-half-year impasse, Lebanon elected a president on 31 October 2016 and appointed a new prime minister soon thereafter. Consultations to form a new government are ongoing.

Growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3%, but has now slowed once again. IMF staff estimate that GDP increased by 1% in 2015 and project a similar growth rate in 2016. Lebanon’s traditional growth drivers (tourism, real estate and construction) have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4%) soon. Inflation also declined sharply in 2016 on the back of lower oil prices, but should return to trend (about 2%) by early-2017.

On the fiscal side, low oil prices have helped secure a primary surplus of 1.4% of GDP in 2015, and staff project a similar surplus (1.1%) in 2016. But public debt is high (138% of GDP in 2015) and without decisive corrective action, Lebanon’s debt burden will increase further.

In the context of Lebanon’s fixed exchange rate regime, foreign exchange inflows slowed in H1/16, resulting in a drop in official international reserves. In response, during May – October the Banque du Liban (BdL) engaged in an unconventional financial operation which, among other objectives, helped boost reserves to above 2015 levels. At the same time, the operation also created sizable excess Lebanese pound liquidity and increased commercial banks’ exposure to the sovereign.

Downside risks dominate the outlook, but there are also significant upside risks. If remaining political milestones are met quickly, the recent election of a president and appointment of a prime minister could pave the way for much needed reform and adjustment, boost the economy, and help correct macroeconomic imbalances. A resolution of the Syria conflict would also significantly boost Lebanon’s economy. On the downside, however, foreign exchange inflows could decelerate, excess Lebanese pound liquidity and reduced banks’ foreign exchange liquidity could put pressure on the foreign exchange reserves, growth might remain subdued, and fiscal imbalances could widen.

Executive Board Assessment

Executive Directors commended the authorities for preserving macroeconomic stability and market confidence in very difficult circumstances, especially the significant spillovers from the conflict in Syria, including refugee inflows. These spillovers have affected growth and overwhelmed the country’s already-strained public infrastructure and services. Directors recognized that, by hosting Syrian refugees, Lebanon is providing a global public good and that the international community needs to be more supportive of Lebanon’s efforts.

Directors observed that the recent election of a president and appointment of a new prime minister could set the stage for a revitalization of Lebanon’s policymaking framework. In this context, they noted Lebanon’s rising vulnerabilities and underscored the need for a change in policy direction, to anchor confidence and help secure improved economic performance.

Directors stressed that a sustained and balanced fiscal adjustment is essential. They welcomed Lebanon’s primary surpluses, but observed that that, without further adjustment, Lebanon’s public debt burden will continue to rise, adding to existing vulnerabilities and ultimately crowding out essential public investment and social spending.

In this regard, Directors urged passage of a budget for 2017. They also stressed the immediate need for reform in the electricity sector, which remains a large drain on the budget and a key bottleneck to improved competitiveness and equity.

More broadly, Directors stated that it was critical to place public debt on a sustainable downward path. They observed that there is significant scope to increase revenue equitably, including by improving compliance and broadening the tax base, starting with fuel taxation.

Directors noted the challenges faced by monetary policy in the current environment of tighter international financial conditions and slowing inflows. They agreed that monetary policy should remain geared to supporting the peg and commended the BdL for maintaining adequate international reserves. In this context, Directors underscored that, although the BdL’s recent financial operation has successfully bolstered BdL’s gross international reserves and banks’ capital, it was not a sustainable solution to Lebanon’s funding needs. They also called for a medium-term strategy to improve the BdL’s balance sheet.

Directors stressed the critical role of Lebanon’s banking system in securing sustained, broad based economic growth. Taking note of the findings of the recent FSAP, they appreciated the authorities’ close oversight of the financial system, but highlighted the need for continued vigilance. In particular, they stressed the benefits of measures that would introduce forward-looking capital planning; strengthen regulation and supervision by, among others, aligning loan classification rules and sovereign risk weights with international good practice; and support liquidity risk management. Directors noted that progress had been made since the last full assessment of Lebanon’s AML/CFT framework, but observed that some gaps remain and that the framework needs to be enhanced further.

Directors urged the authorities to advance structural reforms. In addition to electricity reform, they stressed the need for legislation to reinvigorate private investment, including in the oil and gas sector; and for better service provision and stronger safety nets. In this context, Directors pointed out that increased growth was also important in supporting Lebanon’s ability to cope with the recent refugee inflows. Directors also urged the authorities to move decisively to improve Lebanon’s statistical system, building on ongoing progress. (IMF 24.01)

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11.4 GCC: Cross-Border Cooperation – A Game-Changer for Gulf Cybersecurity

On 29 January, Wajdi Al Quliti wrote in the Cipher Brief Newsletter that recent years have witnessed a series of increasingly audacious and unprecedented cyber-attacks, leading up to the recent accusations of Russian hacking throughout last year’s U.S. presidential election season.

In the Middle East, the Arabian Gulf region has also experienced its fair share of the threat from cyberspace. In fact, proportional to its population and attack surface, the Gulf faces more cyber-attacks than any other region in the world.

The Middle East’s rising cyber problem

Arabian Gulf states are dealing with a cybersecurity landscape that is among the most challenging in the world. Cyber-attacks in the region increased by 15% in the first quarter of 2016 in comparison to the previous year. Five percent of all global cyber-attacks are targeted against the United Arab Emirates alone, a country home to only 0.13% of the world’s population.

The primary targets of cyber-attacks in the Gulf are financial centers – particularly Dubai’s financial district – followed by oil and gas infrastructure. In addition, rising digitization in services, transport, infrastructure and communications is increasing cybersecurity challenges. The largest bank in the Middle East, the Qatar National Bank, was recently hacked, leading to significant data damage and financial loss.

In 2012, Saudi Arabia’s state-owned company Aramco was subjected to a massive hack destroying 35,000 computers. A few months later, Qatar’s RasGas was attacked with the same virus, leading to significant damage to its servers. In December 2016, Saudi Arabia was again significantly attacked. Hackers used the same Shamoon virus that was used against Aramco in 2012. This attack removed all files on infected hard drives with the infamous image of drowned Syrian toddler Aylan Kurdi and then took over the boot record to prevent the computers from being turned on again. The brunt of the attack was against the Saudi General Authority of Civil Aviation but other companies in the energy, manufacturing and transportation sectors were also harmed by the attack.

According to a recent Price Waterhouse Coopers report, the region’s dramatic strides toward digitization – expected to add over $800 billion to GDP and over 4 million jobs by 2020 – is making the Arabian Gulf a major target for fast evolving cyber threats.

So how does the Gulf region and wider Islamic world address a challenge that in nature and scale is unprecedented?

That was an issue the Organization of Islamic Cooperation (OIC) focused on at its annual cybersecurity conference last month. There, several possible responses to cybersecurity challenges across the Gulf region and wider Islamic world were discussed.

Deterrents and the criminal justice system

Some proposed responses focused on using deterrents and the criminal justice system. The use of deterrents requires the cost of a cyber-attack to outweigh the benefits. This can be either the cost of starting an attack or of being caught.

However, to be effective, this approach faces many jurisdictional issues. There was an attempt to overcome this through the Convention on Cybersecurity, colloquially known as the Budapest Convention, with the hope of mitigating the threat of cybercrime. However, no Gulf nation has signed the Convention. Therefore, they do not have harmonized cybersecurity laws and there is no obligation on foreign nations to deport suspects to the Middle East.

The other glaring issue with the criminal justice system is that cyber-crime can be very difficult to attribute. The most common known attack vector is using SQL injection, which manipulates unsecured code to inject harmful malware into data-driven applications. These injections can be very difficult to trace and therefore nations are often at a loss as to who is behind the attack. Other attack vectors, such as DDoS attacks, use hundreds of IP addresses to mask the addresses belonging to the attackers. All of this makes it very difficult to determine who to prosecute.

Harmonizing laws across legal jurisdictions

There have been attempts to build a common cybersecurity framework in the Arabian Gulf region, though this is complicated by different legal systems and “free zones” that have distinct legal structures. Nevertheless, progress is still being made in collaboration with Western cyber and defense experts.

Cross-border cooperation and common cybersecurity structures could prove to be a game-changing advantage in the fight against cybercrime. In this area, the Organization of Islamic Cooperation has been working extensively during the past few years to establish a collective Computer Emergency Response Teams (CERT) network – a team of different national IT experts who assist in cybersecurity emergencies – in the Islamic world. Since 2006, there have been annual meetings in member states to meet with OIC-CERTs, national-CERTS, and commercial CERTS. The OIC-CERTs are also partnered with Africa-CERT and Asia Pacific-CERT. This initiative allows the OIC to easily tap into its 57 member states’ human talent.

The elephant in the room, however, is the issue of state-sponsored hacking, in which case harmonized laws are unlikely to make a difference. Ultimately, a UN agreement on state-sponsored hacking will likely be needed, and without majority international support, such attacks will only escalate.

Balancing privacy and security

As the drive towards digitization continues, how the region balances its privacy laws and its security priorities will be another critical detail in setting the tone for the fight against cyber threats. Increasing digitization makes potential damage from cyber-attacks significantly more dangerous.

Kaspersky Lab recently warned that the region’s heavy dependence on oil and gas, as well as the oil and gas-powered desalination plants that provide much of the region’s fresh water, is a source of cyber vulnerability. Any cyber-attack on these installations could prove catastrophic and might result in a humanitarian disaster.

One successful method to maintain this balance has been adoption of data protection laws in Dubai’s International Financial Center. These laws have required the same level of encryption and security as data protection laws in the UK and EU. Similar laws in other Gulf nations will be a major step forward in data protection.

Building a common cybersecurity program

Middle Eastern governments and the private sector have launched a series of measures to tackle cyber threats, including prevention techniques, cyber education, and emergency response. The cyber market in the region is expected to be worth $10 billion by 2019, while the private sector alone spends $1 billion on cyber security annually.

In recent years, there have been more conferences and events bringing together industry experts, aimed at establishing a robust cyber security program that can face a wide array of cyber threats. One took place at the OIC-CERT conference last month with participation by experts from over 20 countries and six continents and included prominent cybersecurity firms like BAE Systems and FireEye.

Public education to enhance cybersecurity

Cyber education is one area where the Gulf has taken a lead. In a 2016 survey, it was revealed that two-thirds of 18- to 26-year-olds globally have never been taught about cybersecurity, while in the Gulf region, the number reaches around 40%. Moreover, only 16% of Gulf students have never attended a cybersecurity class, while the global number is 45%.

In 2013, the UAE introduced cybersecurity curricula for primary schools aimed at educating people against cyber threats and building a solid prevention scheme from the bottom up. Similar awareness programs are also being rolled out in other Gulf countries. Such developments could prove to be effective in the long term, since strong preventative controls are far more successful compared to reactive measures. (The Cipher Brief 29.01)

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11.5 SAUDI ARABIA: Slowly but Surely: Growing Relations between Saudi Arabia & China

Yoel Guzansky and Assaf Orion posted in INSS Insight No. 891 on 29 January that from China’s perspective, enhanced relations with the Saudi kingdom address a variety of interests. From Saudi Arabia’s perspective, China constitutes a stable and reliable strategic partner that complements the kingdom’s strategic relations with the United States, mainly on economic and political dimensions, and without the unpleasant Western criticism on issues relating to human rights and democratization. Thus, both countries are finding a common comfort zone in mutual respect of their sovereignties without trying to change each other. There may be potential to promote common topics of interest in the China-Saudi Arabia-Israel triangle as long as they are of low visibility and of sufficient deniability. Considering that China has proven advantages in developing economic infrastructure, while Saudi Arabia can and wants to have an economic-strategic impact on the region, Israel would do well to continue striving to tap the potential in the partnership between them to stabilize its strategic environment, with an emphasis on those countries that are at peace with Israel – Egypt and Jordan – as well as the Palestinian arena.

On 27 October 2016, a joint anti-terrorism exercise was completed in China, with dozens of combatants from the Chinese and Saudi Arabian special forces participating. The exercise, the first of its kind, invites an examination of trends in China-Saudi relations as part of the network of ties between world powers and leading Middle East states.

From China’s perspective, enhanced relations with the Saudi kingdom address a variety of interests, including: promoting security and energy interests and boosting its economy; balancing its strategic posture, which is heavily based in East Asia, by turning westward; improving its internal stability in western China by striving to stabilize the near periphery in central Asia and the distant periphery in the Middle East; alleviating the domestic threats of radical Islam (posed particularly by the Uyghur minority in the Xinjiang region) and minimizing the external criticism of China’s treatment of its Muslim citizens; and finally, recognition of its standing as a global power, while increasing its involvement in an asset-rich region.

From Saudi Arabia’s perspective, China constitutes a stable and reliable strategic partner that complements the kingdom’s strategic relations with the United States, mainly on economic and political dimensions, and without the unpleasant Western criticism on issues relating to human rights and democratization. Therefore, both countries are finding a common comfort zone in mutual respect of their sovereignties without trying to change each other: they are both concerned about the challenges to their internal stability posed by the upheavals in the Middle East; both are seeking stability and security in the Middle East and a safe flow of energy; and they both recognize a zone of common interest in economic development while safeguarding governmental order.

The regimes manage the bilateral relations while maneuvering impressively between areas of contention and while finding points of delicate balance for mitigating possible tensions. China successfully implements its traditional Middle Eastern policy (“getting along with everyone”), conducting parallel but separate relationships with Iran and with Tehran’s sworn enemies, Saudi Arabia and Israel. China’s support for Russia and the Assad regime in Syria is diametrically opposed to Saudi positions; Beijing has also called for an end to the fighting in Yemen, while avoiding substantive criticism of the kingdom’s fighting there. For its part, Saudi Arabia has deepened its economic relations with China, without damaging its trade relations with the United States, let alone its security and political relations with Washington. To a great extent, this maneuvering was successful because China has consistently refrained from explicit declaration of a concrete regional policy, from taking clear sides on points of contention or expressly supporting sides to conflicts, and from public wrangling – this within the scope of a policy replete with internal contradictions that coexist harmoniously in ambiguity.

A recent study by the Rand Institute defined China and its involvement in the Middle East as “an economic heavyweight, a political lightweight, and a military featherweight.” This pattern of involvement is also evident in its relations with Saudi Arabia, with its lion’s share in the economic sphere (according to data from the UN Comtrade database, bilateral trade totaled about $51 billion in 2015 and about $21 billion during the first half of 2016), focusing on energy. While oil exports from Saudi Arabia to the United States have diminished gradually, due to increased US oil shale production, China, the largest oil importer in the world, has become Saudi Arabia’s principal customer. Saudi Arabia is now seeking to sustain its dominance in the Chinese energy market in the face of intensifying competition, mainly on the part of Iran and Russia. To this end, and to help stabilize the supply, Saudi Arabia is operating in China through investments and the establishment of oil refineries and strategic stockpiling facilities for Saudi oil in China. Furthermore, many Chinese companies are operating in the Saudi market in the fields of infrastructure, construction, and communications, and employ tens of thousands of Chinese workers. Both countries also agreed to cooperate in the field of renewable energies, including nuclear energy, and in the field of aerospace.

Diplomatic relations, led by visits by senior officials and cooperation agreements, have also risen over the last decade, and most of their achievements are geared to promote trade and economic relations. Between 2008 and 2013, Chinese officials visited Saudi Arabia twice a year on average, compared to an average of 2.8 visits per annum by their counterparts from the United States. Notable in this context were the visit to Saudi Arabia by China’s President Xi Jinping in January 2016 and the reciprocal visit to China by Deputy Crown Prince and Minister of Defense Mohammad bin Salman in September, during which they signed memoranda of understandings on a series of topics and announced the deepening of the bilateral security dialogue. In this context, a five-year security cooperation contract was signed on November 6, 2016, focusing on joint security training between Saudi Arabia and China.

Thus far, security relations have focused primarily on weapons sales from China to Saudi Arabia, particularly systems that other suppliers refused to sell to Saudi Arabia, inter alia, due to the restrictions of nonproliferation regimes and pressure from Israel. Notable in this context are the sale of dozens of CSS-2 and DF-3 ballistic missiles in 1988, the sale of DF-21 ballistic missiles in 2007, and in the last years, perhaps even cruise missiles, and highly likely, reconnaissance and attack UAVs, which Saudi Arabia apparently employs in the fighting in Yemen. Nevertheless, overall, Chinese security exports to Saudi Arabia constitute merely a niche, since over the years, Saudi Arabia acquired most weapons from the West (mainly from the United States and the United Kingdom), while imports from China were only marginal in volume, though qualitative strategically.

Saudi Arabia understands that currently there is no substitute for the American military presence in the Gulf to curb Iranian encroachment, but it is not interested in finding itself, overall, becoming completely dependent on the United States, particularly as the image of the United States as a stable pillar for security was damaged during the Obama years. The disagreements with the United States were exacerbated as a result of the administration’s policy toward Egypt, its siding with the Muslim Brotherhood, its weakness vis-à-vis Assad’s regime and Putin’s moves in general, and in Syria in particular, and the nuclear agreement signed with Iran, which the Saudis see as a highly negative development.

These tensions pushed Saudi Arabia to attempt to improve its relations with various countries as much as possible, including China, and perhaps this, inter alia, served to signal to the new administration that the relations between the countries must be restored to the status quo ante. The recent military exercises enabled both Saudi Arabia and China to gradually improve their military ties on “soft” issues (e.g., combatting terrorism), as a supplementary layer to their mutually beneficial economic relations, and serve their mutual political and strategic interests. For China, the military exercises constitute another cautious measure toward promoting relations and interests both in mainland China and beyond its borders, at a very low risk level. It is possible on the basis of the current military cooperation to build relations with the top Saudi security officials, and in particular, Prince Mohammad bin Salman, who potentially could reach the throne in the coming years.

Nonetheless, China cannot and is not interested in supplanting the United States as the strategic security guarantor of the kingdom’s safety and of regional stability, shouldering the burden this entails. The scope of the United States military presence and its ability to project power, coupled with the quality of its weapon systems, the depth of its military and political relations, and its interoperability with allied militaries, are beyond China’s competitive capabilities, at least in the near and medium range.

Against this background, and coupled with the rapid development of the Israel-China trade relations on the one hand, and the wider spheres of common interests between Israel and Saudi Arabia on the other, there may be potential to promote common topics of interest in the China-Saudi Arabia-Israel triangle as long as they are of low visibility and of sufficient deniability. Considering that China has proven advantages in developing economic infrastructure, while Saudi Arabia can and wants to have an economic-strategic impact on the region, Israel would do well to continue striving to tap the potential in the partnership between them to stabilize its strategic environment, with an emphasis on those countries that are at peace with Israel – Egypt and Jordan – as well as the Palestinian arena.

Israel should likewise continue monitoring the development of relations between China and Saudi Arabia in the security dimension (visits, agreements, military exercises, delegations and, in the future, possibly military bases and the presence of forces in the region), and monitoring the regional implications. First and foremost, Israel should monitor nuclear-related developments and the arrival of special weapon systems, particularly missiles (surface-to-surface, surface-to-air, anti-ship) and UAVs, which could affect the military balance in the region and Israel’s qualitative and quantitative edges. Furthermore, as the Saudi regime is analyzing ways to promote its national strength by establishing indigenous industries, it would be advisable to monitor the growth of China-assisted military industries in the kingdom, as a possible source of potential threats in the region. These are issues that should be discussed between the defense establishments in Israel and the United States, as well as between the Israeli government and the Chinese government and, if possible, between Israel and Saudi representatives.

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11.6 EGYPT: The Trials of the Egyptian Pound

Brendan Meighan wrote in Sada on 7 February that Egypt’s suddenly depreciated pound will likely rebound in the long run, but in the meantime will suffer from pent-up demand for U.S. dollars.

Egypt agreed with the International Monetary Fund on11 November 2016 for a $12 billion loan in exchange for a series of economic reforms. These have already fundamentally transformed the Egyptian economy, particularly and most recognizably, depreciating the Egyptian pound against the U.S. dollar. The reforms package won praise at home and abroad for its foreign exchange market liberalization. Yet this move, which allows the price of the Egyptian pound to be determined by market forces instead of the Central Bank of Egypt (CBE), resulted in the pound-to-dollar exchange rate falling from EGP 8.88 to the dollar in early November to more than EGP 19.50 by late December.

While the pound has recovered slightly, currently standing at about EGP 18.45 to the dollar, the average Egyptian lost over half of their savings and had their monthly income cut substantially. Given Egypt’s dependence on imports, the devaluation of the pound in dollar terms also drove up the already troublingly high rate of inflation, with year-on-year core consumer price index (CPI) inflation hitting 20.73% in November 2016 and 25.86% in December.

The inflation levels are likely to die down once the effects of the currency float and subsequent devaluation have had enough time to filter through the economy. Right now, however, the most pressing question is whether the price of the pound will ever bounce back.

Prior to the IMF loan agreement and the concurrent efforts to liberalize the foreign exchange market, the CBE used to auction off roughly $120 million each week to the various domestic banks in Egypt at a fixed exchange rate. The domestic banks would then resell the dollars to their corporate clients to import goods and services from abroad and, in the case of multinational corporations with headquarters outside of Egypt, move profits out of the country. Once the supply of U.S. dollars had been spent, the only options available were currency traders or the black market exchange bureaus. For companies wishing to make larger transactions, buying dollars on the street was not feasible.

Since the reforms, the CBE has been is relying on foreign currency inflows to supply the interbank market. With the exception of one auction on 3 November, when the shock liberalization took place, individuals and corporate banks could only obtain foreign currency on the interbank foreign exchange market. While there have been rumors that the CBE may make some reserve foreign currency available to the interbank market, this has yet to happen.

The thinking behind this move was that by abruptly stepping away from the foreign exchange market, the pound would depreciate naturally until supply and demand achieve equilibrium. As the value of the pound falls to a more natural level, domestic assets become more attractive to foreign investors, who can now buy more with their dollars. While neither the CBE nor the IMF was expecting the value of the pound to fall as much as it did, the consensus in the business community has been that the Egyptian pound will appreciate in the coming year, for a number of reasons.

Sudden currency depreciations are often followed by gradual appreciations, an effect known as “overshooting.” When a currency rapidly depreciates, domestic prices are often slow to adjust to the new value of the domestic currency despite the rapid adjustments seen in financial markets. Additionally, import needs are often fixed in the short term due to contractual obligations and the lack of domestic substitutes. The demand for foreign currency falls in the long term as domestic businesses are able to ramp up production of substitutes for imports, and foreign investment increases due to lower costs of inputs needed for producing exports.

Moreover, while the CBE has formally stepped out of the foreign exchange market, the amount of its reserves strengthens the credibility of the Egyptian government. As the announced macroeconomic reforms are implemented and the IMF loan tranches are delivered, reserve levels will rise. Already, reserves have hit $26.36 billion – a level not seen since 2011 – and the IMF expects them to reach the Mubarak-era levels of $33 billion by fiscal year 2018/9. By boosting reserves higher than they were expected to reach, Egypt’s economy will be seen as a better environment for foreign investors, which will increase demand for the pound and push its price up.

Higher reserves have already allowed Egypt to begin repaying foreign creditor nations and international firms—a strong indication of financial stability. When the Egyptian government put dollar-denominated bonds on sale on 29 January with the initial intention to sell $2.5 billion, investor turnout was high enough to sell $4 billion worth. As Egypt develops a more accommodating and attractive investment environment under the reform program, the country may also begin exporting natural gas toward the end of the decade. Egypt’s natural gas production is expected to climb from 3.8 billion cubic feet per day (bcfd) in summer 2016 to 7.7 bcfd in three years. While Egypt still consumes 5.2 bcfd, the anticipated excess gas can then be exported to the international markets. This will increase Egypt’s heavy industry and manufacturing export potential once natural gas shortages are resolved and reduce Egypt’s demand for foreign natural gas imports, further increasing demand for the pound.

The prospects for Egypt’s long-term economic growth are promising, and the reforms have already begun to attract substantial foreign investment. But despite this case for optimism, there are other factors that should bring pause to investors considering the currency as a low risk asset or consumers expecting a rebound in value any time soon.

One such factor is the continued tightening of U.S. monetary policy. The Federal Reserve raised fund rates at the end of 2015 for the first time in nine years and followed that up with another rate increase at the end of 2016. While the most recent rate increase largely spared the emerging markets, including Egypt, the December 2015 increase made them comparatively less attractive to investors, pushing emerging market stocks down 20% between November 2015 and January 2016.

Also, there are several indicators that Egypt’s pent-up demand for dollars does not reflect the broader potential needs of the market. While the eventual aim of the CBE and IMF is to have a fully functioning foreign exchange market with relatively free flows of capital in and out of the country, Egyptian banks have thus far been somewhat stingy with their distribution of hard currency. This has resulted in a substantial backlog of foreign exchange requests needed for imports. Local media reported in mid-January that Egyptian banks were taking up to 70 days to meet foreign currency requests for manufacturing production inputs and Egyptian companies were still sourcing anywhere from 15 to 100% of their foreign exchange needs from the black market. Additionally, at the end of November, the Egyptian government suggested that it would allow banks to release dollars for the purpose of repatriating profits, but there has been little evidence of this. Instead, importers of basic goods, such as foodstuffs and medicine, are still given priority when it comes to foreign currency and it appears that even top investors are unsure of what the CBE’s current rules are for profit repatriation.

This means that the demand for U.S. dollars may be substantially larger than what Egyptian companies have requested so far, and any upward pressure on the pound will almost certainly be counteracted by this demand for dollars. The present realized demand is largely coming from companies that need the dollars for basic goods, and it does not reflect the full extent of the Egyptian market’s need for hard currency once one factors in importers of non-essential goods and multinationals looking to move profits out of the country. In other words, the restrictions on the uses of dollars have likely suppressed demand because companies that are effectively prohibited from using dollars are not currently in the market for them.

According to the IMF extended fund facility report, Egypt is aiming to have a fully functioning foreign exchange market by 30 June. That will mean lifting the $100,000 restriction on individuals’ dollar transfers abroad and the $50,000 limit on cash deposits for importing non-essential goods. As more restrictions on the use of foreign currency in Egypt are lifted, the downward pressure on the pound may increase, cutting further into the savings and salaries of most Egyptians.

Any appreciation to the Egyptian pound would certainly be a great boon to the economy and Egyptian consumers, but it is not clear that it will take place any time soon. However, future fiscal responsibility and a continuation of the IMF reform package will make the economy of Egypt stronger in the long run and, as a result, strengthen the Egyptian pound. As the most populous Arab country, Egypt has the greatest economic potential in the Middle East, and a healthy, diversified, and inclusive economy is key to unlocking that potential.

Brendan Meighan is a macroeconomic analyst focusing on the Middle East. (Sada 07.02)

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11.7 EGYPT: Egypt’s Contraceptive Crisis Worsened by Illegal Stockpiling

Amy Smekar posted in Al-Monitor on 26 January that as contraceptive pills disappear from pharmacies in Egypt, allegations arise of illegal stockpiling by pharmaceutical companies in anticipation of a government-mandated price increase on the medication.

For months, Egypt has been experiencing medication shortages. Popular types of imported contraceptive pills were among the first to disappear from pharmacies and move to the black market, causing concerns in a country already experiencing overpopulation, rising fertility rates and a severe economic crisis. Al-Monitor found evidence of illegal stockpiling of medications in anticipation of a significant government-mandated price increase to be partially responsible for the shortages.

The foreign contraceptive pills Gynera, Yasmin, Yaz and Microlut cost 30, 39, 65 and 16 Egyptian pounds ($1.60, $2, $3.40 and $0.80), respectively, until the price hike goes into effect, in comparison with the 1 and 4.5 pound prices ($0.05 and $0.20) for the Egyptian-manufactured Microcept and Triocept. In February, 15% of all domestic medications and 20% of imported medications will see price increases of between 30% and 50%, and another subset will undergo an increase in July.

In a conversation with Al-Monitor, Adel Moussa, a prominent pharmacy owner in Mohandessin who asked to go by a pseudonym, discussed his struggle in dealing with import shortages and black market demands. “The importing company tells pharmacists that they are out of stock of contraceptives, such as Gynera and Yasmin, because of problems on the foreign market. In reality, they are waiting for the government to raise prices based on the new worth of the US dollar.”

SoficoPharm — the private corporation responsible for importing the popular foreign contraceptive pills Gynera, Yasmin, Yaz and Microlut — has not distributed contraceptives to Moussa’s pharmacy for months. Every time he attempts to place an order, a representative tells him that the company is out of stock due to import issues.

The Egyptian Pharmaceutical Trading Company, a government-owned company that receives a supply of imported contraceptives from SoficoPharm, only allowed Moussa to purchase 10 individual, one-month strips of medication at a time. This restriction caused him to run out of the medication quickly, especially when clients fearing the shortage asked for multiple strips.

The black market is highly profitable, but Moussa will not risk sullying a pharmacy that has been a family business for generations. He instead sells his medications for the prices set by the government because he respects his clientele and knows they are aware of prices. Still, when desperate clients ask for medications that are out of stock, he will tell them to turn to other pharmacies operating on the black market.

Pharmacists caught participating in the black market risk at least one year of jail time, a fine of up to 20,000 Egyptian pounds (an amount just over $1,000) and even temporary forced closing of their pharmacies. Inspectors check pharmacy stocks periodically to ensure that no medications are being stockpiled or withheld from the public. However, Moussa explained that some pharmacists get around inspections by bribing officials.

Al-Monitor conducted a survey of over a dozen pharmacies throughout downtown Cairo and Mohandessin, which turned up no boxes of Gynera and only one box of Yasmin, sold at an illegal 15% price hike. Several pharmacists complained that SoficoPharm had ceased to distribute any medicines to their pharmacies. One pharmacist even encouraged clients to report shortage issues to the Health Ministry and to include complaints about SoficoPharm’s failure to distribute Gynera, Yasmin, Yaz and Microlut.

When Al-Monitor asked SoficoPharm about allegations that the company would no longer distribute these medications, Sameh Kheir — who is responsible for sales and distribution of the contraceptives line at SoficoPharm — rejected the claims and maintained that all contraceptive pills SoficoPharm imports are “available in pharmacies throughout all of Cairo.”

He also denied that SoficoPharm is keeping stocks of medicine, saying, “This is not true, and the most important thing to our company is to sell the medicine.” Kheir then referred to the other distributor of imported contraceptives, the Egyptian Pharmaceutical Trading Company, to argue that competition would prevent SoficoPharm from stockpiling medications.

“We are not the only company selling Gynera in Egypt. If we were keeping stocks, it would give the other company an opportunity to sell Gynera over us,” Kheir said. He did not mention, though, that SoficoPharm is the sole company responsible for importing Gynera, Yaz, Yasmin and Microlut, and actually sells these drugs to the Egyptian Pharmaceutical Trading Company in limited quantities. When pressed again on whether this meant SoficoPharm was playing a role in shortages, Kheir promised that the general manager would return our call in half an hour. Al-Monitor attempted to contact Kheir after a day of no response but — after an initial call went unanswered — received only this automated message: “The mobile you have called is not available.”

Adel Tolba, former chairman of the Egyptian Pharmaceutical Trading Company, said in an interview with Al-Monitor on 4 January: “I don’t know whether the other companies keep stocks or not, but for me I sell what I have. We are not responsible for the crisis regarding Gynera and Yasmin. SoficoPharm is responsible for importing these medications. We are distributing the Egyptian medicine Microcept and Triocept. These are available and there is no problem, and we are selling it to anyone according to the official price. For sure, they are available in pharmacies throughout Egypt.”

Less than a week after his interview with Al-Monitor, Tolba offered his resignation from the Egyptian Pharmaceutical Trading Company. A Health Ministry source told Veto Gate, an independent newspaper in Egypt, that he was threatened with dismissal after the company was found to be storing medication in “secret warehouses.”

In an interview with Al-Monitor, Souad Abdel Magid, head of the Department of Population and Family Planning at the Health Ministry, denied that there is a contraceptive crisis in Egypt, saying, “All Egyptian-manufactured contraceptive pills offered by the government [Microcept and Triocept] are available and sufficient for one year. There is no shortage.”

However, a shortage of Egyptian pills seems to exist, despite denials from the Health Ministry and the Egyptian Pharmaceutical Trading Company. Al-Monitor’s survey of pharmacies throughout Mohandessin and Downtown found that only two of 12 pharmacies had Microcept in stock and several were selling Triocept on the black market for prices as high as 16.5 pounds — nearly four times the 4.5-pound price set by the Egyptian government last year.

The director of the Egyptian Center to Protect the Right for Medicine, Mahmoud Fouad, confirmed suspicions that pharmaceutical distributors are withholding stocks to sell at higher prices. He told Al-Monitor, “Contraceptives such as Gynera and Yasmin are in Cairo in huge quantities, but they are stockpiled by small pharmacies and the distributing companies know that they will sell them at high prices soon. … They are just seeking profit.”

According to Fouad, members of the parliament’s Health Committee have discussed the disappearance of imported medications from the market, and they exposed information about stockpiling and black market activity prior to the start of the new year. Karim Abdelaaty, an adviser in the Cabinet, told the Egyptian Center to Protect the Right for Medicine that the Health Ministry is taking steps toward regulating prices of old stocks because allowing companies to sell them at new prices would reward illegal stockpiling.

Indeed, a Health Ministry statement established that only medications produced after the official announcement of a new price index, expected in February, can be sold at new prices. It remains to be seen if pharmacies will comply with these regulations.

In the end, it is low-income Egyptians who will likely suffer most. Fouad fears that, as a result of stockpiling and price increases, they may simply give up trying to find suitable and affordable contraceptive methods, further contributing to such issues as overpopulation, infant and female mortality and teenage pregnancy. (Al-Monitor 26.01)

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11.8 MOROCCO: IMF Executive Board Concludes 2016 Article IV Consultation with Morocco

On January 23, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Morocco.

Morocco’s macroeconomic conditions have improved since 2012, but growth has remained sluggish. In 2016, growth slowed due to a sharp contraction in agricultural output and subdued non-agricultural activity. The unemployment rate decreased to 9.6% in Q3/16 while youth unemployment remains high at 21.8%. Headline inflation (year-on-year) reached 1.6%, reflecting higher food and energy prices.

External imbalances have fallen substantially since 2012, even though the current account deficit increased to 2.9% of GDP in 2016, against 2.2% in 2015. Strong manufacturing and agriculture exports, and a rebound in tourism and remittances, have more than offset the impact of increased equipment and food imports and low phosphate prices. As a result, and with continued robust foreign direct investment (FDI), international reserves strengthened to about seven months of imports.

Fiscal consolidation has continued with a deficit down from 4.4% in 2015 to about 4% of GDP against the objective of 3.5% of GDP for 2016. This reflects resilient tax revenues and well contained current expenditures, which offset the grant shortfall of about 0.3% of GDP and allowed for an increase in investment spending.

Banks are well capitalized and have stable funding, but nonperforming loans are rising and credit concentration risks, while declining, are still elevated. The expansion of Moroccan banks into Sub-Saharan Africa opens new channels of risk transmission, but cooperation with host country supervisors is intensifying and supervisory requirements for cross-border activities are being upgraded.

Morocco’s medium-term prospects are favorable, with growth expected to rebound to 4.4% in 2017 and reach 4.5% by 2021. However, risks remain substantial, and relate mainly to growth in advanced and emerging countries, geopolitical tensions in the region, world energy prices, and global financial market volatility. Stronger medium-term growth will hinge on continued implementation of comprehensive reforms with regard to labor participation and labor market efficiency, access to finance, quality education, public spending efficiency and further improvements to the business environment. Continued poverty reduction, and lower regional and gender disparities, will also be crucial to achieve higher, sustainable and more inclusive growth.

Executive Board Assessment

Executive Directors commended the authorities for their sound macroeconomic policies and reforms, which have helped reduce domestic and external vulnerabilities, enhance the fiscal and financial policy frameworks, and increase economic diversification. Directors noted that, while the medium term outlook is favorable, risks remain elevated. Against this backdrop, they welcomed the authorities’ continued strong commitment to sound policies, and encouraged them to sustain their reform efforts to further reduce vulnerabilities and promote stronger job creation and more inclusive growth.

Directors commended the continued progress made in fiscal consolidation, particularly the recent containment of current spending, the energy subsidy reform, and the reform of the public pension system. Going forward, they encouraged the authorities to gradually reduce the level of public debt over the medium term while preserving pro-growth and social spending. Directors agreed that efforts should focus on accelerating tax reforms to broaden the tax base and on careful and well-planned implementation of the fiscal decentralization to mitigate any related fiscal risks. Directors also encouraged the authorities to reform the civil service to help contain the public wage bill.

Directors endorsed the currently accommodative monetary policy stance in the context of moderate inflation and the nascent credit growth recovery. They supported the authorities’ intention to move gradually to a more flexible exchange rate regime and a new monetary policy framework, which will help preserve competitiveness and better insulate the economy against shocks. In this regard, Directors concurred that the conditions for a successful transition in 2017 are in place. Directors also encouraged the authorities to submit to parliament the draft central bank law, which will strengthen Bank Al-Maghrib’s (BAM) independence and expand its roles in the promotion of financial stability and inclusion.

Directors welcomed that the banking sector remains sound and well capitalized, and stressed that rising non-performing loans, credit concentration risks, and the expansion into Sub-Saharan Africa require continued monitoring. They also welcomed BAM’s continued efforts to strengthen the financial regulatory and supervisory framework in line with 2015 Financial Sector Assessment Program recommendations, including ongoing advances on cross border bank oversight, more risk based and forward looking supervision, a stronger macroprudential policy framework and efforts to strengthen supervisory resources in view of expanding responsibilities.

Directors emphasized the importance of sustained implementation of structural reforms to promote higher and more inclusive growth. They recommended continued efforts to improve the business climate, particularly for small and medium sized enterprises, including by enhancing their access to financing. Directors also called for improved labor market regulations as well as increased efficiency of public spending on education and vocational training that better addresses skill mismatches, which will be critical to bolster growth, reduce unemployment—especially among the youth—, lower gender gaps, and strengthen competitiveness. Directors welcomed ongoing efforts to reinforce the governance and oversight of public enterprises, and looked forward to further progress in implementing the national strategy to fight corruption. (IMF 23.01)

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11.9 TURKEY: Will Turkey’s New Inflation Calculations Impact More Than Just Economy?

Zilfikar Dogan posted in Al-Monitor on 2 February that realizing that double-digit inflation could negatively affect the upcoming presidential system referendum, Turkey has changed its method of calculating the inflation rate.

The Official Statistical Agency of Turkey (TUIK), which has been routinely coming out with creative reconfigurations of its methods of calculation of essential data, introduced its latest innovation on 25 January with changes it made to the “inflation basket.” In December 2016, the TUIK had altered the national income calculation method, which increased, on paper, national per capita income from $9,130 to above $11,000 overnight; this became a topic of bitter humor.

The reliability of the TUIK, whose calculation methods have been questioned, particularly when calculating unemployment, the numbers of tourists and tourism revenues, is now being challenged by its reconfiguration of the “inflation basket” with new indexed weights of items.

Inflation reached 8.53%, exceeding 2016 predictions by 1.5% and seemed likely to reach double-digit numbers this year. That now may not happen because of the changes in the basket, as the weights of major components such as food, nonalcoholic beverages, clothing, housing, health, and electricity and natural gas were all reduced.

The weight of food was lowered from 23.68% to 21.77%; clothing from 7.43% to 7.33%; housing, electricity, water and natural gas from 15.93% to 14.85% and health expenses from 2. 66% to 2.63%. Weights of alcoholic beverages, cigarettes and tobacco products were increased. Transportation expenses were upped to 16.31% from 14.31%.

But in its latest family expenditures statistics, the TUIK noted that the “largest portion of family spending was for food and housing-rents.” Although the weight of alcoholic beverages, cigarettes and tobacco products was increased to 5.87% in 2017 from 4.98% a year before, it is known that the portion of these items in family budgets has been constant at 4.2% since 2012.

The Monetary Policies Council of the central bank had been cautioning about further increases in inflation. In its 24 January statement, the council said “extreme volatility of foreign exchange rates has added new risks for inflation. Because of the delayed effects of foreign currency parities and the unpredictability of prices of unprocessed food items, the inflation rate is likely to continue rising in the short term.”

When the TUIK altered the weights of items in the inflation basket a day after the central bank statement, it became obvious that the TUIK was finding a way to lower the inflation rate on paper. When food, housing and rent expenses of families are reaching 50%, the move by TUIK to lower their weights raised eyebrows with its timing. The official justification for the changes was not convincing.

The vice chairman of the TUIK, Mehmet Aktas, said the weight of food was lowered because of the decreasing number of tourists and corresponding declines in tourist spending on food and drink. Aktas defended the changes, saying, “The basic change in the portion of food in calculation is because of the decline in foreign visitors. There is a decline in direct foreign visitor spending for food.”

Financial experts and academics say that the gap between “real inflation and official inflation” will widen under these TUIK changes. The experts note that as income levels go down, the ratio of food expenditures in family budgets goes up. They warn that major changes in the index could wipe out the utility of the “inflation basket” as an economic indicator.

Nongovernmental organizations dealing with pensioners say the TUIK inflation basket and the prices pensioners have to cope with in the markets do not mesh. These NGOs maintain that the TUIK should consult with them when determining the weight of items in the basket, particularly because pensions are calculated on the basis of the inflation rate the TUIK announces. In other words, if the inflation rate is low on paper, then the pensions of retired civil servants and other workers will be lower than what they otherwise would have been.

Opposition parties have also reacted to the TUIK changes. Erdogan Toprak, a member of parliament from the main opposition Republican People’s Party, said the government, on the eve of the presidential system referendum, “is trying to keep inflation low on paper by index manipulation and by saying that all is well in economy.”

Toprak said: “The TUIK has lowered the weights of major consumption items in the inflation basket. The index weights of items [such] as alcoholic beverages, cigarettes, eating in restaurants and staying at luxury hotels have been increased as if people can afford them. The ploy is obvious. Just as they did when they changed the national income calculation in one day and made us all $2,000 richer on paper, now they aim to lower, on paper, inflation that is heading to a double-digit rate on the eve of the referendum.”

The constitutional amendment referendum that is likely to be held in April is of vital importance for President Recep Tayyip Erdogan and his Justice and Development Party government while the economy is under severe pressure because of rising unemployment, the Turkish currency’s loss of value and security costs.

The lowering of Turkey’s credit rating by Fitch and Standard & Poor’s on 27 January were clear warnings of the economic woes the country is facing. Turkey has lost its rating of safe for investment. According to latest figures issued by the Economy Ministry, in the January-November 2016 period direct foreign investment diminished by 42% compared with the same period in 2015. Confidence in the Turkish economy and the willingness to invest in Turkey has undoubtedly been losing ground.

Already deteriorating economic conditions for the people are likely to worsen as the referendum approaches. The only way to assure “yes” votes for Erdogan may well be the calculation tricks on paper that the TUIK excels in. (Al-Monitor 02.02)

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Fortnightly, 8 February 2017

Fortnightly, 8 February 2017

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