Fortnightly, 8 March 2017

Fortnightly, 8 March 2017

March 7, 2017
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FortnightlyReport

8 March 2017
10 Adar 5777
8 Jumada Al-Akhirah 1438

TOP STORIES

TABLE OF CONTENTS:

 1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Knesset Passes Controversial Biometric Database Law
1.2  Netanyahu Government Approves Decriminalization of Marijuana Use
1.3  Shekel Cements Position as one of the World’s Strongest Currencies

2:  ISRAEL MARKET & BUSINESS NEWS

2.1  Israel’s Natural Gas Already Flowing to Jordan
2.2  Wix Acquires DeviantArt, Pairing Wix Capabilities with Global Creative Community
2.3  Fox Set to Open Israel’s First 3 Foot Locker Stores
2.4  Uponit Raises $2.3 Million
2.5  TestCraft Raises $1 Million
2.6  FEMSA Selects Pointer to Provide Fleet and Distribution Services
2.7  innogy & OurCrowd Partnership to Deliver the Next Generation of Energy Solutions in Israel
2.8  China’s SAIC to Open Israel Development Center
2.9  Brayola Raises $5 Million
2.10  Air India to Launch Tel Aviv – New Delhi Flights
2.11 XACT Robotics Raises $5 Million and Signs NIH Agreement
2.12  Three Months into 2017, Israeli Startups Raise $700 Million
2.13  Avery Dennison Completes Hanita Coatings Acquisition
2.14  Cymulate Raises $3 Million
2.15  Legal SaaS A.I. Platform LawGeex Raises $7 Million in Funding Round

 3:  REGIONAL PRIVATE SECTOR NEWS

3.1  UK Construction Giant Quits All Operations in Middle East
3.2  Healthcare Operator Notes Abu Dhabi Revenue Challenges
3.3  More Details of Warner Bros World Abu Dhabi Revealed
3.4  Saudi Arabia Hires Bechtel to Run Infrastructure Projects Office
3.5  Saudi & US firms Sign Deal to Form Ocean Freight Joint Venture
3.6  Hyatt Announces Plans for First Hyatt-Branded Hotel in Algeria

 4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Abu Dhabi to Close $872 Million Solar Plant Financing
4.2  Saudi Energy Firm Inks Deal for Australian Solar Farm
4.3  Morocco Launches Environmental Police

5:  ARAB STATE DEVELOPMENTS

5.1  Lebanese Consumer Prices Rose in the First Month of 2017
5.2  Lebanon’s Trade Deficit Stood at $1.37 Billion in January 2017
5.3  Total Number of Lebanese Registered New Cars Fall By January 2017
5.4  Jordanian Revenues from Remittances & Tourism on the Rise
5.5  Incentives Launched as Part of Jordan’s Economic Correction Plan

♦♦Arabian Gulf

5.6  Arabian Gulf States Set to Discuss Regional Rail Project in April
5.7  Bahrain’s Inflation Rate Falls Sharply in January
5.8  Bahrain’s Economic Growth Forecast to Shrink in 2017 – 2018
5.9  Qatar’s Foreign Trade Surplus Jumps 62% in January
5.10  India to Grow Crops to Meet UAE Food Demand
5.11  Abu Dhabi’s New Airport Terminal Opening Delayed to 2019
5.12  Dubai May Opt To Delay Launch of Driverless Flying Taxis
5.13  Saudi Economy Forecast to Continue Slowdown in 2017
5.14  Saudi Arabia Sees First Deflation in More Than a Decade
5.15  Saudi Arabia Seen Saving $96 Billion Through Reforms by 2020

♦♦North Africa

5.16  Egypt’s Trade Deficit Declines by 44% Year-On-Year in January 2017
5.17  Egyptian Expat Remittances Increase by 23% in January
5.18  Egypt’s Suez Canal Generates $395.2 Million in January Revenue
5.19  Morocco Set to Become Manufacturer of Weapons

6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS


6.1  Turkey’s Inflation Hits Double Digits in February for First Time Since 2012
6.2  Turkey Among Top Five Countries to See Most Millionaire Outflow in 2016
6.3  Russian Tourist Numbers to Turkey Rise in January but Foreign Arrivals Keep Declining

7:  GENERAL NEWS AND INTEREST

♦♦ISRAEL

7.1  Israelis Satisfied With Their Lives, New Survey Shows

♦♦REGIONAL

7.2  King Abdullah Urges Strict, Swift Implementation of Judicial Reform Plan
7.3  Sheikh Hamdan Tries Golden Burger Inspired by Burj Khalifa

8:  ISRAEL LIFE SCIENCE NEWS

8.1  MIXiii-Biomed 2017 – Israel’s Premier International Life Sciences Conference and Exhibition
8.2  Phytecs Partners with Yissum to Discover New ECS-Targeting Compounds
8.3  OWC Receives IRB Approval to Start Testing on its Cannabinoid-Infused Psoriasis Cream
8.4  Pharma Two B Closes $30 Million Financing Round
8.5  Can-Fite’s Namodenoson (CF102) Prevents Progression of Liver Fibrosis
8.6  Via Surgical Signs Exclusive U.S Distribution Agreement With Progressive Medical
8.7  RadiAction Medical Raises $5.7 Million
8.8  Medial EarlySign’s System Helps Identify Individuals at High Risk for Colorectal Cancer

9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1  Giraffic and Byond Join Forces to Create Mobile VR Magic
9.2  Mellanox Introduces World-Leading 6WIND-Based Router and IPsec Indigo Platform
9.3  RADWIN Fulfills the Promise of 5G, Today
9.4  Shaw Selects NICE Sales Performance Management to Manage Complex Incentive Plans
9.5  Altair’s CAT-1 IoT Chipset Certified For Operation on T-Mobile’s 4G LTE Network
9.6  Altair and Geotab Team up to Develop LTE-enabled Automotive Telematics Devices
9.7  ASOCS Unveils In-building vRAN Solution Pre-Integrated with HPE Open NFV Platform
9.8  Assa Abloy Implements Industry 4.0 Solution Powered by Magic xpi Integration Platform

10:  ISRAEL ECONOMIC STATISTICS

10.1  Ministry of Finance Warns Growth Rests on New Car Sales
10.2  Israeli Women Are More Educated and Live Longer, But Earn Less

11:  IN DEPTH

11.1  ISRAEL: Israeli PM’s Visit to the Two Sides of the Caspian Sea
11.2  LEBANON: Republic of Lebanon ‘B-/B’ Ratings Affirmed; Outlook Stable
11.3  IRAQ: Republic of Iraq Ratings Affirmed At ‘B-/B’; Outlook Stable
11.4  EGYPT: Fitch Reviews Egypt’s Rebalancing Continues Ahead of Challenging Year
11.5  EGYPT: Egypt’s First-Ever Female Governor Marches to a Different Drummer
11.6  EGYPT: Will Families With 2 Children Become the Norm in Egypt?
11.7  TUNISIA: Will Tunisia Finally Amend Harsh Cannabis Law?
11.8  ALGERIA: Still Avoiding Austerity
11.9  MOROCCO: Reducing Gender Inequality Can Boost Growth
11.10  GREECE: The Threat of Grexit Returns
11.11  GREECE: Fitch Affirms Greece at ‘CCC’

1:  ISRAEL GOVERNMENT ACTIONS & STATEMENTS

1.1  Knesset Passes Controversial Biometric Database Law

The controversial Biometric Database Law was ratified by the Knesset on 27 February after passing second and third readings, with 39 coalition MKs voting in favor and 29 opposition lawmakers voting against it.  Prior to the law’s approval, a joint committee of representatives from the Constitution, Law and Justice Committee; the Internal Affairs and Environment Committee; and the Science and Technology Committee narrowly voted (6 to 5) to approve the bill.  Significant changes were made to the original version of the Biometric Database Law, before it could be applied universally.  According to the provisions of the law, the database will contain facial images of every citizen, while each person will have the option of providing his or her fingerprints.

As stated, a person can consent or refuse to give his fingerprints, but those who decline the option will receive passports and ID cards that are valid for a period of only five years.  Meanwhile, those who provide their fingerprints will receive identification documents that are valid for 10 years, which is the current standard period of time.  The law stipulates that those who consent to providing their fingerprints can change their minds at any time and request deletion of the information from the database.  Additionally, the law forbids keeping the fingerprint information of minors under the age of 16.  The law also requires the police to adhere to the existing detainment procedure, and forbids the police from using the database at all until the Knesset can approve the relevant new protocols.

Public Security Minister Erdan will have until 1 May to present the new protocols for approval and the Knesset will have until the end of July to approve them.  The law will go into effect only after the Knesset approves the protocols; until then the guidelines that have been in place throughout the pilot phase will remain binding.  (Various 28.02)

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1.2  Netanyahu Government Approves Decriminalization of Marijuana Use

On 5 March, the Netanyahu government voted in favor of decriminalizing recreational marijuana use, joining some US states and European countries who have adopted a similar approach.  The proposal was submitted by Minister for Public Security Gilad Erdan and Minister of Justice Ayelet Shaked.  Erdan called the government vote “an important step towards creating new policy that will emphasize explaining (the dangers of drug use) and treatment instead of prosecution.”  The vote followed the recommendations of a committee, nominated by Erdan, to impose fines on individuals caught possessing cannabis.

According to the new policy, people caught smoking marijuana would be fined rather than arrested and prosecuted.  Criminal procedures would be launched only against those caught repeatedly with the drug.  An inter-ministerial committee will now draft new legislation to implement the new policy, which still must be ratified by the Knesset, a process that will likely take months.  Selling and growing marijuana would remain criminal offenses.

Shaked said Israeli authorities would now put their focus on education about the possible harmful effects of drug use.  Marijuana use is fairly common in Israel.  The United Nations Office on Drugs and Crime has said that almost 9% of Israelis use cannabis, though some Israeli experts believe the numbers are higher.  Israeli police figures showed only 188 people were arrested in 2015 for recreational use of marijuana, a 56% drop since 2010, and many of those apprehended in that time were never charged.  About 25,000 people have a license to use the drug for medicinal purposes in Israel, one of the world leaders in medical marijuana research.  In the United States, 28 states have legalized marijuana for medical use and since 2012, several have also approved marijuana for recreational use.  (Various 05.03)

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1.3  Shekel Cements Position as one of the World’s Strongest Currencies

The Israeli shekel on 1 March cemented its position as one of the strongest and most solid currencies in the world, marking gains against the top three currencies: the dollar, euro and pound.  According to the Bank of Israel, March’s foreign currency trade began with the shekel trading at NIS 3.62 per dollar, the shekel/euro exchange rate was set at NIS 3.82, and the shekel/pound exchange rate came to NIS 4.47.  The 1 March dynamic trading day and the gains the shekel marked vis-à-vis all major currencies, especially the 0.74% drop in dollar rates, prompted the Bank of Israel to intervene and purchase foreign currency valued at $300 million in an attempt to curb the trend.  The shekel has appreciated by 6% against the dollar over the past year, its strongest level since October 2014. It is also hovering at a 15-year peak against the euro.

The Bank of Israel bought $2.6 billion in foreign currency in the second half of 2016, and another $50 million in January.  The shekel is essentially echoing the dollar’s behavior in world markets, as the American currency has been growing stronger against major currencies such as the euro and pound, especially over political turmoil in France.  (IH 1.03)

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2:  ISRAEL MARKET & BUSINESS NEWS

2.1  Israel’s Natural Gas Already Flowing to Jordan

Natural gas from Israel’s offshore Tamar reservoir began flowing to Jordan in early 2017, an Israeli energy industry official said on 1 March.  The amount of gas is expected to be relatively small and is being delivered via a special pipeline built in the Dead Sea.  However, the delivery is just the initiatory step ahead of the more significant developments expected to follow when the offshore Leviathan reservoir goes online. Leviathan is expected to become operational by the end of 2019.

The agreement to deliver the gas to the Arab Potash Company and Jordan Bromine Company, on the Jordanian side of the Dead Sea, was signed in 2014, in conjunction with a subsidiary of Texas-based Noble Energy, which operates Leviathan.  Construction of the pipeline from the Dead Sea Works plant on the Israeli side to the Jordanian plants was completed in 2016.  As part of the project, a 16 kilometer (9.9 mile) pipeline was laid down on the Israeli side, meeting a pipeline 20 kilometers (12 miles) in length that was laid down on the Jordanian side.  The pipeline became operational in early 2017.  A separate transport system will deliver gas at far greater quantities from the Leviathan field to the other foreign markets earmarked as destinations.  The amount of gas to be delivered each year is estimated at anywhere between 3 and 3.5 billion cubic meters.  (IH 01.03)

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2.2  Wix Acquires DeviantArt, Pairing Wix Capabilities with Global Creative Community

Wix.com announced that it acquired Los Angeles’ DeviantArt, one of the world’s largest online communities dedicated to artists, art enthusiasts and designers.  The acquisition represents inherent opportunities in key growth areas for Wix including product development, brand recognition and increased traffic potential.  Wix will provide DeviantArt users easy access to powerful tools specifically designed to help emerging artists create and showcase their creativity online and build their brands.  At the same time, Wix creatives and designers will have access to DeviantArt’s thriving community of tens of millions of visual artists.  DeviantArt is consistently one of the most visited websites worldwide and has grown organically for over a decade with virtually no investment in marketing or advertising.  Currently, the community boasts over 325 million individual pieces of original art and more than 40 million registered members.

Wix and DeviantArt share a vision to provide designers and artists of all types a platform on which they can create, manage and showcase their work online, grow their audience and build their own global brands.  Wix will provide technology and marketing expertise to the DeviantArt universe enabling its users to further their reach and increase engagement, both online and on mobile.  DeviantArt’s focus on developing and fostering online collaboration and communities will provide Wix users a platform to engage with creative designers and artists across multiple mediums.  Together the companies will strive to create an innovative gallery for artists globally, mixing world class creative with unmatched opportunities for design, display and distribution.

Tel Aviv’s Wix.com is a leading cloud-based web development platform with more than 100 million registered users worldwide.  Wix was founded on the belief that the internet should be accessible to everyone to develop, create and contribute.  Through free and premium subscriptions, Wix empowers millions of businesses, organizations, professionals and individuals to take their businesses, brands and workflow online.  (Wix.com 23.02)

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2.3  Fox Set to Open Israel’s First 3 Foot Locker Stores

The first two branches of the Foot Locker sports stores will open in Israel during the coming months.  Fox-Wizel will operate the Israeli franchise for the brand.  Another Foot Locker branch will open shortly afterwards in Terminal 1 at Ben Gurion Airport, the Israel Airports Authority reported – as part of the duty free chain at the overhauled terminal.  Designated for low cost flights, Terminal 1 is currently undergoing renovations, but is scheduled to resume full activity in July, when the duty free area in the terminal will also be opened.  The mix of stores in the Terminal 1 duty free area will be similar to Terminal 3, but the area will be smaller, totaling some 1,650 sq.m.

Some of the franchise operators at Terminal 3, such as James Richardson, have first rights to open a branch at Terminal 1.  Sakal Duty Free, which operates a sports store at Terminal 3, does not have this option; Foot Locker won a tender to establish its foothold.  Fox, which has the Foot Locker franchise for Israel, is likely to open the first two stores in March-April in two shopping malls scheduled to open: one in Gindi in Tel Aviv and one in Rishonim in Rishon LeZion (owned by Azrieli Group).  (Globes 26.02)

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2.4  Uponit Raises $2.3 Million

Israeli ad recovery platform Uponit announced that it has raised $2.3 million in funding.  The round was led by Jerusalem Venture Partners (JVP) with a strategic participation from KDC Media Fund, a joint venture of Dick Clark Productions and Keshet.  Working with dozens of publishers globally, Uponit has recovered over 6.8 billion ad impressions and will use the investment for continued development of its platform and expansion of its sales and marketing teams.

Uponit was founded in Tel Aviv in 2015 by a team of 5 security experts who served at one of Israel’s elite intelligence units.  Using cyber technologies, Uponit helps publishers measure and restore their blocked ad inventory and communicate with their adblocking audience.  Uponit’s solution deploys seamlessly, allows publishers to serve direct ad campaigns, supports all ads including display, video and native, maintains original tracking and targeting, and is immune to current ad blockers.  Furthermore, the solution accelerates page load times by 20%-30%, improving user experience.  (Globes 23.02)

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2.5  TestCraft Raises $1 Million

Tel Aviv’s TestCraft Technologies has raised $1 million in seed funding from a number of serial software entrepreneurs and industry veterans to connect manual software testers to automated DevOps.  The company provides continuous testing SaaS-based solutions that allow manual business testers to create test automation without coding.  TestCraft intends to use the proceeds of this round to work with customers to further enhance its solution and to expand its core development team.  TestCraft allows manual testers to quickly outline test cases on a virtual canvas, which TestCraft then converts to Selenium scripts and connects to common CI/CD suites and multi-platform testing labs.  Founded in 2015, with the advancement of DevOps and agile development methodologies, TestCraft expects to be part of a new wave of tools that will empower software developers and their testing teams.  (Globes 22.02)

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2.6  FEMSA Selects Pointer to Provide Fleet and Distribution Services

Pointer Telocation, a leading provider of cloud-based Telematics services of Fleet, Mobile Resource Management (MRM) and Internet of Vehicle (IoV) solutions, announced the selection of its Mexican subsidiary, to provide fleet management services for COCA – COLA FEMSA.  COCA – COLA FEMSA, the largest public bottler by sales volume of Coca-Cola products in the world, operates a Center of Excellence in Mexico, and is responsible for continuous improvements to its overall activities.  FEMSA’s Center of Excellence launched a project to improve all aspects of its distribution to retail outlets.  The project focuses on efficiencies and improvements across four major areas: (i) service to customers; (ii) distribution activities; (iii) distribution costs; and (iv) road traffic safety. Pointer was selected as one of the providers to solve these demanding challenges.

Pointer Telocation is a leading provider of technology and services to the automotive and insurance industries, offering a set of services including Fleet Management, Mobile Asset Management, Stolen Vehicle Recovery, Vehicle Diagnosis and a comprehensive solution in the field of Internet of Things. Pointer has a growing list of customers and products installed in 50 countries. Cellocator, a Pointer Products Division, is a leading AVL (Automatic Vehicle Location) solutions provider for stolen vehicle retrieval, fleet management, car & driver safety, public safety, vehicle security and more.  (Pointer Telocation 27.02)

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2.7  innogy & OurCrowd Partnership to Deliver the Next Generation of Energy Solutions in Israel

Essen, Germany’s innogy SE, a leading European energy company, and Jerusalem’s OurCrowd, a leading global equity crowdfunding platform, announced a new business partnership.  The partnership will combine the strength of OurCrowd’s network and ability to scout investment opportunities in Israeli startups and match the business objectives of innogy to provide innovative products and services beyond the energy market.

OurCrowd, a platform that connects investors and startups around the world, will help funnel Israeli technology startups that support innogy.  This partnership will help innogy achieve its goal of enabling people to improve their quality of life by changing and enhancing the energy sector worldwide (and in Europe and Germany in particular) through decarbonization, decentralization and digitalization.

innogy’s Innovation Hub established an outpost in Israel to engage with innovative startups in its areas of interest (Smart & Connected, Urban Solutions, Disruptive Digital, Big Data and Machine Economy/Blockchain), aiming to collaborate and invest in accordance with its open innovation strategy. The innogy Israel outpost is based in Tel Aviv.  (OurCrowd 28.02)

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2.8  China’s SAIC to Open Israel Development Center

Shanghai Automotive Industry Corporation (SAIC) will found an R&D center in Israel for advanced auto technologies, the company announced in China.  The company said that the center would focus on development and venture capital investment in “electrical propulsion, data networks, car sharing, and smart automated propulsion.”  The center is part of a global plan in which the company is expanding its R&D worldwide.  It recently opened a similar center in Silicon Valley.  The company’s advance team is already in Israel and the company’s branch in Israel is slated to expand to 50 employees.  It is believed that SAIC’s business in Israel will be located in the new management center of the Lubinski group in Meuyan Sorek.  Lubinski has been the official importer for SAIC in recent years and has sold several thousand units of the brand to date.

SAIC, a Fortune 100 company that is one of the four largest Chinese auto manufacturers, is a Chinese government company selling nearly five million vehicles a year.  The auto industry believes that this is only the spearhead of R&D and venture capital investment by Chinese auto manufacturers in Israeli auto-tech.  (Globes 26.02)

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2.9  Brayola Raises $5 Million

Israeli startup Brayola has completed a $5 million financing round.  The First Time fund led the round with a $4 million investment, with participation from Gett (formerly GetTaxi) founders.  Brayola’s market is estimated at $32 billion a year, including $14 billion in the US, where the company is currently focusing.  The company’s algorithm enables women to find bras that fit them and offers them a selection of virtual bras, from which they can select the ones they like according to brand and size.  The model is successful, reflected in a 10% rate of returns, compared with a 30% average in online bra purchases.  Brayola’s algorithm uses a database with information about over five million bras. The company currently cooperates with over 100 brands offering over 10,000 products.  (Various 05.03)

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2.10  Air India to Launch Tel Aviv – New Delhi Flights

Air India has submitted a request for flights from New Delhi to Ben Gurion Airport.  Three weekly flights on the route will begin in May.  The Israel Airports Authority announced that civil aviation between Israel and India has grown significantly in recent years, culminating with a 22.8% increase in activity in 2016, when the number of passengers flying directly between the countries reached 158,000.  In addition, many other travelers between the two countries do not fly directly; less than one third of travelers from Israel to India, 27%, use direct flights.  Airports Authority figures show that the number passengers flying directly between the two countries rose 12.4% to 130,000 in 2015. An analysis of indirect flights to India shows that 30% of passengers to India flew via Moscow, 14.5% through Istanbul, 11.8% by way of Tashkent, 2.3% via Larnaca, etc.

The main destinations in India for Israelis are Mumbai (62,280 passengers), New Delhi (57,370), Bangalore (11,502), and Goa (6,347).  Only El Al Israel Airlines currently runs direct flights between Israel and India.  (Globes 02.03)

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2.11  XACT Robotics Raises $5 Million and Signs NIH Agreement

XACT Robotics has raised $5 million in a round led by investment company MEDX Ventures Group.  The financing round, XACT Robotics’ second, brings the total amount raised to date by the company to $10 million.  At the same time, the Caesarea based company announced the signing of a research cooperation agreement with the National Institutes of Health (NIH) in the US.  The agreement concerns joint development of a second generation of XACT Robotics’ product that will be suitable for imaging systems other than CT, for which the product is currently designed.

The product has undergone animal trials, in which the company showed that it can bring the needle to the right place without damaging essential tissue.  This trial will probably be enough to obtain marketing approval for the product towards the end of 2017.  XACT will also conduct trials on human beings at three medical centers, but this trial is not required for approval of the product; it is designed to support the company’s marketing efforts.

XACT Robotics began operations in August 2013 and is located in Caesarea, Israel.  The company is developing a novel platform robotic technology for needle steering in minimally invasive interventional procedures, such as biopsies and ablations.  The technology is based on a novel approach to needle steering using a 5 degrees-of-freedom robot, ongoing needle path calculation, and real-time closed-loop control. XACT is currently developing the system for use in CT-guided procedures.  (XACT Robotics 02.03)

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2.12  Three Months into 2017, Israeli Startups Raise $700 Million

Globes reported that Israeli startups raised nearly $700 million in January and February.  This is keeping pace with last year when Israeli startups raised a record $4.8 billion, according to IVC.  In the first quarter of 2016, Israeli startups raised $1.09 billion.  The pace of financing is all the more impressive in the light of consistent reports of a downturn in startup financing in the US.

The trend of Israeli startups closing large financing rounds continues, especially in January when nearly $450 million was raised.  Flash storage company Kaminario raised $75 million and mobile ad analytics company Appsflyer raised $56 million.  Cyber security, as in 2016, remains the hottest sector with SentinelOne raising $70 million, Transmit Security raising $40 million, Demisto raising $20 million and Intsights Cyber Intelligence raising $15 million, among others.

February ended with a flurry of financing rounds, the largest of which was drug development company Pharma Two B, which raised $30 million for a Parkinson’s treatment trial.  The first major financing closing of 2017 by an Israeli startup was also in the medical sector with smart shirt company Healthwatch raising $20 million.  Other major financing rounds were closed by Valens Semiconductor (raising $20 million), Aquarius Engines (raising $20 million), eCommerce company FeedAdvisor ($20 million), SaaS company Samanage ($20 million), enterprise software company Trax Image Recognition ($19.5 million), artificial intelligence company Chorus.ai ($16 million), co-working space company Mindspace ($15 million), smartphone camera company Corephotonics ($15 million), sports publishing company MinuteMedia ($15 million) and power electronics company visIC ($11.6 million).  In fintech, VAT recovery company VATBox raised $20 million, Earnix raised $13.5 million and Credifi raised $13 million.  (Globes 01.03)

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2.13  Avery Dennison Completes Hanita Coatings Acquisition

Glendale, California’s Avery Dennison Corporation announced it has completed the acquisition of Hanita Coatings, a pressure-sensitive materials manufacturer of specialty films and laminates, from Kibbutz Hanita and Tene Investment Funds.  Headquartered in northern Israel with sales and distribution facilities in the United States, Germany, China and Australia, Hanita develops and manufactures coated, laminated and metallized polyester films for a range of industrial and commercial applications.  Hanita Coatings will be known as Avery Dennison Hanita and will continue its operations as a distinct business unit.  Avery Dennison is a global leader in pressure-sensitive and functional materials and labeling solutions for the retail apparel market.  The company’s applications and technologies are an integral part of products used in every major industry.  (Avery Dennison 02.03)

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2.14  Cymulate Raises $3 Million

US investment fund Susquehanna International Group has led a $3 million Series A financing round in Rishon LeTzion’s Cymulate, an Israeli cyber security startup.  The company had previously raised $500,000 from Eyal Gruner, a director in the company.  Cymulate conducts penetration tests.  The company has developed a platform enabling enterprises to simulate cyber attacks in real time, while testing the security system’s resilience from the potential attacker’s perspective.  Among other things, Cymulate makes it possible to assess an enterprise’s readiness for ransom and fishing attacks, and for detecting more complicated breaches through which hackers can take over an enterprise’s computers and apps.  The $3 million raised will enable Cymulate to continue development of its automatic tool, hire 15 more employees in addition to the eight it already has, and establish a sales apparatus in the US.

The market for information and cyber security testing as part of cyber as a service in which Cymulate operates is estimated at $6 billion in the US and Europe alone.  The new realization that it is no longer possible to rely on period testing in large-scale projects carried out by third-party companies is a business opportunity for Cymulate.  The company’s platform enables any enterprise to test whenever it wants how it stands against the current attack threats.  Cymulate’s system continuously updates research teams and hackers investigating attacks in the operation system, software, apps, and a broad range of services.  By using the service, the information security manager gets an up-to-date idea of the enterprise’s state of resistance to cyber attacks.  The system also provides suggestions for repairing existing breaches, so that in most cases, by implementing these recommendations, the information security manager blocks and neutralizes quite a few threats.  (Globes 07.03)

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2.15  Legal SaaS A.I. Platform LawGeex Raises $7 Million in Funding Round

LawGeex announced the closing of a $7 million Series A funding round.  The round was led by a group consisting of high-profile investors, including Japanese-based HR and information services company, Recruit Holdings, the owner of Indeed.com.  Previous investors Lool Ventures and LionBird also participated in this round, bringing LawGeex’s total funding to $9.5 million.  The LawGeex Artificial Intelligence reviews incoming contracts, approving them if they match pre-defined criteria, or escalating them to the legal team if needed.  Legal teams can define their criteria based on best practices, or create their own custom “playbooks”, outlining exactly what the platform should accept or reject in any contract.  By enforcing a single set of standards, LawGeex helps companies minimize legal risk and ensure compliance, while reducing legal bottlenecks and shortening contract turn-around time.

LawGeex currently supports a wide range of standard business contracts, from NDAs to purchase orders and software licenses.  The additional capital will be used to further advance LawGeex’s A.I. capabilities, enhance its SaaS offering, and continue building a world class team of engineers, data scientists and legal experts.

Tel Aviv’s LawGeex is transforming legal operations using artificial intelligence, and helping businesses save hundreds of hours and thousands of dollars reviewing and approving everyday contracts.  Founded in 2014, LawGeex enables businesses to automate their contract approval process, improving consistency, operational efficiency and getting business moving faster.  LawGeex combines machine learning algorithms, text analytics and the knowledge of expert lawyers to deliver in-depth contract reviews using the legal team’s pre-defined criteria.  LawGeex removes the legal bottleneck, helping customers and their legal teams focus on the big picture without getting lost in the paperwork.  (LawGeex 07.03)

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3:  REGIONAL PRIVATE SECTOR NEWS

3.1  UK Construction Giant Quits All Operations in Middle East

On 21 February Balfour Beatty, the international infrastructure group, announced that it has reached an agreement with its joint venture partner to sell its entire share in Dutco Balfour Beatty and BK Gulf.  The company said in a statement that, subject to regulatory approval, the deal is worth £11 million.  As part of the transaction, the local partner will assume responsibility for Balfour Beatty’s guarantees of bonding obligations in the joint ventures.  Since the start of 2015, Balfour Beatty has exited the Middle East, Indonesia and Australia in order to focus on its chosen markets, in the UK, US and Far East.  In 2014, the UK-based construction firm said it has won a $353 million contract from Emaar Properties to build an extension to The Dubai Mall.  (AB 22.02)

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3.2  Healthcare Operator Notes Abu Dhabi Revenue Challenges

Private UK based hospital group Mediclinic International has warned it may deliver lower earnings for its Middle East business amid a “challenging” market in Abu Dhabi.  The company said that patient volumes and operating performance continue to be below expectations in Abu Dhabi and was particularly pronounced in January.  The group said it now expects full year 2016/17 Middle East revenue to be down to AED3 billion ($820 million) with an underlying EBITDA margin of approximately 10-11%.

Mediclinic took over Abu Dhabi’s Al-Noor last year and started consolidating the group’s hospitals with its own Dubai operations.  In the Middle East, Mediclinic said its established Dubai business continues to perform well, including a strong ramp up in patient activity at the newly opened Mediclinic City Hospital North Wing.  Despite the current economic and trading environment, Mediclinic said it has confidence in its long term Middle East growth strategy.  It said significant progress has been made integrating the Al Noor and Mediclinic operations into a single business unit and AED75 million of annualized cost synergies are expected to be realized during the current financial year.  (AB 21.02)

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3.3  More Details of Warner Bros World Abu Dhabi Revealed

Miral confirmed that Warner Bros World Abu Dhabi, an indoor theme park spanning 1.65 million square feet, will be home to 29 rides, shows and interactive attractions.  The developer announced that the park will also include retail outlets featuring a wide collection of merchandise inspired by Warner Bros franchises as well as a range of dining options.  Warner Bros World Abu Dhabi will bring together Super Heroes and Super-Villains from the DC Universe, including Batman, Superman and Wonder Woman, as well as Warner Bros’ iconic animated properties such as Bugs Bunny, Scooby-Doo and Tom and Jerry, creating a family-friendly destination for fans of all ages, the statement said.   Theming is currently underway throughout the park.  Factory acceptance testing for all rides is nearly done, and delivery and installation of rides has already started.

Warner Bros World Abu Dhabi, which comes as part of Yas Island’s commitment to attracting 48 million annual visits by 2022, is set to open in 2018, and will complement Miral’s Yas Island destination portfolio of themed parks, which includes Ferrari World Abu Dhabi, Yas Waterworld, CLYMB, and SeaWorld Abu Dhabi which is scheduled to launch in 2022.  (AB 28.02)

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3.4  Saudi Arabia Hires Bechtel to Run Infrastructure Projects Office

Saudi Arabia has appointed Bechtel Corp, one of the world’s largest industrial contractors, to run a new oversight office tasked with reducing inefficiencies and trimming costs on state infrastructure projects.  Bechtel will help the Saudi government set up and run its new National Project Management Organization (NPMO), known in Arabic as Mashroat.  The firm has worked on mega-projects in the Islamic kingdom for some 70 years, including airports and the sprawling Jubail and Ras al-Khair industrial cities.  It is currently developing two of six lines on the $20 billion Riyadh Metro project.

The Saudi cabinet created the NPMO office last year as part of a broad government effort to overhaul the economy and close a gaping budget deficit, as sustained low oil prices have taken a toll on the kingdom’s finances.  Projects throughout Saudi Arabia slowed to a halt last year as the government delayed payments to contractors for their work, in some cases for more than a year.

At least $13.3 billion of government projects are at risk of being cancelled in Saudi Arabia this year because of fiscal pressures and shifting government priorities.  The total value of project awards for 2017 is forecast at $27 billion, and could rise to $32 billion if the Mecca Metro project, which was originally expected to be awarded in 2016, goes through this year.  (Reuters 21.02)

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3.5  Saudi & US firms Sign Deal to Form Ocean Freight Joint Venture

A subsidiary of the national shipping arm of Saudi Arabia has signed a joint venture agreement to establish an ocean freight supplier for dry bulk import and export flows in and out of the Middle East region.  Bahri Dry Bulk Company (BDB), a subsidiary of Bahri Group, and Koninklijke Bunge, a unit of US-based Bunge Limited, a global agribusiness and food company, announced the agreement.  The JV, which will operate under the name Bunge Bahri Dry Bulk Ltd, will provide exclusive freight transportation services to regional and other international customers.  The company plans to ship over 5 million metric tons in its first year, ramping up volume over time to double-digit figures, a statement said.  It added that BDB and Bunge will own 60/40% of the JV respectively, and it will be registered and based in Dubai.  Financial terms of the agreements were not disclosed.  Bunge buys, sells, stores and transports oilseeds and grains and is headquartered in New York.  (AB 22.02)

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3.6  Hyatt Announces Plans for First Hyatt-Branded Hotel in Algeria

Chicago’s Hyatt Hotels Corporation announced that a Hyatt affiliate has entered into a management agreement with Société d Investissement Hôtelière EPE SPA for a Hyatt Regency hotel to be located at Houari Boumediene Airport in Algiers, Algeria.  The hotel, expected to open late 2018, will mark the first Hyatt-branded hotel in Algeria.  Hyatt Regency Algiers Airport will add to Hyatt’s growing brand presence in Africa, following the successful openings of Hyatt Place Taghazout Bay in Morocco and Park Hyatt Zanzibar in Tanzania in 2015, which brought the total number of Hyatt-branded hotels in Africa to six.  Hyatt Regency Algiers Airport will be part of a wider airport expansion in one of North Africa’s largest cities. The 326-room hotel will be situated directly opposite the airport’s new terminal and will be the only terminal-linked hotel.

Société d Investissement Hôtelière EPE SPA is a company whose shareholders are amongst the most important financial and industrial institutions in Algeria.  Since its creation in 1997, the company has developed numerous internationally branded hotels throughout the country.  (Hyatt 06.03)

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4:  CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1  Abu Dhabi to Close $872 Million Solar Plant Financing

Abu Dhabi’s government-owned power utility aims to close a financing package for a 3.2 billion dirham ($872 million) solar power plant, which will be the world’s largest, in April.  Abu Dhabi Water & Electricity Authority (ADWEA) said it had selected a consortium of Japan’s Marubeni Corp and China’s JinkoSolar Holding to build and operate the 1,177 MW plant.  The duo were selected from six bids received by ADWEA in September.  The project is ADWEA’S first foray into renewable energy.  Abu Dhabi aims to generate 7% of its energy from renewables by 2020; the government’s green energy firm Masdar has launched renewable energy projects including solar plants.

The plant, to become operational in 2019, will be funded 25% by equity and 75% by debt, Adel al-Saeedi, acting director of privatization at ADWEA, said.  ADWEA would contribute the equity while local and international banks would fund the debt.  The winning bidders offered to provide electricity for 2.42 U.S. cents per kilowatt hour, one of the most competitive prices seen to date in the solar industry, Saeedi said.

A special-purpose company would be formed to operate the project; ADWEA would own 60% of the company while Marubeni and Jinko would hold 40%. Power generated would be sold to Abu Dhabi for 25 years.  Initially the plant at Sweihan, east of the city of Abu Dhabi, was to have a capacity of 350 MW, but ADWEA increased the capacity because additional land became available, said Saeedi.  (Reuters 05.03)

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4.2  Saudi Energy Firm Inks Deal for Australian Solar Farm

Fotowatio Renewable Ventures (FRV), a developer of large-scale solar power plants and part of Saudi-based Abdul Latif Jameel Energy, has signed a power purchase agreement for the Lilyvale Solar Farm in Queensland, Australia.  The deal with Ergon Energy, the Queensland Government-owned electricity retailer, will see Ergon Energy purchase 100% of the electricity and all large scale renewable energy certificates (LRECs) generated by FRV’s 100MW Lilyvale Solar Farm project.  The agreement will be effective once the solar facility begins operation, expected to be towards the end of 2018, and run until 2030.

The proposed Lilyvale solar farm is located 50 kilometers North East of Emerald in the Queensland Central Highlands region, known for its many coal mines and cattle farming industry.  The project’s location near to major existing network infrastructure makes it ideal for connecting the solar farm to the national electricity grid.  The project received approval in September 2015, with construction set to begin mid-2017 and expected to take 12-16 months.  FRV estimates up to 200 workers will be needed to complete Lilyvale Solar Farm’s construction. It is expected to power approximately 45,000 homes.  The announcement is the third power purchase agreement that FRV has signed in Australia within the last 12 months, following deals with Origin Energy for the Moree Solar Farm in New South Wales and the Clare Solar Farm, near Ayr in North Queensland.  (FRV 24.02)

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4.3  Morocco Launches Environmental Police

Morocco’s Ministry of Energy, Mining, Water, and Environment organized a ceremony to launch the environmental police on 23 February in Rabat.  The ceremony involved presenting environmental inspector’s cards and the presentation of technical monitoring equipment and vehicles for the environmental police.  The creation of regional environmental brigades to protect against environmental damage was first announced in September 2013 by the General Directorate of National Security.

The missions of the environmental police, set by Decree in 2015, include the raising of awareness of environmental issues and the inspection, research, investigation, verbalization and detection of environmental infringements.  The offenses that the environmental brigades will police are as numerous as its mission: deposits of waste on private or public land, possession obsolete products or contraband drugs, transport of dangerous goods without authorization.

Offenders may face fines ranging from MAD 100 to MAD 2 million as well as possible imprisonment. Once the infringement has been established by the environmental inspector, this latter is responsible for determining the seriousness of the infringement and the penalty for the infringement.  According to the decree, environmental police officers “perform their functions voluntarily, or at the request of the governmental environmental authority, or as part of a national environmental supervisory board set up for purpose of environment protection.  (MWN 24.02)

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5:  ARAB STATE DEVELOPMENTS

5.1  Lebanese Consumer Prices Rose in the First Month of 2017

According to the Central Administration of Statistics (CAS), the Lebanese Consumer Price Index (CPI) showed signs of inflation in the first month of the year.  The CPI rose from 94.45 points in January 2016 to 98.47 points by the end of January 2017, recording a 4.25% year-on-year (y-o-y) increase.  This rise is mostly attributed to the rising oil quotes this year.  In terms of the CPI’s components, “transportation” (13.10% of CPI) and “water, electricity, gas & other fuels” (11.8% of CPI), saw annual growth of 6.88% and 15.68%, respectively.  Moreover, the “education” sub-index, constituting 6.60% of the CPI, increased annually by 2.74% in January 2017.  Prices of “communication” (4.5% of CPI) and “Clothing and Footwear” (5.2% of CPI), posted respective y-o-y rises of 0.70% and 14.29% over the same period. In addition, “restaurant & hotels” (2.8% of CPI) prices went up by 1.64% y-o-y, which might be due to an improving tourist activity during the first month of the year.  Nonetheless, “food and non-alcoholic beverages” prices (20% of CPI) as well as the “Health” (7.7% of CPI) sub-index registered respective drops of 0.28% and 1.06% y-o-y in January 2017.  (CAS 22.02)

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5.2  Lebanon’s Trade Deficit Stood at $1.37 Billion in January 2017

Lebanon’s trade deficit for the first month of 2017 stood at $1.37B, widening from the $1.31B registered in the same month last year.  Total imports grew by 7.36% year-on-year (y-o-y) to $1.60B and exports rose by 24.81% y-o-y to $231.65M.  The top imported goods to Lebanon were Mineral products with a share of 22.58%, followed by 10.93% for products of the chemical and allied industries and 9.73% for machinery and electrical instruments.  The value of imported mineral products dropped by 2.80% y-o-y to $362.31M in January 2017.  Meanwhile, the value of products of the chemical and allied industries and that of machinery and electrical instruments rose by a yearly 12.76% and 8.29% to reach $175.41M and $156.08M in January, respectively.

In January, the top three import destinations were Greece, China and the US with shares of 10%, 9% and 7%, respectively.  As for exports, the top exported products from Lebanon were pearls precious stones and metals with a share of 30.91% of the total followed by shares of 13.91% for prepared foodstuffs, beverages and tobacco and 11.23% for base metals and articles of base metal.  Specifically, the value of pearls, precious stones and metals more than doubled in January 2017 to stand at $71.61M, and the value of base metals and articles of base metal rose by 30.76% to $26.01M.  Nonetheless, the value of prepared foodstuffs, beverages and tobacco registered a yearly drop of 3.85% to $32.23M. In January, the top three export destinations were South Africa with 18%, followed by Switzerland and Syria with a similar share of 10%.  (Blom 01.03)

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5.3  Total Number of Lebanese Registered New Cars Fall By January 2017

According to the Association of Lebanese Car Importers, the total number of newly registered commercial and passenger cars slid by 1.00% year- on- year (y-o-y) to 2,571 cars by January 2017.  In details, the number of registered commercial cars dropped by 18.82% y-o-y to 151, while the number of registered passenger vehicles rose by 0.37% to reach 2,420 by January 2017.  In terms of car brands, Kia maintained its top rank, with the largest share of 19.23% of newly registered passenger cars, followed by Hyundai, Toyota and Nissan with respective shares of 12.93%, 12.48%, and 10.33%.  As for sales per importer, Natco acquired the largest stake of newly registered cars with 15.22% of the total, followed by RYMCO with 15.13%, BUMC and Century Motors with 12.91% and 12.41%, respectively.  (BLOM 21.02)

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5.4  Jordanian Revenues from Remittances & Tourism on the Rise

Total income from tourism and remittances by Jordanian expatriates increased by 8.5% in January, reaching $664 million compared to $612 million during January last year, Petra, reported.  The Central Bank of Jordan (CBJ) said in a statement that initial data indicated a 4.2% overall increase in Jordanian expatriates’ remittances during January, reaching around $296 million compared with $284 million in the same period last year.  Revenues from tourism in January 2017 recorded a 12.2 increase, standing at $368 million, compared with $328 million in January 2016.  The CBJ said the increase in tourism income is mainly attributed to an 8.7% increase in overnight tourists, reaching 339,200 tourists in January this year compared to 312,200 in January 2016.  Total income from tourism and remittances amounted to $8 billion in 2016, Petra added.  (JT 06.03)

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5.5  Incentives Launched as Part of Jordan’s Economic Correction Plan

Amman is carrying on with its administrative reforms and has launched a set of economic incentives to boost the economy’s performance.  The government’s efforts to address the budget deficit have started with reducing governmental expenses and was followed by amending previously “deformed” sales tax regulations.  The next step is enacting economic incentives, a government spokesman said in a press conference at the Prime Ministry.  These “comprehensive national” reforms must be seen in their “bigger picture”, he noted, highlighting that Jordan does not approve of any dictations from external bodies.

Under administrative reform, the government identified the maximum allowance for its representatives on boards of directors of state-owned companies based on an A, B and C classification of the companies.  Government representatives on boards of “A” companies will be allowed JD500 monthly, while those on boards of companies “B” and “C” will be allowed JD400 and JD300 monthly, respectively.  Surplus money will return to the Treasury through the Finance Ministry.  Regarding public servants’ travel allowance, around 90% of travel allowance requests were rejected, with the majority of the remaining 10% being covered by hosts.

The economic incentives include the government’s endorsement of the Jordan Valley Authority’s decision to distribute lands in Ghweibeh area in Southern Ghor to underprivileged families as means of direct support to ease their difficult economic conditions.  In addition, companies that offer financial, legal or technical services within the Aqaba Special Economic Zone will be exempted from income tax if 60% of their operations are within the special zone.  Work is under way to create an agenda of governmental activities over a period of weeks. This timeframe will allow ministers to view activities of other ministries and seeks to enhance coordination among them in order to serve the government’s broader development and economic goals.  (JT 26.02)

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►►Arabian Gulf

5.6  Arabian Gulf States Set to Discuss Regional Rail Project in April

The Gulf Cooperation Council (GCC) will discuss the likelihood of constructing a regional rail network by 2021 at a meeting of regional ministers in April.  The regional bloc made up of Saudi Arabia, the UAE, Bahrain, Kuwait, Oman and Qatar last year reached an agreement in principle to delay the 2018 completion date until 2021.

The 2,100-km (1,310-mile) passenger and cargo network stretching through all six Gulf states from Kuwait to Oman has faced technical and bureaucratic obstacles, and stalled as state budgets tightened because of low oil prices.  The UAE has suspended further construction of its project while Oman has shifted concentration to building a domestic network linking the ports of Salalah, Sohar and Duqm.  Bahrain has said it would not connect its network to a neighboring state, Saudi Arabia, until at least 2023.  It later plans to connect to Qatar.  The meeting between regional ministers who oversee transport and infrastructure portfolios would “most likely” take place in Saudi Arabia.  (Reuters 28.02)

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5.7  Bahrain’s Inflation Rate Falls Sharply in January

Bahrain’s inflation rate fell sharply in January as food prices dropped, according to latest data released by the country’s statistics office.  The inflation rate fell to 0.8% last month from 2.3% a year earlier, the figures showed.  Although housing and utility costs, which account for 24% of consumer expenses, rose 3% from a year earlier, the prices of food and non-alcoholic beverages, which account for 16%, fell 2.3%.  Inflation in Bahrain rose to 3.8% in April 2016, its highest level since December 2013.  In December, the CEO of the country’s investment agency said he expects Bahrain to see non-oil sector growth of more than 3% in 2016 and 2.4% in 2017.  (AB 21.02)

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5.8  Bahrain’s Economic Growth Forecast to Shrink in 2017 – 2018

Bahrain’s fiscal deficit will fall only marginally to 12.3% of GDP this year from 13.6% in 2016 as oil prices settle well below the country’s breakeven figure, according to ratings agency Fitch.  The agency said it expects Brent to average $45 per barrel in 2017, nearly $40 below the breakeven price for the Gulf kingdom.  Fitch Ratings affirmed Bahrain’s long-term foreign and local currency issuer default ratings at ‘BB+’ with a stable outlook.  It noted that Bahrain’s ratings are supported by high GDP per capita and human development indicators and a developed financial sector.  The strengths are balanced by double-digit fiscal deficits, high and rising debt, a highly oil-dependent government budget and domestic political tensions that hamper fiscal adjustment, it added.

Fitch expects GDP growth of 2.4% in 2017-2018 including a moderation of non-hydrocarbon growth to 3% from an estimated 3.4% in 2016.  Continued deficits will push debt to 84% of GDP in 2018 from 75% in 2016, Fitch said.  It added that the country’s gradual increases in domestic gas and fuel prices will partly offset the negative effect of oil price weakness on hydrocarbon revenue.  Fitch said it expects spending to grow at a rate below non-oil GDP growth, after a broad-based cut of 8.2% in 2016. The biggest spending cuts were to subsidies and transfers and capital spending.  Notably, the nominal wage bill also fell for the first time in recent history.

In Fitch’s forecast, the government’s foreign borrowing reaches roughly $3.2 billion in 2017 and $2.2 billion in 2018, after $2.9 billion in 2016.  It added that banks are well placed to extend more credit to the economy and the government, enjoying profitability, high levels of capitalization and liquidity, and low nonperforming loan levels.  (Fitch 05.03)

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5.9  Qatar’s Foreign Trade Surplus Jumps 62% in January

Qatar’s January trade surplus increased by 62.2% from a year earlier, according to data released by the country’s Ministry of Development, Planning and Statistics.  The country’s surplus rose to QR10.9 billion ($3 billion) in January from QR10.7 billion in December and up from QR6.7 billion in January 2016.  Qatar’s December trade surplus, which increased 21.7% from a year earlier, was its only monthly rise in 2016.  Exports of petroleum gases and other gaseous hydrocarbons climbed 13.7% to QR13.27 billion ($3.65 billion).

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.  (Various 28.02)

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5.10  India to Grow Crops to Meet UAE Food Demand

India and the UAE are reportedly working on creating a “farm-to-port” special economic zone to meet the latter’s food security interests.  In a joint statement issued during the visit of Abu Dhabi Crown Prince Sheikh Mohammed Bin Zayed to India in January, the two countries agreed that food security remains an area of high priority for the two sides.  The statement stated that the Indian side welcomed proposal from the UAE for establishing food security parks, including through creation of high quality food processing infrastructure, integrated cold chain, value addition and preserving technology, packaging of food products and marketing.

The Times of India quoted Amar Sinha, secretary, ministry of external affairs, as saying that the initiative will be similar to a special economic zone but in the style of a corporatized farm, where crops are grown keeping the specific UAE market in mind, with dedicated logistics infrastructure all the way to the port.

The UAE has developed a comprehensive plan to secure food supply, which includes investments in farmlands across Namibia, South Africa, Tunisia, Morocco, Algeria, Sudan and Egypt and improving domestic productivity by using new technologies.  However, poor security and political risks affected some of these projects with the UAE now shifting its focus to safer havens such as Eastern Europe, Australia, and North and South America.  (AB 07.03)

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5.11  Abu Dhabi’s New Airport Terminal Opening Delayed to 2019

The opening of Abu Dhabi Airports’ $2.94 billion Midfield Terminal has been pushed back by two years, in the latest setback for a project seen as crucial to the emirate’s wider expansion into tourism.  Abu Dhabi is investing billions in tourism, infrastructure and industry to diversify its economy away from oil.  But some projects have been hit by delays.  The expansion of its main airport, Abu Dhabi International, had already been delayed by around five months until December 2017, while the opening of the Louvre Abu Dhabi museum has also been delayed to 2017 due to pending construction work.

The Midfield Terminal will be able to accommodate up to 30 million passengers a year when it opens.  Abu Dhabi International Airport will have passenger capacity of 45 million per year when the Midfield Terminal opens, almost double the 23 million passengers it attracted in 2015.  A consortium of Turkey’s TAV Insaat, Athens-based Consolidated Contractors Company and Dubai’s Arabtec are building the terminal.  (Reuters 06.03)

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5.12  Dubai May Opt To Delay Launch of Driverless Flying Taxis

Dubai’s Roads and Transport Authority (RTA) said it will not commence commercial service of driverless flying taxis until it gets a safety certification.  Earlier this month, the RTA in collaboration with China’s Ehang Company announced it had carried the first test run of an autonomous aerial vehicle capable of carrying a human and would put it in operation by July.  The RTA is also in talks with UAE’s General Civil Aviation Authority (GCAA), the federal, autonomous body set up to oversee aviation-related activities in the country, for completion of the certification process.

The driverless flying taxis are part of Dubai government’s 2030 initiative, unveiled in April 2016, which aims to have 25% of the emirate’s transport to be autonomous by 2030 and generate economic revenues and savings of up to $5.99 billion (AED22 billion) a year.  The RTA is testing the aerial vehicles but will soon set up a budget to buy these autonomous vehicles before starting the service.

The EHANG184 vehicle is fitted with a touchscreen to the front of the passenger seat displaying a map of all destinations in the form of dots and has preset routes from which the rider can choose a destination.  The vehicle will then start automatically, take off and cruise to the set destination before descending and landing in a specific spot.  The vehicle is fitted with eight main propellers, and in case of any failure in the first propeller, there would be seven other propellers ready to complete the flight.  A ground control center will monitor and control the entire operation, the RTA has said.  (AB 27.02)

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5.13  Saudi Economy Forecast to Continue Slowdown in 2017

Saudi Arabia’s economy is forecast to continue slowing this year, dragged down by negative growth in the oil sector, according to Jadwa Investment.  Its latest report said growth in the oil sector will turn negative due to the kingdom’s compliance with OPEC production cuts, while non-oil sector growth should rebound but “remain subdued” during 2017.  Jadwa forecast that growth in the non-oil private sector will accelerate from 25 year lows with non-oil mining and ownership of homes likely to be the fastest growing sectors.  It added that growth in wholesale and retail and construction will turn positive following a recession in 2016.  Jadwa said that the combination of a rebound in oil revenue as a result of higher oil prices, rising non-oil revenue, and improving efficiency in expenditure will result in the fiscal deficit falling to single digits in 2017.  The current account deficit will also shrink considerably, boosted by a rise in oil export revenue, it noted.  Jadwa added that the partial impact of fiscal balancing measures will be offset by the government’s focus on restructuring the private sector support mechanism.  (AB 24.02)

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5.14  Saudi Arabia Sees First Deflation in More Than a Decade

Inflation turned negative in Saudi Arabia for the first time in more than a decade in January, according to data released on 23 February by the country’s Central Department of Statistics.  The figures showed that prices fell by 0.4% last month compared to a rise of more than 4% in January 2016.  The fall was partly due to the weakness of the Saudi economy, where low oil prices have slashed the government’s export revenues and forced it to cut spending.  Food and beverage prices fell 4.2% from a year earlier, partly because of the strong US dollar, to which the Saudi riyal is pegged.  Prices of housing and utilities rose 1.2% and transport costs fell 3.1%, with inflation in both categories down sharply compared to rates in previous months.  The government raised prices of domestic fuel and utilities around the end of 2015, and the changes dropped out of calculations this month.

Pressure for prices to rise is expected to increase within months, however.  The government plans another round of fuel price increases in mid-2017 and has said it will impose a 50% tax on soft drinks and a 100% levy on tobacco and energy drinks in the second quarter of this year.  The government plans to raise fees for foreigners’ work permits and their dependents’ visas, starting this year, and intends to introduce a 5% value-added tax in the first quarter of next year.  (CDS 21.02)

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5.15  Saudi Arabia Seen Saving $96 Billion Through Reforms by 2020

Planned fiscal measures in Saudi Arabia by 2020 will lead to savings of around SR362 billion ($96.5 billion), according to estimates by Jadwa Investment.  Its latest research note said the Gulf kingdom’s Fiscal Balance Program (FBP) includes initiatives designated for enhancing spending efficiency, reforming energy and water prices, and promoting non-oil revenue.  According to Jadwa’s estimates, planned fiscal measures will result in a fiscal surplus of SR162 billion in 2020, compared with a deficit of SR200 billion if no reforms are implemented.  The company said its forecast differs slightly from the baseline scenario presented in the Fiscal Balance Program due to its belief that oil revenue will be slightly higher than what the government is expecting.

Jadwa noted that FBP initiatives will help in keeping total government spending in an expansionary mode from 2018 to 2020, adding that it also touches on critical socioeconomic aspects such as the creation of a “household allowance program” to support low-to-mid income Saudi households.  Inflation turned negative in Saudi Arabia for the first time in more than a decade in January, according to data released by the country’s Central Department of Statistics.  The figures showed that prices fell by 0.4% last month compared to a rise of more than four% in January 2016.  The falls were partly due to the weakness of the Saudi economy, where low oil prices have slashed the government’s export revenues and forced it to cut spending.  (Jadwa 04.03)

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►►North Africa

5.16  Egypt’s Trade Deficit Declines by 44% Year-On-Year in January 2017

Egypt’s trade deficit declined 44% in January 2017 from $3.49 billion to $1.96 billion compared to the same month in 2016, the Ministry of Trade and Industry said.  Minister Kabil announced that non-petroleum exports increased by 25% in January 2017 to $1.6 billion from $1.32 billion in the same month in 2016, while imports decreased by 25% from $4.82 billion to $3.62 billion.  In December 2016, the trade deficit declined by 40.5% in December 2016, according to CAPMAS.  Year on year, the import of sugar increased drastically by 7,535% in December 2016.

Egypt has been facing a shortage in supplies of sugar, of which the country consumes more than three million tons annually, since September as the foreign currency crisis crippled imports.  The sugar crisis eased following the country’s decision to float its currency in November as well as the Ministry of Supply decision to import 120,000 tons of sugar from Brazil and France.  Egypt has undergone a hard currency crisis in recent months that resulted in high dollar rates on the black market and left banks unable to provide companies with the currency needed to service imports.

The Central Bank floated the pound against the dollar in November 2016 in an attempt to alleviate the country’s flagging economy, leading the pound to plummet, reaching an average exchange rate of EGP 18.5 to the dollar in early March, compared to EGP 8.88 prior to the flotation.  (Ahram Online 05.03)

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5.17  Egyptian Expat Remittances Increase by 23% in January

Remittances from Egyptian citizens working abroad rose by 23% in January to $1.6 billion, compared to $1.3 billion in January 2016, the Central Bank of Egypt said.  Since the currency devaluation in November, remittances have risen by about 19.7% to $5 billion as of January, compared to $4.1 billion during the period of comparison.  CBE said last month that remittances from the last quarter of 2016 rose by 11.8% compared to the same period last year, to reach $4.6 billion.

The Suez Canal and remittances from Egyptians living abroad are now the sole sources of foreign currency coming into the country, after the halt in gas exports to Israel and Jordan and the struggling tourism sector, which was exacerbated by the downing of the Russian passenger jet in October 2015.  Egypt floated the national currency on 3 November.  It devalued the Egyptian pound by about a third from the former peg of LE8.8 against the dollar and allowed it to drift lower.  Egypt’s dollar peg had drained the central bank’s foreign reserves, which were hit by reduced foreign investment following political turmoil in the past few years, forcing the central bank to impose capital controls and ration dollars.  (CBE 06.03)

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5.18  Egypt’s Suez Canal Generates $395.2 Million in January Revenue

Egypt’s revenues from Suez Canal trade declined in January to register $395.2 million compared to $434.8 million in the same month last year, according to data from the Suez Canal Authority (SCA).  According to the data, 1,369 ships passed through the Egyptian waterway last month, compared to 1,414 ships in December and 1,411 ships in January 2016.  January’s receipts declined slightly compared to the previous month, when it registered to $414.4 million.  The canal, which is the fastest shipping route between Europe and Asia, is one of the country’s main sources of foreign currency.  (Ahram Online 25.02)

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5.19  Morocco Set to Become Manufacturer of Weapons

Morocco is conducting talks with a number of countries and companies in order to launch consortia for local weapons manufacturing.  A report by Strategic Defense Intelligence (SDI) has revealed that Morocco is currently holding talks with Spain, France, and the US, as well as companies in Belgium and the UK, to launch local joint ventures for weapons manufacturing.  The attempt seeks to reduce Morocco’s complete dependency on foreign suppliers.

SDI, which delivers proprietary content for the global defense sector, acknowledged that, while Morocco’s military industry is not in a position to export weapons and military equipment, “this is likely to change soon with the government’s attempts to develop and expand the field of domestic arms manufacturing.”  The SDI report explained that Morocco’s desire to develop its military arsenal has evolved from its aspiration to become a military power in the continent, bolstered by its macro-economic stability, low level of inflation, and huge reserves of hard currency.  As well, Moroccan weapons imports have grown, making the country the world’s 13th biggest importer, and the second in Africa, after Algeria, a position the SDI predicted it would hold until at least 2020.  (EDN 27.02)

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6:  TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1  Turkey’s Inflation Hits Double Digits in February for First Time Since 2012

Turkey’s annual consumer price inflation hit 10.13% in February, hitting double digits for the first time since April 2012 and coming in higher than analysts’ expectations, as transportation and health costs climbed, according to official data.  Consumer prices were up 0.81%, when compared with January, exceeding forecasts, data from the Turkish Statistics Institute (TUIK) showed on 3 March.  The report showed that the highest monthly increase was in transportation, at 2.82%, while the main drivers of yearly consumer price inflation on an annual basis were alcoholic beverages and tobacco, together up 21.72%.

The Turkish Lira, which lost more than 1% of its value against the U.S. dollar on 2 March, weakened to as far as 3.7460 after inflation data was released, its weakest since 8 February.  It subsequently firmed back to 3.7285.

In January, the Central Bank raised its year-end inflation forecast to 8% from 6.5%.  It has taken unorthodox monetary tightening steps to tame price rises and defend the lira after sharp losses at the start of the year.  According to analysts, the increases in automotive prices and the delayed impact of the loss in the lira’s value pushed up the transport costs.  TUIK in January said it had altered its inflation basket, cutting the weighting of food and non-alcoholic beverages.  (AA 03.03)

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6.2  Turkey Among Top Five Countries to See Most Millionaire Outflow in 2016

There were a total of 82,000 millionaire migrants that left for greener pastures in 2016, with Turkey one of the five countries witnessing the greatest such outflow, according to a fresh survey by New World Wealth.  France, China, Brazil, India and Turkey saw the highest number of outflows last year.  Among the top five, Turkey experienced the highest increase in outflow last year compared to 2015.  While some 1,000 millionaires left the country in 2015, this figure rose to 6,000 in 2016, representing a 500% year-on-year increase.  France topped the list for a second straight year, as rich people dodge conditions that they consider to be adverse, according to the report.  China and India both continue to have net outflows of millionaires, but two of the more interesting countries on this list were Brazil and Turkey, according to the report.

In 2016, Australia was the number-one destination for millionaire migrants, with the United States and Canada being close behind.  Millionaire immigration to New Zealand also doubled, while the United Arab Emirates remained a popular location for the wealthy in the Middle East.  (HDN 27.02)

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6.3  Russian Tourist Numbers to Turkey Rise in January but Foreign Arrivals Keep Declining

The number of Russian tourists visiting Turkey soared 81.5% in January compared to the same month of 2016, although foreign arrivals to the country continued to decline.  According to preliminary data released by the Tourism Ministry on 28 February, some 40,124 Russians visited Turkey in January.  Russia thus ranked fifth in the top source of tourists for Turkey, following Georgia, Iran, Germany and Bulgaria.  In 2016, the number of arrivals from Russia into Turkey regressed to 866,256 overall, a 76.2% drop from the previous year amid the diplomatic crisis between the two countries.  A total of 3.65 million Russians visited Turkey in 2015 and 4.5 million in 2014.  (AA 28.02)

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7:  GENERAL NEWS AND INTEREST

*ISRAEL:

7.1  Israelis Satisfied With Their Lives, New Survey Shows

Some 89% of Israelis are satisfied with their lives, a new Central Bureau of Statistics survey shows.  According to the survey, titled “The Wellbeing, Sustainability and National Resilience Indicators – 2015,” 91% of Jewish respondents were satisfied or very satisfied with their lives, as well as 82% of Arab respondents (non-Jews who are not Arab were surveyed together with Jews).  The respondents for this survey were aged 20 and up.  The categories used to gauge the various indicators were: employment quality; personal security; health care; housing; education and skills; personal and social welfare; the environment; civic involvement; and material wealth.

The number of people who were satisfied with their employment rose from 81.5% in 2002 to 88.4% in 2015.  Life expectancy increased between 2000 and 2015 by 3.4 years (from 76.7 to 80.1) among men and by 3.2 years (80.9 to 84.1) among women.  The survey found that 71% were satisfied with the health care they received, with 15% saying it was “very good” and 56% saying it was “good.”  Some 60% said the Israeli health care system would provide them with the best possible treatment in case of a severe illness: 18% said they believed this “strongly” and the rest (42%) said “somewhat.”

Some 81% of respondents (90% of men and 72% of women) said they felt safe walking alone at night near their homes.  In Jerusalem, only 71% said they felt safe walking alone.  Answers split along socio-economic lines when it came to housing-related expenses for 2014: Some 55% of families in the poorest decile spent at least 30% of their net income on housing-related expenses, but only 14% of households in the richest decile said the same.  By and large, 33.5% of Israeli households spent 30% or more of their income on housing expenses.  The survey further showed that the standard net income per capita stood at NIS 97,828 (about $26,700) in 2015, an increase of 2.8% compared to the previous year.  (CBS 28.02)

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*REGIONAL:

7.2  King Abdullah Urges Strict, Swift Implementation of Judicial Reform Plan

On 27 February, King Abdullah said that the judiciary is a red line, vowing to personally follow up on the recommendations of a panel tasked to improve the judicial environment in the Kingdom.  He made the remarks as he received the report compiled by the Royal Committee for Developing the Judiciary and Enhancing the Rule of Law, which came up with 49 suggestions, some of which have been key demands by advocacy groups and activists for decades.  The implementation of the plan will involve changes to, or the introduction of 16 pieces of legislation.

The Royal committee was formed in October 2016 under the chairmanship of former prime minister Zeid Rifai.  Its mandate was to draw up a comprehensive strategy within four months to address the challenges facing the judicial reform process and improve legislation.  The implementation stage should begin immediately, the King said, urging coordination among the three branches of government to translate the plan into concrete measures and policies within the current year.  The King underlined the potential impact of success in this endeavor, especially since it would assure citizens and investors that their rights are protected and transactions completed within reasonable timeframes.

The taskforce also reviewed the achievements of previous committees with a similar mandate and the work of the Judicial Council and the Ministry of Justice, covering all the aspects of the mission, with focus on human rights, criminal and civil laws, tribunal formation, the Judicial Council, public prosecution, judicial inspection, judges’ affairs and judicial environment.  This includes ensuring optimal independence of the Judicial Council to appoint, transfer, promote and mandate judges as well as serve their interests and ensure them job security.  (JT 26.02)

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7.3  Sheikh Hamdan Tries Golden Burger Inspired by Burj Khalifa

Crown Prince of Dubai Sheikh Hamdan has been spotted trying the 24 carat golden burger at food event Eat The World DXB.  The burger priced at $63 (AED230) per piece is topped off with an edible 24 carat gold leaf bun.  The $63 burger topped off with an edible 24 carat gold leaf bun consists of five Wagyu beef patties, truffle cheese, seared and “ethically sourced” foie gras, saffron mayonnaise and blackberry ketchup.  The Golden Burger was launched by London-based good truck trader The Roadery.  (Various 27.02)

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8:  ISRAEL LIFE SCIENCE NEWS

8.1  MIXiii-Biomed 2017 – Israel’s Premier International Life Sciences Conference and Exhibition

In May 2017, MIXiii-BIOMED, the leading event of Israel’s life science industry, will mark its 16th anniversary.  Throughout the years, this conference emerged as the main annual meeting place for representatives of Israel’s healthcare industry with colleagues from around the globe.  Anyone looking for innovation in the life sciences should definitely attend this meeting!  Visitors from around the world come to explore the various innovations and experience firsthand the entrepreneurial spirit which is a basis of Israel’s vibrant life science community.  Previous successful conferences hosted over 6,000 senior executives, scientists, engineers and investors, including approximately 1,000 participants from over 45 countries.

This year, aging and age-related diseases are the central themes of the conference, which will be dedicated to diseases affecting the elderly population such as chronic diseases, cancer, neuro-degenerative diseases, diabetes and more.  Looking at the future of the healthcare system, participants will address ways to monitor, diagnose and treat elderly patients by utilizing new methods and innovations in fields such as precision medicine, genetics, personal diagnostics and more, as well as explore how digital health and health IT address these fields.  In addition, issues of cybersecurity will be raised in association with the use of new age-related technologies.  Additional fields that will play a crucial role in aging individuals are medical robotics, regenerative and cell therapies and longevity.  All these and more will be presented and discussed as part of the growing interest and resources invested by healthcare systems in addressing issues of aging populations.  (MIXiii-BIOMED 22.02)

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8.2  Phytecs Partners with Yissum to Discover New ECS-Targeting Compounds

Los Angeles’ Phytecs, a biotechnology company exploring innovative research into and potential treatments targeting the endocannabinoid system (ECS), together with Yissum Research Development Company, the technology-transfer company of the Hebrew University of Jerusalem, announced a new partnership with two aims: to synthesize novel compounds that show increased efficacy over existing phytocannabinoids in targeting specific elements of the ECS, a key homeostatic regulator of the human body; and to continue testing semi-synthetic, patented fluorinated cannabidiol (F-CBD) compounds developed under a previous licensing agreement, which was signed with Yissum, University of Sao Paulo (USP) and Federal University of Rio Grande Do Sul (UFRGS).  Work conducted under the new partnership will complement Phytecs’ existing research into therapeutic applications for various phytocannabinoids and terpenoids sourced from cannabis, and combinations thereof.  Financial details of the partnership were not disclosed.

Yissum Research Development Company of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University’s intellectual property.  Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $2 billion in annual sales.  Ranked among the top technology transfer companies in the world, Yissum has registered over 9,325 patents covering 2,600 inventions; has licensed out 880 technologies and has spun out 110 companies including Mobileye, Briefcam, Orcam, Avraham Pharmaceuticals, Betalin Therapeutics, CollPlant and Qlight Nanotech.  Yissum’s business partners span the globe and include companies such as Microsoft, Intel, Johnson & Johnson, Novartis, Roche, Merck, Teva, Syngenta, Monsanto and many more.  (Phytecs 22.02)

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8.3  OWC Receives IRB Approval to Start Testing on its Cannabinoid-Infused Psoriasis Cream

OWC Pharmaceutical Research Corp. has received Institutional Review Board (IRB) approval to conduct safety testing on its proprietary topical creme compound for the treatment of psoriasis and related skin conditions.  The approval follows the Company’s 1 February 2017 8K filing announcing an extension to the size and scope of its efficacy study on the same compound, which began in November 2106.  The IRB approved study encompasses the cream itself, as a delivery mechanism, as well as the proprietary psoriasis formulation, and is the first to formally make such claims with the NIH Registry.  The double-blind study, which will be conducted on healthy volunteers at one of Israel’s leading academic hospitals, is designed to demonstrate the safety of the formulation in treating psoriasis on human skin tissue. Administrators began soliciting for study participants as soon as approval was received.

Petah Tikva’s OWC Pharmaceutical Research Corp., through its wholly-owned Israeli subsidiary, One Word Cannabis, conducts medical research and clinical trials to develop cannabis-based pharmaceuticals and treatments for conditions including multiple myeloma, psoriasis, fibromyalgia, PTSD and migraines.  OWC is also developing unique delivery systems for the effective delivery and dosage of medical cannabis.  All OWC research is conducted at leading Israeli hospitals and scientific institutions, and led by internationally renowned investigators.  (OWC 27.02)

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8.4  Pharma Two B Closes $30 Million Financing Round

Pharma Two B has completed its third round of financing.  The $30m funding round was led by Israel Biotech Fund (IBF) which identified the company, led the due diligence and syndicated with leading US and Israeli biotechnology investors, including aMoon and JVC.  Current investors, including JK&B and Generali Financial Holdings FCP-FIS SF2 participated in this round as well.  The funds raised will be used to complete the final pivotal phase III clinical trial needed to register P2B001, the company’s lead combination product for the treatment of Parkinson’s disease.  This round will enable Pharma Two B to expand its portfolio to include additional products.

Rehovot’s Pharma Two B develops clinically differentiated and value-added products, based on approved drugs.  The company focuses on Fixed-Dose-combinations of two or more drugs with complementary and synergistic effects, providing high clinical value and shorter regulatory pathways (US 505(b)(2) approach).  The company develops products in two therapeutic areas with great unmet needs. The company’s leading product is a combination drug for the treatment of early stage Parkinson’s disease.

Israel Biotech Fund seeks high value returns by identifying and maximizing the success of therapeutic assets of Israel-based biotech companies.  Based in Rehovot, Israel’s main Biotech hub, Israel Biotech Fund invests exclusively in Biotech companies developing drugs at or near clinical stages.  The Fund has the tools, experience and network required to identify the best opportunities and partner with its portfolio companies to help them go the distance.  (Pharma Two B 27.02)

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8.5  Can-Fite’s Namodenoson (CF102) Prevents Progression of Liver Fibrosis

Can-Fite BioPharma announced new data that show its liver disease drug candidate Namodenoson (CF102) prevented liver (hepatic) fibrosis progression in preclinical studies.  Liver fibrosis is the excessive accumulation of scar tissue resulting from ongoing inflammation. It can result in diminished blood flow throughout the liver and is associated with NAFLD.  Recent preclinical studies in a mouse model of liver fibrosis demonstrated the anti-fibrotic effects of Namodenoson.  The Namodenoson treated group exhibited normal liver under macroscopic view, no accumulation of fluid (ascites), a low fibrosis profile, and lower serum levels of transaminases as compared to the control group.  In addition, liver protein extracts and mRNA for the alpha smooth muscle actin showed a significant anti-fibrotic effect in the Namodenoson treated group as compared to the control group.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer, inflammatory disease and sexual dysfunction.  The Company’s lead drug candidate, Piclidenoson, is scheduled to enter Phase III trials in 2017 for two indications, rheumatoid arthritis and psoriasis.  The rheumatoid arthritis Phase III protocol has recently been agreed with the European Medicines Agency. (Can-Fite 28.02)

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8.6  Via Surgical Signs Exclusive U.S Distribution Agreement With Progressive Medical

Via Surgical has entered into an exclusive US distribution agreement with St. Louis’ Progressive Medical for distributing its lead product FasTouch across the US.  The FasTouch Fixation System is intended for fixation of prosthetic material to soft tissues in various minimally invasive and open surgical procedures such as hernia repairs.  FasTouch Sutures, for the first time, provides surgeons fixation that is designed like sutures and delivered like tacks.  This next generation technology is the first to provide lockable, flexible suture-like fixation that is truly trans-fascial with less foreign body material.  For physicians and patients, this has the potential to increase confidence in fixation, minimize complications such as adhesions and post-op pain and lead to a faster recovery.  In addition, The FasTouch Fixation System uses exchangeable cartridges potentially providing increased value and cost savings over traditional fixation devices for Healthcare institutions.

Moshav Amirim’s Via Surgical provides innovative next-generation fixation technology.  Realizing that many hernia repairs make use of multiple means for mesh fixation – anchor/helical hernia tacks, manually applied transfascial sutures – Via Surgical has developed its FasTouch system to provide deployable suture fixation that is strong and consistent, yet easily and rapidly deployed for hernia repair.  (Via Surgical 06.03)

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8.7  RadiAction Medical Raises $5.7 Million

RadiAction Medical has completed a $5.7 million Series A financing round led by HighGround Tairun Investment LLPs, an investment fund co-managed by HighGround Capital and Boya Capital from China.  The company has developed an innovative radiation shielding device for fluoroscopic systems in interventional suites.  The technology was developed by RadiAction, which was founded in 2014 in the RAD Biomed incubator in Israel.  The technology involves a device that transfers the radiation shielding from the personnel to the fluoroscopy system itself, while seamlessly integrating with the physician’s work flow and featuring zero-impact on the X-ray image quality.

Trials using a non-commercial prototype have shown that RadiAction’s technology has the potential to reduce scattered radiation levels in the catheterization room by 97% or higher, with no need for personal shielding garments.  RadiAction’s technology is protected by several patents in the US and globally.  The company intends to use the proceeds of the current round for accelerating the R&D activity, complete required tests, obtaining regulatory clearances and to get to market with a commercial product.

Tel Aviv’s RadiAction Medical is developing an innovative radiation shielding system that enables profound radiation protection to all personnel in the interventional suite, with higher protection levels than current gold standard of lead aprons and shields.  The unique concept is to transfer the radiation shielding from the personnel to the fluoroscopy system itself and block the scattered radiation from its origin.  (RadiAction Medical 07.03)

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8.8  Medial EarlySign’s System Helps Identify Individuals at High Risk for Colorectal Cancer

Medial EarlySign announced new research with one of Israel’s leading integrated delivery networks, Maccabi Health Services (MHS), that found the company’s MeScore (hereafter ‘ColonFlag’) tool can potentially be used to identify individuals who are at 10 to 20 times increased risk of harboring an occult colorectal cancer (CRC).  The peer-reviewed study, published by PLOS ONE, sought to determine if information contained in complete blood count (CBC) reports could be processed automatically and used to predict the presence of occult CRC in the setting of a large health services plan.  The researchers reviewed Maccabi’s CBC reports for 112,584 study subjects, of whom 133 were diagnosed with CRC in 2008, and analyzed these with Medial EarlySign’s tool.

This is the first time that ColonFlag has been evaluated on previously collected prospective data.  Reviewing the charts of patients diagnosed with colorectal cancer, the researchers found that for the majority of individuals with cancer, CRC was not suspected at the time of the blood draw.  The study also indicated that frequent use of anticoagulants, presence of other GI pathologies, and non-GI malignancies were associated with false positive ColonFlags.  ColonFlag is not yet cleared by the FDA for commercial use in the USA.

Kfar Malal’s Medial EarlySign‘s advanced algorithm platform accurately detects the likelihood of disease for subpopulations using basic medical information, such as blood test results, and other EMR data.  The company’s predictive tools provide physicians with actionable insight, while providing insurers with effective models to flag and focus on patients at risk, helping to prioritize resources, save money and improve care.   Medial EarlySign’s platform addresses numerous potential clinical outcomes, including cancers, diabetes and other life-threatening illnesses.  (EarlySign 07.03)

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9:  ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1  Giraffic and Byond Join Forces to Create Mobile VR Magic

Tel Aviv’s Giraffic, together with Byond, a groundbreaking cloud-based VR development platform, introducing the first mobile VR video experience that delivers flawless and uninterrupted HD and 4K streaming in real time.  The mainstream adoption of VR significantly relies on mobile platforms and wireless networks, while streaming will be the most compelling option to view dynamic and live content. In order to accomplish that, VR must provide users with high-quality uninterrupted experience.  The video delivery infrastructure is constrained by network congestions and its unstable behavior, flawing the viewing experience with low resolution and buffering pauses, thus preventing users from fully utilizing their amazing mobile displays and immersive content.  As VR video generates 3 to 10 times higher bitrates, its streaming in hi-res and in real-time remains a big challenge.  Giraffic and Byond come together to solve this specific problem, turning the troublesome task of high-quality 360 degree video and VR streaming into a thing of a past.

Giraffic Adaptive Video Acceleration, the leading client-side video experience technology, enabling consumer electronics devices and streaming service providers’ apps to deliver HD, UHD 4K video and VR, without re-buffering pauses or streaming resolution reduction.  AVA technology was adopted by leading manufacturers, powering over 80 million devices, and now is making its way into VR and apps. Giraffic was featured in Deloitte’s 2016 Technology Fast 50, a list of the fastest growing technology companies in Israel, as one of the Top 10 Rising Stars.  (Giraffic 27.02)

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9.2  Mellanox Introduces World-Leading 6WIND-Based Router and IPsec Indigo Platform

Mellanox Technologies announced the IDG4400 6WIND Network Routing and IPsec platform based on the combination of Indigo, Mellanox’s newest network processor, and France’s 6WIND’s 6WINDGate packet processing software, which includes routing and security features such as IPsec VPNs.

The IDG4400 6WIND 1U platform supports 10, 40 and 100GbE network connectivity and is capable of sustaining record rates of up to 180Gb/s of encryption/decryption while providing IPv4/IPv6 Routing functions at rates up to 400Gb/s.  As the result of the strong partnership between the two companies, Mellanox’s IDG4400 6WIND delivers a price/performance advantage in a turnkey solution designed for carrier, data center, cloud and Web 2.0 applications requiring high-performance cryptographic capabilities along with IP routing capabilities.  The IDG4400 6WIND complements Mellanox’s Spectrum-based Ethernet switches to provide a full solution for the datacenter.

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 27.02)

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9.3  RADWIN Fulfills the Promise of 5G, Today

RADWIN demonstrated its carrier-grade solutions in Barcelona.  Deployed by tier-1 carriers worldwide, RADWIN’s JET solutions set a new standard in the broadband wireless access market, providing unmatched fiber-like quality at speeds of up to 3 Gbps per cell.  JET portfolio encompasses the JET PRO 750 Mbps series geared for enterprises requiring SLAs and JET Air 250 Mbps series designed for the residential market. JET base stations are powered by Bi-Beam – the industry’s first bi-directional beamforming antenna which assures the lowest interference rate in the industry.  RADWIN’s solutions incorporate a suite of network planning and design tools that significantly simplify and reduce deployment times.  Built to last, JET carrier-grade equipment operate in the toughest environments for wireless, including non-line-of-sight, severe interference and harsh weather.

Tel Aviv’s RADWIN is a leading provider of Point-to-Multipoint and Point-to-Point broadband wireless solutions.  Incorporating the most advanced technologies such as a Beam-forming antenna and an innovative Air Interface, RADWIN’s systems deliver optimal performance in the toughest conditions including high interference and obstructed line-of-sight.  Deployed in over 170 countries, RADWIN’s solutions power applications including backhaul, broadband access, private network connectivity, video surveillance transmission as well as delivering broadband for trains and metros.  (RADWIN 23.02)

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9.4  Shaw Selects NICE Sales Performance Management to Manage Complex Incentive Plans

NICE announced that Shaw Industries Group, a subsidiary of Berkshire Hathaway, has selected NICE cloud-based Sales Performance Management (SPM) to handle incentives for retailers and retail sales associates.  As part of the retailer incentive project, NICE SPM will manage incentive planning, calculations, rebates, retailers’ statements, reports, inquiries and disputes.  Shaw Industries chose NICE SPM over several competitors due to its flexibility to adapt to its business needs, and ability to address the complexity of its retailer incentive requirements.  Particularly, the Sales Support team at Shaw was looking for better control and visibility over its complex rebate programs.

NICE Sales Performance Management (SPM) helps large organizations manage sales compensation to improve sales performance.  NICE SPM handles complex incentive compensation management (ICM) needs, automates sales operation processes, manages territories and quotas, and delivers sales performance analytics.

Ra’anana’s NICE is the worldwide leading provider of both cloud and on-premises enterprise software solutions that empower organizations to make smarter decisions based on advanced analytics of structured and unstructured data. NICE helps organizations of all sizes deliver better customer service, ensure compliance, combat fraud and safeguard citizens.  (NICE 27.02)

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9.5  Altair’s CAT-1 IoT Chipset Certified For Operation on T-Mobile’s 4G LTE Network

Altair Semiconductor announced that its ALT1160 CAT-1 LTE for IoT chipset has been certified to run over T-Mobile’s 4G LTE network, and has been added as an option for T-Mobile’s IoT access packs, which combine simple IoT pricing with industry-leading CAT-1 chips.  Altair’s ALT1160 CAT-1 LTE chipset certification on the T-Mobile network will improve product makers’ time-to-market and reduce the cost associated with the introduction of new LTE devices on the network.

Altair’s ALT1160 CAT-1 chipset features downlink speeds of up to 10Mbps and extremely low power consumption. The IoT-optimized chipset is highly integrated and incorporates elements such as an advanced on-chip power management unit, integrated DDR memory and a low-power MCU subsystem with a secure application execution environment.  The chipset will now be included in T-Mobile’s IoT Access packs, which give new and existing customers a simplified wireless solution for launching IoT devices.

Hod HaSharon’s Altair Semiconductor is a leading provider of LTE chipsets.  Altair’s portfolio covers the complete spectrum of cellular 4G market needs, from supercharged video-centric applications all the way to ultra-low power, low cost IoT and M2M.  Altair has shipped millions of LTE chipsets to date, commercially deployed on the world’s most advanced LTE networks including Verizon Wireless, AT&T, Softbank and KT (Korea Telecom).  (Altair 28.02)

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9.6  Altair and Geotab Team up to Develop LTE-enabled Automotive Telematics Devices

Altair Semiconductor announced that it is teaming up with Geotab, a global provider of open IoT fleet management solutions, to power the next generation of GPS vehicle tracking devices operating on AT&T’s 4G LTE network.  Designed to meet the needs of telematics applications, Altair’s CAT-1 chipset, will usher in the new era of Geotab’s LTE-connected products.  Customers can look forward to the advanced connectivity and longevity provided by LTE-enabled telematics.  Geotab’s end-to-end telematics solutions provide fast GPS acquisition time and highly accurate engine diagnostics. Key features include high quality recording capabilities, in-vehicle driver coaching, and accident detection and notification.

Designed specifically for IoT and M2M applications, Altair’s chipset employs advanced idle and sleep mode power management. It offers a combination of low cost, reduced power and small size that is unmatched in the market.

Hod HaSharon’s Altair Semiconductor is a leading provider of LTE chipsets. Altair’s portfolio covers the complete spectrum of cellular 4G market needs, from supercharged video-centric applications all the way to ultra-low power, low cost IoT and M2M. Altair has shipped millions of LTE chipsets to date, commercially deployed on the world’s most advanced LTE networks including Verizon Wireless, AT&T, Softbank and KT (Korea Telecom). The company’s customer roster includes some of the world’s leading OEMs and ODMs, such as Telit, Sierra Wireless, WNC and Gemtek, as well as the majority of Asian ODMs developing LTE products for global markets.  (Altair Semiconductor 28.02)

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9.7  ASOCS Unveils In-building vRAN Solution Pre-Integrated with HPE Open NFV Platform

ASOCS unveiled its in-building virtual Radio Access Networks (vRAN) solution.  The solution delivers on the promise of the Network Function Virtualization (NFV) initiative carried out by carriers around the globe aiming to virtualize network services currently being carried out by proprietary, dedicated hardware.  Virtualizing baseband processing in the Radio Access Network (RAN) is one of the hardest elements to virtualize due to its real-time nature.  ASOCS’ virtual base station (vBS) runs software performing real-time baseband processing on Commercial Off-The-Shelf (COTS) servers using a cloud-architecture.  This fully virtualized solution allows for dynamic and automated allocation of baseband resources based on actual data traffic, eliminating the need to over provision base stations to meet peak demand.  The vBS is designed for networks at any scale, from nationwide outdoor networks to campus and in-building networks.

Rosh HaAyin’s ASOCS is a pioneer in virtual Radio Access Networks (vRAN) and a provider of fully virtualized, NFV-compatible virtual Base Station (vBS) solutions.  Transitioning LTE baseband processing from proprietary, bundled hardware, to a software-rich application that runs on Commercial Off -The-Shelf (COTS) servers significantly improves spectrum efficiency, and enables Open Mobile Edge Clouds (OMEC) at any scale, from in-building and campus deployments to outdoor Macro networks.  (ASOCS 28.02)

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9.8  Assa Abloy Implements Industry 4.0 Solution Powered by Magic xpi Integration Platform

Magic Software Enterprises announced that Assa Abloy AG, the Swiss global leader in locking systems and security technology, has put the Magic xpi Integration Platform at the heart of the company’s new fully automated manufacturing system for its KESO keys.  The Industry 4.0 solution enables faster and more efficient production.  To digitize the manufacturing process, Assa Abloy replaced 20 separate drilling machines previously used on the production line with two new digital drilling machines.  While the old system required machine operators to manually enter data using job boards, the new automatically feeds the machine the relevant data based on the bar code.  The Magic xpi Integration Platform merges relevant information from the company’s Infor ERP, custom-made Production Information System based on MS Dynamics CRM, and proprietary Lock Management System into an XML file, which is read by the digital machines.  The digital manufacturing process has dramatically shortened turnaround time from job placement to delivery, enabling Assa Abloy to deliver customized products faster and more reliably.

Or Yehuda’s Magic Software Enterprises empowers customers and partners around the globe with smarter technology that provides a multichannel user experience of enterprise logic and data.  (Magic Software Enterprises 07.03)

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10:  ISRAEL ECONOMIC STATISTICS

10.1  Ministry of Finance Warns Growth Rests on New Car Sales

Car purchases accounted for much of the increase in both private consumption and investments in 2016, the Finance Ministry announced.  The initial growth estimate for 2016 published this month by the Central Bureau of Statistics surprised many people in the economy.  The figures indicated a 4% growth rate last year, much higher than in the preceding years, and also high in comparison with many development countries, where growth rates have been much lower.  In his analysis of the main economic trends that contributed to the high growth rate, the Ministry of Finance chief economist concluded that two substantial, but temporary, factors affected the growth rate in 2016: increased purchases of new cars and the upgrading of the Intel fab.

As in the preceding years, private consumption (mainly of durable goods) accounted for 3.7% of GDP in 2016, while investments accounted for 2.7%.  The Ministry of Finance explains that these two factors were influenced to a great extent by one main cause – increased purchases of vehicles.  Consumption of vehicles for private use affects private consumption in the economy, while purchases of vehicles by leasing companies affects the amount of the economy’s investments, according to the Ministry of Finance.

The Ministry of Finance says that the massive buying of vehicles is not confined to Israel; it is taking place in many developed countries.  At the same time, the chief economist warns that this will not last forever, explaining that the effects of increase vehicle purchases on GDP growth are only temporary.  While increased purchases of vehicles in other Western countries (in Portugal and Ireland, for example) are following an economic crisis, the Ministry of Finance notes that this is not the case in Israel.  “Part of the explanation for the relatively rapid rise in in Israel many be the fact that the motorization rate in Israel is lower than in most developed countries, and even in comparison with countries having a similar per capita GDP as Israel. In Israel, the number of vehicles per 1,000 people is 300, compared with an average of 500 in the developed countries.  At the same time, given the global trend towards a rapid increase in purchases of vehicles, it is unreasonable to assume that this trend will continue for long in Israel, and the same is true for its effect on growth,” the review stated.  (Globes 26.02)

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10.2  Israeli Women Are More Educated and Live Longer, But Earn Less

Women in Israel live longer and are better educated than their male counterparts – but earn much less – according to a report on the socioeconomic status of Israeli women released by the Central Bureau of Statistics on 6 March.  At the end of 2015 there were 3,102,500 women aged 15 and above living in Israel, according to the report. Their average life expectancy stood at 84.1 years, compared to 80.1 years for men.

The report found those women are getting married at a later age and, in turn, having children at a later age.  In 2014, 50,797 women got married. The average age for a newly married woman that year was 25 – an increase from 2004’s average of 24.5 years.  By sector, the findings indicated the average age for marriage among Jewish and Christian brides stood at 25.9 and 25.8 years, respectively.  The average age of Muslim and Druze brides was significantly lower, at 22.2 and 24.1 years, respectively.

Some 173,800 women gave birth in 2015, with the mothers at an average age of 27.6 years, up from 26.5 years a decade ago.  The average number of children per woman in the country stood at 3.09 – the highest in the OECD, which has an average of 1.7 children per woman, the report said.

The CBS reported major salary gaps between men and women in the labor market.  The findings indicated that 59.4% of women aged 15 and older had entered the workforce, compared to 69.1% of men.  In 2016, the average monthly salary for a woman was NIS 7,666, while the number was significantly higher, NIS 11,219, for a man.  The average monthly income for a self-employed woman stood at NIS 7,065, compared to NIS 12,399 for men.  One of the main reasons behind the salary gap cited by the report was the number of hours men and women worked, with male employees working an average of 44.9 hours per week and female employees working an average of 36.7 hours.  Taking this into account, the salary gap between employed men and women was reported at 15.1%.

The data further revealed that, of women who are employed, 68% worked fulltime jobs and 32% worked part-time, compared to 86.6% of men with full-time jobs and 13.1% working part-time.  The report found that 75.4% of married mothers were in the workforce: 78.3% of mothers with one child; 79.5% of mothers with two children; and 63.7% of mothers with four or more children.  In 2016, only 34.1% of executives were female.

Gaps between men and women in the field of education were also included in the report.  In 2015, 69% of 12th grade girls were eligible for a matriculation certificate compared to only 56% of boys.  In the 2015/16 academic year there were some 314,400 students in Israel, of which 183,700 were women, accounting for 58.4% of the total.  This is a significant increase from the 1969/70 academic year, in which women comprised only 43.3% of the total student body.  (CBS 06.03)

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11:  IN DEPTH

11.1  ISRAEL:  Israeli PM’s Visit to the Two Sides of the Caspian Sea

On 6 February 2017, Avinoam Idan observed in the CACI Analyst that Israel’s Prime Minister Binjamin Netanyahu made a landmark visit to Azerbaijan and Kazakhstan in December 2016.  The Israeli Prime Minister’s visit reflects Israel’s growing interest in Central Asia and the Caucasus, a region that is part of Israel’s greater strategic environment.  Israel’s interest in Kazakhstan focuses on its trade potential, its regional and international status, and its position as a vital link in the Chinese Belt and Road Initiative.  Azerbaijan’s geographical location, its role as a significant energy exporter, and its security approach have been foci of the close relations that have developed between Baku and Jerusalem over the years.  The Prime Minister’s visit reflects the continued deepening of ties with Azerbaijan.

Background:  In December, Israeli Prime Minister Netanyahu conducted a three-day visit to Azerbaijan and Kazakhstan from 13-15 December 2016.  This was the first visit by an Israeli Prime Minister to Kazakhstan and the second visit to Azerbaijan.  The visit to these two countries is a direct continuation of an ongoing Israeli process to strengthen relations with Astana and Baku since their establishment as independent states.  With the large bulk of Jewish immigration into Israel behind it towards the end of the 1990s, and especially after the construction of infrastructure for energy exports from the Caspian Sea in the mid-2000s, Israeli policymakers began to understand the importance of the countries bordering the Caspian Sea, while creating a distinction between Azerbaijan and Kazakhstan.

Interest in Kazakhstan focused on trade and economic interests, as well as its role in convening international political fora.  As for Azerbaijan, its geostrategic location, which includes a common border with Iran, as well as the existence of a large ethnic Azerbaijani community in Iran (a third of the population) made Azerbaijan especially attractive for developing relations.  A heritage of coexistence and tolerance for the Jewish minority in Azerbaijan and the existence of an active community of Azerbaijani Jews in Israel facilitated strong ties between the countries, especially trade.

During Netanyahu’s visit to Kazakhstan, a series of agreements were signed in the fields of research and development, as well as aviation and travel.  An agreement was also made to exchange teams focused on high-tech, technology and security development.

The leaders of Azerbaijan viewed Israel as a successful model for a small state located in a hostile environment which manages to deal with security challenges while still thriving in all aspects of development.  Israel, for its part, viewed the strengthening of ties with Azerbaijan as an opportunity to foster strong ties with a Muslim-majority country.  In addition, Azerbaijan became a major exporter of oil to Israel by way of the BTC pipeline transferring oil from the Caspian Sea to the Mediterranean Sea became operational in 2005.  Approximately 40% of Israel’s total oil imports come from Azerbaijan.

Azerbaijan’s desire to create a military option to regain control over its territories occupied by Armenia during the war in and around Nagorno-Karabakh has also contributed to the strengthening of relations between Azerbaijan and Israel, especially in the field of arms trade.  During the PM’s visit, a cooperation agreement in the field of agriculture was signed.  The sides also agreed on the establishment of a joint commission to promote economic cooperation in the fields of science, technology, health, agriculture and trade.

Implications:  Prime Minister Netanyahu’s visit to Azerbaijan and Kazakhstan is an expression of Israel’s growing political momentum in Central Asia and the Caucasus region.  Netanyahu’s visit is designed to promote Israel’s relations with Kazakhstan in several aspects.  Kazakhstan took the lead among the Central Asian states in both the political and economic spheres.  Kazakhstan took a role in establishing CICA (Conference on Interaction and Confidence-building in Asia) as well as positions within the Shanghai Cooperation Organization and OSCE, and is since the beginning of this year also a member of the UN Security Council.  Israel’s interest to strengthen ties with Kazakhstan in the political sphere should therefore be viewed against the backdrop of its regional and international status.  Kazakhstan has use for the technology and knowledge that Israel can offer it, and the two countries have a mutual interest in developing trade relations between them.

Kazakhstan is also a major link in Central Asia for China’s vision of a Belt and Road Initiative.  Israel has an interest in integrating with the project in its Central Asian section as part of its deepening of relations with China in recent years.  Kazakhstan is an appropriate arena for such Israeli-Chinese cooperation to occur.  Together with the security challenges and the need to combat terrorism in the region, such cooperation and use of Israeli knowledge and experience is of mutual interest to both China and Kazakhstan, and the strengthening of ties between Israel and Kazakhstan can be used to promote that trilateral  cooperation.

The Israeli Prime Minister’s visit to Baku marks an important milestone in the relations between Israel and Azerbaijan.  The Azerbaijani President was especially forthcoming in discussing the scope of the defense export contracts signed between the two countries which come close to five billion dollars, an unprecedented statement of acknowledgment.  This demonstrative show of friendship on the part of the Azerbaijani President was very different from the nature of the bilateral relations that existed before.

Since the April 2016 battles between Azerbaijan and Armenia (commonly referred to as the Four Day War) and the contribution of Israeli origin arms, Israel has become extremely popular in Azerbaijan.  The establishment of the Southern Gas Corridor, which provides a route for gas export from the Shah Deniz offshore field in Azerbaijan to Europe, potentially may be used by Israel to export its own gas to Turkey and potentially European markets, adds to the mutual interests of the countries.  Azerbaijan’s historical heritage of tolerance towards the Jewish community in Azerbaijan forms another significant contribution to the close relations between the two countries, as openly expressed during PM Netanyahu’s current visit.

Conclusions:  Israel is intensifying its activity in its expanded strategic circle which includes Central Asia and the Caucasus, and Netanyahu’s visit is an expression of this trend.  The visit helped consolidate and strengthen the close relationship it enjoys with Azerbaijan, and promoted economic and political ties with Kazakhstan – all the while increasing its presence in an area where China has a special interest, and creating conditions for future cooperation with China in Central Asia.

Close relations with Azerbaijan and Kazakhstan, two Muslim-majority countries  with no hostility toward Israel and that manage their foreign policy based on bilateral interests and a legacy of coexistence and tolerance between Islam and Judaism, helps Israel break the cycle of hostility it has with the Muslim world in the international system.  This visit of the Israeli Prime Minister promoted both Israel’s presence in a vital region as well as common interests shared by Israel and the two host countries, and has the potential to promote Israel’s relations with other countries in the region.

Dr. Avinoam Idan is a political geographer and a Senior Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program, based in Washington DC.  Prior to his academic career, he served in the Israeli Embassy in Moscow during the break-up of the Soviet Union.  (CACI 06.02)

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11.2  LEBANON:  Republic of Lebanon ‘B-/B’ Ratings Affirmed; Outlook Stable

On 3 March 2017, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Republic of Lebanon.  The outlook remains stable.

Rationale

In our analysis, the Lebanese government’s debt-servicing capacity depends largely on the domestic financial sector’s willingness and ability to add to its holdings of government debt, which in turn relies on bank deposit inflows, particularly from nonresidents.  This structural weakness constrains the ratings, as do Lebanon’s divisive political environment and regional tensions.  These factors have, in turn, hindered economic outcomes and public finances, to which consistently large fiscal deficits, as well as high, and rising, public debt attest.  Lebanon’s general government debt, at an estimated 147% of GDP in 2017, is the third highest among all sovereigns rated by S&P Global Ratings, after Japan and Greece.

Spillovers from the war in Syria (which is about to enter its seventh year) have weighed on Lebanon’s economic growth through their impact on the country’s traditional growth drivers – tourism, real estate and construction – and also via the influx of refugees (now estimated at nearly one-third of Lebanon’s population).  The ratings are supported by Lebanon’s external profile; the country’s liquid external assets (that is, foreign exchange reserves and financial sector assets held abroad) exceed total external debt.  We anticipate, however, a gradually worsening profile as nonresident deposit inflows (largely from the Lebanese diaspora) continue to finance the country’s large twin deficits.

We anticipate a period of relative political stability, following the presidential election held in October 2016.  This should bode well for confidence and support economic growth, in our view.  The Lebanese parliament elected former general Michel Aoun as the country’s president, breaking the political deadlock that lasted more than two years.  The appointment was shortly followed by the nomination of former Prime Minister Saad Al-Hariri as the new prime minister.  Discussions regarding changes to the electoral law are ongoing.  These could prove controversial and could delay the parliamentary elections scheduled for spring 2017.

We also expect that growth will be supported by the authorities’ efforts to normalize relations with the Gulf Cooperation Council (GCC; Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) states, an important source of visitors to the country (including Lebanese expatriates based there).  We project that the economy will grow on average by about 3% in real terms over 2017-2020, supported by a gradual rebound in domestic consumption and services’ exports.  The government recently approved two decrees needed for the organization of the country’s first offshore oil and gas exploration and production licensing; however, we do not incorporate the effects of any potential discoveries into our economic or fiscal forecasts at this time.

Although we project that on a headline basis, real GDP will continue to grow, we estimate that trend growth in real GDP per capita (which we proxy by using 10-year weighted-average growth) will remain around negative 2% in 2011-2020, which is below that of peers that have similar GDPs per capita.  This partly reflects the heavy burden imposed on Lebanon by the influx of refugees from the Syrian civil war. Registered refugees number about 1 million, according to the U.N. High Commission for Refugees, and are included in Lebanon’s population data. Unofficial estimates range up to about 2 million, representing about one-third of the total population.

We expect that the current account deficit will remain large and average about 17% of GDP over 2017-2020.  The end of the political paralysis and the firmer oil price will likely boost remittance inflows and tourism from the large Lebanese diaspora, particularly from those expatriates residing in the GCC.  However, we still expect the current account deficit will widen gradually as a result of a higher import bill, arising from both the rebound in oil prices and improving domestic demand.

We anticipate that nonresident deposit inflows will remain an important source of financing for Lebanon’s large current account deficit, followed by foreign direct investment (FDI) and capital account receipts, including donor inflows in response to the refugee crisis.  The financial system is instrumental in intermediating the country’s external financing requirement.  Nearly one-fourth of Lebanese bank deposits are externally sourced, mostly from the country’s diaspora.  The banking system is highly dollarized, with about 60% of system deposits and nearly 70% of bank loans to the resident private sector denominated in foreign currency.

Nonresident deposits into Lebanon are sensitive to swings in confidence.  However, we note that in past episodes of volatility, such as the 2005 assassination of Prime Minister Rafic Hariri and the 2006 war with Israel, withdrawals lasted only a few weeks.  In addition, they were in the low-single-digit percentages of total bank deposits and were more than compensated by returning inflows.

We have observed a general deceleration in nonresident deposit growth since the start of the war in Syria in 2011.  Nonresident deposit growth further slowed to a low of 1.5% annually in April 2016, compared with an average of 11% in the first half of 2015.  We believe that the political vacuum and, to a lesser extent, the economic slowdown in the GCC region explained this slowdown.  The Central Bank of Lebanon (BdL) has successfully encouraged foreign inflows back to the economy and increased central bank reserves, closing a large balance-of-payments gap, through a financial engineering operation conducted between May and August 2016.  However, the need for such an operation highlights the risks related to Lebanon’s structural weakness stemming from its dependence on external funding.

Under the operation, the BdL swapped Lebanese pound-denominated government bonds ($2 billion equivalent) for Lebanese government Eurobonds held by the Ministry of Finance.  It then sold the foreign currency-denominated bonds plus other securities it held, totaling $13 billion, to domestic banks, employing incentives to make the transaction attractive to the banks.  Domestic banks bought the dollar assets, attracting foreign currency financing from abroad for this purpose.  As a result of the operation, annual growth in nonresident deposits rebounded to about 7% by the end of 2016.  At the same time, BdL bought $13 billion equivalent in Lebanese pound-denominated treasury bills and certificates of deposit from the domestic banks, increasing Lebanese pound liquidity in the banking system.

Domestic banks support government debt-servicing in two ways.  First, they buy Lebanese government debt directly.  Banking system claims on the public sector account for about 17% of total banking system assets or about one-half of total government debt.  Second, Lebanese banks buy certificates of deposit issued by the BdL, which in turn buys government debt.  As of year-end 2016, the BdL held 44% of the government’s outstanding treasury bills, which amounted to about 27% of total government debt.  Although we view the concentration of government financing from these sources as a structural weakness, at the current rating level these flows are an essential support.

We expect the general government will post a modest primary fiscal surplus and the broader deficit will stabilize at 8.5% of GDP through 2020.  On the one hand, the end of the political vacuum and slightly better economic activity should improve the government’s revenues.  On the other, Lebanon’s public finances and fiscal flexibility will remain constrained by structural expenditure pressures, including transfers to the electricity company, Electricite du Liban. Interest payments account for close to 50% of general government revenues.  This is the highest ratio among all sovereigns rated by S&P Global Ratings.  We expect net general government debt will stabilize at around 130% of GDP from 2018.  At about 40% of total government debt, we consider the proportion of foreign currency-denominated debt in the government’s overall funding structure as high and as posing a risk, particularly in the context of the relatively short average maturity of sovereign debt and the country’s stabilized exchange-rate arrangement against the U.S. dollar.

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

Outlook

The stable outlook on Lebanon reflects our expectation that continued deposit inflows to the financial system will remain sufficient to support the government’s borrowing requirement and the country’s external deficit over the next 12 months.

We could lower our ratings on Lebanon if the political and economic situation deteriorated, leading to significant declines in deposit growth rates or foreign-exchange reserves.

We could raise our ratings if Lebanon’s policymaking framework became more predictable and effective, boosting economic activity significantly more than we current forecast and improving the sustainability of public finances.  (S&P 03.03)

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11.3  IRAQ:  Republic of Iraq Ratings Affirmed At ‘B-/B’; Outlook Stable

On 24 February 2017, S&P Global Ratings affirmed its ‘B-‘ long-term and ‘B’ short-term foreign and local currency sovereign credit ratings on the Republic of Iraq.  The outlook is stable.

Rationale

Our ratings on Iraq are constrained by the government’s war against the militant group IS, the early stage of development of its political institutions, as well as the divisions between the Sunni, Shia and Kurdish ethnic and sectarian groups.  In addition, our ratings are underpinned by the assumption that Iraq’s oil output remains in areas firmly under the control of the federal government.  Crucially, over 85% of Iraq’s oil fields and oil output are located in the south of the country, close to Basra, the main port for crude exports.  These fields are at some distance from the conflict in IS-controlled areas.  We assume that the Iraqi government will remain in control of these assets.

Iraq has the world’s fifth-largest proven crude oil reserves and is the second-largest oil exporter in the Organization of the Petroleum Exporting Countries.  Oil dominates the Iraqi economy, contributing over 50% of GDP, 90% of government revenues, and more than 95% of exports.

The militant group IS previously controlled large areas in Iraq along the Tigris and Euphrates Rivers north of Baghdad.  Since our August 2016 review, IS’ territorial control of northwest Iraq has shrunk significantly. Iraqi forces and their allies have retaken some territories from IS, such as Ramadi (west of Baghdad), Baiji (the site of Iraq’s largest oil refinery) and Fallujah.  The Iraqi army, in coalition with Kurdish Peshmerga forces, has recently recaptured the eastern side of Mosul – Iraq’s second largest city – and is preparing the ground to retake the western side of the city.  Future governance of the Sunni-dominated territories liberated from IS remains a key political and security challenge for the Iraqi government.

The fragmentation of political power across different parties and regions makes it difficult to carry out critical political or economic reforms in Iraq.  Prime Minister Al-Abadi, who has been in office since 2014, announced reform measures, including cuts in the size of government in response to social protests.  That said, many Iraqis believed that the announced reforms were not implemented and in early 2016, protesters entered the parliament in Baghdad.

The political paralysis has meant that the government has been unable to deliver reforms, further fueling the already tense and unstable political and security situation in Iraq.  In 2016, Iraq’s Prime Minister attempted to reshuffle his cabinet.  His attempt to appoint more technocrats to ministerial roles was blocked by the parliament.  Over the last few months, the Iraqi parliament, through a series of no-confidence votes, has impeached key ministers in the government, namely the ministers of defense, interior and finance.  On Jan. 30, 2017, parliament approved the appointment of the new interior and defense ministers.

Iraq faces significant corruption challenges, in our view.  The country scores among the worst countries in the world on corruption perceptions and governance indicators.  Corruption in Iraq is exacerbated by the ethnic-sectarian divide, lack of experience in public administration and its weak capacity to manage the influx of aid money.  We believe that fighting corruption and IS represent Iraq’s major political and security challenges in the near term.  Combating corruption by strengthening governance, accountability, and transparency and repelling IS could help unlock Iraq’s economic potential.

We expect Iraq to report strong real GDP growth of about 5% in 2016, driven by the increase in oil production and exports.  However, we project real GDP growth will fall below 1% on average in 2017-2020 owing to the headwinds from fiscal consolidation and weak non-oil growth.  Iraq’s oil production in 2016 was estimated at 4.5 million barrels per day (bpd), compared with 3.5 million bpd in 2015.  We expect oil production to remain close to these levels in 2017-2020, as increasing oil output to more than 4.5 million bpd would require significant investment contrary to the authorities’ fiscal consolidation plans.  Nevertheless, Iraqi oil exports are projected to reach 3.8 million bpd by 2020, substantially up from 3.0 million bpd in 2015 and 2.5 million bpd in 2014.

The non-oil economy contracted sharply in 2016 because of the disruption of trade between the regions, destruction of infrastructure, reduced access to electricity, the general security situation and political uncertainty.  We project non-oil growth will remain below 1% for at least the next two years.  Also, our updated economic projection points to weakening trend growth in real per capita GDP estimated at -0.8% during 2011-2020 (10-year weighted average).  This growth rate is below that peers that have similar GDP per capita.

The internal and external shocks – the sharply lower oil revenues and the IS conflict – that Iraq has faced since 2014 have weakened public finances.  The double-digit fiscal deficits since 2014 resulted largely from falling oil revenues, which have reduced to 32% of GDP in 2016 from 39% in 2014.  Moreover, increased fiscal spending including high military and humanitarian expenditures has climbed to 37% of GDP in 2016 from 27% in 2014.  We project the general government fiscal deficit at 12.7% of GDP in 2017, down from 13.6% of GDP in 2015 and 13.2% in 2016.  We assume the government will continue implementing the fiscal consolidation measures supported by the International Monetary Fund (IMF).  The fiscal deficit is projected to decrease to 2.6% of GDP in 2020, largely stemming from the improvement in oil revenues and a broadening of the tax base.  Customs revenues and tax collection are expected to increase as the government regains control of some areas currently under IS control.  On the expenditure side, containment of non-oil primary spending will mostly be achieved through reduction of the wage bill through natural attrition, controls over pension beneficiaries, and continued postponement of lower priority non-oil investment.

We think that the IMF’s Staff-Monitored Program, approved in December 2015, helped restore some order to public finances and paved the way to the current $5.4 billion IMF financing agreed in July 2016.  In December 2016, the IMF disbursed about $618 million following the completion of the first review of Iraq’s reform program.  Additional external financing of the budget is expected from the World Bank ($3 billion) and other bilateral creditors over 2017-2020.

Nevertheless, domestic issuance remains the main funding source for the 2017 government financing requirement.  We expect most of the debt will be taken up by Iraq’s commercial banks, led by the two largest state-owned banks Rafidain Bank and Rasheed Bank.  We anticipate that the banks will fund these purchases by incremental deposit growth and by repurchase operations with the Central Bank of Iraq (CBI).  In addition, the Iraqi government issued a $1 billion international bond with a 100% U.S. government guarantee in January 2017 and has indicated it could issue a $1 billion Eurobond in 2017.

We project government net debt will peak at 68% of GDP in 2019.  Our government liquid assets estimate of about 20% of GDP largely comprises government deposits with domestic commercial banks. Iraq’s debt stock has benefited from an 80% haircut that the government negotiated with its Paris Club creditors in 2003-2004.

The liabilities and guarantees of the domestic banks appear high compared with the fair value of their assets, and we view the risk stemming from the financial sector as a moderate contingent liability for the government.  In addition, the Iraqi nonfinancial public sector includes a large number of state-owned entities (SOEs), which present a burden for the government budget.  The potential fiscal cost of the contingent liabilities of state-owned banks and entities is, however, hard to estimate due to their poor reporting.

As a result of the drop in oil prices, the current account turned into a deficit of about 4% of GDP in 2016 down from a surplus of 11% of GDP in 2014.  The deficit is projected to range between 1% and 1.5% of GDP in 2017-2020, supported by rising export revenues and will continue to be partly financed by the draw on the reserves.  Iraq’s foreign exchange reserves have declined from about $66 billion at end-2014 to about $46 billion at end-2016.  We estimate reserve coverage of current account payments at more than seven months over 2017-2020. We forecast external debt, net of public and financial sector external assets, at about 27% of current account receipts (CARs) in 2017, and we estimate gross external financing needs as a percentage of CARs and usable reserves at about 66% over the same period.  We note that there are only limited balance of payments and international investment position data available for Iraq which, in our view, reduces the visibility of external risks.  We also assess the concentrated nature of Iraq’s exports as exposing the country to significant volatility in terms of trade movements.

The security situation and the drop in oil revenues have led to sharp deceleration in public spending and low private sector consumption resulting in subdued inflation.  We expect inflation to remain about 2% in 2017-2020.  We expect that the CBI will maintain the dinar’s peg to the U.S. dollar, albeit with minor fluctuations, unless financing conditions are more difficult than we currently expect.  While the peg has helped control inflation, it is limiting the CBI’s monetary flexibility, in our view.  Gross international reserves have fallen to an estimated 86% of the monetary base at year-end 2016 from 124% in 2013, and are projected to reach 77% at year-end 2017.

Outlook

The stable outlook reflects our expectation that fiscal consolidation will continue over the next few years, while economic growth prospects remain subdued because of the consolidation measures and domestic political tensions.

We could lower the rating if the government’s net debt or debt servicing costs were to rise sharply.  This could occur if oil revenues were to disappoint, or if the government were to deviate substantially from its fiscal consolidation path.

We could raise the rating if Iraq’s political and security situation improves and its public finances improve substantially.  (S&P 24.02)

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11.4  EGYPT:  Fitch Reviews Egypt’s Rebalancing Continues Ahead of Challenging Year

Fitch Ratings said on 1 March that rising foreign exchange reserves, a return of private capital inflows and currency appreciation point to further progress in Egypt’s gradual external rebalancing in early 2017.  Further fiscal consolidation alongside external rebalancing would lay the groundwork for a broader-based improvement in sovereign credit metrics in 2018.

However, challenges, including the risk of social unrest, are substantial.  Even if the envisaged reforms progress smoothly, it would take several years to reduce gross general government debt to more sustainable levels.

FX reserves have continued to rise, with net international reserves reaching $26b at the end-January – up from $24b at end-December and more than $10b above their July 2016 low.  The Egyptian pound has strengthened 20% against the US dollar since late December, reversing some of its losses following November’s flotation.  A return of foreign inflows into Egyptian treasuries prompted a partial retracement of government debt yields, with 91-day T-bill yields down by around 200bp in the month to mid-February (although yields ticked up in subsequent auctions, pointing to potential volatility).  Anecdotal evidence suggests progress clearing the backlog of FX demand in the economy.

These positive developments largely reflect inflows from multilateral and bilateral institutions – notably the IMF and World Bank – and a resumption of foreign portfolio inflows and remittances after the authorities floated the pound, as well as import compression and improving export activity.  As such, they are in line with our general expectations when we affirmed Egypt’s ‘B/Stable’ sovereign rating in December following the flotation and IMF board approval of a $12b extended fund facility, of which $2.7b was disbursed.  The rebound in FX reserves has been slightly stronger than anticipated, partly due to a larger-than-expected $4b international bond issue in January.

Completion of the first review of the IMF program before end-June would release another $1.25b, further boosting reserves and economic and investor confidence.  We think this is likely, as the Egyptian authorities appear to have met monetary targets and the introduction of VAT in September and control of civil service wage growth, alongside other measures including fuel and electricity tariff adjustments, suggests that the budget targets will also be broadly met.

Beyond the first review, we believe the detailed program targets will act as a policy anchor, but there are implementation risks, especially on the fiscal side.  For example, despite recent appreciation, the Egyptian pound is still around 44% weaker than before flotation, which may make more extensive near-term subsidy reforms necessary to achieve 2017 deficit targets (the IMF may allow some leeway given the unforeseen extent of EGP depreciation).  These would add to inflationary pressure (headline inflation hit 28.1% in January, although we think it will drop later this year) and would be politically sensitive, adding to the risk that social unrest will prompt the government to row back from some reforms.

The Egyptian government’s ability to balance fiscal, monetary and economic reforms with the risks of a social backlash therefore remains an important sovereign rating consideration.  The government is attempting to address this in its economic program, with some increases in social spending and other measures, such as improving electricity provision.  If the authorities can maintain recent progress, the next fiscal year starting in July (FY18) would see stronger growth (we forecast 4.5%, up from 3.3% for FY17) as inflation falls and economic adjustment bears fruit; further reduction of the primary deficit; and debt-to-GDP start to decline from a forecast 96% of GDP at end-FY17.  (Fitch 01.03)

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11.5  EGYPT:  Egypt’s First-Ever Female Governor Marches to a Different Drummer

Menna A. Farouk posted in Al-Monitor on 21 February that recently Egypt appointed the country’s first-ever female governor — a post traditionally given to retired military or police officers.

In a move that broke with a long-standing tradition of appointing retired military or police officers as governors, Nadia Abdu was named governor of Egypt’s Beheira governorate.

With the 16 February reshuffle of governors, engineer Nadia Abdu, 73, became the first woman in Egypt’s history to hold such a leading post. Abdu was named governor for the Nile Delta governorate of Beheira.  “The appointment is an affirmation of the state’s belief that women are capable of taking over leading positions in the country as well as an appreciation of their role in contributing to Egypt’s progress,” Abdu told Al-Monitor.  Abdu is the first woman to hold the post of deputy governor and the first woman to hold the post of chairperson of the national water company in Alexandria.

For religious and cultural reasons, it is difficult to have female civil servants in high-ranking positions in Egypt, especially in the Cabinet and the judiciary.  Hikmat Abu Zeid was the first woman to become a Cabinet minister in Egypt in September 1962.

The first woman to hold a judicial position in Egyptian history was Tahani al-Gebali, who was appointed in 2003.  She held the position of vice president of the Supreme Constitutional Court, the highest court in Egypt, until 2007.

Abdu said that the integration of women into the political and leadership scene in Egypt is gradually evolving and her appointment is the “best proof.”  “It is changing over the years, and Egypt is moving toward fulfilling gender equality in all fields,” she added.

During her tenure in office, Abdu said that she would focus on accomplishing all underway projects that are expected to “lead to real development in the governorate.”  Abdu noted, “The completion of the industrial zones, suspended projects, sewage projects and development of the poorest villages are on the top of my priorities.”  Abdu explained that such projects would woo foreign businesspeople to pump investments into the governorate and start new ventures that would provide job opportunities for the city’s young people.  “Turning the governorate into an investor-attractive city is my target,” Abdu said.

The new governor said that she would fight tooth and nail to eliminate the problem of water shortages and sewage treatment in her city this year.

Abdu received her bachelor’s degree in engineering in the chemistry department at Alexandria University in 1968, and then she received a master’s degree in sanitary engineering from the same university.  She has two sons who also graduated from the same faculty.  She was appointed as the deputy governor of Beheira in 2013 and supervised national projects in the governorate, including water and sewage projects. She founded the Arab Countries Water Utilities Association and is a member of the general assembly of the World Water Council.  She also headed the Egyptian Holding Company for Water and Wastewater for 10 years from 2002 until 2012 and is a member of the National Council for Women and the Businessmen Association in Alexandria.  Abdu’s political career began in 2010 when she won a seat in parliament with the now-defunct National Democratic Party.

On 16 February, Egyptian Prime Minister Sherif Ismail announced a reshuffle of the top posts in five of 27 governorates: New Valley, El-Qalubiya, El-Daqahliya, Alexandria and Beheira.  Shortly after the announcement of Abdu’s appointment, some ultraconservative Salafi groups have denounced the move, saying that a woman does not have leadership skills.  Salafi preacher Sameh Abdel Hamid said that women are not eligible to take up leading positions.  “Men are the only people capable of leading others, and scholars have agreed on this,” Abdel Hamid said.

However, the appointment has drawn the applause and praise of several women’s rights groups and nongovernmental organizations.  Mona Ezzat, an official at the New Women Foundation, said that the appointment is a very positive move in the direction of breaking gender stereotypes, empowering women and giving them leading posts. Ezzat noted that the move affirms the state’s rejection of calls by some people not to appoint women as governors for security reasons.  “The appointment came to prove that the government believes women have leadership capabilities and can make a change in society,” she told Al-Monitor.  Ezzat added that the move coincides with President Abdel Fattah al-Sisi’s labeling of 2017 as the year for women, “which reflects the state’s willingness to support and empower women in all aspects of life.”

Ezzat also said that the new female governor should be assessed just like any other governor with no regard to her gender.  “If she did good things, we would praise her efforts.  And if she did not, she would be criticized — just like any other previous governor,” Ezzat added.  Abdu said that people can assess her performance after just one month of her appointment.  “I will also conduct a regular monthly assessment of my performance in order to know the mistakes and flaws and avoid or correct them,” she added.  Abdu also said that she would work on empowering women and girls in her governorate and give them leading posts. “I will give women who have a high level of efficiency and knowledge leading positions in several institutions,” she said. “It is their right to be leaders. It is their right to be on the top.”  (Al-Monitor 21.02)

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11.6  EGYPT:  Will Families With 2 Children Become the Norm in Egypt?

Walaa Hussein posted in Al Monitor on 28 February that a parliamentary committee is examining draft legislation aimed at curbing Egypt’s population growth by encouraging smaller families.

The country’s total population in January 2016 was 90 million, according to Egypt’s Central Agency for Public Mobilization and Statistics (CAPMAS).  By the end of February, CAPMAS said the figure has reached 92.5 million.

With its economy in crisis, Egypt had already enacted in June a long-term national population strategic plan, a campaign aimed at cutting Egypt’s projected population in 2030 to 110 million instead of 122 million.  The plan consists of five main sections, including campaigns for family planning and for empowering women in the labor market, as well as media campaigns to raise social awareness and stress the need to educate youths and teenagers.

Now parliament is examining a proposal for a draft law to facilitate that aim, according to Tariq Tawfiq, rapporteur of the Ministry of Health’s National Council for Population, who spoke on 19 February with Al-Monitor.  Tawfiq said, “We submitted legislative proposals to make it mandatory for the state to ensure education, create jobs and provide social support for families with two children as an incentive to encourage them to have only two children.”

In addition to carrots, however, sticks are also proposed.  “We called on the parliament to help us draft laws to reduce the birth rate, mainly by criminalizing early marriages of girls under 18 years of age and setting forth deterring penalties on their guardian and the ‘maazoun’ [a government-authorized cleric who administers marriage and divorce] as well as by providing for fines against parents when their children drop out of school.”

The Egyptian government wants the draft to be finalized by parliament and then presented to the public and media to be discussed by mid-2017 during parliament sessions with political figures and representatives of civil organizations and the government.

Yahya al-Kedwani, undersecretary of parliament’s Committee for Defense and National Security, told Al-Monitor the committee is still deliberating in closed sessions what procedures might be included in the draft.  “We will discuss India’s and China’s experiences in battling population surge, which now threatens Egypt’s national security in light of no increase of resources,” he said.

Kedwani explained that the committee is discussing the feasibility of implementing ration card subsidies and cutting taxes on households that commit to the two-child policy.  “The subsidized goods would be suitable for small households and would put pressure on families having more than three children,” he said.

However, the Egyptian government already dropped similar disincentive proposals from its long-term plan after examining the experiences of other countries, such as China.  China stringently imposed a one-child policy in 1980 when its population reached 1.3 billion.  In 2013, the policy was eased to allow two children if one of the parents was an only child.  In 2015, it began allowing all families to have two children.  Tawfiq said Egyptian officials worried the disincentive measures would not sit well with the public and could violate the constitution, which specifies that all citizens are equal in rights and obligations without discrimination.

Amani Aziz, secretary of parliament’s Religious Committee, also said offering different tax rates and subsidies for families having no more than two children would be unconstitutional and would have a negative impact on society.

The government has been warning that if the population strategy isn’t implemented, the number of unemployed will rise to 20 million people a year, as opposed to 14 million if the strategy is applied.  Moreover, Tawfiq said in a 26 January press conference that without the plan, the amount of potable water will decrease significantly and inflation will rise.

Former Health Minister Maha al-Rabat told Al-Monitor that the main challenges facing the population plan include: the prevailing culture that embraces procreation, traditions such as early marriage and families’ lack of reproductive health services and family planning.  “There have been many widespread campaigns in Egypt over long years against family planning because it is against the Sharia,” she said.  Rabat also called upon the government to focus efforts on engaging both the private and civil sectors in providing family planning services and ensuring they are accessible.

The government’s strategy also encourages Muslim and Christian clerics to take part in awareness campaigns to correct misperceptions about family planning methods and to provide the necessary funding to improve the quality of reproductive health services.  “Family planning is not forbidden, according to Al-Azhar scholars,” Ahmad Karima, a professor of comparative jurisprudence at Al-Azhar University, told Al-Monitor.  “It is not wrong if a couple wishes to have only two children.  Islam does not forbid the organization of society according to [existing] economic and social situations so that people can balance their lives.”

Karima also noted that Salafi groups are behind the campaigns against family planning under the banner of Islam.  “These groups espouse radical ideologies and have always been an obstacle in the face of social reform,” he said.  “Controlling birth in Egypt should be done through social awareness and education,” Aziz told Al-Monitor.

It seems clear that the next move is in the hands of parliament, which has to live up to the challenge and set forth positive incentives to families so as to reduce the birth rate without discrimination among citizens.  (Al Monitor 28.02)

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11.7  TUNISIA:  Will Tunisia Finally Amend Harsh Cannabis Law?

Sarah Souli posted in Al-Monitor on 22 February that Tunisians, including government officials, have been in favor of amending a harsh law for possession and use of cannabis, but doing so has not been easy.

Two students in their final year of high school were arrested 12 February under Tunisia’s draconian Law 52, which punishes the consumption or possession of cannabis with prison time and heavy fines.  The public outcry reached enough of a fever pitch that the government felt compelled to respond.

“No to the prison sentence!” said Prime Minister Youssef Chahed during a visit to the soon-to-be-reopened El Amal, a drug rehabilitation facility.  El Amal was the country’s only drug abuse treatment and prevention center before it was closed several years ago.  Its reopening, a move supported by the Health Ministry, along with Chahed’s public statement, perhaps offers a bit of cautious optimism that the government might be willing to reconsider its treatment of drug users and abusers.

“Law 52 is a law from the dictatorship [of Zine El Abidine Ben Ali],” Antonio Manganella, the director of Lawyers Without Borders (ASF), told Al-Monitor during a recent visit to the organization’s Tunis office.  “The goal of the law was to terrorize the population and make them shut their mouths.”  According to Manganella, the legislation targeted Tunisians who were seen as “against the system.”

Tunisia’s penal code is more than a century old, and until recently, reforms introduced to it were done so “during the darkest days of the Tunisian dictatorship,” said Manganella.  Law 52, implemented in 1992, punishes any type of possession of cannabis and its use.  Usage is a particularly contentious issue legally, as THC, the active ingredient in cannabis, can be found in a person’s urine as long as 67 days after consumption.  In Tunisia, anyone who is randomly stopped and taken into custody by police can be subjected to a urine test, even for non-drug-related incidents.

The punishment for possession or usage is the same: up to a year in prison and a fine of between 1,000 and 1,500 Tunisian dinars ($438 – $657).  Repeat offenders face a minimum of five years imprisonment.  Unlike other laws under the penal code, judges are forbidden from “considering mitigating circumstances,” creating a system whereby anyone who consumes cannabis is more or less “automatically considered guilty.”  The offense cannot be removed from judicial records, thus jeopardizing or prohibiting future educational or employment opportunities.

Despite such harsh punishment, there has been no shortage of arrests, as drug use is widespread.  According to a 19 January Human Rights Watch (HRW) report, “Tunisia: Amend Draft Drug Law,” the government recorded more than 6,700 people as being jailed in 2016 under Law 52.  Manganella said this means that “between 10,000 and 15,000 people were arrested.”  Most of those arrested are young men from lower socio-economic backgrounds. Heroin and cocaine are also used in Tunisia, but hashish, being cheaper, is more popular.  A sticky brown brick of “zatla,” Tunisian slang for hashish, can be had for less than 10 dinars ($4) in lower-class neighborhoods.

Although drug usage is still taboo in Tunisia, including for soft substances such as hashish, the Tunisian public is not necessarily in favor of harsh sentences for it.  Even members of Ennahda, the leading Islamist party, have publicly stated that people should not be going to prison under Law 52.  Manganella frames the issue in terms of human rights, noting that Tunisia is a member of the United Nations and has signed and ratified most human rights treaties.  “We need to start talking about the reality,” he said, “not a philosophical idea of what a society is. …  This is just pragmatic thinking.”

The reality is that people incarcerated for drug use constitute more than 30% of Tunisia’s prison population, HRW reported in January.  This suggests that recreational users, not dealers and couriers, are bearing the brunt of the punishment when drugs are involved.  In relative population terms, Manganella said, Tunisia’s incarcerated population is twice that of France.  The UN High Commissioner for Human Rights estimates that some prisons are at 150% capacity.  Tunisian prisons have come under fire as hotbeds for jihadi recruitment and radicalization, so it seems illogical that the government would want to mix drug-using students with hardened or radicalized criminals.

Law 52 is often presented as a policy of deterrence, but 54% of those jailed under the statute have been found to resume smoking, according to Manganella.  Financial gain for the state could be a motive for the law’s continued implementation.  With 6,700 arrests in 2016, the related fines could total some 10 million dinars ($4.4 million).  It is also possible that given Tunisia’s democratic transition, which is only six years old, the government has focused more on economic reforms and political stability than on judicial reforms and human rights.  The Justice Ministry declined to comment for this article.

Tunisian civil society is robust and has been lobbying the government for reforms.  In December 2015, the government approved and sent parliament a draft revision of Law 52 that would have abolished jail time for first- and second-time offenders in cases involving possession for personal use.  It would also have given judges leeway to prescribe alternative forms of punishment and treatment.

A second draft revision by parliament early last month, however, reinstated prison terms and increased the fine for possession to 5,000 dinars ($2,188).  Judges have discretion on whether to hand down prison terms, but this leaves the door open to corruption and misuse. ASF, HRW and the Tunisian League for Human Rights issued a joint statement on 19 January condemning parliament’s revision.

President Beji Caid Essebsi, who in 2014 campaigned on a platform of amending Law 52, said on a 19 February in an interview with Nessma TV, “One year of prison is too much, and I am involved in presenting a new legal project to preserve the lives of our youth.”  Essebi reportedly wants to temporarily halt arrests on cannabis charges until the legislature completes work on revising Law 52.

There is reason for Tunisians to be hopeful that Law 52 will be amended, although the effort will more likely stem from local organizations and civil society than newfound benevolence on the government’s part.  Manganella remarked, “I’m optimistic that civil society won’t so easily let a [new] law pass that reminds us of Ben Ali’s regime.”  (Al Monitor 22.02)

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11.8  ALGERIA:  Still Avoiding Austerity

Riccardo Fabiani wrote in Sada on 28 February that while preparing the population for austerity measures, the Algerian government is still scrambling for alternatives to avoid them.

The protracted decline in oil prices has been a major source of concern for the Algerian authorities for some time.  For almost fifteen years, high oil and gas revenues have maintained the stability and prosperity that President Abdelaziz Bouteflika’s ascent to power brought.  The drop in oil prices has widened budget deficits in recent years (the IMF recorded an estimated deficit of 16.2% of GDP in 2015, expected to widen to 17.9% in 2016) and depleted currency reserves, potentially triggering a balance of payments crisis if they run out by 2018 as expected.

However, with a delicate presidential succession looming in the background, the ruling factions are fearful of implementing tax raises or spending cuts that could cause social unrest and elite fracture.  Fearful of triggering a wave of unrest, the authorities originally prioritized two approaches.  The first was to use pedagogic discourse in the media to prepare the population for inevitable, yet unspecified, austerity measures.  The second was to borrow domestically outside of the banking sector to tap savings generated by the informal economy.  While the former is unlikely to have a considerable impact on a population that blames politicians for corruption and inefficiencies, the latter is key to understanding how the regime is trying to avoid any short-term fiscal adjustment.

In April 2016, the government launched a six-month domestic funding scheme by selling bonds to businessmen that have amassed enormous fortunes outside the formal economy.  The thinking behind this initiative was that tapping this money would be sufficient to finance the government’s short-term spending plans while avoiding mopping up private savings in the financial sector.  For this reason, the authorities issued both registered security and anonymous bearer bonds interest rates of between 5 and 5.75%.  The option of anonymous bonds, which are securities for which no records of the owner or transaction are kept, provides a key guarantee to businessmen operating in the informal economy.  However, this financing initiative failed to attract enough of their capital and instead crowded out private investors and banks and exacerbated the liquidity shortage by diverting investments from the strained formal financial sector.  After all, why would Algerian businessmen operating in the informal economy pour their savings into bonds that yield little more than 5% when there are more profitable transactions to make?  For example, they could exploit the arbitrage opportunity by borrowing money at the official exchange rates and selling this foreign currency on the black market for profit.

Faced with this failure, the authorities sought a different approach.  In November 2016, they broke the long-held taboo on external borrowing, securing a €900 million loan from the African Development Bank.  More significantly, Minister of Industry Abdeslam Bouchouareb has been spearheading a series of initiatives to boost investment and business activity in the non-hydrocarbon sectors.  His strategy has essentially relied on two pillars: removing obstacles to investment and facilitating and protecting the development of a local manufacturing industry to replace imports.  The government believes their foreign currency reserves buffer gives them a few years to see the results of this approach before they have to resort to austerity measures.

To achieve these goals, in July 2016 Bouchouareb started introducing more flexibility in the investment code, which used to put burdensome requirements on the private sector.  The new code shortens the time it takes to obtain building permits, removes foreign companies’ obligation to borrow domestically and maintain a permanent foreign currency surplus, and limits the scope of the government’s right to bid first on the sale of foreign-owned businesses.  While these measures fall short of making Algeria a business-friendly economy due to persisting obstacles in registering property, getting credit, conducting trade, and enforcing contracts, it still represents a major turning point in the authorities’ approach to economic policy.

The second pillar of this strategy has been more in tune with the country’s socialist past.  Bouchouareb envisages a quick transition from a hydrocarbon-dependent to a manufacturing economy, but his strategy relies on state intervention through an import-substitution strategy to artificially create an industrial base.  Foreign investment is welcome only as joint ventures with local companies, thus making sure that ownership remains firmly in Algerian hands.  Only at a later stage should Algeria’s manufacturing sector start targeting export markets.

Indeed, in the past months the government has introduced quotas and other restrictions on importers, particularly in the automotive and cement sectors, while giving car dealers three years to invest in the car manufacturing industry if they want to keep their import licenses.  Moreover, the Ministry of Industry announced a series of joint ventures between local and foreign investors in the automotive, cement, steel, and phosphate sectors.  In addition, Bouchouareb aims to create a vast network of Algerian subcontractors, particularly in the automotive industry.  The most high-profile example of this strategy has been the announcement of a joint venture between Volkswagen and Algerian car importer Sovac to build a factory that should produce over 100,000 cars per year for the domestic market by 2022.  Once the local manufacturing industry can stand on its own and allow Algerians to replace certain imports, the authorities believe that exports will naturally follow.  In a statement on 5 January, Bouchouareb said that Algeria will start exporting cement and phosphates in 2017 and that by 2019 Algeria will become an emerging market.

This strategy marks the first comprehensive approach to the problem of economic development and industrialization in a country that for a long time has relied almost exclusively on recycling oil money into the economy.  Nevertheless, it continues to ignore a series of issues that have undermined development in Algeria for decades.  Beyond the emphasis on joint ventures and attracting foreign investment, there is no plan to support small- and medium-sized enterprises, which crony capitalists close to Algeria’s decision makers will continue to discriminate against.  In addition, the uncertain political transition ahead means there is no guarantee that the regulatory framework will remain intact and Algeria has seen many unpredictable changes in the past.  Finally, the authorities have no plan to tackle the many long-standing problems that still hamper growth, such as low levels of human capital, poor economic governance, a lack of competition in almost all sectors, and an extremely challenging business climate.

Riccardo Fabiani is a Senior North Africa Analyst at Eurasia Group.  (Sada 28.02)

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11.9  MOROCCO: Reducing Gender Inequality Can Boost Growth

The IMF observed on 1 March that policies that better integrate women into the economy could help increase overall income and significantly improve Morocco’s growth prospects.

Jamila is a 12-year-old girl living in rural Morocco.  She is still in school when most girls her age are not—about 78% of girls between the ages of 12 and 14 are no longer in formal schooling in the country’s rural areas.  Her dream is to become a doctor, and if she stays on track with her education she should be able to accomplish this goal.

But significant challenges stand in Jamila’s way—a slowing economy over the past five years, limited job opportunities (22% youth unemployment), and fewer women in the workplace as compared to men (25% participation rate compared to over 66%).  The government has started to implement policies that better integrate women into the economy, but more still needs to be done to help young girls like Jamila achieve their dreams.

Women and the Economy

As part of the assessment of Morocco’s economy, we looked at the relationship between gender inequality and growth and found that policies that better integrate women into the economy could significantly improve the country’s growth.  For instance, if there were as many women working as men currently are in Morocco, income per capita could be almost 50% higher than it is now.

Furthermore, Morocco’s population growth is slowing, and the United Nations projects that the dependency ratio—the age population ratio of those out and in the labor force—will rise by 2040.  This means that there is a potential for more people to be out of work over the next few decades.  Continuing to implement policies that eliminate gender gaps—such as increasing access to education and improving public transportation (making it safer and easier to get to work) for women, vocational training and literacy programs for rural areas—could offset these negative effects.

Improving Women’s Rights

The government has already initiated the following steps:

* The family code was revised to expand the rights of women in marriage, guardianship, child custody, and access to divorce in 2004.

* A constitutional guarantee for equality was enacted in 2011.

* Maternity leave of 14 weeks at full salary was introduced in 2004.

* The first and most advanced gender budgeting initiative in the Middle East and Central Asia region was launched in Morocco in 2002.  Gender budgeting uses fiscal policies and administration, at the national, state, or local level, to address gender inequality and women’s advancement.

More Reforms Needed

Even with these improvements, our research points out that stronger and better targeted measures are needed to increase female labor force participation and employment, and to address gender gaps in education in Morocco.

For instance, the study found that:

* Investing in public childcare facilities could free women’s time, enabling them to undertake more educational and training activities, and join the labor market.

* Tax deductions or credits are currently only available to men, who as taxpayers are able to claim a dependent deduction for both spouse and children.  A female taxpayer may not claim similar tax advantages unless she proves that she is a legal guardian.

* Conditional transfer programs for education, as recommended in the recently-adopted national employment strategy, can promote better access to secondary education for girls.  The transfer programs could also support literacy programs for women in rural areas, female entrepreneurship, and vocational training programs for all women.

If all these actions are implemented, there is no doubt that the barriers to Jamila’s economic participation would be greatly reduced, and she would have more opportunities to contribute to a more prosperous and inclusive Moroccan society.  (IMF 01.03)

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11.10  GREECE:  The Threat of Grexit Returns

Yannos Papantoniou posted in Carnegie Europe on 9 February that the specter of a Greek exit from the Eurozone, or Grexit, is gradually returning to haunt European politics.  Fears stem in part from the international security environment, as an isolationist United States and an assertive Russia raise fears of a return to great-power rivalries.  If Europe wishes to survive as a global player, it should stand on its own feet by developing a security policy based on higher defense spending and an active international presence.  This, however, is conditioned by a strong European economy, which is currently far from guaranteed.

The EU should prioritize the completion of the half-finished construction of monetary union, by reinforcing its fiscal and financial structures and improving its system of governance.  As the notion of more Europe is no longer popular, far-reaching changes cannot be envisaged for the foreseeable future.  However, France and Germany have no other option than to set the train moving after their elections later in 2017, because monetary integration, once started, only goes in one direction.

In the midst of this turmoil, Greece is continuing to make a mess of its handling of the economy.  Over the last decade, successive Greek governments have committed fatal policy errors that, coupled with selfish policies by Athens’s euro area partners, have led to the present impasse.

The conservative New Democracy party, which took over the government in the mid-2000s, allowed Greece’s fiscal deficit to reach a staggering 15.2% of GDP in 2009, bringing the country close to default.  PASOK, the Socialist party, returned to power in that year with a new leader, George Papandreou, who promised further fiscal handouts while claiming—incredibly—that “the money exists.”  Confidence soon collapsed, and in April 2010 the government was forced to accept a bailout loan from the euro area and the International Monetary Fund (IMF).  German and French banks were protected against default procedures, while Greece was penalized with an extremely harsh program of fiscal adjustment with no compensatory measures to sustain demand.

A succession of short-lived governments failed to meet the challenges of the bailout process.  The present coalition of the radical Left and extreme Right has managed to worsen Greece’s prospects because of its erratic negotiating tactics and refusal to own reforms that have been agreed to.  Greece has lost one-quarter of its GDP, unemployment stands at 23% and public debt represents 176.9% of GDP—much higher than at the start of the crisis in 2009, when the figure was 126.7%.

Crucially, reforms are being implemented inefficiently, so they do not produce the expected beneficial outcomes—either for the competitiveness of the Greek economy or for the investment environment. Privatization is proceeding very slowly.  Deregulation is stumbling.  The state of the administration and of the health, education, and justice systems is worse than at any time in the recent past.

Germany continues to insist on an irrationally tight fiscal policy while refusing to grant substantial debt relief.  The IMF maintains that German-inspired fiscal targets are unattainable without either debt relief, which Berlin rejects, or new fiscal measures, which Athens does not accept.

A possible compromise could involve a mild version of labor-market reform, which Greece’s lenders demand, and a commitment to take fiscal measures when the need arises.  If, however, negotiations drag on and the next tranche of the bailout loan is withheld, Greece may require further assistance by summer 2017.  The lenders may choose to refuse such help and propose instead to start talks on Greece’s withdrawal from the Eurozone.  Alternatively, the government may opt for an early parliamentary election, which would likely be overshadowed by the question of whether Greece should keep the euro or revert to the drachma.

The Grexit option appears increasingly attractive in conservative European circles.  Patience for Greece is gradually being exhausted, while the idea is gaining ground that a more restricted monetary union, freed from its weakest members, could make it easier to move to further fiscal integration without the risk of a transfer union—a German nightmare.

However, Grexit carries risks.  It would inflict a further shock to the Greek economy, induced by skyrocketing inflation resulting from the expected large devaluation of the new currency, a corresponding explosion of public debt as a proportion of GDP, and irreparable damage to Greeks’ confidence.  Social discontent and political instability would follow, raising serious geopolitical risks at a time when Russia and Turkey are challenging European security and the refugee problem has not passed its peak.  Stabilizing Greece outside the euro area would require semi-permanent surveillance and substantial injections of financial assistance from the country’s lenders.

It is therefore hoped that sense prevails among all interested parties so that agreement is achieved.  Failing that, a fresh election should be held as soon as possible to allow a new government to assume power before the situation gets out of hand.

Yannos Papantoniou is president of the Center for Progressive Policy Research, an independent think tank.  (Carnegie 09.02)

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11.11  GREECE:  Fitch Affirms Greece at ‘CCC’

On 24 February 2017, Fitch Ratings has affirmed Greece’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘CCC’.  The issue ratings on Greece’s long-term senior unsecured foreign- and local-currency bonds are also affirmed at ‘CCC.  The Short-term Foreign and Local Currency IDRs and the rating on Greece’s short-term debt have all been affirmed at ‘C’ and the Country Ceiling at ‘B-‘.

Key Rating Drivers

Greece’s ‘CCC’ IDRs reflect the following key rating drivers:

The Greek government is broadly complying with the terms of the 86b European Stability Mechanism (ESM) program.  The second review of the program remains incomplete and there are disagreements among the country’s European creditors and the IMF around the long-term sustainability of Greek public debt.  The delay in the completion of the second review increases the risk that the recent economic recovery will be undermined by a hit to confidence or by the Greek government building up arrears with the private sector to preserve liquidity.

The Greek government agrees with the IMF that further debt relief is needed, but has objected to the fund’s position that the government should pre-legislate for specific automatic fiscal correction measures in case it misses future primary surplus targets.  Even so, the current stand-off appears to be driven more by the inter-creditor disagreement.  Relations between the Greek government and official creditors have stayed on a fairly firm footing since the current ESM program was agreed.

The government’s compliance with the ESM program conditions is one reason that Fitch believes Greece’s European creditors would be prepared to proceed and disburse funds without IMF involvement.  Another reason is the desire to avoid a Greek political crisis during an already congested European election year.  However, downside risks remain and a negative shock with respect to the completion of the second review and the payment of the next bailout tranche cannot be excluded.

Fitch’s baseline is that an agreement will be reached.  This implies that the Greek government may have to adopt additional fiscal measures, which increases the risk of early elections as Syriza’s slim parliamentary majority (153 out of 300 seats) makes it harder for the government to maintain sufficient support for unpopular measures.  The extent to which Prime Minister Alexis Tsipras will continue to be able to rely on votes from centrist parties is unclear.

Early elections are not our baseline.  In our view, Prime Minister Tsipras will try to avoid elections: based on recent polls, Syriza trails by more than 10% to the center-right New Democracy party, which has less ideological opposition to a number of the program measures but has been arguing for its renegotiation in particular on the fiscal targets.  Early elections would provide an additional source of uncertainty that would likely undermine the recent economic recovery.

Real GDP grew 0.3% in 2016 amid improved business and consumer confidence and progress in clearing government arrears with the private sector.  Fitch has revised upwards its real GDP growth forecasts to 2.5% and 3% in 2017 and 2018, from 1.8% and 2.2% respectively.  Pent-up investment demand, a declining unemployment rate and continued clearance of government arrears are set to support domestic demand.  Resilient Eurozone growth recovery should support export performance.

Fitch estimates that Greece recorded a primary surplus of 2.5% of GDP in 2016, well above the ESM program target of 0.5%, owing to higher-than-budgeted revenues.  Revenue outperformance stems mainly from stronger growth in indirect and corporate income tax receipts.  The 2016 outturn should make the 2017 target of 1.75% easier to achieve.  However, the 2018 target of 3.5% in 2018 remains challenging.  The European creditors estimate the 2018 fiscal gap at €700m (0.4% of GDP).

The government has already legislated “prior actions” measures, which are projected to yield 3% of GDP through 2018, of which just above two-thirds come from pension and income tax reform.  Fairly weak domestic ownership of program measures makes full implementation of these measures more difficult and the 2018 target harder to achieve.  There is, however, a contingent fiscal mechanism to retrospectively trigger further measures if a target is missed, and tax efficiency reform on which the follow-through is more uncertain.

Confidence in the banking sector remains fragile.  The customer deposit base is prone to volatility.  After falling by 27% between September 2014 and July 2015, private sector deposits have barely recovered.  Since the relaxation of capital controls in July 2016, the inflow of deposits has been weak.  Delays to the program review are likely to put additional pressure on investor confidence, although capital controls should limit deterioration in banks’ liquidity position.

A key challenge for the banking sector is tackling non-performing exposures (NPEs), which remain stubbornly high at 45.2% of gross loans.  Improvement has been made to the legal and institutional framework for resolving loans and banks have stepped up their restructuring efforts but with limited effect on the stock of NPEs so far.

Rating Sensitivities

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

-Evidence that the recent economic recovery is sustained and a track record of achieving primary surpluses. Official sector debt relief would also provide upward momentum for the ratings over the medium-term;

-Further track record of successful implementation of the ESM program, underpinned by an orderly working relationship between Greece and its official sector creditors and a fairly stable political environment.

Future developments that could, individually or collectively, result in negative rating action include:

– A breakdown in relations between Greece and its creditors or domestic political instability disrupting economic and fiscal policies and out-turns;

-Non-payment, redenomination or distressed debt exchange of government debt securities issued in the market or a government-declared moratorium on all debt service.

Key Assumptions

-Our base case assumes the second program review is completed ahead of the July debt maturities.

-Any debt relief given to Greece under the ESM program will apply to official sector debt only, and would not therefore constitute an event or default under the agency’s criteria.  (Fitch 24.02)

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