Fortnightly, April 8th 2015

Fortnightly, April 8th 2015

April 8, 2015





1.1  Israel Applies to Join China-Backed AIIB Investment Bank
1.2  Israel Licenses Gas Exports from Tamar to Jordan
1.3  Israel’s Minimum Wage Hike Takes Effect on 1 April


2.1  Israeli Companies Raise $1.5 Billion on Wall Street in First Quarter
2.2  New Accelerator Launched For Satellite Technology
2.3  Investment in Israeli Cyber Companies Exceeds $250 Million
2.4  GreenRoad Technologies Secures $26 Million in Growth Funding
2.5  Bright Food Finally Completes Acquisition of Tnuva
2.6  Israel Chemicals to Buy Canada’s Allana Potash
2.7  DRS & Beth-El Team to Develop Improved NBC Protection Systems
2.8  Dutch Company Wins Tender to Operate New Ashdod Port
2.9  SHL Telemedicine Completes Acquisition of GPH Cordiva
2.10  Nova Completes the Acquisition of ReVera


3.1  Rwanda Signs $75 Million Deal with UAE Firm for Water Treatment Plant
3.2  UAE Steel Foundry Plans to Produce Car Parts Revealed
3.3  Marimekko Makes Dubai Debut – Plans GCC roll-out by 2018
3.4  Mondelez Brings First ‘Made in Morocco’ Oreos to Market
3.5  Florida Business Delegation Visits Morocco on 2 – 9 May


4.1  Israel Installs Record-Setting Solar Field on Knesset Roof
4.2  ET Solar Builds a 50 MWp Solar Power Plant in Israel
4.3  French Firm Wins Deal to Clean Up Qatar Lagoon


5.1  Lebanon’s CPI Continues its Negative Trend in February
5.2  Lebanon’s Trade Deficit Plunged to $2.17 Billion by February
5.3  Jordan’s GDP Grows by 3.1% in 2014
5.4  EU Highlights Jordan’s Resilience in Face of Shocks
5.5  Jordan’s Toukan to Negotiate for IMF Extended Fund Facility
5.6  US Transfers Last Tranche of 2014 Budget Grant to Jordan
5.7  Jordan Seeks Further Cooperation with Russia in the Nuclear Field

♦♦Arabian Gulf

5.8  Gulf States Agree To Push Ahead with VAT Plans
5.9  UAE’s Inflation Edges Down From Near 6-Year Highs
5.10  UAE Drafts Law Permitting 100% Foreign Ownership of Firms
5.11  UAE’s ENEC Submits Plan to Run First Two Nuclear Reactors

♦♦North Africa

5.12  US Releases Military Aid to Egypt Suspended Since 2013
5.13  Early April Sees Completion of New Suez Canal Dry Digging
5.14  Egypt’s Tourism Rises 5.5% in January


6.1  Turkey Misses Growth Target as GDP Per Capita Melts in 2014
6.2  Turkey’s Inflation Sees Highest Monthly Surge Since 2003
6.3  Turkey Spends $13.3 Billion on Telecommunications
6.4  2015 Turkish Worker Deaths Surpass Number of Soma Casualties
6.5  Turkey Grinds to Halt After Massive Power Cut
6.6  Cyprus Lets Eurozone’s First Capital Controls Go Quietly
6.7  Greece Agrees to Repay IMF Debt by 9 April



7.1  Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2015
7.2  Israel Commemorates Soldiers Who Fell in the Line of Duty
7.3  Israel’s 67th Independence Day Celebrated
7.4  Knesset Members Sworn in at Festive Ceremony
7.5  Israel Switching to 8 Digit Vehicle License Plates


7.6  UAE Likes Facebook, Penetration Second Highest in Arab World


8.1  Teva Reinforces Leadership Position in CNS with Acquisition of Auspex
8.2  Sleep Apnea Company Ninox Raises $5 Million
8.3  Teva Launches Generic Exforge Tablets in the United States
8.4  Rosetta Genomics Granted U.S. Patent Allowance for its Novel Kidney Cancer Test
8.5  BioLineRx Announces Successful Results for Novel Stem Cell Mobilization Treatment
8.6  Teva Announces FDA Approval of ProAir RespiClick
8.7  DreaMed Diabetes and Medtronic Enter Strategic Collaboration
8.8  Cannabics Engages Technion to Screen Anticancer Cannabinoid Compounds
8.9  Zebra Launches Comprehensive Medical Imaging Research Platform


9.1  Ginger Keyboard Introduces In-Keyboard Games and News Feed
9.2  FST Biometrics Untethers Award-winning IMID Technology
9.3  Correlsense’s New Patent Approved for Transaction Traffic Monitoring
9.4  Simunity is Launched: Free Resources for Web Developers and Designers


10.1  Israel’s Unemployment Rate Hits Record Low of 5.3%
10.2  It Pays to be an MK in Israel
10.3  Israel Remains World Leader in US Registered Patents


11.1  ISRAEL: Election Can Boost Structural Reform Capacity
11.2  LEBANON: ‘B-/B’ Ratings Affirmed As Bank Deposit Inflows Remain Resilient
11.3  JORDAN: Increased Confidence in Jordan’s Currency
11.4  QATAR: ‘AA/A-1+’ Ratings Affirmed On Medium-Term Growth Expectations
11.5  EGYPT: Moody’s Upgrades Egypt to B3 With a Stable Outlook
11.6  EGYPT: Egypt Looks to Success After Investment Conference
11.7  TUNISIA: Fitch Revises Outlook to Stable; Affirms IDR at ‘BB-‘
11.8  ALGERIA: Algeria Moves to Boost Agricultural Production
11.9  TURKEY: Erdogan Grows More Radical


1.1 Israel Applies to Join China-Backed AIIB Investment Bank

Prime Minister Netanyahu has signed a letter of application for Israel to join the China-led Asian Infrastructure Investment Bank (AIIB), the Israeli Foreign Ministry said on 1 April. More than 40 countries, including Australia, South Korea, Britain, France, Germany and Italy, have said they would sign up with the AIIB, with Japan and the United States the two notable absentees. China set a 31 March deadline to become a founding member of the AIIB, an institution that could enhance Beijing’s regional and global influence. Washington initially tried to dissuade its allies from joining the AIIB, seeing it as a challenge to the World Bank and Asian Development Bank over which the US exerts considerable influence, but changed its tack after many signed up for it.

US Treasury Secretary Lew said that Washington would welcome the AIIB as long as it complements existing institutions and adopts high governance standards. The Foreign Ministry said Israel’s AIIB membership would open up opportunities to integrate Israeli companies into infrastructure projects it financed.

Israeli companies are increasingly turning to Asia to capitalize on a boom in demand for their technology, as the government urges them to diversify export markets in response to Europe’s rising anti-Semitism and potential trade sanctions. The new bank plans to invest $100 billion in infrastructure projects in Asian countries. Half of that amount has already been budgeted by China. (Various 02.04)

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1.2 Israel Licenses Gas Exports from Tamar to Jordan

Prime Minister Benjamin Netanyahu, Minister of National Infrastructures, Energy and Water Resources Silvan Shalom and Israel’s Petroleum Commissioner Alexander Varshavsky authorized the Tamar natural gas reservoir partnership to export gas to private customers in Jordan. Under the agreement, Israel will export 1.8 BCM for 15 years for $500 million to bromine factories and the Arab Potash Company on the Jordanian side of the Dead Sea. This is the first time that the Israeli government has approved a gas export contract for the purpose of strengthening relations with neighboring countries.

The Tamar partnership recently signed a gas export contract with Egyptian company Dolphinus with a minimum quantity of 5 BCM over the first five years for an estimated $1.2 billion (NIS 5 billion). Under this agreement, Israel will deliver natural gas to Egyptian industrial customers, thereby helping Egypt deal with its severe energy crisis. (Globes 02.04)

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1.3 Israel’s Minimum Wage Hike Takes Effect on 1 April

The minimum wage hike ordered by Prime Minister Netanyahu in December took effect on 1 April, raising the minimum wage in Israel from 4,300 shekels ($1,081) to NIS 4,650 ($1,169). The increase is part of a plan to raise the minimum wage in Israel to NIS 5,000 ($1,257) by late 2017. Netanyahu had ordered the plan’s implementation after negotiations with the Histadrut and the Manufacturers Association. Under the agreement, the pay raise will be implemented in three increments: The first taking place on 1 April; the second set for 1 August, when the minimum wage will increase to NIS 4,825 ($1,213); and the third planned for 1 January 2017, when the minimum wage will amount to NIS 5,000. April’s raise will be in effect for employees earning up to NIS 4,300, and will exclude those earning NIS 4,650 and over. The Finance Ministry believes the wage agreement will cost the economy some NIS 1.3 billion ($330 million) a year. (Various 28.03)

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2.1 Israeli Companies Raise $1.5 Billion on Wall Street in First Quarter

Israelis companies conducted 11 offerings on Wall Street in Q1/15: three IPOs and eight secondary offerings. An almost unimaginable total of $1.5 billion was raised, considering that $3.9 billion was raised in all of 2014. The three Israeli Wall Street first quarter IPOs raised an aggregate $150.5 million and the eight secondary offerings raised an aggregate $1.33 billion, including $1.03 billion in two major offers for sale by Mobileye and CyberArk Software. This figure highlights the desire of the shareholders in these two companies to exchange their shares for cash as soon as US law allows (six months after the IPO). Seven of the 11 offerings were by biomedical companies – another figure that illustrates the size of the possible bubble in this sector. The other four were by technology companies, including two information security companies (according to some, another sector with a bubble). (Globes 01.04)

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2.2 New Accelerator Launched For Satellite Technology

Or Yehuda’s ImageSat International, which develops satellite sensors, and Ariel’s Incentive Incubator, controlled by the Peregrine Ventures Fund, are launching an accelerator for startups developing satellite information-based applications. ImageSat and Incentive announced that they planned to invest NIS 15 million in five to six startups in this field over the next two years. Entrepreneurs must submit their candidacy by mid-May. Each venture will receive $600,000, with the possibility of a later follow-on investment by Peregrine. Incentive is an incubator that currently divides its activity between the life sciences, which account for the bulk of its activity, and computer and communications technologies. ImageSat currently provides services in the analysis and exploitation of information in various realms: security, precision farming and the environment, smart cities, transportation, and infrastructure. The company has launched two satellites that currently provide services to governments and companies throughout the world. (Globes 01.04)

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2.3 Investment in Israeli Cyber Companies Exceeds $250 Million

Israel’s National Cyber Bureau said investments in cyber companies in Israel have amounted to more than $250 million and Israeli cyber companies’ acquisitions in 2014/5 totalled more than$1 billion. As part of the state’s preparations in the field, every government ministry will have to allocate at least 8% of its IT budget to investments in cyber security.

The Israeli government recently adopted the National Cyber Bureau’s recommendation to set up a national cyber security authority that will operate for the benefit of the civilian sector as an executive body with significant technological capabilities and widespread national and international partnerships. (Various 25.03)

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2.4 GreenRoad Technologies Secures $26 Million in Growth Funding

GreenRoad announced that it has raised $26 million in growth capital. The investment round was led by Israel Growth Partners with participation from existing investors Amadeus Capital Partners, Benchmark Capital, DAG Ventures, Generation Investment Management and Virgin Green Fund.

Beit Dagan’s GreenRoad provides fleet businesses a single, comprehensive solution for changing driver behavior and managing fleet performance. GreenRoad’s platform helps fleet operators improve driving safety, increase fuel economy, lower insurance premiums, and reduce accident-related costs. GreenRoad’s advanced business intelligence and performance analytics enable fleets to optimize daily and strategic operations. GreenRoad will utilize the new capital injection to invest heavily in expanding its sales and marketing resources and activity in the US and EMEA. In addition, the company plans to enhance its driver behavior technology to capture opportunities arising from next generation mobility models, new ADAS and connected fleet technologies. GreenRoad is privately held and has offices in the US, UK and Israel. (GreenRoad 25.03)

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2.5 Bright Food Finally Completes Acquisition of Tnuva

Ten months after signing a deal to buy control of Israel’s Tnuva Food Industries, China’s Bright Food Corp. finally completed the acquisition on 30 March. Bright Food has transferred NIS 4.78 billion to Apax Partners and Mivtach-Shamir Food Industries for their respective 56.15% and 20.7% stakes. (Globes 30.03)

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2.6 Israel Chemicals to Buy Canada’s Allana Potash

Israel Chemicals reached an agreement with Allana Potash Corp. to acquire all outstanding shares in the Canadian company. Israel Chemicals, which already holds a 16.36% stake in Allana, will pay C$0.50 per share for a total of C$137 million (US$109 million). The deal, which is supported by Allana’s board, will be paid for in cash and Israel Chemicals shares. Israel Chemicals bought its 16.36% stake in Allana last year, as part of an agreement giving the Israeli company the rights to purchase and market one million tons of potash mined from the Danakhil mine in the Afar region of northeast Ethiopia Allana holds a concession to mine potash in Ethiopia, through its subsidiary, Allana Potash Afar. Allana estimates that its Danakhil project could yield up to one million tonnes of muriate of potash production per year for 25 years.

Israel Chemicals’ offer is in line with the company’s “Next Step Forward” strategy to broaden its sources of raw materials globally while reducing production costs and focusing on high growth emerging markets that will support the company’s growth over the next decade. The company currently produces potash at mines located in Israel, Spain and the UK, and in 2014 it sold over five million tonnes of potash worldwide. Israel Chemicals said that acquiring ownership of Allana will enable the company to control the development of the Danakhil project, accelerate pre-construction engineering design work, as well as secure project financing and reduce the company’s risks associated with the project. (Allana 26.03)

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2.7 DRS & Beth-El Team to Develop Improved NBC Protection Systems

Arlington, Virginia’s DRS Technologies signed a teaming agreement with the world’s leading supplier of chemical, biological, radiological, and nuclear (CBRN) filtration products to deliver state-of-the-art environmental control and protection systems to the warfighter. The agreement between DRS Technologies and Israel-based Beth-El Industries brings together exceptional technologies from both companies to provide protection systems for combat vehicles and multiple types of shelters utilized in forward operating bases. In today’s combat environment, improving protection levels for weapons of mass destruction is not something to be taken lightly. DRS understands that, and developing an improved CBRN protection system to address these increasing threats demonstrates its commitment to this country’s uniformed men and women around the world.

Zichron Yaakov’s Beth-El has been designing and manufacturing CBRN collective protection filtration systems for the past 40 years. For more than ten years they have exported their technology for use by over 60 armies worldwide including many NATO forces. As a result their CBRN systems have been tested and qualified by international standards institutes from countries all over the world. (DRS Technologies 31.03)

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2.8 Dutch Company Wins Tender to Operate New Ashdod Port

Dutch company TIL has been awarded a 25 year tender to operate the new private port that will be built in Ashdod, the Israel Ports Company has announced. TIL beat German rivals Eurogate to win the tender for the new port. The port will be built by Chinese company PMEC, a subsidiary of China Harbour, and is due to begin operations in 2012. The week before, the Israel Ports Company announced that Shanghai International Port Group (SIPG) had won the 25 year tender to operate the new Haifa port. The new Haifa port, which should also begin operations in 2021, is being built by Ashtrom Group and Shapir. (Globes 01.04)

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2.9 SHL Telemedicine Completes Acquisition of GPH Cordiva

SHL Telemedicine completed the acquisition of GPH (Gesellschaft fur Patientenhilfe), based in Munich, for a cash purchase price of € 7.6 million. GPH’s nationwide German telemedicine program Cordiva currently cares for about 10,000 chronic heart failure patients in daily regular care. GPH, a subsidiary of US-based Alere, has AOK Bayern and AOK North East amongst its major clients.

Tel Aviv’s SHL Telemedicine is engaged in developing and marketing personal telemedicine systems and the provision of medical call center services, with a focus on cardiovascular and related diseases, to end users and to the healthcare community. SHL Telemedicine offers its services and personal telemedicine devices to subscribers utilizing telephonic and Internet communication technology. (SHL Telemedicine 01.04)

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2.10 Nova Completes the Acquisition of ReVera

Nova Measuring Instruments closed the previously announced acquisition of ReVera Incorporated, a profitable privately held company headquartered in Santa Clara, California. The acquisition allows Nova to offer the most innovative and unique metrology portfolio, which combines Optical CD and XPS solutions, to address customers’ technology and productivity challenges in the most advanced nodes. Nova acquired 100% of the equity of ReVera for $46.5 million in cash from existing funds, on a cash free, debt free basis. The deal is expected to contribute annual revenues of $25-$30 million and be accretive on a non-GAAP basis within 12 months.

Rehovot’s Nova Measuring Instrument delivers continuous innovation by providing advanced optical metrology solutions for the semiconductor manufacturing industry. Deployed with the world’s largest integrated-circuit manufacturers, Nova’s products deliver state-of-the-art, high-performance metrology solutions for effective process control throughout the semiconductor fabrication lifecycle. Nova’s product portfolio, which combines high-precision hardware and cutting-edge software, supports the development and production of the most advanced devices in today’s high-end semiconductor market. (Nova 02.04)

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3.1 Rwanda Signs $75 Million Deal with UAE Firm for Water Treatment Plant

Rwanda has signed a deal for a $75 million river water treatment plant to provide all Rwandans access to potable water by 2018. The water purchase agreement is with Kigali Water Limited, a Rwandan-registered company owned by Metito, a water management company based in the United Arab Emirates. Under a public-private partnership arrangement lasting 27 years, water will be taken from the Nyabarongo River and treated for use in the capital Kigali. The project will take approximately two years to complete. Access to potable water in Kigali is currently 85% – higher than Rwanda’s average of about 75%. (Reuters 03.04)

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3.2 UAE Steel Foundry Plans to Produce Car Parts Revealed

Abu Dhabi Ports has signed an agreement with Advanced Manufacturing Solutions (AMS), a subsidiary of the FourWinds Group of Companies, to build a steel foundry for producing automotive parts in the emirate. Products such as brake disks and brake calipers will be produced for the global automotive industry at the factory in Khalifa Port’s Industrial Zone (KIZAD). The new foundry will be developed in three phases and ultimately will have a capacity of 300,000 metric tonnes per annum, ranking it among the largest single-source foundries in the world producing automotive parts. The steel foundry products will cater to both local and international markets, exporting via Khalifa Port, for end use by high-end vehicle manufacturers such as BMW, VW, and Mercedes-Benz as well as world leading automotive parts companies.

Phase 1 of the foundry, estimated to cost $140 million, will have an installed capacity of 75,000 metric tonnes per annum, and will produce grey iron for brake discs and ductile iron for brake calipers. Phase 2 of the project will increase the capacity to 145,000 metric tonnes per annum and Phase 3 will take the capacity to 300,000 metric tonnes per annum. The new steel foundry represents one component of a series of investments that AMS plans to undertake in Abu Dhabi. (AB 04.04)

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3.3 Marimekko Makes Dubai Debut – Plans GCC roll-out by 2018

Finnish retailer Marimekko has announced its Middle East debut with the opening of its first store in Dubai, with plans to roll out the brand across the Gulf region. The first store will be followed by another Marimekko outlet to be opened in April in The Dubai Mall. Marimekko and its local partner BinHendi Enterprises aim to open a total of eight Marimekko stores in the Middle East by the end of 2018. After store openings in the UAE, the intention is to also extend operations to Kuwait, Qatar and Saudi Arabia.

Marimekko is a Finnish design company renowned for its original prints and colors. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home decor items ranging from textiles to tableware. (AB 29.03)

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3.4 Mondelez Brings First ‘Made in Morocco’ Oreos to Market

Deerfield, Illinois’ Mondelez International announced that it has begun to make and sell Oreo, the world’s #1 biscuit in Morocco after investing almost $11 million in a state-of-the-art local production capacity to create the company’s largest Oreo production line in Africa. The investment will make the world’s best-selling cookie widely available to Morocco’s 34 million people and expand the local biscuits market by generating more business for Mondelez International’s Morocco trade partners. Mondelez Maroc, Mondelez International’s local subsidiary, will have the capacity to make as many as 900 million Oreo cookies per year, or almost 2.5 million Oreo cookies per day in its Casablanca facility after completing installation of the high-tech production line and starting up in March. If laid side by side, that’s enough Oreo biscuits in a year to stretch the full length of Morocco more than 15 times!

Two years after completing the acquisition of Biscuiterie Industrielle du Moghreb (BIMO), the $11 million investment in the Casablanca plant reinforces Mondelez International’s presence and interest in Morocco. Mondelez International is the world’s largest maker of Cookies and the number one cookie maker in Morocco. (Mondelez 31.03)

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3.5 Florida Business Delegation Visits Morocco on 2 – 9 May

A business delegation from Florida will be visiting Morocco on 2-9 May, said Enterprise Florida, a public-private partnership tasked with promoting economic development in the state of Florida. The members of the Florida mission will be visiting Rabat, Casablanca and Marrakech where they will hold business meetings with public and private Moroccan operators. The US delegation will also take part in networking events with the aim to promote exports, the same source said. Special attention will be given to business prospects in the sectors of agriculture, renewable energies, aviation, training and environmental technologies. (MWN 07.04)

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4.1 Israel Installs Record-Setting Solar Field on Knesset Roof

Israel has installed solar panels on the roof of its parliament building, creating what it calls the largest solar field of any national assembly in the world. The office of the parliament speaker says energy generated from some 1,500 solar panels will provide 10% of the electricity used at the Knesset, Israel’s parliament, saving approximately $400,000 annually. There are 4,600 square meters [1.1 acres] of photovoltaic panels. The array of solar panels, according to a Knesset press release, provides a capacity of 450 kilowatts. The Knesset is also advancing other energy-saving projects, like installing energy-saving light bulbs, automatically shutting down lawmakers’ computers at the end of each workday, and using water from air conditioning systems to help irrigate the gardens surrounding the building. The measures will reduce the Knesset’s energy use by a third. Scientists will also conduct ecological research on the parliament roof. The Knesset unveiled the solar field in a dedication ceremony on 29 March. (Israel Hayom 31.03)

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4.2 ET Solar Builds a 50 MWp Solar Power Plant in Israel

China’s ET Solar, a leading smart energy solutions provider, announced that its wholly-owned German subsidiary, ET Solutions AG, has been chosen to provide turnkey EPC services for a 50MWp solar power plant in Israel, along with local partners G-Systems and El-Mor Group. The project is located 20 km north-west of the port of Ashkelon, and will be built on 60 hectares of semi-arid land. The new solar power facility is expected to be grid-connected by the end of this year and generate over 85,000 megawatt hours of clean energy annually, enough to offset approximately 50,000 tons of carbon dioxide from the atmosphere every year. ET Solar will provide end-to-end services including project management, electrical design, plant layout, purchasing, quality control, construction supervision, and commissioning services. After commissioning, ET Solar will also act as the operations & maintenance service provider with its partners. (ET Solar 07.04)

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4.3 French Firm Wins Deal to Clean Up Qatar Lagoon

French engineering group Egis has been hired to rehabilitate a lagoon near Doha which is raising serious environmental problems. The lagoon covers more than 4 sq. km and is raising serious environmental problems, Egis said, adding that almost 60,000 cubic meters of untreated wastewater per day is discharged onto this site, causing the contamination of the water table by infiltration, producing foul odors and creating safety risks connected with the transport of sewage. The Public Works Authority of Qatar, also known as Ashghal, awarded the engineering, procurement and construction management (EPCM) contract to rehabilitate the lagoon. Ashgal has called for the eradication of the lagoon and the site’s comprehensive overhaul, in continuance of the measures taken to date to mitigate its environmental impact. The contract follows one awarded to Egis a few weeks ago for the extension of the Doha West waste water treatment and recycling plant. (AB 27.03)

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5.1 Lebanon’s CPI Continues its Negative Trend in February

According to Beirut’s Central Administration of Statistics (CAS), the consumer price index (CPI) remained in the red, recording a negative change in CPI year-on-year (y-o-y) for a 3rd consecutive month. The CPI dropped from 100.18 points in February 2014 to 97.20 points by the end of February 2015, registering a 2.97% yearly fall. Since “water, electricity, gas & other fuels” and “transportation” constitute two of the largest weights in the CPI with a cumulative share of 25%, it’s not surprising that the CPI inflation dropped based on the 60% decline in international oil prices since January 2014. However, the rate of decline in overall prices has slowed down compared to January’s annual decrease of 3.75%, primarily due to the recovery of Brent crude oil.

In terms of the CPI’s components, food and non-alcoholic beverages (20.6% of CPI) declined by 0.54% y-o-y in February 2015. Moreover, transportation (13.1% of CPI) and water, electricity, gas & other fuels (11.9% of CPI), witnessed a yearly drop of 13.91% and 18.05%, respectively. The final 2 sub-indices that waned were Health (7.8% of CPI) and Communication (4.6% of CPI), posting a 4.34% and 23.69% y-o-y decline, respectively. The effect of lower internet and mobile tariffs launched in Mid-May continue to push down communication prices on a y-o-y basis. (CAS 28.03)

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5.2 Lebanon’s Trade Deficit Plunged to $2.17 Billion by February

Lebanon’s trade deficit plunged by 30% y-o-y by February 2015 to stand at $2.17b due to a 26% decrease in overall imports outpacing the 2% decline in total exports. Total imports, in the first two months of the year, summed up to $2.66b compared to $3.60b during the same period last year.

The three major product categories that were imported to Lebanon by February were mineral products (18.8% share of total imports), chemicals or allied industries (11.8% share of total imports) and machinery and electrical instruments (10.5% share of total imports). The change in imported mineral products, on a cumulative year-on-year basis, displayed a huge drop of 54% from February 2014. The nose dive in mineral imports goes hand in hand with the approximate 60% decrease in the price of international oil since the mid of last year. In addition, products of the chemical or allied industries and machinery & electrical instruments fell by an annual 11.8% and 10.5%, respectively. Notably, the three major countries that Lebanon imports goods from were China, Russia and Germany with corresponding weights 13%, 6.7% and 5.81%. Similarly, total exports fell yearly by 2.1% to $486.38m by February 2014 despite the 17.68% increase in volume of overall exports to 325 tons.

On a monthly basis, total exports dropped by 6.57% from February 2014. In parallel, despite the recovery In the volume of imported gas fuels from last month’s descent due to bad weather conditions, overall imports dropped by a monthly 23.76%. The trade deficit narrowed from $1.48b to $1.08b in February. (TDS 06.04)

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5.3 Jordan’s GDP Grows by 3.1% in 2014

Jordan’s GDP grew by 3.1% in 2014, according to the Department of Statistics (DoS). The economic growth rate is compatible with expectations of the government and the International Monetary Fund. Last year’s growth rate was higher than 2013, when the economy expanded by 2.8%. According to the DoS, the Kingdom’s GDP grew by 3.3% during Q4/14. DoS also said that most sectors recorded growth during the fourth quarter of last year. The extractive industries sector registered the highest growth rate at 71.1%, followed by the agricultural sector, which expanded by 18.8%, the private nonprofit services producers sector, with growth of 7.8%, the social and personal services sector, with 4%, and the construction sector, with 3.9%. (JT 01.04)

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5.4 EU Highlights Jordan’s Resilience in Face of Shocks

Jordan remained resilient in face of regional crises in 2014 in terms of security, stability and economy, according to the European Neighbourhood Policy Report. According to the report, Jordan continued to remain a moderate and tolerant regional key player with a stabilizing role both regionally and internationally in spite of the significant threats that the crises in Syria and Iraq have posed to the country’s security, political and socio-economic situations. The report underlined that the crises in neighboring countries have led to a refugee influx and loss of trade routes, markets and energy supply, yet domestic stability has been preserved in spite of the regional threats, adding that the country has continued promoting religious coexistence, and supporting freedom of religion and beliefs.

The report also highlighted the Kingdom’s resilience against external shocks, in particular the influx of refugees from neighboring Syria and Iraq. In this regard Jordan and the EU continued to prepare negotiations on Deep and Comprehensive Free Trade Area (DCFTA), according to the statement.

The EU has allocated more than €300 million to support Jordan since the beginning of the Syrian crisis. EU funding through the European Neighbourhood Instrument amounted to €145 million in humanitarian assistance. Financial allocation under the ENI during 2014-2017 may range between a minimum allocation of €312 million and a maximum allocation of €382 million. (JT 25.03)

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5.5 Jordan’s Toukan to Negotiate for IMF Extended Fund Facility

The Jordanian Cabinet on 1 April authorized Finance Minister Toukan to forge ahead with negotiations with the International Monetary Fund (IMF) to enable Jordan to benefit from the IMF’s Extended Fund Facility. The Council of Ministers also entrusted Toukan with working to reach an agreement with the US Treasury, National Security Council and State Department on the issuance of $1.5 billion in Eurobonds. The ministers were briefed on the findings of the European Neighbourhood Policy Report on Jordan for 2014, which highlighted several positive observations on the Kingdom’s role at the local, regional and global levels. The report highlighted that Jordan maintained its stability at the political, economic and social levels despite surrounding threats.

The Cabinet also approved a recommendation by the Economic Development Committee to assess the condition of underground water in the Kingdom’s northern region. It also approved a recommendation by the Services, Infrastructure and Social Affairs Committee to re-examine the bases for dealing with medical treatment requests submitted to the Royal Court. A committee tasked with this review was requested to submit its recommendations within three months. (Petra 01.04)

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5.6 US Transfers Last Tranche of 2014 Budget Grant to Jordan

The US has transferred a total of $57 million to the Jordanian Treasury, which is the second and last tranche of the 2014 financial grant to support the state budget, the Ministry of Planning and International cooperation announced. The ministry said that the transfer is part of the $184 million allocated by the US in direct support to the budget as $127 million was transferred at the end of last year. The funds were transferred by USAID. Jordan and the US signed the economic aid agreement for 2014 in September at a value of $633 million, out of which $197 million was allocated to finance development schemes across the Hashemite Kingdom. (JT 31.03)

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5.7 Jordan Seeks Further Cooperation with Russia in the Nuclear Field

On 25 March, Jordan’s King Abdullah met Sergei Kiriyenko, head of Rosatom, Russia’s state-run atomic energy corporation. King Abdullah underlined the significance of boosting cooperation between the Jordan Atomic Energy Commission (JAEC) and the Russian corporation, which resulted in the signing of the intergovernmental agreement with Russia on 24 March to build and operate the first nuclear power plant. The agreement represents the legal and political framework between the governments of the two countries, and highlights their support of the plan, which entails building two nuclear reactors with a total capacity of 2,000 MW at a total cost of $10 billion.

Rosatom has signed preliminary contracts to build two to four nuclear plants in Egypt, while currently embarking on four plants on the Mediterranean shores of Turkey. The agreement with Jordan gives the government the option to return nuclear waste to the country of origin, Russia, after two decades of operating the plant. (JT 25.03)

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►►Arabian Gulf

5.8 Gulf States Agree To Push Ahead with VAT Plans

Arabian Gulf officials have agreed to formulate a general framework for the introduction of value added tax, better known as VAT, in the region. The Under-Secretaries of the Ministries of Economy and Finance of countries in the Gulf Cooperation Council agreed to the deal at their 46th meeting in Doha. The meeting called for finishing all requirements for the establishment of the Customs Union by the end of this year. The six nations of the GCC have been considering the introduction of VAT since 2007 to broaden their revenue base, with negotiations happening jointly to avoid any one nation losing out in competition with others in the region. The recent sharp reduction in oil prices is thought to have lent a further push to introduce the levy, given that most Gulf states are expected to record budget deficits in the coming fiscal year and are reluctant to pare back spending on infrastructure and social spending aimed at developing their economies and improving the lives of citizens. A levy of between 3% and 5% has been proposed but a figure has not been finalized. Officials at the IMF have long urged GCC states to introduce the tax as a way of ensuring a reliable inflow of government revenues, safeguarding against volatility in oil prices. (WAM 31.03)

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5.9 UAE’s Inflation Edges Down From Near 6-Year Highs

The UAE’s inflation rate edged down from near-six year highs in February despite continuing upward pressure from the cost of housing and utilities, according to the UAE National Bureau of Statistics. Inflation fell to 3.6% year-on-year from 3.7% the previous month, which was the highest level since March 2009. Housing and utility costs, which account for over 39% of consumer expenses, jumped 7.4% from a year earlier in February and rose 0.2% from the previous month. Food and beverage prices, which account for nearly 14% of the basket, rose 0.9% year-on-year and edged up 0.4% month-on-month.

In February, Dubai’s inflation rate edged down to 4.3% year-on-year from 4.5% the previous month, which was the highest level since May 2009. February inflation in Abu Dhabi also dropped from its January level, which was the highest since at least January 2009, according to the Abu Dhabi Statistics Centre, easing to 4.6% from five%. (WAM 27.03)

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5.10 UAE Drafts Law Permitting 100% Foreign Ownership of Firms

The UAE is at an advanced stage of drafting a foreign investment law that would allow 100% foreign ownership of businesses in some sectors, economy minister Sultan bin Saeed Al Mansouri said at an international investment conference in Dubai. He did not specify the sectors or say when the law might be passed. The process of drafting and enacting major laws in the UAE often takes years. However, the initiative may mark a more aggressive push by the Arab world’s second biggest economy to attract investment. At present, foreigners generally cannot own more than 49% of any UAE firm unless it is incorporated in a special “free zone”. A new companies law, anticipated to take effect within months, was originally expected to relax this restriction, but that reform was dropped because of strong opposition from some Emiratis who feared they could lose out to foreigners. Mansouri said, however, that the UAE was determined to diversify its economy beyond oil and saw foreign investment as a key way to do this.

New foreign direct investment (FDI) in the UAE rose 25% to $13 billion in 2014. The government aimed to raise FDI to 5% of GDP in coming years. GDP was AED1.540 trillion ($420 billion) last year. (Reuters 30.03)

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5.11 UAE’s ENEC Submits Plan to Run First Two Nuclear Reactors

The Emirates Nuclear Energy Corporation (ENEC) has announced that it has formally applied for an operating license for the UAE’s first two nuclear power reactors, Barakah Units 1 & 2. The submittal follows a five year-long process in which ENEC and the Korea Electric Power Corporation (KEPCO), the developer of ENEC’s nuclear program, documented the safety of the planned operations and maintenance of the Barakah plant. ENEC’s submission, on behalf of its operating entity, seeks a FANR license to safely operate and maintain the UAE’s first two nuclear energy plants, which are currently under construction at Barakah, in the Western Region of Abu Dhabi. The application is approximately 15,000 pages in length.

ENEC is aiming to receive an operating license for Barakah Unit 1 in 2016, in time for the scheduled start of commercial operations in 2017. Approval for the Barakah Unit 2 operating license is anticipated to follow in 2017. ENEC’s application seeks a license to operate both plants for 60 years – the expected operating life of ENEC’s chosen APR1400 plant design. ENEC has also applied to FANR for two separate licenses related to the import, receipt, and possession of radioactive and nuclear materials, which were submitted to FANR for approval earlier this year.

Upon completion, the four APR-1400 units will boast a combined capacity of approximately 5,600 MW and will be capable of generating approximately 25% of the UAE’s electricity needs while saving up to 12 million tons of carbon emissions every year. (AB 28.03)

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►►North Africa

5.12 US Releases Military Aid to Egypt Suspended Since 2013

President Barack Obama on 31 March released military aid to Egypt that was suspended after the ouster of Islamist President Morsi in July 2013, in an effort to boost Cairo’s ability to combat the extremist threat in the region. The White House said Obama notified Egyptian President el-Sisi in a phone call that the U.S. would be sending 12 F-16 fighter jets, 20 missiles and up to 125 tank kits, while continuing to request $1.3 billion in military assistance for Egypt. The White House said that would make Egypt the second-largest recipient of U.S. foreign military financing worldwide.

The funds were suspended 21 months ago after the ouster of Morsi. But Washington could not provide almost half of the annual aid package — along with assistance held up from previous years — until it certified advances by el-Sisi’s government on democracy, human rights and rule of law or issued a declaration that such aid is in the interests of U.S. national security. The U.S. has been providing hundreds of millions in counterterrorism assistance to its ally, which didn’t stall as a result of the government overthrow. Egypt has been arguing it needs the money to face growing threats from extremists creeping over the border from lawless Libya or operating in the Sinai Peninsula, and the U.S. sees the funds as critical for stability in the volatile Middle East. The aid comes as Egypt is trying to play a leading role in forming an Arab military alliance that can fight terrorism in the region. (Ahram Online 31.03)

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5.13 Early April Sees Completion of New Suez Canal Dry Digging

Egyptian Armed Forces Engineering Corps Head, General Kamel El-Wazir announced that the dry digging of the new Suez Canal project will be concluded on 9 April. Approximately 94.8% of dry digging works have taken place over seven and a half months, with 215 million cubic meters having been dug. Around 20,000 workers and 80 companies are participating in the project.

The new Suez Canal project was launched in August 2014 by President Abdel Fattah Al-Sisi, referring to it as a national project. It is expected that a new 72 km. long canal will be dug alongside the original, to be implemented over a year. Al-Sisi had called on the army’s engineering corps, who will directly supervise the project, to conclude the project in one year. This would replace the previously scheduled three–year timeline, attributing the shortened time period to the “the deteriorating security”, which could threaten the project. The new canal will be established to increase the Suez Canal’s capacity to 97 passing ships per day, up from the current rate of 49 per day. The project would involve 35 km. of dry digging and 37 km. of “expansion and deep” digging.

Upon completion, the project would see canal revenues increase by 259%, up from current annual revenues of $5b. Cairo had refused foreign participation in funding the project, with Al-Sisi stressing that only national banks, companies and investors can finance it. In September 2014, Al-Sisi approved the Suez Canal investment certificate law on 1 September to access the needed funds for the project. (Ahram 31.03)

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5.14 Egypt’s Tourism Rises 5.5% in January

The number of tourism arrivals to Egypt in January increased by 5.5% compared to the corresponding month in 2014, registering 677,000 arrivals up from 642,000 arrivals last year, CAPMAS announced on 25 March. The government plans to increase tourism sector investments in 2015 by offering land parcels through the General Authority for Tourism Development (GATD). Tourism investment over the past four years fell by 75%, compared to the period before 25 January 2011. The authority plans to raise five projects for integrated development during the Economic Summit, with investments worth EGP 5.2b.

Egypt is targeting a 20% growth in tourist numbers this year. The sector’s income was $7.5b in 2014, with a growth of $1.6b compared to 2013. Before the 30 June 2013 protests leading to the ouster of Islamist president Morsi, tourist arrival numbers were up 16.4% year-on-year in June. CAPMAS reported that the total number of tourists visiting Egypt in June reached 988,573, up from around 850,000 in the corresponding month in 2012. Following the protests, Egypt’s security situation weakened, leading many international travel firms to halt selling holiday packages to the country. Several European governments, including Germany, Russia, France, Spain, Sweden and Italy, imposed travel alerts for Egypt, fearing the violence after the dispersal of pro-Morsi sit-ins in Rabaa Al-Adaweya and Al-Nahda squares in August of the same year. (DNE 25.03)

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6.1 Turkey Misses Growth Target as GDP Per Capita Melts in 2014

Turkish GDP growth slowed to 2.9% in 2014 from 4.2% the preceding year, data from the Turkish Statistics Institute (TurkStat) showed on 31 March, signaling a major headache for the ruling Justice and Development Party (AK Party), which has had a solid record on the economy since coming to power in 2002 and is aiming for a sweeping victory in this year’s elections. Economic growth in 2014 exceeded the 2.7% expected by economists but missed the government’s target of 3.3%, the data showed.

The economic slowdown is feared to have been exacerbated by weak industrial output and exports as well as volatility in exchange rates during this year. Some estimated that Turkey’s economy would grow just 1.5% in Q1/15 and 2% in 2015 as a whole. TurkStat said per capita earnings dropped to $10,400 in 2014 from $10,822 in 2013 amid a sharp depreciation in the Turkish lira against the US dollar. Turkey’s GDP fell to $800.1 billion in 2014 from $823.04 billion a year ago. Turkey’s foreign trade volume shrank in February as exports fell 6% and imports dropped 7.2% on a monthly basis. (TurkStat 31.03)

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6.2 Turkey’s Inflation Sees Highest Monthly Surge Since 2003

Turkey’s month-on-month inflation experienced the fastest increase in March since the same month of 2003, while an increase in food prices contributed to a great extent to this surge. March 2003 was when current President Erdogan became prime minister for Turkey’s ruling Justice and Development Party (AK Party). Rising food costs pushed Turkey’s consumer prices sharply higher in March, which may encourage the central bank to resist political pressure for aggressive rate cuts in the run-up to elections in June.

Consumer prices jumped 1.19% month-on-month, the Turkish Statistics Institute said. Food prices contributed to half of that increase. Unlike core inflation, also closely watched by economists, consumer prices include food and energy costs, which are beyond the control of central banks. Compared with the same month last year, the consumer inflation rate rose to 7.61%. Domestic producer prices rose 1.05% on the month, for an annual rise of 3.41%, the data showed.

However, separate data on auto sales for the month gave a somewhat brighter picture of consumer health, showing a rise of 75% from the same period last year, when sales were battered by a tax increase and tougher credit regulations. The Automotive Distributors Association said forthcoming elections and expected structural reforms will have a “decisive” impact on the auto industry in the coming year. (Zaman 03.04)

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6.3 Turkey Spends $13.3 Billion on Telecommunications

Turks spent more than TL 35.5 billion ($13.3 billion) on telecommunications last year, up from TL 32.2 billion ($12.2 billion) in 2013, according to a report released by the Information and Communications Technologies Authority (BTK) on 27 March. Over 80% of the amount spent went on Turkey’s top four telecommunication companies, the report stated.

The revenue of the four leading telecommunications companies (landline provider Turk Telekom and mobile networks providers Turkcell, Vodafone and Avea) jumped 8.6% annually, rising from TL 25.9 billion in 2013 to TL 28.1 billion ($10.1 billion). Their net sales reached TL 7.4 billion ($2.9 billion) last year, an increase of 16% compared with the previous year. In the same period, these same companies also invested more than TL 4.1 billion ($1.6 billion), up by 9% from 2013.

According to the report, the number of mobile phone subscribers in Turkey increased to nearly 72 million in 2014 from 69.6 million in 2013, with more than 57 million 3G subscribers. Overall mobile penetration rate stood at 93.8% in 2014. Turkey imported 14.6 million mobile devices in 2014, down from 15.8 million mobile devices in 2013. In 2012, the country had imported 13.2 million mobile phones. Local production increased by 208% last year, rising to nearly 1.1 million mobile devices from 346,746 in 2013.

Turkey’s local producers want the government to impose emergency import tariffs on mobile phones in order to boost local production further. The country already imposes strict controls on mobile phones imported by individuals, blocking handsets after 20 days in the country from using a local Turkish SIM card unless they are registered and their tax paid. Half of imported phones in Turkey are smartphones. The cost of these imports was estimated to be around TL 10 billion ($3.8 billion) in 2013. (AA 27.03)

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6.4 2015 Turkish Worker Deaths Surpass Number of Soma Casualties

A staggering number of work-related accidents have claimed at least 351 lives in the first three months of this year, a number which surpassed the death toll of the country’s major mining disaster in Soma, a town of Manisa province, where 301 workers were killed after an explosion in May 2014. Though Turkey experienced one of its most disastrous calamities only a year ago, the country doesn’t seem to have learned its lesson. According to figures released by the Council for Workers’ Health and Work Safety, the number of workers who died due to job-related accidents hit 351, 139 of whom were killed during March alone. Of those killed in March, 126 were male and 13 female. The sectors where the majority of the deadly accidents occurred were agriculture, construction, transportation and mining. Traffic accidents, collapses, falls from buildings, drowning, intoxication, lightning strikes, shootings, heart attacks and suicides were all factors contributing to the high number of fatalities in the workplace.

2014 was plagued by one of the highest numbers of deadly job accidents in Turkey’s history, with 1,886 people killed in work-related accidents, the highest annual number of workers to have been killed in the country since 2002.

In May 2014, 301 workers were killed at once after an underground explosion in a coal mine in Soma, located in the western province of Manisa. Another major accident occurred in the Ermenek, a town in the Central Anatolian province of Karaman, on 28 October. Eighteen miners were trapped in a coal mine after it collapsed following flooding in the mine’s gallery. None were saved. Not a month after the Ermenek disaster, 10 workers were killed when an industrial elevator fell from the 32nd floor of the building they were working on, crashing to the ground, in Istanbul.

A decade of rapid growth has fueled a construction boom in the country; however, workplace safety standards have failed to keep pace. The lack of safety regulations in Turkish workplaces has also been the subject of European Union accession reports. The lack of adequate monitoring of facilities is the main cause of accidents, with inspections of workplaces having fallen by 70% over the last 10 years, according to local unions’ data. (Zaman 06.04)

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6.5 Turkey Grinds to Halt After Massive Power Cut

A massive power cut caused chaos on 31 March across Turkey, shutting down the metro networks in Istanbul and Ankara, with the government saying an outside attack on the system was not ruled out. The power cut, the worst in 15 years, began around 10:30 in Istanbul. It was confirmed to have hit 49 of the country’s total 81 provinces, from the Greek border to those in the southeast with Iran and Iraq. Energy Minister Yildiz said the authorities were investigating whether the power outage was due to a technical failure or a “cyber-attack.” The outage affected at least two dozen cities, where telephone and internet lines were also mostly down. Almost all provinces in Turkey were affected by the outage, except the Van province in the east which imports electricity from neighboring Iran.

Around three hours after the power cut struck Istanbul, the metro, tramway and the Marmaray underground system that goes underneath the Bosphorus came back on line and resumed operations. (AFP 31.03)

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6.6 Cyprus Lets Eurozone’s First Capital Controls Go Quietly

Cyprus freed capital flows on 6 April, ending two years of controls that set an unwanted precedent for the Eurozone at the height of the bloc’s debt crisis. Cyprus became the first and, to date, the only Eurozone member to impose controls, acting to stem a flight of capital from its banks in March 2013. But with an incremental relaxation over the past 18 months, banks reported no unusual activity. The last controls to go were regulatory approval to move more than €1 million ($1.1 million) out of the country, and a traveler’s limit of €10,000 per trip. Announcing the abolition of controls, Cypriot President Anastasiades said banks were largely immune to the troubles of neighboring Greece, still struggling to unlock remaining funds from its bailout program. One condition imposed by international lenders on Cyprus for €10 billion in aid was severing its long-time banking links with Greece in 2013. (Various 06.04)

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6.7 Greece Agrees to Repay IMF Debt by 9 April

Greece has agreed to repay its debt to the International Monetary Fund by 9 April, IMF chief Lagarde said after a meeting with Greek Finance Minister Varoufakis. There was speculation ahead of the visit that Athens might fail to meet the €460 million ($501 million) IMF installment if forced to choose between the IMF and paying government workers. Lagarde said repaying the IMF debt was in the country’s best interest. Greece has not received the remaining funds in its €240 billion European Union-IMF rescue package as Brussels has demanded to first approve Greece’s revised reform plan. (AFP 06.04)

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7.1 Yom HaShoah – Holocaust Martyrs’ & Heroes’ Remembrance Day 2015

Israel will mark Holocaust Martyrs’ & Heroes’ Remembrance Day (Yom HaZikaron HaShoah ve-laGvura in Hebrew) beginning on Wednesday evening, 15 April and Thursday, 16 April. Holocaust Remembrance Day (Yom HaShoah) is a national day of commemorating the six million Jews murdered in the Holocaust. It is a solemn day, beginning at sunset on Hebrew date of 26 Nisan and ending the following evening. The internationally recognized date comes from the Hebrew calendar and corresponds to the 27th day of Nisan on that calendar. It marks the anniversary of the 1943 Warsaw ghetto uprising.

Places of entertainment are closed and memorial ceremonies are held throughout the country. The central ceremonies, in the evening and the following morning, are held at Yad Vashem and are broadcast nationally on television. Marking the start of the day, in the presence of the President and the Prime Minister, dignitaries, survivors, children of survivors and their families, gather together with the general public to take part in the memorial ceremony at Yad Vashem in which six torches, representing the six million murdered Jews, are lit. The following morning at 10:00, the ceremony at Yad Vashem begins with the sounding of a siren for two minutes throughout the entire country. For the duration of the sounding, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the victims of the Holocaust. Afterwards, there is a central ceremony at Yad Vashem, while other sites of remembrance in Israel, such as the Ghetto Fighters’ Kibbutz and Kibbutz Yad Mordechai, also host memorial ceremonies, as do schools, military bases, municipalities and places of work. Throughout the day, both the television and radio broadcast programs about the Holocaust.

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7.2 Israel Commemorates Soldiers Who Fell in the Line of Duty

Israel’s Memorial Day for Fallen Soldiers and Victims of Terrorism which will begin at sundown on 21 April, honors the soldiers who have fallen in the line of duty since 1860 (when modern-day Jews first lived outside of Jerusalem’s Old City walls). The Memorial Day begins with a minute-long siren sounded at 20:00h, followed immediately by official events. On the following day, a two-minute siren will be sounded at 11:00 as part of Memorial Day ceremonies across the country. For the duration of the sounding of both sirens, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the fallen soldiers and victims of terrorism.

A small flag a black ribbon will be laid on the grave of every soldier who died in the line of duty as an expression of respect and sympathy. More than a million people are expected to visit military cemeteries across the country. Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow. Both Memorial Day and Independence Day are observed one day earlier this year to prevent the desecration of the Sabbath.

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7.3 Israel’s 67th Independence Day Celebrated

Celebrations for the 67th anniversary of Israel’s regaining its independence will begin on Wednesday evening, 22 April throughout the country, continuing through Thursday, 23 April. The official observance starts when the state flag is raised to full mast at a national ceremony on Mount Herzl in Jerusalem. Israel Independence Day is celebrated annually on 5 Iyar, which, in 1948, corresponded to 14 May, the date the British mandate ended over the Land of Israel. A religious and national holiday, Yom Atzmaut – Independence Day is a celebration of the renewal of the Jewish state in the Land of Israel, the birthplace of the Jewish people. In this land, the Jewish people began to develop its distinctive religion and culture. Here the Jews preserved an unbroken physical presence, for centuries as a sovereign state, at other times under foreign domination. Throughout their long history, the yearning to return to the Land has been the focus of Jewish life. With the rebirth of the State of Israel, in 1948, Jewish independence, lost 1,879 years earlier, was restored.

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7.4 Knesset Members Sworn in at Festive Ceremony

Two weeks after the end of a stormy election season, the Knesset convened on 31 March for a festive swearing-in ceremony, during which the lawmakers of the 20th Knesset were to declare their allegiance to the Israeli parliament and its laws. The 120 Knesset members include 39 first time MKs, who were earlier treated to a special seminar on the inner workings of parliament. The 19th Knesset had 49 new members and a record number of women – 27 in total. That record was broken on 17 March, when voters gave 28 women seats in the Knesset. The party with the highest number of new MKs is the new Kulanu faction, whose MKs, aside chairman Moshe Kahlon, are all swearing allegiance for the first time. The Likud faction will also present 11 new MKs. (IH 31.03)

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7.5 Israel Switching to 8 Digit Vehicle License Plates

In order to cope with the pace of new vehicle sales in Israel, the Ministry of Transport decided to adopt license plates with eight digits, instead of seven digits, for all new vehicles on the road, starting in 2017. It has been learned that this project is by no means a simple one. The Ministry of Transport is saying that it is the second biggest project since the Y2K bug project at the millennium changeover. It affects a long list of parties, including government ministries, Israel Police, banks, auto importers and leasing companies, local authorities, and others. The project will probably cost hundreds of millions of shekels, with most of the costs being incurred in changing the information systems, which are currently based on seven-digit license numbers. A pilot of the transition to the new system will begin next year, with the aim being to commence the actual transition in January 2017. The only question left to see how much vehicle owners will pay for it. (Globes 01.04)

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7.6 UAE Likes Facebook, Penetration Second Highest in Arab World

There are currently about five million Facebook users in the UAE, which represents 6% of the total number of Facebook users in the Arab World and 28% of those in the GCC. Facebook estimates that 3.5 million of the UAE’s Facebook users are in Dubai, who have, over the course of March alone, exchanged over a billion messages, left 111.5 million comments, and posted over 45 million pictures. Overall, the UAE has one of the highest rates of Facebook penetration in the Arab World at 60.4%, second only to Qatar. Just under half of all Facebook users in the country (48%) are under 30. Dubai’s government has increasingly looked to Facebook to connect with local residents, with RTA, Dewa and the Dubai Police each having hundreds of thousands followers. For his part, Shaikh Mohammed bin Rashid al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai’s official Facebook page has almost 2.5 million followers. (KT 04.04)

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8.1 Teva Reinforces Leadership Position in CNS with Acquisition of Auspex

Teva Pharmaceutical Industries and La Jolla, California’s Auspex Pharmaceuticals have entered into a definitive merger agreement under which Teva will commence a tender offer for all of the outstanding shares of Auspex at $101.00 per share in cash, representing a total consideration of approximately $3.2 billion in enterprise value and approximately $3.5 billion in equity value. This transaction is expected to enhance Teva’s revenue and earnings growth profile and strengthen its core central nervous system (CNS) franchise with the addition of Auspex’s portfolio of innovative medicines for people who live with movement disorders.

Auspex is an innovative biopharmaceutical company specializing in applying deuterium chemistry to known molecules to create novel therapies with improved safety and efficacy profiles. Its lead investigational product, SD-809 (deutetrabenazine), which leverages Auspex’s deuterium technology platform is being developed for the potential treatment of chorea associated with Huntington’s disease, tardive dyskinesia, and Tourette syndrome, with a pharmacokinetic profile that allows for lower doses resulting in a favorable safety profile. The acquisition of Auspex is a significant step in strengthening Teva’s leadership position in CNS and advances the company into underserved movement disorder markets.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 30.03)

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8.2 Sleep Apnea Company Ninox Raises $5 Million

Startup investments company Xenia Venture Capital announced a $10 million financing round for Ninox Medical, its portfolio company, with the participation of leading Israeli and overseas funds. The round will take place in two stages: $5 million will be raised immediately, and an additional $5 million according to milestones. The financing round is the company’s first, before the completion of its incubation period. Xenia will invest $250,000 both stages of the round – a total of $500,000.

Jerusalem’s Ninox is developing a device for the treatment of obstructive sleep apnea (OSA) that is designed to be effective, comfortable to use, and without the side effects typical of other treatment devices. Patients with OSA suffer from repeated episodes of upper airway obstruction during sleep that disrupts the quality of their sleep and causes accompanying ailments, such as hypertension, diabetes, heart attacks, and stroke. (Globes 29.03)

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8.3 Teva Launches Generic Exforge Tablets in the United States

Teva Pharmaceutical Industries launched a generic equivalent to Exforge (amlodipine and valsartan) Tablets in four different strengths, in the United States. Exforge (amlodipine and valsartan) Tablets are used in the treatment of high blood pressure (hypertension), a chronic condition often without symptoms that is linked to serious health issues such as heart disease and stroke, if not detected early and treated appropriately. With the launch of Amlodipine and Valsartan Tablets, Teva can offer those prescribed Exforge a generic alternative to help manage their high blood pressure.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. (Teva 31.03)

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8.4 Rosetta Genomics Granted U.S. Patent Allowance for its Novel Kidney Cancer Test

Rosetta Genomics received a Notice of Allowance for U.S. Patent Application No. 13/412,020, entitled, “Gene Expression Signature for Classification of Kidney Tumors.” The patent is owned jointly with Tel Hashomer Medical Research, the technology transfer company of the Chaim Sheba Medical Center in Israel. The allowed patent describes a method for distinguishing four different types of kidney cancer: oncocytoma, clear cell renal cell carcinoma (RCC), papillary (chromaphil) RCC and chromophobe RCC in a human subject with renal cancer, through the expression profile of a unique set of 24 microRNAs and a classifier algorithm.

Rosetta Cancer Tests are a series of microRNA-based diagnostic testing services offered by Rosetta Genomics. The Rosetta Cancer Origin Test™ can accurately identify the primary tumor type in primary and metastatic cancer including cancer of unknown or uncertain primary (CUP). The Rosetta Lung Cancer Test™ accurately identifies the four main subtypes of lung cancer using small amounts of tumor cells. The Rosetta Kidney Cancer Test™ accurately classifies the four most common kidney tumors: clear cell renal cell carcinoma (RCC), papillary RCC, chromophobe RCC and oncocytoma.

Rehovot’s Rosetta Genomics develops and commercializes a full range of microRNA-based molecular diagnostics. Founded in 2000, Rosetta’s integrative research platform combining bioinformatics and state-of-the-art laboratory processes has led to the discovery of hundreds of biologically validated novel human microRNAs. Building on its strong patent position and proprietary platform technologies, Rosetta is working on the application of these technologies in the development and commercialization of a full range of microRNA-based diagnostic tools. The Company also leverages its commercial infrastructure by marketing tests and sequencing services for Admera Health and Precipio. Rosetta’s cancer testing services are commercially available through its Philadelphia-based CAP-accredited, CLIA-certified lab. (Rosetta Genomics 26.03)

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8.5 BioLineRx Announces Successful Results for Novel Stem Cell Mobilization Treatment

BioLineRx announced successful top-line results from the Phase 1 safety and efficacy study of its lead clinical candidate, BL-8040, as a novel approach for mobilization and collection of bone-marrow stem cells from the peripheral blood circulation. All safety and efficacy endpoints were met, showing that treatment with BL-8040 as a single agent was safe and well tolerated at all doses and resulted in efficient stem cell mobilization and collection in all study participants. Importantly, the results support BL-8040 as one-day, single-dose collection regimen, which is a significant improvement upon the current standard of care. Robust stem cell mobilization was evident in all treated participants, across the different doses tested, supporting a novel approach to stem cell collection. After a single administration, BL-8040 enabled collection of a yield of stem cells that exceeds the number required to support a transplant in all treated participants, following only one collection procedure.

Jerusalem’s BioLineRx is a publicly-traded, clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates. The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization. (BioLineRx 25.03)

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8.6 Teva Announces FDA Approval of ProAir RespiClick

Teva Pharmaceutical Industries announced that the U.S. FDA has approved ProAir RespiClick (albuterol sulfate) inhalation powder, a breath-actuated, multi-dose, dry-powder, short-acting beta-agonist (SABA) inhaler for the treatment or prevention of bronchospasm in patients 12 years of age and older with reversible obstructive airway disease; and for the prevention of exercise-induced bronchospasm (EIB) in patients 12 years of age and older. It is expected to become commercially available to patients during Q2/15. The approval was based on a comprehensive clinical development program consisting of eight clinical trials designed to evaluate the safety and efficacy of ProAir RespiClick in adults and adolescents (12 years of age and older) with asthma and EIB. Clinical trial results showed that ProAir RespiClick was both safe and effective with adverse events consistent with those seen with previous albuterol inhalers. The most common adverse events in greater than one% of patients treated with ProAir RespiClick, compared to placebo, were back pain, body aches and pains, upset stomach, sinus headache, and urinary tract infection.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day. Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area. In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products. (Teva 01.04)

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8.7 DreaMed Diabetes and Medtronic Enter Strategic Collaboration

DreaMed Diabetes signed an exclusive worldwide development and license agreement with Medtronic, the world’s premier medical technology and services company, for the development and marketing of products incorporating DreaMed’s MD-Logic Artificial Pancreas algorithm in Medtronic’s insulin pumps. Under the terms of the agreement, DreaMed Diabetes will receive undisclosed royalties from future sales of each device utilizing MD-Logic. Medtronic will be responsible for all development and marketing of such devices. In addition, Medtronic has made a minority investment in DreaMed Diabetes of $2 million.

DreaMed Diabetes’s CE approved GlucoSitter, which is based on the MD-Logic Artificial Pancreas algorithm, is a fully-automated, artificial-pancreas system for controlling glucose levels. The system links the glucose sensor with the insulin pump through computerized control algorithms. It uses data of glucose levels from a continuous glucose sensor, analyzes them and directs the insulin pump to deliver the correct dose of insulin that should be released to the body in order to maintain balanced blood glucose. In effect, the software continuously monitors glucose levels, and defines precisely when and how to adjust insulin levels.

Petah Tikva’s DreaMed Diabetes was established in 2014 to develop and commercialize diabetes treatment and management solutions. Its flagship product, GlucoSitter, is a closed-loop insulin delivery system for patients with type 1 and type 2 diabetes. Additional development programs include insulin-treatment-profiling systems for diabetic clinics, patient decision-support and educational apps, and automatic insulin delivery systems – all aimed at people with diabetes to better control their disease. (DreaMed 06.04)

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8.8 Cannabics Engages Technion to Screen Anticancer Cannabinoid Compounds

Bethesda, Maryland’s Cannabics Pharmaceuticals executed a Research Agreement with the Israel Institute of Technology (Technion) in Israel, for the screening of potential Anticancer Cannabinoid compounds. Under the terms of the agreement, Cannabics Pharmaceuticals will collaborate with a researcher from the Biology Department of the Technion to develop a diagnostic system that screens the anti-cancer properties of cannabis-based active ingredients. This system would be harnessed to explore different types of cancer cells treated with a multitude of cannabinoid combinations.

Cannabics Pharmaceuticals is an emerging drug company focused on the development and commercialization of advanced drugs, therapies, food supplements and administration routes based on the wide range of active ingredients found in diverse and unique strains of the Cannabis plant.

Haifa’s Technion – Israel Institute of Technology is consistently ranked amongst the world’s top science and Technology Research Universities. The Faculty of Biology is comprised of 23 independent research groups, focusing on a variety of aspects of Cellular, Molecular and Developmental Biology. The faculty has extensive collaborations with the pharmaceutical and biotechnology industries. (Cannabics 06.04)

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8.9 Zebra Launches Comprehensive Medical Imaging Research Platform

Zebra Medical Vision launched a closed beta of its Medical Imaging Research platform and announced funding of $8 million led by Khosla Ventures, with participating parties DeepFork Capital and Salesforce. The company’s solution enables researchers to quickly develop imaging algorithms and insights based on large scale datasets and advanced processing power. Zebra’s commercialization pipeline will then expedite clinical application of imaging research products. Zebra’s platform offers a cloud-based, fully hosted research and development environment. This includes access to large datasets of structured, de-identified studies, storage, state-of-the-art GPU computing power and support for a multitude of research tools. The platform also enables research groups to collaborate and create joint tools.

Kibbutz Shefayim’s Zebra Medical Vision has set out to create the world’s largest medical imaging insights platform. They believe that by providing machine-learning researchers the needed tools and datasets Zebra can accelerate development of advanced decision support tools and diagnosis needed to serve the world’s population. (ZMV 07.04)

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9.1 Ginger Keyboard Introduces In-Keyboard Games and News Feed

Ginger introduced “Entertain” for its Android keyboard, allowing users to play games and read the latest headlines without leaving their messaging interaction. Development for “Entertain” began following focus groups and internal data analysis that clearly identified high idle time during messaging interactions. Initially, “Entertain” will feature a mix of retro games like (Pong-like) Squash and Snake as well as newer games like 2048. These games will be available alongside content feeds featuring the latest headlines from top tier publications. The release of “Entertain” follows last month’s introduction of “Smart Bar”, which allows the use of 3rd party apps from within the keyboard, emphasizing Ginger’s continued focus on innovation in mobile productivity by maximizing the entire keyboard experience to go beyond standard writing and typing features.

Tel Aviv’s Ginger specializes in developing mobile keyboard and writing enhancement apps that enable everyone to quickly write high-quality, accurate messages. Ginger has developed the NLP platform (natural language processing), which is the foundation for its advanced text analysis applications. This platform lies at the core of all of Ginger’s mobile, web-based and PC products, providing English corrections, editing options, context appropriate synonyms, translations that match the context and original meaning of the content. (Ginger 31.03)

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9.2 FST Biometrics Untethers Award-winning IMID Technology

FST Biometrics announced the release of two new products – one wireless and one portable – each designed to supplement the important work of security personnel.

IMID Mobile is a smartphone application that delivers FST’s award-winning IMID technology to personal devices, while IMID Rapid provides an end-to-end, ruggedized and portable solution to quickly secure access to contained areas, such as crime scenes and senior government official press conferences. The IMID Mobile smartphone application complements the IMID Access system and can be installed onto smartphones of security guards, school security personnel and parking garage guards, bringing mobility to the secure access experience. IMID Mobile identifies authorized users based on a unique fusion of biometric identifiers including facial and behavioral recognition. Security personnel can now identify authorized users via the IMID Mobile app, providing a seamless secure access experience.

IMID Rapid incorporates FST Biometrics’ award-winning IMID Access solution into a well-protected end-to-end portable product that will hold up to outdoor elements. All of the hardware and software needed to secure a specific location is included. A security team can complete assembly and secure an area within ten minutes.

Rishon LeTzion’s FST Biometrics is a leading identity management solutions provider. The company’s IMID product line offers access control through its proprietary In Motion Identification technology. This provides the ultimate security and convenience for users, who are accurately identified without having to stop or slow down. IMID solutions integrate a fusion of biometric and analytic technologies that include face recognition, body behavior analytics and voice recognition. (FST 31.03)

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9.3 Correlsense’s New Patent Approved for Transaction Traffic Monitoring

Correlsense announced that the US Patent and Trademark Office has allowed its patent application for tracking transaction related data in corporate computing environments. The patent for an Apparatus and Method for Tracking Requests in a Multi-Threaded Multi-Tier Computerized Environment, is scheduled for final grant later this year. The patent covers tracking transaction data within the heterogeneous computing environments found in most enterprises. The patent pending technology is an integral part of the company’s SharePath software. SharePath monitors enterprise environments where there are multiple tiers, servers, programming languages, databases, applications, middleware components and a variety of end points. SharePath’s big data architecture tracks and correlates information from all these diverse sources and monitors transaction performance across all hops in the data center and Cloud.

Herzliya Pituah’s Correlsense is a leading enterprise APM Company, delivering customer and value by ensuring that all business-critical applications perform effectively. It is the APM product of choice for business and IT operations managers who rely on complex enterprise applications. Correlsense paints a complete and dynamic picture of IT service levels and performance and real user monitoring for applications that span mobile, SaaS, cloud, data center and legacy platforms. SharePath customers include some of the world’s largest financial, telecom, gaming, and healthcare firms. (Correlsense 01.04)

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9.4 Simunity is Launched: Free Resources for Web Developers and Designers

Simunity, a web resource initiated by the creators of Simbla website builder, offers a variety of dev tools, generators, code snippets and freebies, all available online and free to use. The site has gone viral on Facebook, Twitter and LinkedIn for the past month since launching its first tools (e.g. HTML responsive website templates, icon maker and photo stock (high resolution photos for web usage) – all free for any usage! A blog has also been created which publishes reviews and professional guides of interest to the web community. The founders say the site’s purpose is to bring together the web community under one roof.

Simunity is the child of a bigger, more ambitious project by the founders, named Simbla. Tel Aviv’s Simbla is a responsive, mobile and tablet compatible website builder, which uses drag and drop techniques based on the modern bootstrap3 framework. Simbla’s unique approach is in its simplicity and perfect design. With Simbla, anybody can build their own impressive, beautiful website, where no coding skills are required. Simbla’s founders say they’re in the middle of a breakthrough on a concept that will change the future of the web community. (Simbla 07.04)

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10.1 Israel’s Unemployment Rate Hits Record Low of 5.3%

Israel’s unemployment rate dropped by 0.3% in February, hitting a record low of 5.3%, compared to 5.6% in January, the Central Bureau of Statistics said on 26 March. Israel’s unemployment figures are now among the lowest jobless rates recorded among the member nations of the OECD.

CBS data found that men’s participation in the workforce was up from 84.6% in January to 84.9% in February, while women’s participation in the workforce was down from 75% in January to 74.4% in February. Men’s unemployment was down from 5.7% in January to 5.3% in February, and women’s unemployment was down from 5.5% in January, to 5.3% in February. The overall employment rate in February was 60.6%, unchanged from January, the report said. According to the CBS, unemployment in Israel has dropped by 2.6% since 2009. (CBS 26.03)

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10.2 It Pays to be an MK in Israel

Israel’s incoming Knesset members will receive a monthly salary that is four times the national average. Each of the 120 MKs will be given a monthly salary of NIS 39,562 ($9,951), a vehicle, two parliamentary aides, two newspapers, a mobile phone, a television in their office and rooms at hotels in Jerusalem when required. The Knesset members will also each have a NIS 49,000 ($12,000) budget for public outreach each year. The benefits and salary add up to NIS 4.5 million ($1.1 million) per MK each year. The Knesset’s 2016 budget is NIS 666,762,000 ($167,697,000). The Israeli MK’s salary is relatively high compared to other nations, and is 4.3 times the national average for an employee working full time. (IsraelHaYom 28.03)

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10.3 Israel Remains World Leader in US Registered Patents

Israel remains a world leader when it comes to registering patents in the United States. According to Israel’s largest business information group, BDICoface, Israeli companies and entities registered no less than 3,555 patents in the United States in 2014 – an increase of around 21% over the previous year. The numbers for 2014 mean that Israel remains third in the world in terms of US-registered patents, ahead of Sweden, Germany, the Netherlands, France, China and South Korea, and behind only Japan and Taiwan. The BDICoface figures show that the leading Israeli-based companies in the field are in fact local branches of American technology firms – Intel, IBM, Marvell, SanDisk and HP. These are followed by Tel Aviv University’s research institutes and the Weizmann Institute. (Ynet 31.03)

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11.1 ISRAEL: Election Can Boost Structural Reform Capacity

On 30 March, Fitch Ratings observed that the outcome of the Israeli general election in March should enhance the country’s capacity for structural fiscal reform. If successfully implemented, such reforms could make it easier to achieve sustainable deficit reduction that would bring the debt-to-GDP ratio closer to the ‘A’-category median.

March’s legislative elections saw Benjamin Netanyahu’s Likud party secure 30 of the 120 Knesset seats. Netanyahu was later mandated to form a government, starting formal negotiations with other party leaders that could last between four and six weeks (informal talks were already underway).

The election delivered a more decisive outcome than opinion polls had predicted. This suggests that Netanyahu will not have to rely on support from an ideologically diverse range of parties and can build a more cohesive and longer-lasting coalition than had been expected.

Israel’s domestic politics can be turbulent, with a fragmented legislature and fluid parties leading to sometimes unstable coalition governments; the previous government served only half of its term. Avoiding such an outcome would mean the new government is better placed to enact substantive fiscal reforms, such as removing tax exemptions, reducing spending rigidities, for example on military expenditure, and potentially reforming fiscal rules and introducing a medium-term fiscal framework.

Israel’s fiscal position improved last year, despite the setback to consolidation in Q3/14 because of military operations against Hamas in Gaza. Preliminary official estimates put the central government’s 2014 deficit at 2.8% of GDP, the lowest since 2008 and in line with the original budget projections. The costs of the Gaza operations were partly offset by subsequent cuts and by capital expenditure under-execution and revenues were boosted by the bounce-back in economic activity and by one-off items.

Monthly government spending in 2015 is limited to one-twelfth of the level budgeted for the previous year until a new budget is agreed. We think growth will strengthen to 3.2% this year, helped by the Bank of Israel supporting the competitiveness of the shekel. A combination of a contained deficit and stronger growth should allow a modest decline in debt/GDP this year.

Nevertheless, debt/GDP, at around 67%, is a key rating weakness and well above the ‘A’ category median of 48.8%. Fitch believes it will take some time for this gap to narrow.

Continued progress in reducing the debt/GDP ratio toward the peer median, accompanied by a sustainable reduction of the fiscal deficit, would be positive for the ratings. (Fitch 30.03)

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11.2 LEBANON: ‘B-/B’ Ratings Affirmed As Bank Deposit Inflows Remain Resilient

Rating Action

On 27 March 2015, Standard & Poor’s Ratings Services affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on the Republic of Lebanon. The outlook is stable.


The Lebanese government’s debt servicing capacity is to a significant extent determined by the domestic financial sector’s willingness and ability to continue buying government debt, directly or indirectly, and by the strength of deposit flows into the financial system. In our view, confidence in the Lebanese financial system remains strong, supported by the Banque du Liban (BdL, the central bank) policy of maintaining high foreign currency reserves that cover almost 80% of local currency money supplies, as well as stable prices and a favorable interest rate differential. This confidence is not likely to be significantly affected by domestic political developments, in our view, short of a major escalation of local unrest.

The banking system’s funding features a high proportion of retail deposits that have shown resilience through various crises. Resident and nonresident private-sector deposit growth was 6% in 2014, and we expect similar levels in 2015. In our view, this should be sufficient to enable the domestic financial sector to finance the large government deficit and demand for private-sector credit.

We expect lower oil prices to have a positive impact on Lebanon’s economy. The cost of oil imports is a source of pressure on economic growth (adding to the high cost of doing business) and Lebanon’s fiscal and external positions. However, the net benefits for Lebanon of lower oil prices could be partly offset by the ongoing conflicts in the region, particularly in Syria, as well as by an internal political environment that is not conducive to implementing structural reforms.

In 2015, we expect a modest acceleration in real GDP growth to over 2% from an estimated 1.5% in 2014. We estimate that GDP per capita will reach just below $10,000 in 2015 (though our population figures do not take into account the influx of Syrian refugees). Higher disposable incomes due to lower oil prices will support growth, as will a third BdL stimulus package of $1 billion for 2015 aimed at supporting private sector growth and small and midsize enterprises. The BdL will continue to proactively seek to maintain financial stability and stimulate the economy.

Our growth forecast assumes relative stability in the political environment, with neither a major breakthrough in the deadlocked political system nor a significant deterioration in security. We anticipate that regional crises will continue to suppress growth, and we do not anticipate a significant rebound in tourism, financial and trade services, or foreign direct investment (FDI) in 2015. The Lebanese economy, traditionally services-driven, is highly sensitive to swings in consumer and investment confidence. If the parliament elects a president this year, followed by the formation of a new government, this would likely lead to a pickup in consumer and investor confidence and therefore stronger growth. A prolonged and significant deterioration in the security situation would put pressure on growth. We do not expect that in the current internal and geopolitical contexts the government will use the lower oil price environment and the fiscal space this gives to pursue the structural reforms that would promote longer-term sustainable economic growth.

Lebanon’s large current account deficits, estimated at 22% of GDP in 2014, are financed by capital inflows (deposits) into the banking system, as well as FDI, which allows the BdL to continue to accumulate foreign exchange reserves. Central bank foreign assets reached $43 billion as of end-2014 (including $11 billion in gold). The BdL keeps substantial foreign assets to maintain confidence in the financial system.

We expect the current account deficit to narrow in 2015, primarily due to a lower import bill stemming from lower oil prices. The strengthening U.S. dollar will also reduce import prices from the Eurozone, which account for 34% of Lebanese imports. Lebanon’s foreign currency inflows are highly dependent on remittances. A significant portion of remittances are estimated to come from the Gulf, but we do not expect their inflow to decrease. Stock-flow discrepancies between the country’s balance of payments and international investment position continue to make the analysis of Lebanon’s external position difficult, in our view.

The general government deficit narrowed to 6% of GDP in 2014 due to one-off factors, including a larger-than-expected transfer from the Ministry of Telecommunications, improvement in tax collection, and a decline in capital expenditure. As a result, the primary balance returned to a surplus of over 2% of GDP in 2014 and general government debt as a percentage of GDP remained relatively flat, contrary to our expectations – though the debt-to-GDP ratio remains one of the highest among rated sovereigns at 135% of GDP. We expect the general government deficit to widen in 2015 to above 8% of GDP, despite expected savings of around 1.5%-2% of GDP from lower transfers to the electricity company Electricite du Liban (EdL)–which have averaged over 4% of GDP in recent years–due to lower oil prices. Lower transfers to EdL will be offset to an extent by a reduction in VAT and customs duties. We expect 2015 revenues to fall short of 2014, when they were supported by one-off developments, and we expect debt to increase to 138% of GDP in 2015.

Public finances and fiscal flexibility will remain constrained by structural expenditure pressures, including transfers to EdL, as well as high interest payments, which account for around 40% of general government revenue. We do not expect any major progress on structural reforms that would lead to a sustained fiscal adjustment, which would reduce the high debt-to-GDP ratio.

The Ministry of Finance, which is targeting lengthening maturities and increasing foreign currency borrowing as part of its public debt strategy, has used up nearly all of the $2.5 billion in additional foreign currency borrowing sanctioned by the parliament after issuing $2.2 billion in Eurobonds in February.

As of end-2014, 62% of gross debt was denominated in local currency. Domestic banks support the government debt market by buying government debt directly or by purchasing certificates of deposit issued by the BdL, which in turn buys government debt. At end-2014, banking sector claims on the public sector accounted for 21% of total banking system assets, and bank creditors held 51% of the government’s outstanding local currency debt. We view the concentration of government financing from these sources as a structural weakness that leaves Lebanon more vulnerable to adverse business, financial, and economic conditions.

Recently, the Lebanese parliament failed for the 20th time to elect a president. There has been a presidential vacuum since President Sleiman’s term ended in May 2014. The parliament, whose term was due to end in June 2013, voted a second time to extend its term in November 2014. A national unity government comprises both the March 14 and March 8 political alliances, the former led by former Prime Minister Hariri, who opposes the Assad regime in Syria, and the latter by Hezbollah, whose military arm is actively fighting in support of the Assad regime.

The Syrian crisis has displaced millions of people, both inside and outside Syria. Lebanon is the neighboring country by far the most affected by the crisis and the flow of refugees. The UN High Commissioner for Refugees reports that 1.2 million Syrian refugees are registered in Lebanon. Unlike neighboring Jordan, the Lebanese government has not benefited from substantial foreign aid to address the refugee crisis, although Lebanon has received donations through UN agencies and non-governmental organizations to assist Syrian refugees. In the medium term, the impact of the increasing number of Syrian refugees on Lebanese politics and society–as well as on the economy, as pressure increases on public spending, services, infrastructure, and the labor market – will become a greater and greater concern for the Lebanese government.


The stable outlook reflects our view that deposit inflows into the financial system will continue over 2015, despite the difficult internal and external political environments, and that consequently the domestic financial sector will continue to enable the government to meet its financing needs.

If the political and economic situation deteriorates such that deposit growth becomes impaired, or if public finances worsen significantly, we could consider lowering the ratings.

We could consider raising the ratings if public finances became more sustainable, which would be supported either by a political breakthrough in Syria–potentially improving economic growth prospects in Lebanon – or an improvement in domestic policymaking that could translate into fiscal reforms. (S&P 27.03)

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11.3 JORDAN: Increased Confidence in Jordan’s Currency

On 26 March, Ziad al-Dabbas posted in Al-Monitor that Jordan’s foreign exchange reserves have witnessed a leap, reaching more than $14 billion at the end of last year, compared to $12 billion at the end of 2013. The International Monetary Fund (IMF) expects the reserves to amount to $17 billion this year, and reach around $18 billion at the end of 2016. This continuous increase is an important indicator to the trust in the Jordanian economy and dinar as a saving and investment currency, and the trust in the political, security and social stability that the kingdom enjoys.

It is known that the political and security instability witnessed in Arab countries in the last years has led to a recession in the flow of foreign currencies and a decrease in the exchange rate of their national currencies, requiring the imposition of limitations on the flow of foreign currencies outside these countries. It is also known that foreign exchange reserves of any state play an important role, since a solid base of foreign currencies renders the national economy more resilient to external risks. Such a base also plays a role in reinforcing the monetary policy and exchange rate of national currencies, and increases the trust of markets in the ability of the state to fulfill its commitments and external debts. All of the aforementioned contributes to reinforcing the credit ranking.

What is more, foreign exchange reserves help countries perform different transactions easily, without fear of the national currency exchange rate falling. These reserves are an indicator to the financial cover the economy has and constitute a safety net that protects from crises.

The Jordanian foreign exchange reserves cover the needs of goods and services imports for more than seven months — a period of time that is considered reassuring according to international applicable standards, and the widely adopted banking principles. Further reinforcing trust in the Jordanian dinar is the pegging between its exchange rate and that of the US dollar. This pegging policy, which has been in place for 20 years, largely contributed to entrenching monetary stability by maintaining a low inflation rate, increasing the competitiveness of exports, and boasting the value of foreign exchange reserves.

The pegging policy also played a prominent role in increasing the flow of transactions, savings and investments of Jordanian expatriates in the Gulf countries for different reasons. These include the national currency exchange rates of these countries is pegged to the US dollar; the disparity between the interest rate of the dinar and that of the dollar; and the flow of Gulf investments, whether directly in real Jordanian economic sectors, such as real estate and industry, or indirectly in the stock exchange of Amman or bonds.

What further made Jordan appealing for Gulf investments is that the risks imposed on exchange rates in Arab Spring countries — mainly Libya, Yemen, Iraq, Syria, Egypt and Tunisia — are not found in Jordan. The large decrease in the exchange rates of the national currencies of these countries has led to high inflation rates and external indebtedness, coupled with a decrease in the transactions, savings and investments of expatriates. Tourism income in the majority of Arab Spring countries suffered a setback due to political and security instability, adversely affecting the flow of foreign currencies into this important sector, as the recession of this flow has several negative effects.

When Jordan pegged its national currency to the US dollar in 1995, the country took into consideration that the dollar represented the biggest economy in the world and constituted the international reserve currency. Central banks in the majority of countries around the world have large reserves in US dollars to meet their needs of goods and services. The US dollar also constitutes one third of foreign monetary reserves in the world, knowing that 80% of foreign exchange rates and 50% of world exports, including oil, are priced in US dollars. (Al Monitor 26.03)

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11.4 QATAR: ‘AA/A-1+’ Ratings Affirmed On Medium-Term Growth Expectations

On 27 March 2015, Standard & Poor’s Ratings Services affirmed its ‘AA’ long-term and ‘A-1+’ short-term foreign and local currency sovereign credit ratings on the State of Qatar. The outlook is stable.

We also affirmed the ‘AA’ long-term issue ratings on the bonds issued by Qatari Diar Finance Q.S.C. and SoQ Sukuk A Q.S.C.


Qatar is a wealthy economy; we estimate its GDP per capita at $78,000 in 2015. The hydrocarbons sector creates about 55% of Qatar’s GDP, 90% of government revenues (oil and gas taxes and royalties, plus dividends from Qatar Petroleum), and 85% of exports. We view Qatar’s economy as undiversified.

In 2013-2014, the oil and gas sector expanded by about 2%, and the non-oil sector by 12%, resulting in average annual GDP growth of about 6%. We project slower real GDP growth of about 4% during 2015-2018 because the hydrocarbon sector will likely continue to stagnate. The non-oil sector, on the other hand, should remain buoyant, thanks to public investment and supported by the growing population.

In our view, Qatar’s high wealth means that its relatively weak per capita economic growth performance is not an immediate concern for the ratings. However, beyond our two-year outlook horizon, Qatar’s economic risk position could deteriorate relative to economies that are expanding more rapidly.

In our view, medium- to long-term challenges to Qatar’s competitive position in the liquefied natural gas (LNG) market are likely to come from new shale production, Russia’s gas pipeline to China, and increased pressure to delink LNG contracts from the oil price. Nevertheless, we see several factors that support Qatar’s competitive position in the LNG market.

First, we expect global demand for natural gas to remain strong, absorbing the new supply. Second, Qatar’s strategy has been to diversify into all major markets, adjusting the mix of destinations and contract types according to market needs. Moreover, the majority of its exports are under long-term contracts, which provide certainty of volume off-take, while built-in diversion clauses in the contracts provide additional flexibility to manage quantity and price risks. Third, Qatar will continue to have a cost advantage over many new projects in other countries. Since Qatar produces and exports significant quantities of condensate and natural gas liquids associated with natural gas, its effective average cost of producing LNG is much lower.

We also assume that Qatar’s oil production will decline as output from maturing fields’ contracts. We expect an average annual decline in crude oil production of about 5% over 2015-2018. We project largely flat gas output (LNG and natural gas), given Qatar’s moratorium on new investments in the sector, while condensate volumes will likely increase by about 5% per year over the same period.

Based on our oil and gas market assumptions, we expect the general government balance to fall into a modest deficit in 2015 and 2016.

Notwithstanding the government’s intention to rationalize and outsource part of its operations and to award more projects to the private sector, it remains to be seen whether the desired level of participation by the private sector can be achieved.

We understand that the government is committed to awarding about $220 billion worth of large-scale investment projects over the next 10 years. The program will focus on infrastructure, education, and health, and the majority of these projects are expected to be completed ahead of the International Federation of Football Associations’ World Cup championship in 2022. In the context of lower hydrocarbon revenues and increasing capital spending, the government is prioritizing existing projects, focusing funding on the highest priority and strategic investments. We expect national development strategy projects to improve the economy’s productive capacity and strengthen Qatar’s competitive position.

Alongside government investments funded through the budget, public-enterprise and private-sector spending on the national development strategy is likely to be funded by borrowing from domestic financial institutions. This may cause banks’ net external liability position to widen and their loan-to-deposit ratios to rise. That said, in 2014, increased public-sector deposits on banks’ balance sheets reduced banks’ reliance on external funding, and the loan-to-deposit ratio has stabilized at about 109%.

We assume Qatar’s net external asset position will remain strong at about 200% of current account receipts in 2015-2018. Qatar has accumulated considerable foreign assets over the past decade, as a result of its development of its natural resources. We forecast that the general government net asset position will stay robust, averaging about 100% of GDP during the next three years. The pace of asset accumulation will depend on how hydrocarbon production and prices develop. We expect Qatar’s assets to provide many decades of production at the current levels.

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

In our view, monetary policy flexibility is limited because the exchange rate is fixed to the U.S. dollar.


The stable outlook reflects our view that Qatar’s high economic wealth levels and strong external and fiscal positions will balance its institutional shortcomings and limited monetary flexibility over the next two years.

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

We could raise the ratings on Qatar if we saw domestic institutions mature faster than expected, alongside significant improvements in transparency regarding government assets and external data quality. (S&P 27.03)

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11.5 EGYPT: Moody’s Upgrades Egypt to B3 With a Stable Outlook

On 7 April Moody’s Investors Service upgraded Egypt’s issuer and senior unsecured bond ratings to B3 from Caa1, with a stable outlook. Key drivers for this rating action are:

1. Improving macroeconomic performance,

2. Reduction in external vulnerabilities, and

3. Ongoing commitment to fiscal and economic reform.

In this rating action, Moody’s has also raised Egypt’s foreign-currency bond ceiling to B2 from B3, the foreign-currency deposit ceiling to Caa1 from Caa2, and the local-currency country risk ceiling to Ba2 from Ba3. The short-term country ceilings for foreign-currency bonds and deposits remain unchanged at Not-Prime (NP). The Aaa rating assigned to Egypt’s senior unsecured bonds backed by the United States government remains unaffected by today’s rating action.

Ratings Rationale: Rating Upgrade to B3 from Caa1

First driver – Improving macroeconomic performance

The first driver of this rating action is the expectation that recent improvements in Egypt’s growth performance and macroeconomic stability will be enduring. Moody’s expects real GDP growth in Egypt to recover to 4.5% year-on-year for the current fiscal year 2015, which ends in June, and then to rise to around 5%-6% over the coming four years. This expected level is based on an assumption that domestic political stability will continue, as will improvements in the business environment, which in Moody’s view will be conducive to higher investment levels.

Second driver – Reduction in external vulnerabilities

Net international reserves have stabilized at $15.5 billion at the end of February 2015, providing ample coverage for external debt payments due in 2015. Since July 2013, the governments of Kuwait, Saudi Arabia and the United Arab Emirates have remained committed to support Egypt by making large foreign currency deposits in the Central Bank of Egypt.

Moody’s expectation of a recovery in domestic and foreign investment is underscored by the strong donor support in Egypt’s Economic Development Conference, which was held during 13-15 March in Sharm El-Sheikh. The support came predominantly but not exclusively from Gulf Cooperation Council (GCC) member countries, which pledged a total of $12.5 billion in official aid and investments. Together with the approximately $38 billion in reported signed investment deals, the large amount of financial support will help to mitigate external vulnerabilities and reduce balance-of-payments risks.

Third driver – Ongoing commitment to fiscal and economic reform

Finally, Moody’s expects the Egyptian government to carry on with fiscal and economic reforms. Expenditure-side reforms, such as recalibration of subsidies and putting a lid on public sector salary growth, coupled with revenue-enhancing measures such as the likely introduction of a full-fledged value added tax in the coming fiscal year, will help to gradually reduce fiscal deficits. The rating agency expects the general government deficit to decline to around 10% of GDP in fiscal 2015, and edge down further to around 9.3% by 2016.

Moody’s also projects general government debt to decline gradually to less than 90% of GDP during 2015-16. In addition, lower government borrowing costs on the back of declining inflation rates, and maturity lengthening measures, will help to reduce Egypt’s very large government borrowing requirements. Going forward, the government is planning to diversify its sources of financing – which will further help lower the cost of debt – by issuing dollar-denominated bonds as well as tapping into the sukuk market.

Rationale for the Stable Outlook

Moody’s views the downward pressures on the rating as limited. The strong support from the GCC countries and increasingly from other foreign donors also mitigates these pressures. Relations with the IMF have also improved, reflected in the publication of the first Article IV report since 2010 in February 2015.

However, despite the positive developments that Moody’s expects, Egypt still faces marked challenges and upward pressure on the government bond rating is likely to be limited over the next 12-18 months.

Rationale for the B3 Rating

Egypt’s B3 government bond rating remains primarily constrained by the weak level of government finances, marked by still sizeable deficits and elevated debt levels, which both will continue to exceed the median for B3-rated peers.

In addition, while government effectiveness has improved and risks to policy making are diminishing, Moody’s still sees elevated security risks, as reflected in ongoing terrorist attacks – particularly in North Sinai – and due to Egypt’s exposure to regional sectarian violence. In addition, declining yet high unemployment rates create social pressure which translates into ongoing demand for comparatively high levels of recurrent government spending.

Finally, structural impediments to a quick return to high growth rates include Egypt’s weak business environment, as reflected in weak scorings in global surveys, such as the World Bank’s “Doing Business” survey or the World Economic Forum’s Global Competitiveness Report.

Factors That Could Cause the Rating to Move Up/Down

The stable outlook indicates that rating pressures are balanced.

Nevertheless, Moody’s would consider the following developments as credit positive: (1) an accelerated implementation of measures to lower fiscal deficits and government debt; (2) a faster and sustained growth recovery to pre-revolution levels, combined with a sharper reduction in inflation rates; (3) a faster-than-envisaged build-up of foreign exchange reserve buffers, driven by less reliance on external donor support; and/or (4) further improvement in the domestic security situation.

On the other hand, Moody’s could take a negative rating action in the case of: (1) a renewed intensification of political turmoil and instability; (2) a significant deterioration in the external payments position; (3) a slippage or reversal of fiscal and economic reforms, which leads to a sharp rise in the government’s funding costs; and/or (4) diminution in the banking system’s capacity to fund government deficits.

• GDP per capita (PPP basis, US$): 11,073 (2014 Actual)

• Real GDP growth (% change): 2.2% (2014 Actual) (also known as GDP Growth)

• Inflation Rate (CPI, % change average): 10.1% (2014 Actual)

• Gen. Gov. Financial Balance/GDP: -12.8% (2014 Actual)

• Current Account Balance/GDP: -0.8% (2014 Actual)

• External debt/GDP: 16.1% (2014 Actual)

• Level of economic development: Moderate level of economic resilience

• Default history: No default events (on bonds or loans) have been recorded since 1983. (Moody’s 07.04)

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11.6 EGYPT: Egypt Looks to Success After Investment Conference

Garnering more investment, loans and assistance packages than had been widely expected, Egypt’s Economic Development Conference (EEDC) secured investment contracts worth $36.2b, an additional $18.6b in infrastructure contracts to set up power plants, and $5.2b in loans from international financial institutions, reports the Oxford Business Group.

More commitments are expected to arise from the EEDC, held in March, in the medium-term as a result of several memorandums of understanding (MOU) inked during the event.

Total investment commitments far outweighed original estimates. Speaking ahead of the conference, the minister of investment, Ashraf Salman, forecast projects would attract in the range of $15b – $20b. The level of commitments represents a welcome return of foreign investment after years of muted inflows and compares favorably to the $13.2b worth of FDI Egypt attracted in 2007-08 during the height of its pre-revolution growth.

Gulf States Lead Investments

During the opening ceremony at the three-day event, held in Sharm El Sheikh, Saudi Arabia, Kuwait and the UAE – which combined have already disbursed billions in grants and concessionary loans to Egypt in recent years – pledged an additional total of $12b in economic assistance to the country.

The financial packages included a combination of aid and investment: the UAE pledged $2b as deposits in the Central Bank of Egypt (CBE) and an additional $2b in investments; Saudi Arabia promised to make $3b worth of investments and add a further $1b to the CBE; and Kuwait brought the total assistance received from the Gulf to $12b by promising $4b worth of investments. Oman also pledged $500m, half aid and half investment, over the next five years.

Onlookers described the event as a demonstration of political and economic support for Egypt from the Arab world, coming at a much-needed time for the Egyptian economy. “A portion of the aid committed by the Gulf countries is expected to be placed as deposits in the Central Bank, which could bring some much-needed foreign currency liquidity if the CBE decides to inject some of these funds into the banking system via special forex auctions,” Nadir Shaikh, country officer for Citibank, told OBG.

Focus on energy

More encouraging for Egypt’s prospects of economic recovery was the interest shown by multinationals in the energy sector. BP committed to invest $12b over four years in the natural gas fields it operates in the West Nile Delta, which represents the single-largest foreign investment deal in Egypt’s history. Additional deals signed by Italy’s Eni, UK’s BG Group and UAE’s Dana Gas should help expand Egypt’s upstream activity, which in recent years has struggled to meet rapidly expanding domestic demand.

Egypt’s electricity minister was also busy over the weekend, signing an MOU with Germany’s Siemens to establish power stations at the cost of $10b with a total production capacity of 6.6 GW. In addition, an MOU was signed with Saudi Arabia’s ACWA Power International and UAE’s Masdar to construct a number of power plants, including solar plants and a wind energy project. The companies will invest $2.4b with a production capacity of up to 4400 MW, adding much-needed capacity to the national grid’s 27 GW (as of the end of 2013, according to the US Energy Information Administration).

Other significant commitments came from a range of UAE firms, including Majid Al Futtaim, which plans to invest LE5b ($653.4m) in eight real estate projects over the next five years; Al Swidan Group, which plans to invest $6b in a grain logistics hub in Damietta; and Khalifa bin Butti Bin Omeir (KBBO) group, which plans to invest $2b in key sectors such as health, waste management, money exchange and renewable energy.

“These investments – especially the large amounts announced by the oil and gas majors – represent a much-needed boost to FDI,” said Shaikh. “According to the recently released balance of payments report for the first half of the fiscal year, FDI has already begun to pick up.”

Hussein Choucri, chairman and managing director of HC Securities and Investment, told OBG that the success of the event was underpinned by government changes to the investment law and other initiatives to improve the business environment. “Local investment banks worked hand in hand with the government to present various investment opportunities during the conference,” said Choucri. (OBG 31.03)

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11.7 TUNISIA: Fitch Revises Outlook to Stable; Affirms IDR at ‘BB-‘

On 27 March, Fitch Ratings revised Tunisia’s Outlooks to Stable from Negative. Its Long-term foreign and local currency Issuer Default Ratings (IDRs) have been affirmed at ‘BB-‘ and ‘BB’ respectively. The issue ratings on Tunisia’s senior unsecured foreign currency bonds are also affirmed at ‘BB-‘. The Country Ceiling is affirmed at ‘BB’ and the Short-term foreign currency IDR at ‘B’.

Key Rating Drivers

The revision of Outlook of Tunisia’s IDRs reflects the following key rating drivers and their relative weights:


The smooth legislative and presidential elections in late 2014 enabled the formation of a new, democratically-elected coalition government in early 2015, which benefits from a large majority (more than 70%) in a Parliament elected for five years. This puts an end to a four-year political transition process and lays the ground for better political stability in the country. Political and economic destabilization risk from social unrest or terrorist attacks remains significant, however, as illustrated by the recent attack in Tunis.


Budget deficit is on an improving trend, narrowing to 4.5% of GDP in 2014 from 6.5% in 2013 (including grants), constraining public debt to just below 50% of GDP at end-2014. Although the consolidation partly reflects continuously low capital spending and a natural decline in subsidies in 2014 after payments of arrears the previous year, Fitch believes that the fiscal stance will slightly strengthen in coming years, helped by lower international oil prices in 2015-2016 and gradually improving economic performance.

Tunisia’s IDRs also reflect the following key rating drivers:

• Development indicators, including GDP per capita, human development index and investment rate, as well as governance indicators are in line with ‘BB’-rated peers. Tunisia has a clean track record of debt repayment.

• External finances are a key rating weakness. The current account deficit (CAD) has significantly widened since the start of the revolution, as exports have suffered from weak EU activity and supply shocks while consumption has driven imports up. The CAD further deteriorated to 8.9% of GDP in 2014, mostly on account of higher food and energy shortfalls, pushing net external debt to 34.8% of GDP in 2014, much higher than ‘BB’-rated peers (14.8%).

Fitch expects the CAD to narrow in 2015 in line with lower international oil prices, but to remain elevated at 7.7% of GDP due to weak tourism revenues and the impact of a depreciating dinar on the cost of energy imports.

• Tunisia has benefitted from strong international official support since the revolution, providing cheap, long-term sources of external financing requirements. This has come at the expense of a higher share of public debt denominated in foreign currency (52.4% at end-2014). The recent $1b bond issue marks Tunisia’s return to capital markets, therefore reducing the country’s dependence on official lending, but Fitch expects the international community will continue supporting the country in coming years.

• Economic performance has been mediocre since the revolution despite fiscal and monetary stimulus, with real GDP growth averaging 1.7% over the past four years (compared with 4.4% in the previous five years); inflation has started cooling down in 2014 to 5.5% on average but remains above pre-revolution levels.

Recovery in the EU will slightly spur activity in 2015 but Fitch has revised down its GDP growth estimate for 2015 to 2.7% from 3.2% after the recent terrorist attack in Tunis. We expect that growth prospects over the medium-term will be dependent on social stability, security and the implementation of structural reforms improving the investment climate and the banking sector.

Recapitalization and restructuring of Tunisia’s three highly vulnerable public banks, which account for around a third of bank assets, has been delayed. Fitch expects recapitalization will take place in 2015 but broader restructuring will be long and painful, particularly if the establishment of an asset management company to acquire bad loans to clean up banks’ balance sheets is postponed or cancelled. The banking sector’s risks to public finances remain significant over the medium term and public banks’ ability to finance the economy is structurally impaired.

Rating Sensitivities

The Stable Outlook reflects Fitch’s view that upside and downside risks to the ratings are currently balanced. The main factors that could, individually or collectively, lead to a negative rating action are:

• A reversal in fiscal consolidation trend, e.g. related to relaxed budget deficit targets or higher than currently expected bank recapitalization needs

• A material surge in political, social or security instability in the country

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

• A structural improvement in Tunisia’s CAD, leading to reduced external financing needs and stronger international liquidity buffers

• A material strengthening of the banking sector’s financial health and supervision, driven by a recapitalization and a deep restructuring of major public banks

• Improved economic performance related to the effects of reforms on structural indicators, such as the business environment, the investment rate or governance indicators.

Key Assumptions

Fitch assumes that Brent crude will average $65 and $75 per barrel in 2015 and 2016 respectively, compared with an average $101 in 2014, therefore alleviating pressures on the CAD and budget spending

Fitch assumes that economic recovery in the Eurozone will gradually strengthen, with real GDP growth averaging 1.4% in 2015 and 1.7% in 2016 (against 0.8% in 2014), therefore improving export prospects for Tunisia. Fitch assumes that the new government will remain committed to continuity in Tunisia’s relationship and commitments to official lenders, including the IMF, which in turn will continue to remain supportive of the country in coming years. (Fitch 27.03)

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11.8 ALGERIA: Algeria Moves to Boost Agricultural Production

The Oxford Business Group reported that weaker oil prices coupled with a drive to improve food security have prompted Algeria to accelerate its planned agricultural reforms over the next five years.

In 2014, the government announced plans to spend AD300b (€2.8b) annually on agriculture, as part of the “Plan Quinquennal 2015-19”, to build on the country’s Agricultural and Rural Renewal Policy (Politique de Renouveau Agricole et Rurale, PRAR). During the 2014-15 agricultural season, the government aims to facilitate a number of improvements, such as the introduction of advanced irrigation techniques and higher fertilizer usage. It will also be looking to increase domestic production of staples from potatoes to milk.

Strengthening a Key Sector

Currently the agricultural sector is a major component of the country’s non-hydrocarbons economy. As a whole, farming and agro-industrial activity contributes just under 9% to Algeria’s GDP, and in 2013, it employed more than 2.4m people – equal to nearly one-fifth of the entire labor force. Agriculture’s share of GDP has eased slightly since 2012, when it was closer to 10%, but that is due primarily to stronger revenues in the secondary sector. Agricultural production has actually increased steadily since in recent years, reaching more than €23b in 2013.

The PRAR, which was launched in 2008, has been a key driver of industry development in recent years, leading to an annual growth rate in agricultural production of 8.3% between 2010 and 2014, up from an average of 6% between 2000 and 2008. Measures introduced under the initial PRAR scheme included facilitating farmers’ access to land and the introduction of preferential lending rates for producers, along with efforts to encourage farming in under-served areas such as the Hauts-Plateaux.

While the PRAR has seen improvements in terms of production, development and equipment usage, there is still plenty more to be done, according to the minister of agriculture, Abdelwahab Nouri. “Agriculture continues to face challenges with respect to the climate and a lack of institutional order,” Nouri said, speaking to OBG in the summer of 2014. “To address these issues, the government is allocating additional budgetary funds to improve agriculture and rural development from 2015 to 2019,” he added.

Planning Ahead

A number of key challenges will need to be tackled over the next five years if the program objectives are to be met. Unsurprisingly, given the country’s arid environment, water usage is one of the primary focal points. The government hopes to create 2m ha of irrigated land – from 1.2m ha currently – with over a quarter earmarked for the production of cereals. Authorities are also partway through the development of a 22 km. system of canals and pumps that will help support cereal production in the north-east while improving access to land for farmers operating informally remains a key focus.

Increasing the use of fertilizers in Algeria is also another key objective under the government’s five-year plan, including the creation of co-operatives, which can work together in the area of machinery and fertilizers. At present, the Ministry of Agriculture and Rural Development subsidizes 20% of the cost of fertilizers. However, figures from the World Bank indicate that Algeria’s use of fertilizers between 2009 and 2013 sat well below that of some of its peers. Producers used an average of 12.7 kg of fertilizer per ha of arable land in Algeria, significantly less than Morocco (39.1 kg per ha) and Tunisia (40.4 kg per ha).

Algeria is also targeting improving the technical capacity of its farmers. While still in its early stages, the creation of the School of Agricultural, Forestry and Agribusiness Professions (Ecole nationale des métiers de l’agriculture, des forêts et de l’agro-industrie , ENMAFA) is expected to play a major role improving training and vocational skills. The school will provide training in agriculture-related occupations, forestry and agro-industry with the exact location of the school still to be determined.

Improving productivity, including focusing on an intensified local production and greater use of new farming techniques, should be the focus moving forward according to the director of the Algerian National Institute of Agronomic Research, Fouad Chehat. “With the pace of population growth in the population, food needs are increasingly important. To ensure better coverage of demand, it is imperative to act on improving yields of agricultural production,” Chehat told local media. (OBG 31.03)

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11.9 TURKEY: Erdogan Grows More Radical

Kadri Gursel posted in Al Monitor on 24 March that Turkish President Recep Tayyip Erdogan’s recent speeches and media remarks have been marked by an increasingly radical rhetoric. Among mainstream political leaders in Turkey today, Erdogan is by far and away the most hard-line and polarizing orator.

Radical anti-Western antagonism and paranoia, based on an extremist mélange of Turkish nationalism and Islamism, have increasingly infused his speeches. The most striking example of this troubling metamorphosis was the speech he made during a ceremony held 16 March in the presidential palace to award “state honor medals” to army veterans and families of fallen soldiers.

“These lands remain our home because every singly citizen of this 78 million-strong country — men and women alike, even the children and the elderly — see martyrdom as an honor when necessary. Otherwise, we wouldn’t have been allowed to stay a single day here,” he said.

“Don’t even think that the struggle that began 1,400 years ago between the truth [Islam] and fallacy [other beliefs] is over. Don’t even think that those who set an eye on these lands 1,000 years ago have given up their ambitions. Don’t even think that those who turned up at the Dardanelles and then across Anatolia 100 years ago, coming with the most powerful armies, weapons and technology of the time, have repented. No, they never did so. This long-standing struggle is going on and will go on,” he added.

Erdogan went on to say, “We have to keep toiling with this awareness, always ready for one of the two beautiful [eventualities], and take measures accordingly.” What he meant by two “beautiful” eventualities was becoming a “martyr” or “ghazi.” In the Islamic sense, a martyr is someone who sacrifices his life in the name of Allah, while “ghazi” is a title honoring fighters who have survived a war in the name of Allah. In contemporary Turkish culture, the “martyr” and “ghazi” terms are generally used to denote fighters who get killed or injured while defending the motherland.

Following this belligerent message, Erdogan said, “Those who want to turn Turkey into another Andalusia, another Middle East and Eastern Africa, those who want to make Turkey meet the fate of Eastern Europe and the Balkans, have never abandoned their intentions.”

To speak of the existence of “those who want to turn Turkey into another Andalusia” reflects a state of morbid paranoia. Erdogan refers to Andalusia in 1492, meaning that certain forces exist today who want to similarly purge Muslims from Turkey or force them to convert. It is a suspicion impossible to back up with tangible evidence. Yet, a front-page headline in the Islamist Yeni Safak the following day read, “Turkey will not become another Andalusia.” The leftist BirGun daily, for its part, said Erdogan’s remarks amounted to “a call for jihad.”

Erdogan’s Turkish-Islamic Synthesis

In the same speech, Erdogan blended pan-Islamism and Turkish nationalism on the basis of anti-Western antagonism, saying, “The ‘Turk’ denotes an ethnicity only in our country. In Western eyes, all Muslims have been ‘Turks’ throughout history, or described so. … This reflects also the responsibility that history has placed on our nation.”

The concept of a “Turkish-Islamic synthesis,” which claims to blend Turkish nationalism and Islamism, was the official ideology of the 12 September 1980 coup in Turkey. The rightist ideologues of the time could have seen the blending of the two ideologies as a way to secure national unity on as broad a base as possible.

Erdogan’s hard-line rightist and Islamist-nationalist rhetoric, meanwhile, could be explained with the objectives he has for the June 7 general elections. He is calling for a presidential system for Turkey, which requires a new constitution.

Under the current constitution, a constitutional overhaul needs to be approved by a three-fifth parliamentary majority before it can go to a referendum. This means at least 330 members in the 550-seat parliament. Hence, Erdogan wants the Justice and Development Party (AKP) to clinch at least 330 seats so that his coveted new constitution gets parliamentary approval with no need of support from other parties, even though Erdogan is no longer the AKP’s chairman nor even its member under the current constitution, which requires him to be a neutral president.

Several opinion polls, however, indicate that a certain number of AKP voters have been switching to the Nationalist Action Party (MHP) and that the predominantly Kurdish People’s Democracy Party (HDP) is poised to overcome the 10% national threshold to enter parliament. If those polls are to be believed, an extreme nationalism that outstrips even the MHP seems to be Erdogan’s way of trying to lure back the votes headed to Turkey’s main nationalist party.

Just a day before he spoke of “those who want to make Turkey another Andalusia,” Erdogan denied the existence of a Kurdish problem in Turkey. “What Kurdish problem? There is nothing like this anymore,” he said, sending out a message to the nationalist bases of the AKP and the MHP.

Yet, the impact of Erdogan’s anti-Western and hard-line nationalist rhetoric should not be seen as confined to the electoral context. His messages, after all, reach the widest of popular masses through the means of mass communication, and Turkey’s political culture is changing in line with his radical ideological tone.

The radicalization of Erdogan’s rhetoric is neither something new nor can it be explained with the elections only. This trend, rising in parallel with an increasingly authoritarian regime, became visible and persistent after the 2011 elections, which the AKP won with 50% of the vote. The trend gained a strong momentum and built up with the Gezi Park protests and corruption investigations in 2013. Now, ahead of the 7 June polls, it is escalating further and contributing to the radicalization of Turkish Islamists. (Al-Monitor 24.03)

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