Fortnightly, December 17th 2014

Fortnightly, December 17th 2014

December 17, 2014





1.1  Knesset Dissolution Ahead of March Elections


2.1  Kaminario Secures $53 Million to Fuel Global Expansion 
2.2  Israel a World Leader in Medical Tourism  
2.3  BIRD to Invest $4 Million in Five Israeli Energy Projects   
2.4  Yissum Biotech Unit Raises $3 Million from Chinese Investors  
2.5  Sckipio Raises $17 Million  
2.6  Viewbix Attracts $3 Million in Funding  
2.7  Siklu Signs Agreement with TESSCO  
2.8  Silicom Acquires Fiberblaze, Cutting-Edge Acceleration Company  
2.9  Israel Discovers Another Major Gas Field  


3.1  NovaBay Signs Distribution Agreement With the Biopharm Group
3.2  Lockheed Martin Opens New Innovation Center in UAE
3.3  Air Canada to Launch Non-Stop Service to Dubai
3.4  Mars Invests Further $60 Million to Expand Dubai Factory
3.5  Ford Establishes African Headquarters in Casablanca Finance City
3.5  Saudi & US Firms to Build Theme Park in Morocco


4.1  ET Solar Builds a 40 MWp Solar Power Plant in Israel 
4.2  Licenses Granted To Build Two Solar Power Plants in Jordan 
4.3  US Company ‘First Solar’ Wants to Invest in Morocco 
4.4  Morocco’s Tarfaya Wind Farm Begins Commercial Operations 


5.1  Lebanon’s Trade Deficit Rises 3% Annually
5.2  Lebanon Faces High Unemployment Rate 
5.3  Lebanese New Car Sales Increase by 8% 
5.4  Jordanian Mobile Penetration Rate Climbs to 147%

♦♦Arabian Gulf

5.5  First Reactor of UAE Nuclear Power Plant On-Track for 2017 Start

♦♦North Africa

5.6  Egypt Tourism Revenues More Than Double in Third Quarter
5.7  Egypt’s Trade Deficit Surges 82% in August
5.8  UAE – Egypt Alliance Expands to Desert Wheat Venture


6.1  Turkish Growth Sinks to 2-Year Low, Ankara Blames Bad Weather 
6.2  Turkish Arms Exports Up 20% 
6.3  Turkey’s September Unemployment Hits 10.5% 
6.4  Turkey 2nd in OECD Income Inequality List 
6.5  Turkish Lira Hits 11-Month Low as Media Raid Jars Nerves 
6.6  Cyprus’ Tourism Revenue Continues Downfall 
6.7  Athens Calls Snap Presidential Poll for December 17 



7.1  Chanukah Celebrated in Israel & the World Over


7.2  Amman Uses NASA Help to Reveal Major Water Theft 
7.3  UAE Ranks as Top Arab Country in Well-Being & Life Satisfaction 
7.4  Egypt Cabinet Approves Parliament Constituencies Law 
7.5  Tunisia to Hold Presidential Run-Off on 21 December 


8.1  FDA Approves GI-View’s 360° Colonoscope
8.2  BioLight IOPtiMate Distribution Agreement in Hong Kong & Macao 
8.3  Micromedic Identifies New Genetic Markers to Predict Jaw Necrosis 
8.4  Teva Launches First Generic Celebrex Capsules in the US 
8.5  NLT SPINE Wins Awards for Minimally Invasive Spinal Surgery (MISS) 


9.1  Sol Chip & Netafim Develop Unique Maintenance-free Crop Solution
9.2  OriginGPS’ Nano Module Powers ZANO Drone by Torquing Group 
9.3  JFrog Announces Artifactory Integration with VMware vRealize Code Stream 
9.4  Scottish Water Pilots Applied CleanTech’s New Technology 
9.5  Wikids: the Encyclopedia App for 21st Century Kids 


10.1  Israel’s Consumer Price Index Down 0.2% in November
10.2  Rate of Israelis Below Poverty Line Falls
10.3  Israel Ranks 24th of 34 Countries on the OECD Corruption Index
10.4  Israeli Vehicle Deliveries Up 17% in 2014

 11:  IN DEPTH

11.1  LEBANON: Fitch Affirms Lebanon at ‘B’; Outlook Negative
11.2  IRAQ: Statement at the End of an IMF Mission on Iraq
11.3  IRAQ: Oil Deal a Sign of Hope Between Baghdad & Erbil
11.4  OMAN: S&P Outlook Revised to Negative from Stable
11.5  OMAN: Will Even Oman Now Face Turmoil?
11.6  SAUDI ARABIA: S&P Outlook Revised To Stable From Positive
11.7  SAUDI ARABIA: Saudi Cabinet Changes Suggest Domestic Discontent
11.8  TUNISIA: IMF Completes Fifth Review Under Stand-By Arrangement
11.9  TUNISIA: Tunisia and the Libyan Crisis
11.10  ALGERIA: IMF Executive Board Concludes 2014 Article IV Consultation
11.11  MOROCCO: Oil Explorers Continue Belief in Morocco’s Energy Potential
11.12  TURKEY: IMF Report Forecasts Weaker Economic Performance for Turkey


 1.1  Knesset Dissolution Ahead of March Elections

Less than two years (671 days) after its inception, 19th Knesset voted 93-0 to dissolve itself, making it second-shortest Knesset term in Israeli history.  After only 20 months, MKs voted to dissolve the 19th Knesset and hold new elections on 17 March 2015.

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 2.1  Kaminario Secures $53 Million to Fuel Global Expansion

Kaminario closed a significantly oversubscribed $53 million financing round, bringing total raised capital to $128 million.  In addition to existing investors Sequoia Capital, Pitango, Globespan, Tenaya and Mitsui, the round includes contributions from new investors, Silicon Valley Bank and Lazarus Hedge Fund, as well as a large public company.  Kaminario will use the new investment to accelerate growth and extend go-to-market sales, marketing and support reach with its ultra-efficient, highly scalable and agile K2 all-flash storage array.

Kaminario ( is a leading provider of enterprise-class all-flash storage, delivering unparalleled cost efficiency, with an average price of $2/GB and the industry’s only guaranteed effective capacity.  Built from the ground up to take advantage of the most modern flash SSD capabilities, Kaminario K2 is the only product to feature a true scale-out and scale-up architecture that allows organizations to grow capacity and performance based on their needs.  The company is headquartered in Boston, Massachusetts, with an R&D center in Yokneam, Israel.  (Kaminario 02.12)

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 2.2  Israel a World Leader in Medical Tourism

Canada, the United Kingdom, Israel, Singapore and Costa Rica are among the most attractive destinations in the world for medical tourism in 2014, according to a global index published by the Medical Tourism Association.  The survey was conducted among 5,000 Americans by the International Healthcare Research Center (IHRC).  The MTI measures the attractiveness of a country for medical travel along three key dimensions and 34 underlying criteria.  According to estimates, Israel’s medical tourism industry generates about $250 million a year in income and attracts some 60,000 tourists to the country, including patients and their family members or escorts.  

Israel’s Finance Ministry decided recently to impose taxes on medical tourism.  According to the proposal, a tax of 15% will be imposed on medical tourists, in addition to an 18% value-added tax on medical tourism services.  Politicians defined medical tourism as a goose laying golden eggs and said that imposing taxes on the industry would be like killing that goose.  (Various 08.12)

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 2.3  BIRD to Invest $4 Million in Five Israeli Energy Projects

The US Department of Energy (DOE) and Israel’s Ministry of National Infrastructure, Energy and Water Resources have selected five projects to receive $4 million under the 2014 Binational Industrial Research and Development (BIRD) Energy program.  Each of the cooperative projects includes a US and an Israeli partner and addresses energy challenges and opportunities of interest to both countries, while focusing on commercializing clean energy technologies that improve economic competitiveness, create jobs, and support innovative companies.  The selected projects will leverage private sector cost-share for a total project value of $10.3 million.  This is the sixth year for BIRD Energy which has, so far, approved 22 projects with a total investment of about $18 million (including the projects in this cycle).

The five approved projects are: Advanced MemTech (Ness Ziona) and Arkema (King of Prussia, PA), will develop a carbon nanotube composite membrane that is electrically conductive: Aquanos (Shoshanat HaAmakin) and Aquagen ISI (South Yarmouth, MA), will collaborate on the development and commercialization of an algae-activated aerobic wastewater treatment technology: Fridenson Logistics (Haifa) and ChargePoint (Campbell, CA), will develop a smart grid capable, cloud-connected electric vehicle charging station: NewCO2Fuels (Rehovot) and Acumentrics (Westwood, MA), will collaborate on the development of enhanced performance solid oxide fuels cells for dual application: and Silentium (Rehovot) and GE Energy (Houston, TX), will collaborate on the development of active noise control for power generation ventilation.  (Globes 08.12)

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 2.4  Yissum Biotech Unit Raises $3 Million from Chinese Investors

Integra Holdings (, the biotechnology holdings company of Yissum (, the technology transfer company of the Hebrew University of Jerusalem, has received a $3 million investment from China’s Guangxi Wuzhou Pharmaceutical Group.  The funds raised will be used to advance Integra Holdings’ existing portfolio companies and to create new companies, based on promising projects originating from the Hebrew University.

Integra Holdings, founded by Yissum in 2012, has a portfolio of companies in such therapeutic areas such as oncology, Alzheimer’s disease, infectious diseases, analgesia and inflammation.  The innovative products developed by the portfolio companies range in maturity from pre-clinical stages of development, through clinical stages, to registration.  Currently, the portfolio includes Ayana, Atox Bio, Avraham Pharmaceuticals, Lipomedix, Tiltan Pharma, Lipocure and HIL Applied Medical, in addition to two new companies, which are now being established and develop products with expected short time to market.  This investment was made possible through the local Chinese contacts of the Lakers Holdings Group.  Guangxi Wuzhou Pharmaceutical Group Co. is a subsidiary of the Guangxi Wuzhou Zongheng Group, a Chinese investment holdings company.  (Globes 08.12)

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 2.5  Sckipio Raises $17 Million

Sckipio Technologies has raised $17m in a Series B round led by Pitango Venture Capital and combined with follow-on investment from the original Series A investors; Gemini Israel Ventures, Genesis Partners, Amiti Ventures and Aviv Ventures.  The $17m in Series B follows an initial investment of $10m.  Pitango will take a seat on the Sckipio board of directors. is the newly approved ITU “last mile” standard that will deliver 1Gbps ultra broadband access over existing twisted pair to the home for up to 400 meters. 

Sckipio ( is the leader in modems and is dedicated to delivering ultra-broadband using next-generation Fiber-to-the-distribution point (FTTdp) architectures.  Sckipio offers a complete solution – chipsets bundled with software – for a variety of access and mobile backhaul applications based on the ITU G.9700 and G.9701 standards, to which Sckipio is a leading contributor.  (Sckipio 08.12)

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 2.6  Viewbix Attracts $3 Million in Funding

Viewbix has raised an additional $3m in funding from new investor 2M Companies and previous investors Canaan Partners and Longfellow Venture Partners.  This comes on the heels of $1.1m in funds secured from new investor OurCrowd.  Viewbix will use the funds to accelerate the adoption of its interactive video platform, which has been proven to increase viewer engagement.  The company will also continue to develop its measurement and analytic suite, which allows clients to track and optimize video performance.  Viewbix’s platform makes it easy for advertisers to boost video engagement rates by integrating interactive apps, like call-to-action buttons or email forms, into the video player itself.  Any video can be Viewbix-enhanced and then distributed across the web, from Facebook and Twitter to most video networks.  The company secured $6 million in funding since its founding in 2011.

Tel Aviv’s Viewbix ( is a leading video engagement platform used by marketers to add rich branding and interactive elements – from call-to-action buttons to email captures – to digital videos.  (Viewbix 05.12)

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 2.7  Siklu Signs Agreement with TESSCO

Siklu has signed an agreement with TESSCO Technologies Incorporated, a leading supplier of integrated products and supply chain solutions to the wireless communications industry.  TESSCO will offer Siklu’s full line of EtherHaul millimeter wave systems for high capacity rooftop and street level connectivity.  Siklu leads the millimeter wave radio market with the EtherHaul line of gigabit capacity radios operating over the 60, 70, and 80 GHz bands.  Addressing both rooftop and street level high capacity connectivity challenges, the EtherHaul radios are the ideal solution for dense, capacity-hungry urban networks.

Petah Tikva’s Siklu ( delivers Gigabit capacity millimeter wave wireless backhaul solutions operating in the 60, 70 and 80 GHz bands, ideal for dense, capacity-hungry urban networks.  The most deployed millimeter wave radios in the world, thousands of units are delivering carrier grade performance in varying weather conditions around the world.  (Siklu 04.12)

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 2.8  Silicom Acquires Fiberblaze, Cutting-Edge Acceleration Company

Silicom signed and closed the acquisition of Fiberblaze A/S, a privately-held Denmark-based provider of high performance application acceleration solutions for the mobile, telecommunication, network monitoring, cyber security, financial and related industries.  Silicom has agreed to pay Fiberblaze’s stockholders approximately $10 million in cash, subject to certain adjustments, and additional consideration subject to the attainment of certain future performance milestones.  The transaction has been approved by the Boards of Directors of both companies.  Fiberblaze’s products and core technologies are highly complementary with Silicom’s and do not compete with them. Fiberblaze’s proprietary technologies focus on the implementation of FPGA (Field Programmable Gate Arrays) in network cards, including the programming needed to achieve line-speed data processing with ultra-low latency.  These features are required in Network Monitoring/Capture/Analysis solutions for telecommunications, Lawful Interception, data centers and the Algorithmic HFT (High Frequency Trading) niche of the financial service market, as well as the emerging mobile OSS/BSS market segments.

Kfar Saba’s Silicom ( is an industry-leading provider of high-performance networking and data infrastructure solutions.  Designed primarily to increase data center efficiency, Silicom’s solutions dramatically improve the throughput and availability of networking appliances and other server-based systems.

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 2.9  Israel Discovers Another Major Gas Field

A new natural gas field containing about 3.2 trillion cubic feet (tcf) of gas has been discovered about 150 kilometers (93 miles) off Israel’s coast.  The Royee field contains, according to a seismic survey, between 1.9 and 5 tcf, with 3.2 tcf the best estimate.  The license for the Royee field is held by Israel’s Ratio Oil, which has a 70% stake, along with Israel Opportunity Energy Resources, with a 10% stake.  Italian power company Edison, controlled by France’s EDF, holds 20% of the find.  If the survey is correct, the field would be Israel’s third biggest.  Between the two of them, the much larger Leviathan and Tamar fields have 33 tcf.  According to Israel Opportunity, the find is further evidence that the eastern Mediterranean, known as the Levant Basin, is full of natural gas, and oil may yet be discovered in the region.  (Arutz7 16.12)

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 3.1  NovaBay Signs Distribution Agreement With the Biopharm Group

Emeryville, California’s NovaBay Pharmaceuticals, a biopharmaceutical company focusing on the development and commercialization of its non-antibiotic anti-infective products, signed an exclusive distribution agreement for NovaBay’s NeutroPhase Skin and Wound Cleanser with the Biopharm Group, a leading pharmaceutical company in the Middle East, headquartered in Cairo, Egypt.  Under the terms of the agreement, Biopharm will market NeutroPhase in Egypt, Saudi Arabia, Algeria, Sudan and Libya.

Saudi Arabia, in particular, is a large potential market for NeutroPhase.  The nation’s per capita income is $51,800 — more than $8,500 higher than Canada’s — and its rates of chronic diseases like diabetes are rising.  The increase in chronic diseases, in turn, means a higher rate of medical problems like diabetic ulcers, for which NeutroPhase is an FDA-cleared adjunct treatment.  In fact, researchers report that the number of lower limb amputations due to unhealed diabetic ulcers in Saudi Arabia is climbing rapidly.  More effective treatments for those wounds could save those limbs—while also lowering overall medical costs.  (NovaBay 08.12)

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 3.2  Lockheed Martin Opens New Innovation Center in UAE

Lockheed Martin celebrated the opening of a new state-of-the-art collaboration center in Masdar City to explore innovation, advance security and help to achieve the UAE’s vision of building a strong resilient economy.  The Center for Innovation and Security Solutions (CISS) is the first of its kind outside the United States.  Located in the Incubator Building at Masdar City – Abu Dhabi’s low carbon, sustainable urban development – the Center is a reconfigurable, multi-purpose facility.  It will enable cooperation between Lockheed Martin and the UAE government, industry and academia to develop solutions that address challenges facing today’s world, from climate change to resource scarcity, and advance scientific discovery.  The CISS is the result of a long-standing partnership between Lockheed Martin and the UAE in programs that support government, industry and the development of skills and expertise.  Ten separate projects are underway or in planning.  Lockheed Martin and Masdar have already initiated joint collaboration into nano-technologies and materials with potential applications in aircraft fuselage design, plastics and water-desalination programs, among others.  In addition to Masdar, Lockheed Martin has partnerships in the UAE with Khalifa University, UAE University and Abu Dhabi Polytechnic.  (Lockheed Martin 08.12)

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 3.3  Air Canada to Launch Non-Stop Service to Dubai

Air Canada announced it will launch non-stop service between Toronto and Dubai beginning in November 2015.  The new route will extend the airline’s international network farther into the Middle East at a time of increased travel between North America and the region.  The three-times-weekly Dubai service will be Air Canada’s first non-stop flight to the UAE at a time when air travel between North America and the region is growing.  In addition, the new route will build on Air Canada’s existing codeshare relationship with Etihad Airways, with whom it codeshares on three flights a week between Toronto and Abu Dhabi, in the UAE.  Flights will be operated with the Boeing 787 Dreamliner in a three-cabin configuration, including next generation lie-flat seats in International Business Class, a Premium Economy cabin, and upgraded In-Flight Entertainment available at every seat throughout the aircraft.  (Air Canada 09.12)

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 3.4  Mars Invests Further $60 Million to Expand Dubai Factory

Mars Incorporated, one of the world’s biggest confectionary manufacturers, has announced it has invested a further $60 million in its facility in Jebel Ali Free Zone in Dubai.  The company said it has added a new production line for its Snickers chocolate bars, taking the total investment at the factory to $160 million.  The new line will increase the total site’s production capacity from 60,000 to 100,000 tonnes per year, and create more than 50 jobs to work on the line, adding to over 850 Mars staff currently employed across the GCC.  The launch forms part of a major expansion drive of Mars in the GCC region, complementing its new factory in Saudi Arabia that was inaugurated earlier this month at the King Abdullah City.

With chocolate sales in the Middle East and North Africa expected to reach $5.8 billion in 2016, the latest expansion aims to help the company to continue to meet the demand of the local UAE and Saudi markets, as well as 30 additional markets across the Middle East, North Africa and the Sub-continent to which this facility exports.  (AB 12.12)

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 3.5  Ford Establishes African Headquarters in Casablanca Finance City

US automaker Ford has chosen Casablanca’s Casa Finance City (CFC) to headquarter its office from which it will drive its operations in Africa, making its Casablanca-based headquarters the nerve center of its activities in the African continent.  Ford will be added to the long list of intercontinental companies that have chosen Casa Finance City for the management of their African operations.  In 2014, Casa Finance City received the award for best financial center in the MENA region at the “Middle East Capital Markets Summit & Awards.  (MWN 05.12)

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 3.6  Saudi & US Firms to Build Theme Park in Morocco

A consortium of Saudi and US private firms will invest $1.3 billion on tourism, recreation and health projects in Morocco.  The developments include a theme park featuring a tourist resort and golf course designed to attract 2 million visitors a year, as well as a concrete project that would be used to build low-cost, environmentally-friendly houses, schools, hotels and other facilities.  More than 5,000 two-bedroom homes would be built, as well as a 200,000 sqm medical spa specializing in weight loss and women’s health.  The deal was signed between Riyadh-based Knowledge Corner Marketing and Business Services and the Moroccan city of Taroudant.  Dubai developer Emaar also has built a residential area set around a championship golf course, in the capital, Marrakech.  (AB 07.12)

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 4.1  ET Solar Builds a 40 MWp Solar Power Plant in Israel

ET Solar Energy Corp., a leading smart energy solutions provider, announced that its wholly-owned subsidiary ET Solutions AG has been chosen to provide turnkey EPC service to a 40 MWp PV power plant in Israel along with local partners G-Systems and Elmor.  The project is jointly owned by Arava Power, a pioneering developer of large scale solar installations in Israel, and EDF Energies Nouvelles Israel (“EDF-EN”), one of the world’s leading electric utility companies.  Located in Kibbutz Ketura, approximately 45 km north of Eilat, the project is built in a desert land of 600,000 square meters.  This new solar power facility is expected to generate over 70,000 MW hours of clean and renewable energy each year.  ET Solar provides project management, electrical design and plant layout, purchasing, quality control, construction supervision and commissioning services to this solar power plant.  Furthermore, ET Solar will also serve as the maintenance service provider, and Arava Power will offer the operation services.  (ET Solar 16.12)

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 4.2  Licenses Granted To Build Two Solar Power Plants in Jordan

Two companies were granted licenses recently to start procedures to build two solar-run power plants in the Hashemite Kingdom, according to the Energy and Minerals Regulatory Commission (EMRC).  The commission gave a 20-year license to Jordan Solar One Company to build a 23-megawatt solar-run power plant in Mafraq Governorate.  The commission also gave a 20-year license to Scatec Solar ASA to build a 10.47-megawatt solar-fuelled power plant in the southern Governorate of Maan.  The plant in Maan is expected to be completed in H2/15. 

Jordan, which imports 97% of its energy needs annually, is implementing a strategy to increase the contribution of renewable energy to the overall energy mix to 10% by 2020. 

Also, the Ministry of Energy and Mineral Resources extended a deadline for companies to submit prequalification applications to build a solar plant in the southern region.  The plant, which will be located in Qweira, will have a total capacity of 65-75 megawatts.  The $150 million plant will be funded by grants from Gulf Cooperation Council countries.  In 2011, Saudi Arabia, Kuwait, Qatar and the UAE pledged to grant Jordan $5 billion over a five-year period.  (JT 04.12)

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 4.3  US Company ‘First Solar’ Wants to Invest in Morocco

The US firm First Solar, a global leader in photovoltaic solar energy solutions, expressed its desire to expand its investment in Morocco due to its renewable energy dynamic.  Morocco boasts noteworthy investment opportunities in terms of solar and photovoltaic energy.  First Solar is examining important investment projects in Morocco in partnership with the National Office for Electricity (ONE) and the Moroccan agency for solar energy (MASEN), underlining that Morocco has the asset of the sun which will allow the company to maximize the potential of its technologies in terms of renewable energy production.  The US company had launched its north-African hub in Casablanca last April.  First Solar was part of an American delegation visiting Morocco on 3 – 5 December to explore business opportunities.  The delegation also includes representatives of Brightsource Energy, Ameroc Tires Export, General Electric, Hecate Energy, International Chem-Crete Group, SoEnergy International, Plasti-fab, SunEdison, Solar Energy Group and Zero Mass Water.  (MAP 04.12)

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 4.4  Morocco’s Tarfaya Wind Farm Begins Commercial Operations

The 301 MW Tarfaya wind farm on Morocco’s southern Atlantic coast began full commercial operation on 8 December 2014.  The project has been built by Tarfaya Energy Company (TAREC), an equal partnership joint venture between GDF Suez and Morocco’s Nareva Holding.   Tarfaya is Africa’s largest wind farm to date, comprising 131 wind turbines of 2.3 MW each, spread over an area of 89 million square meters.  The project will generate enough carbon-free electricity for 1.5 million homes.  The total investment cost of the project is approximately $560 million.  The Tarfaya plant has been contracted to supply electricity to the Moroccan state utility Office National de l’Electricité et de l’Eau Potable (ONEE) under a 20-year Power Purchase Agreement (PPA) on a Build, Own, Operate and Transfer (BOOT) basis.  Construction of the wind farm started in January 2013 and phased commercial operation commenced in tranches of 50 MW in June 2014.  The wind farm will be operated by TAREC.  (BNC 14.12)

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 5.1  Lebanon’s Trade Deficit Rises 3% Annually

Lebanon’s trade deficit for the first 10 months of 2014 stood at $14.66b.  This represents a 3% year-on-year (y-o-y) due to the decrease in exports more than offsetting the decrease in imports.  Lebanon’s exports covered 16% of the imports by October 2014, up from 19.42% for the same period in 2013.  Total imports dropped by 1.20% y-o-y to $17.45b.  The three main goods imported to Lebanon were mineral products, which increased by 4.47% y-o-y (24.67% share of total imports), machinery and electrical instruments, which dropped by 16.51% y-o-y (10.53% share of total imports) partly due to the weak construction activity and to the mild intensity of the past winter, and products of the chemical or allied industries, which rose 3.43% y-o-y (9.70% share of total imports).  The three major countries that Lebanon imports products from were China, Italy and France, with respective weights of 12%, 8% and 7%. Simultaneously, total exports fell by 18.61%, yearly, to $2.79b.  This was mainly due to the significant drops in exports of pearls, precious stones and metals by 32.48% y-o-y (17.26% of total exports) and the 15.05% y-o-y decline in exports of machinery and electrical instruments (13.30% share of total exports).  These declines are mainly due to decreased quantity demanded y-o-y, as shown by the 19.41% y-o-y decline in quantities of machinery and electrical instruments exported.  The three major countries that Lebanon exports products to were Saudi Arabia, South Africa and the UAE, with weights of 11%, 10% and 10%, respectively.  Lebanon’s trade deficit for the month of October alone narrowed by 2.76% y-o-y to $1.44b, triggered by the 1.92% drop in imports. In contrast, exports increased by 2.65% in October.  (Blominvest 10.12)

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 5.2  Lebanon Faces High Unemployment Rate

According to the World Bank, the private sector in Lebanon failed in generating enough jobs to take in the expanding labor force.  This drove a rise in unemployment, particularly among young people and women, and to the formation of a large informal economy, concentrated in small, low productive activities.  As it is the case in most countries, young firms and startups are the companies that create the most jobs in Lebanon.  Micro-startups, which are firms operating for 4 years or less and with less than 4 workers, accounted for 177% of aggregate net job creation and created about 66,000 jobs in Lebanon between 2005 and 2010.  The second largest number of jobs (12,000 jobs) was created by young large firms with 200-999 employees.  However, startup creation is low indicating many barriers to starting a business and competition.  

Although a 1% increase in firm productivity in Lebanon raises job creation by 3.9%, most firms do not improve their productivity.  This is due to low competition and poor performance in backbone services such as electricity.  To fix these problems and decrease the unemployment rate, the World Bank proposes the following solutions.  First, policies that weaken open markets and competition for the sake of a few privileged firms should be reformed.  These policies include administrative barriers to firm entry, cumbersome bankruptcy laws, exclusive license requirements to operate in specific sectors, and trade barriers.  Moreover, policymakers should reduce the space for discretionary policy implementation and ensure that laws and regulations are enforced equally across firms.  Another solution is to create institutions that promote and safeguard competition and equal opportunities for all entrepreneurs.  Finally, a process of consultation, inputs and debate between policymakers and citizens should be established.  (Blominvest 05.12)

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 5.3  Lebanese New Car Sales Increase by 8%

Given that Lebanese new passenger car sales inched up by 8% year-on-year over the first 10 months of 2014, to stand at 32,084 cars by October, Business Monitor International (BMI) expects passenger car sales to reach 38,817 units by end of 2014.  Hence, sales growth is forecasted to be 7.5% by end of 2014, compared to a 1.8% by end of 2013.  However, total vehicle imports, new and used, through the Port of Beirut went down by 17.8% y-o-y to reach 64,748 units.  This could indicate that demand growth for vehicles might drop in 2015.  Therefore, BMI projects passenger car sales growth to be lower than 2014, increasing by a yearly 4.0% in 2015, where it would reach 40,369 cars by December 2015.  Nevertheless, due to the tough economic conditions challenging Lebanon, it is expected that small cars, priced below $15,000, would continue to take around 90% of new car sales.  Moreover, the lack of organized public transport and the strong competition between brands are also causes that drive Lebanese consumers to opt smaller cars.  Therefore, luxury cars, priced above $100,000, only account for about 3.5% of the total market.  (Blominvest 04.12)

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 5.4  Jordanian Mobile Penetration Rate Climbs to 147%

Mobile penetration in Jordan reached 147% at the end of the third quarter of this year, increasing by 1% from the end of June, according to Telecommunications Regulatory Commission (TRC) figures.  There were 11 million active mobile subscriptions at the end of September, compared with 10.691 million subscriptions at the end of June.  Internet penetration in the Kingdom also rose by 1% to 74% at the end of September, compared to 73% at the end of the second quarter of this year.  The overall number of internet users in the country stood at 5.6 million at the end of September, the TRC report showed.  Internet subscriptions at the end of the third quarter amounted to 1.646 million, or 22%.  In 2006, Internet penetration stood at 13.7% and subscriptions at 3.7%.

Mobile broadband subscribers constituted 1.3 million of the total Internet subscribers in the first three quarters of this year, followed by ADSL (211,000) and Wi-Max (125,481).  Meanwhile, fixed telephony subscriptions stood at 377,269 by the end of September, continuing a downward trend from 401,000 in 2012, 424,000 in 2011, 485,000 in 2010, 501,000 in 2009 and 614,000 in 2006.  Landline subscriptions as a percentage of the population reached 5.1% by the end of September this year, compared with 8% in 2010 and 11% in 2006.  (JT 16.12)

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♦♦Arabian Gulf

 5.5  First Reactor of UAE Nuclear Power Plant On-Track for 2017 Start

The first of four reactors being built at the UAE’s Barakah nuclear power plant is 61% complete and on track to start up in 2017, Emirates Nuclear Energy Corp (ENEC) said.  The $20 billion Barakah project, funded by the Abu Dhabi government, is expected to provide 24% of the UAE’s energy by 2020, when all four reactors come on-stream.  In December 2009, the UAE awarded a group led by Korea Electric Power Corp (KEPCO) a contract to build four 1,400 MW nuclear reactors to meet surging demand for electricity.  The plant’s second reactor, which was approved by the UAE regulator in 2012 alongside the first one, is over 50% complete.  Approvals for reactors 3 and 4 were given in October this year, with concrete pouring already started for unit 3 and expected for unit 4 by next year.  Soaring energy use and inadequate gas supplies have spurred the UAE to look to nuclear power to diversify its energy sources beyond. The UAE is the first Gulf Arab state to start building a nuclear power plant to generate energy.

Before giving the contract to the South Korean consortium, the UAE signed an agreement with the United States in early 2009 that forfeited its right to enrich uranium domestically.  It awarded $3 billion in contracts to six foreign firms in 2012 to supply fuel for the Barakah project.  The contracts, which range from the purchase of uranium to conversion and enrichment services, will cover fuel supply for the first 15 years of operations.  (Reuters 08.12)

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♦♦North Africa

 5.6  Egypt Tourism Revenues More Than Double in Third Quarter

Egypt’s tourism revenues jumped 112% to about $2 billion in Q3/14, suggesting the key industry was showing signs of recovery, albeit from a particularly bad third quarter last year.  Tourism, an important source of foreign currency, has been hammered since the popular uprising that toppled Hosni Mubarak in 2011.  It suffered another blow in mid-2013, after the ouster of Islamist President Morsi from power after protests against his rule.  The number of tourists reached 2.8 million compared to 1.6 million in the same quarter last year.” 

Egypt received over 14.7 million tourists in 2010, before the 2011 uprising, which saw the number of visitors drop to 9.8 million.  In 2012, the number of tourists rose to 11.5 million but fell again in 2013 to 9.5 million with revenues of $5.9 billion.  Egypt’s tourism minister Zaazou said that tourism could fully recover by the end of next year if regional turmoil did not spread to the Arab world’s biggest country.  (Reuters 08.12)

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 5.7  Egypt’s Trade Deficit Surges 82% in August

Egypt’s trade deficit grew 81.9% in August compared to the same period a year earlier, CAPMAS announced on 11 December.  The deficit reached LE32.8 billion in August compared to LE18 billion in the same period the previous year.  A significant rise in imports by almost 50% caused the rise.  According to the CAPMAS report, the increase in imports was driven by a surge in the value of crude oil, steel and passenger cars by 100%, 95% and 283% respectively.  Meantime, exports slightly increased by 8.5% in August to reach LE15 billion due to the rise in the value of dairy products and ready-made garments.  (Ahram Online 11.12)

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 5.8  UAE – Egypt Alliance Expands to Desert Wheat Venture

Egypt and two companies from the UAE (Al Dahra and Jenaan) have embarked on an ambitious plan to grow wheat in the desert that could boost the Cairo government’s credibility if successful.  Egypt, the world’s biggest wheat importer, has long aspired to become self-sufficient in its staple food through various schemes including reclaiming land in its desert wastelands.  Experts say growing wheat in the desert makes no economic sense given the logistical and environmental challenges.  Within a couple of years, the UAE companies plan to grow and sell several hundred thousand tonnes of wheat to the Cairo government – equivalent to about 10% of the domestic crop bought annually from farmers.  Al Dahra and Jenaan said the decision to grow wheat in the East Oweinat and Toshka regions was made in consultation with Emirati authorities.  Jenaan acknowledged challenges including a lack of labor and transport costs, combined with potential problems with groundwater.  (Reuters 06.12)

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 6.1  Turkish Growth Sinks to 2-Year Low, Ankara Blames Bad Weather

Growth in Turkey’s economy slowed to 1.7% year-on-year in the third quarter, its lowest since the final quarter of 2012.  Ankara is holding weak agricultural output due to bad weather conditions responsible.  The third quarter gross domestic product (GDP) growth was well below the median market estimate of 3%.  A 4.9% year-on-year decline in agricultural production in Q3 and poor domestic consumption were cited among the key factors for the low growth.

Household consumption, which makes up two-thirds of the economy, grew only 0.2% year-on-year in the third quarter compared with 0.5% in the previous quarter.  Government spending, a key contributor to growth, increased 6.6%; meanwhile, investment declined 0.4%.  Exports surged 8%, while imports fell 1.8% year-on-year in the third quarter.  The third quarter growth data comes on the heels of a relatively strong industrial activity in this period. Industrial production in October fell 1.8% from the previous month, registering the biggest monthly loss so far this year, sending mixed signals about the final quarter growth.

The figures heightened prospects of growth being well below the government’s 4% target for 2014.  The average market forecast for 2014’s full-year growth stands slightly above 3%.  (HDN 11.12)

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 6.2  Turkish Arms Exports Up 20%

Turkey’s defense exports for the first 11 months of 2014 increased 20% compared to the same period last year, hitting $1.5 billion, according to figures from the Turkish Exporters’ Assembly.  The U.S. was the largest purchaser of Turkish defense hardware at a total of $508 million.  Other major markets were Malaysia at $109 million and the UAE at around $87 million.  The export items varied from aircraft, helicopter parts to engines, armored land vehicles, speed boats, missiles, rockets, launching platforms, light weaponry and electronic systems, including transmitters, simulators, sensors and military software.  The defense industry products make up slightly over 1% of total exports, which were valued at $144 billion for the January-to-November period.  Turkish exports in the defense and aviation industries reached $1.39 billion in 2013.

Meanwhile, Turkey’s defense spending was TL 29.4 billion, or $13.2 billion, this year, according to the Turkish Defense Ministry.  Turkey spent about 1.71% of its GDP on defense in 2014, far less than was spent in the past.  Turkey is currently negotiating a $3.5 billion deal for a long-range air and anti-missile defense system, including local production, with suppliers from China, the U.S. and Europe.  (Anadolu Agency 11.12)

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 6.3  Turkey’s September Unemployment Hits 10.5%

Turkey’s unemployment rate has increased to 10.5% in the three month period between August and October, compared with the 10.1% between July and September, the Turkish Statistical Institute (TUIK) said on 15 December.  This is the highest figure since February 2011.  The non-agricultural unemployment rate was 12.7% in the September period.  The number of unemployed people aged 15 and over surged to 3.06 million from 2.94 million in the previous period.  The youth unemployment rate was announced as 19.1%.  (TUIK 15.12)

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 6.4  Turkey 2nd in OECD Income Inequality List

The gap between rich and poor in Turkey is at the second highest level among Organization for Economic Cooperation and Development (OECD) member countries, a report by the organization showed.  The OECD report, titled “Does income inequality hurt economic growth?” revealed that income inequality has now hit its highest level in 30 years in OECD countries.  “Today, the richest 10% of the population in the OECD area earn 9.5 times more than the poorest 10%,” the OECD report read.  According to the Gini coefficient, a broader measure of inequality ranging from zero, where everybody has an identical income, to 1, where all income goes to only one person, Turkey ranks second after Mexico in income disparity.  The report adds that income inequality has slightly fallen only in Greece and Turkey. 

Turkey has a bleak record regarding income distribution.  A Credit Suisse report had separately shown in October that the gap between Turkey’s rich and poor continues to expand, with 10% of the population holding 78% of the total wealth in the country.  The same report had said that Turkey was home to the third-fastest deterioration of income equality, after Egypt and Hong Kong, between 2000 and 2014.  (Zaman 09.12)

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 6.5  Turkish Lira Hits 11-Month Low as Media Raid Jars Nerves

The Turkish Lira, one of the worst performers earlier this year due to concern that the FED would end its tapering program that had boosted emerging markets, has seen another tumble after a weekend raid by police on media outlets.  The currency has weakened 0.8% to 2.317 to the dollar, which is its weakest since January when it hit an all-time low of 2.39.  Emerging markets have already been under pressure due to the expected rate announcement by the FED, which is preparing to increase rates after almost a decade.  (HDN 15.12)

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 6.6  Cyprus’ Tourism Revenue Continues Downfall

Tourism revenue continued on its downward path in September, with the latest monthly statistics suggesting earnings dropped a whopping 22.6% year-on-year by €80m, but year-to-date figures showed that the decrease was slower, at €42m compared to the same nine-month period last year.  This follows an earlier trend that saw revenues drop by about €17m or -5.1% in July, compared to the same month in 2013, while increases had been recorded in April, May and June.

The monthly Passenger Survey conducted by the statistical service Cystat showed that revenue from tourism dropped to €273.4m in September compared to €353.4m in the same month last year, as tourist arrivals too dropped in September by 11.5% compared with a year earlier.  For the January-September period, Cystat said revenue from tourism is estimated at €1,697.6m compared to €1,739.7m in 2013, a decrease of 2.4% or €42.1m.  (FM 04.12)

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 6.7  Athens Calls Snap Presidential Poll for December 17

The Greek government announced on 8 December that a first round of votes for the presidential election will be held on 17 December, underlining the need for Greek authorities to focus on troika talks following a decision by eurozone officials to approve a short extension to Greece’s bailout and to curb political uncertainty.  The surprise announcement came shortly after eurozone finance ministers meeting in Brussels signaled that they would approve a request from Greece for the European part of its bailout, which ends on 31 December, to be extended by two months.  The decision paves the way for the return to Athens of troika inspectors and the resumption of a stalled review.

The decision in Brussels to approve the extension of Greece’s bailout by two months came just a few hours after Greece approved its budget for 2015 in Parliament.  A budget passed in Parliament in the early hours of 8 December – with 155 votes in favor, 134 against and 1 MP voting present – predicts a return to growth next year of 2.9% of GDP and a fiscal deficit of 0.2% of GDP. It also pledges a series of tax breaks.

But it does not have the endorsement of the troika, which predicts a fiscal gap for next year which would necessitate more than €2 billion in additional measures.  Although Greece has rejected the existence of a fiscal gap, it has proposed to the troika certain measures that it could take in the event that further savings are necessary.  Those include raising value-added tax on hotel services to 13 from 6.5% and phasing out early pensions.  (ekathimerini 08.12)

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 7.1  Chanukah Celebrated in Israel & the World Over

Tuesday evening, 16 December, the Jewish world began the observance of the eight day Chanukah holiday.  From the Hebrew word for “dedication” or “consecration”, Hanukkah marks the rededication of the Temple in Jerusalem after its desecration by the forces of Seleucid Greeks and commemorates the “miracle of the container of oil”.  The re-dedication followed the liberation of Jerusalem by the Jewish forces, or Maccabees, who were fighting to regain their independence against the Greek invaders.  There was only enough consecrated olive oil to fuel the eternal flame in the Temple for one day.  Miraculously, the oil burned for eight days, which was the length of time it took to press, prepare and consecrate fresh olive oil.  The holiday also celebrates the military victory and the restoration of Jewish independence.  The holiday lasts until 5 December. 

Though business is permitted during this holiday, the week in Israel is marked by many leaving work early to be with the family at nightfall, in time to light the menorah, or eight branched candelabra.  The primary ritual, according to Jewish law and custom, is to light a single light each night for eight nights.  As a universally practiced “beautification” of the mitzvah, the number of lights lit is increased by one each night.  There is also a custom of eating foods fried in oil as a culinary way of commemorating the Chanukah miracle after the Maccabees won the battle against the Greeks ruling Israel.  While the favored fried Chanukah treat of Israelis is the jelly doughnut, most North American Jews prefer latkes, a grated potato-and-onion pancake fried in oil and served with sour cream or apple sauce.  

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 7.2  Amman Uses NASA Help to Reveal Major Water Theft

Through using satellite remote sensing techniques in collaboration with the US National Aeronautics and Space Administration (NASA), authorities have uncovered a major case of water theft, Ministry of Water and Irrigation.  The ministry has discovered an illegal 1.5km pipe linked to a major water conveyer in the Tneib region in south Amman, through which the main suspect had been allegedly diverting 1,200 cubic meters from public water supplies daily to his farm.  Teams from the ministry and Miyahuna, the firm handling the distribution in the capital, who rushed to the scene faced resistance from the suspect and a group of people “who circled the farm”, adding that the farm was also guarded by fierce dogs.  

Aided by security forces as well as the ministry’s teams, the prosecutor general and members of the Higher Judicial Council moved to the spotted location and gave orders to carry out an inspection of the farm.  Inspection unveiled a large pool to store the stolen water, which is then pumped to nearby and faraway farms using pipelines, adding that owner of the pool allegedly installed gauges on the pipelines to sell water to other farmers.  The ministry’s technical teams then documented the violations in detail, dismantled the pipelines and calculated the amount of water stolen.  The farm’s owner was detained for a week, pending further investigation upon directives of the prosecutor general, said the statement.  

The Water Ministry has since August last year launched an aggressive campaign to stop water theft and illegal use, including unlicensed underground water wells, blaming the illegal acts for 70% of water waste in the Kingdom, which is among the top world countries in terms of water shortage.  (JT 08.12) 

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 7.3  UAE Ranks as Top Arab Country in Well-Being & Life Satisfaction

The UAE is ranked the top Arab country in well-being and life satisfaction, according to the Legatum Prosperity Index 2014.  The London-based Legatum Institute released the latest edition of its world prosperity index report last month.  The report reveals that the UAE is among the top countries in safety and security as 92% of people involved in the questionnaires said that they feel absolutely safe in the country.  In economy, the UAE moved from 13th rank in 2013 to the 10th rank this year due to an increase in the gross domestic savings rate, which rose from 33% in 2010 to 43% in 2013, which demonstrates that the UAE population is save their money more than they were four years ago.  The UAE ranked 22 globally with the lowest levels of unemployment with an unemployment rate of only 3.8% of the total labor force.  According to the report, the UAE maintained its 28th ranking globally from among the 142 countries included in the index.

Launched on 3 November, the Index reveals Norway as the most prosperous country for the sixth year in a row, while Switzerland is ranked second and New Zealand has risen from fifth to third since last year.  The least prosperous countries are predominantly found in sub-Saharan Africa, with the Central African Republic bottom of the rankings, followed by Chad and Congo (DR).  (WAM 08.12)

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 7.4  Egypt Cabinet Approves Parliament Constituencies Law

Egypt’s cabinet approved the electoral constituencies law, the final legal step necessary before the parliamentary vote expected mid next year.  The people’s assembly will constitute 567 seats, of which 420 will be allocated for independent candidates and 120 for electoral party lists.  The president will be entitled to appoint 5% of the representatives, or 27 seats.  Independent candidates will be divided over 232 constituencies while party list candidates will be divided over four large constituencies.  The elections law, approved in June, was criticized by a variety of political forces and parties for the allocation of most of the parliament’s seats to individual candidates and closed party lists.

The law still has to be ratified by Egyptian President El-Sisi, who currently holds all legislative powers until the new parliament is sworn in.  Parliamentary elections are the third and final step in a political roadmap set forth after the ouster of Islamist president Mohamed Morsi July 2013.  To ensure equality, the law stipulates a specified number of seats to different sets of minorities and underrepresented factions in society.  At least 24 seats are allocated for Christians, eight for expats, eight for the handicapped and 21 for female candidates.  (Ahram Online 10.12)

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 7.5  Tunisia to Hold Presidential Run-Off on 21 December

Moncef Marzouki and Beji Caid Essebsi are to face off on 21 December in Tunisia’s second round of presidential voting to decide who leads the nation that sparked the Arab Spring.  Campaigning has begun and will last until midnight on 19 December.  Neither incumbent Marzouki nor 88-year-old political veteran Essebsi won an overall majority in the first round of polling on 23 November.  The final results from the first round showed Essebsi ahead with 39.46% of votes cast and Marzouki on 33.43%.

The election in the North African nation is the first time its people have been able to vote freely for their head of state since independence from France in 1956.  Twenty-seven candidates stood in the first round of the milestone election in Tunisia, where the ouster in 2011 of longtime strongman Zine El Abidine Ben Ali set off a chain of revolts that saw several Arab dictators toppled by citizens demanding democratic reform.  The country’s leaders pride themselves on the fact that Tunisia has been largely spared the bloodshed that has hit other Arab Spring states such as Egypt, Libya and Yemen.  But it faces significant challenges, including a jihadist threat, a weak economy and social unrest.

Anti-Islamist party Nidaa Tounes, which is headed by Essebsi, won 86 seats in parliamentary polls in October, beating moderate Islamist movement Ennahda, dominant since Ben Ali’s ouster, into second place with 69 seats.  Marzouki, 69, was an exiled dissident during Ben Ali’s rule and was elected president at the end of 2011 by an interim assembly under a coalition deal with the then-ruling Ennahda.  Essebsi held key positions under Habib Bourguiba, the father of Tunisia’s independence, and under Ben Ali.  To prevent another dictatorship, presidential powers have been restricted under a new constitution, with executive prerogatives transferred to a premier.  The electoral system calls for the party with the most votes to form a coalition government.  Nidaa Tounes has said the process will start after the presidential run-off.  (AFP 08.12)

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 8.1  FDA Approves GI-View’s 360° Colonoscope

GI View announced that it has received FDA 510(k) clearance for its flagship product, the Aer-O-Scope Colonoscope System, an advanced, comprehensive and easy-to-use system for colorectal cancer screening.  Market introduction is expected in the US in early 2016.  In addition to the 360° omni-directional visualization, Aer-O-Scope also has several other unique advantages.  Its soft multi-lumen tube is designed to significantly reduce pressure on the colon wall, which in turn, increases patient safety.  Safety and ease of use are further maximized by the system’s self-propelled intubation, created using balloons and low pressure CO2 gas. As the system is joystick controlled it is also extremely simple to operate and requires minimal training. And finally, but of extreme importance, because the colonoscope is single use and disposable, there is no risk of disease transmission from it.  Like other colonoscopes, Aer-O-Scope also provides insufflation, irrigation and suction.

Headquartered in Ramat Gan, GI-View ( is dedicated to fundamentally advancing the efficiency, accuracy and comfort of colorectal cancer screening.  The company’s flagship product is the Aer-O-Scope Colonoscope System, the only colonoscope with a 360° omni-directional view for colon cancer screening. GI-View has been granted ISO certification for quality systems.  Aer-O-Scope Colonoscope System has a CE mark and is FDA cleared for market.  (GI View 03.12)

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 8.2  BioLight IOPtiMate Distribution Agreement in Hong Kong & Macao

BioLight Life Sciences Investments signed an exclusive distribution agreement for the sale and marketing of the IOPtiMate system in Hong Kong and Macao, including the purchase of at least 9 systems during the initial term of the agreement.  The IOPtiMate system is based on CO2 laser technology that enables the performance of a unique filtration surgery to treat glaucoma without penetrating the inner part of the eyeball, allowing for substantial reductions in post-operative complications and use of eye drops compared with alternatives.  A leading medical center in Hong Kong recently purchased the IOPtiMate system and an additional IOPtiMate system has been installed on a trial basis at a second medical center in Hong Kong.  BioLight recently began marketing to leading physicians and medical centers in China after receiving approval in March 2014 from the China Food and Drug Administration (CFDA) to market and sell the IOPtiMate™ system.  This distribution agreement in Hong Kong and Macao, along with the distributer commitment to purchase at least 9 IOPtiMate systems, is the result of an intensive marketing campaign by BioLight in Asia for the IOPtiMate system as part of the Company’s focus on markets with unmet needs for better solutions to treat glaucoma.

Ramat Gan’s BioLight Life Sciences Investments ( invests in, manages and commercializes biomedical innovations grouped around defined medical conditions – ophthalmology and cancer diagnostics.  The ophthalmic technologies include IOPtiMate, a laser-based non-invasive surgical treatment for glaucoma; TeaRx, a point-of-care multi-parameter diagnostic test for dry-eye syndrome; and Eye-D, a controlled release drug-delivery insert platform.  The cancer diagnostic activities include tests that are designated for bladder, cervical, multiple myeloma and other cancers.  (BioLight 08.12)

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 8.3  Micromedic Identifies New Genetic Markers to Predict Jaw Necrosis

Tel Aviv’s Micromedic Technologies ( has identified several new genetic markers with high potential to predict necrosis of the jawbone in patients taking bisphosphonate drugs for multiple myeloma, a cancer of the bone marrow.  Upon confirmation of these findings from a trial conducted at the Tel HaShomer Medical Center, Micromedic plans to develop a diagnostic test for people with multiple myeloma and possibly for others taking bisphosphonates, such as people with breast or prostate cancer and people with osteoporosis.  The trial was designed to identify the unique genetic profile that enables the assessment of risk among cancer patients to develop the devastating side effect known as bisphosphonate-related osteonecrosis of the jaw, or BRONJ.  BRONJ appears in approximately 500,000 cancer patients each year, with a prevalence rate of up to 18.6% among multiple myeloma patients, 1.2%-12% among breast cancer patients, 6.5%-7% among prostate cancer patients and up to 0.1% among osteoporosis patients taking bisphosphonates.  In response to growing concern about BRONJ, in 2005 the US FDA issued a broad drug class warning about this complication.  Micromedic has filed three new patent applications covering the newly discovered markers and is preparing to conduct testing to validate the findings. “To our knowledge there is no effective method on the market to identify the population at risk of developing the BRONJ side effect. Micromedic invests in, manages and promotes products for the early detection of cancers, with an emphasis on personalized medical treatments. (Israel21c 11.12) 

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 8.4  Teva Launches First Generic Celebrex Capsules in the US

Teva Pharmaceutical Industries launched the first FDA-approved generic equivalent to Celebrex (Celecoxib) Capsules in the US.  Teva is offering 50, 100, 200, and 400 mg strengths of Celecoxib Capsules.  Celebrex (Celecoxib) Capsules, marketed by Pfizer, had annual sales of approximately $2.56 billion in the United States, according to IMS data as of October 2014.  Teva Pharmaceutical Industries ( is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is the world’s leading generic drug maker, with a global product portfolio of more than 1,000 molecules and a direct presence in approximately 60 countries.  (Teva 10.12)

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 8.5  NLT SPINE Wins Awards for Minimally Invasive Spinal Surgery (MISS)

NLT SPINE, a developer of minimally invasive and percutaneous spine surgery systems, has again been recognized for its innovative vision and its non-linear technology, which has already led to several industry-acclaimed spinal solutions.  As a company, NLT SPINE is on the list of 2014 Red Herring Global 100 Winners.  In the US, the company’s ARC Pedicle System for thoracolumbar care has been awarded Orthopedics This Week’s 2014 Spine Technology Award. NLT’s ARC system is one of eleven technologies singled out from a field of 40 submissions for “a most innovative, enduring and practical product to treat back pain.”

This is the second time NLT SPINE has been selected by industry-leading executives, analysts and strategists for a prestigious Red Herring Award.  The company’s inclusion in the list of 2014 Red Herring Global Top 100 Winners, both affirms and expands on the recognition gained when NLT Spine was included in the list of 2013 Red Herring Europe Top 100 Winners in the field of Life Sciences/Biotech. 

Kfar Saba’s NLT SPINE ( specializes in the development of innovative spine surgery instrumentation and implants for treating degenerative spinal conditions through small surgical incisions.  The company’s vision is to improve patient care and reduce total treatment costs by ultimately shifting from traditional open surgical routines to minimally invasive and percutaneous spine surgery, employing new methods and technologies to enhance usability and outcomes.  (NLT SPINE 11.12)

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 9.1  Sol Chip & Netafim Develop Unique Maintenance-free Crop Solution

Sol Chip and Netafim signed an MOU for the joint development of a hybrid, maintenance-free crop monitoring system.  The solution will virtually eliminate the need to carry out maintenance on the battery-operated system, thereby increasing grower profitability.  The innovative system will be powered by Sol Chip Pak (SCP), a unique hybrid power solution that harvests light energy in order to power billions of individual appliances.  Based on a patented IP, SCP integrates all required components into a single unit to supply continuous and sustainable light energy for 24/7 operations.  Sol Chip’s technology utilizes a low-cost manufacturing flow, thereby increasing overall efficiency and decreasing design complexity, while reducing operation costs by 60%.

The joint crop monitoring system is anchored by Netafim’s rSense, a comprehensive solution enabling growers to achieve better and higher yields, while cutting resource use and costs.  The advanced solution leverages market-leading technological and agricultural know-how, as well as 50 years of industry experience.  Featuring a wide range of sensors, reliable wireless communications, and user-friendly monitoring software, rSense combined with SCP represents the industry’s first maintenance-free crop monitoring solution.

Haifa’s Sol Chip ( is an Internet of Things (IoT) system and energy harvesting solutions provider.  Sol Chip has developed maintenance-free IoT solutions based on its Everlasting Solar Battery.  This compact battery can supply energy for the lifetime of IoT devices. Sol Chip’s technology provides a platform for disruptive applications such as home automation, smart cities, precision agriculture and many more.

Tel Aviv’s Netafim ( is the global leader in drip and micro-irrigation solutions for sustainable productivity.  With 28 subsidiaries, 16 manufacturing plants and over 4,000 employees worldwide, Netafim delivers innovative solutions in over 110 countries across the globe.  Founded in 1965, Netafim pioneered the drip irrigation revolution, creating a paradigm shift toward low-flow agricultural irrigation.  Today, Netafim offers a wide range of state-of-the-art irrigation and complementary solutions for agriculture, landscaping and mining.  (Sol Chip 08.12)

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 9.2  OriginGPS’ Nano Module Powers ZANO Drone by Torquing Group

OriginGPS announced that the UK’s Torquing Group has integrated OriginGPS’ Nano Hornet in ZANO, one of the world’s smallest consumer-grade drones, to provide location information for automated flight while acting as a hands free camera.  ZANO’s location capabilities are powered by OriginGPS’ Nano Hornet, the world’s smallest GPS module with an integrated antenna.  Measuring just 10mm by 10mm by 3.44mm, the Nano Hornet delivers outstanding performance and sensitivity with low power consumption. It achieves a rapid time to first fix (TTFF) of less than one second, with approximately one meter accuracy and -163dBm tracking sensitivity.  Because it detects changes in context, temperature and satellite signals, it achieves a state of near continuous availability, while consuming mere microwatts of precious battery power.

Airport City’s OriginGPS ( is a world-leading designer, manufacturer and supplier of miniaturized GNSS modules (“Spider” family), antenna modules (“Hornet” family) and antenna solutions.  OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions.  (OriginGPS 10.12)

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 9.3  JFrog Announces Artifactory Integration with VMware vRealize Code Stream

JFrog, maker of Artifactory, the popular Binary Repository Manager, announced a very important step in the evolution of DevOps environment deployment with the integration of Artifactory into VMware, vRealize Code Stream.  The new integration will enable customers using vRealize Code Stream to more easily manage development environments that automate everything from builds through testing and artifact management to deployment, with minimal configuration.  Development teams will now have access to fully configured and reusable continuous-integration build environments, version control tools and deployment tools.  They will also have the award winning Artifactory for managing artifacts, dependencies and package repositories, and managing build releases on-demand.  This can save Development and DevOps teams time and resources, allowing them to concentrate on the important task of delivering cutting-edge software as efficiently as possible.  Faster cycles is DevOps’ main challenge today.  More viable releases and more confidence means more end-users and better go-to-market!

Netanya’s JFrog ( provides world class infrastructure for software management and distribution in open-source, on-prem and SaaS cloud solutions.  JFrog’s platform is a revolutionary solution that has changed the way companies and individuals develop, release and distribute software.  JFrog’s Artifactory Binary Repository Manager and Bintray, the Distribution as a Service platform, are used by millions of developers around the world.  (JFrog 10.12)

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 9.4  Scottish Water Pilots Applied CleanTech’s New Technology

Applied CleanTech announced that a pilot project to test its new recycling technology for waste water was completed at Dunbar and Aviemore Waste Water Treatment Works with promising results.  Scottish Water has been testing whether value can be recovered from sewage while reducing maintenance and power costs.  This new technology is a very fine filter that captures all the cellulose and some of the fats, oils and grease coming into the waste water treatment works.  The solids are then pasteurized, producing a pellet material called Recyllose.  Known as the Sewage Recycling System (SRS) and developed by Applied CleanTech (ACT), the technology has been successfully used internationally in Mexico, Canada, Israel and the Netherlands.  This is the first installation in the UK.

After successful global installations, Applied CleanTech enters its next round of investment, looking for partners in the UK that will join its success and continue its achievements in producing this new compound of recycled cellulose from an endless, untapped resource.  Jerusalem’s Applied CleanTech ( developed a game-changing technology that transforms raw sewage into green, revenue-generating product, while saving operation expenses.  The company has already revenues from sales and operations, and established business collaborations worldwide, making wastewater treatment a profitable business.  (ACT 15.12)

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 9.5  Wikids: the Encyclopedia App for 21st Century Kids

Wiki-Kids launched Wikids.  Wikids apps feature carefully crafted text and friendly narration, along with images and sounds, offering curious kids who want to explore independently a fascinating way to broaden their horizons.  Each Wikids app contains 120 entries in 5 categories, written from the point of view of the child and presented in a captivating fashion.  Wikids: Animals, Nature, Countries, Landmarks and Food and Wikids: Space, The Human Body, Musical Instruments, Occupations and Transportation will take your kids on a journey through an exciting range of topics.  Wikids entries are written with the belief that almost anything can be explained to young kids in about 80 words (30 seconds narrated).  Designed for independent discovery, Wikids apps present knowledge in context, with interrelated entries allowing your child to freely explore different topics.  Wikids apps are 100% child safe, contain no ads, links or distractions whatsoever, and have been certified by the kidSAFE Seal Program and Momswithapps.

Tel Aviv’s Wiki-Kids ( develops new ways of offering knowledge to young children.  The company works with psychologists and experts in literacy education to make sure that its products contribute to the development of children’s minds.  Its goal is to create an encyclopedia for 21st century kids.  Wikids apps are available for download on the Apple App Store.  (Wiki-Kids 15.12)

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 10.1 Israel’s Consumer Price Index Down 0.2% in November

Israel’s deflation continues despite the depreciation of the shekel and all-time low interest rates.  The Consumer Price Index (CPI) was down 0.2% in November, the Central Bureau of Statistics reported.  The CPI is down 0.2% in the first 11 months of 2014 and without the housing costs component it has fallen by 1.3%.  Analysts had predicted a 0.3% fall in the CPI so this was not unexpected.  In October the CPI rose by 0.3%.  Notable falls in November were in vehicle fuel (3.6%), due to the fall in oil prices on global markets, fresh vegetables (5.8%), vehicle insurance (2%), and poultry (1.5%.).  There were notable rises in housing costs (0.3%), fashion and footwear (2.8%), and cosmetic accessories (2.3%).  (CBS 15.12)

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 10.2 Rate of Israelis Below Poverty Line Falls

More than 1.6 million Israelis lived below the poverty line, including 750,000 children, the latest National Insurance institute poverty report found.  The report found that 18.6% of Israeli families lived below the poverty line at the end of 2013, down from 19.4% at the end of 2012.  Per capita poverty fell from 23.5% to 21.8% over this period and child poverty fell from 33.7% at the end of 2012 to 30.8% at the end of 2013.  Poverty among senior citizens fell from 22.7% at the end of 2012 to 22.1% last year.  However, the report stressed that Israel still has one of the worst rates of poverty in the OECD with only Turkey and Mexico having higher rates.

The report found that as of the end of 2013, a couple with three children were living under the poverty line if they did not have an income of NIS 9,000 per month.  A couple needs a monthly income of NIS 4,783 to stay above the poverty line and an individual needs NIS 2,989.  Poverty in Israel’s Arab sector fell from 54.3% at the end of 2012 to 47.4% at the end of 2013.  Despite cuts in child benefits in 2013, the National Insurance Institute attributes the improved situation on poverty to more welfare aid and higher participation in the work force.  (Globes 16.12)

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 10.3 Israel Ranks 24th of 34 Countries on the OECD Corruption Index

Israel ranked 24th out of 34 OECD member states in the annual Corruption Perceptions Index.  The report, compiled by the anti-corruption organization Transparency International, ranked 175 countries and territories based on how corrupt experts perceived them to be.  Countries were ranked from “very clean” (with a score of 100 points) to “highly corrupt” (0 points).  Israel, with 60 points, was ranked in 37th place, in a tie with Spain.  In 2013, Israel scored 61 points and tied with Taiwan in the 36th spot.

Out of the 34 OECD countries, the world’s most developed countries, Israel came in at 24th, one place lower than in 2013. Turkey received a score of 45, Italy and Greece received score of 43 each, and Mexico had a score of 35.  The Middle East generally featured low on the list, with Jordan ranked 55th (with a score of 49 points), Egypt in 97th place (with 34 points), Lebanon in 135th place (with 27 points) and Syria in 159th place (with 20 points).

Denmark topped the 2014 list with a score of 92, followed by New Zealand, Finland, Sweden and Norway.  Somalia and North Korea were both at the bottom of the list, with a score of 8 each.  More than two-third of the countries surveyed received scores lower than 50.  (IH 03.12)

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 10.4 Israeli Vehicle Deliveries Up 17% in 2014

The number of vehicle deliveries in 2014 so far is up 17% over last year and is moving towards a new record.  In November, 19,754 new cars were delivered, up 17% from November 2013.  The number of new vehicle deliveries in the first 11 months of the year was 229,294, up 14% from the corresponding period of 2013.  Hyundai is the leading carmaker in terms of deliveries in Israel with 27,980 new vehicles sold this year, down 4% on last year.  In second place is Toyota with 23,687 deliveries, up 29% and in third place is Kia with 22,915 deliveries, up 26%.  In fourth is Mazda with 15,405 deliveries, up 67% and in fifth is Skoda with 12,415 deliveries, up 4%.  In sixth is Suzuki with 12,158 deliveries, up 37%.  (Various 06.12)

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 11.1 LEBANON:  Fitch Affirms Lebanon at ‘B’; Outlook Negative

On 12 December, Fitch Ratings ( has affirmed Lebanon’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘B’.  The Outlooks are Negative.  The issue ratings on Lebanon’s senior unsecured foreign and local currency bonds have also been affirmed at ‘B’.  The Country Ceiling has been affirmed at ‘B’ and the Short-term foreign currency IDR at ‘B’.

Key Rating Drivers:  Lebanon’s ‘B’ IDRs reflect the large, rising public debt burden in the context of high political and geopolitical risks, despite a strong resiliency to shocks illustrated by high GDP per capita and human development indicators, a well-run banking system and credible exchange rate policy.

Political risk has been particularly high since the outburst of the Syrian conflict, illustrated by regular security incidents, rising tensions among communities and against Syrian refugees, and political deadlock over the election of a president since May 2014.  A fragile political continuity has prevailed thanks to the formation of a consensual government in early 2014 and the extension by the parliament of its own mandate until 2017 in November.  Domestic and regional stakeholders have also so far been committed to maintaining minimal stability in the country, but risks remain tilted to the downside.

The spillovers of the Syrian conflict have severely affected economic performance.  Fitch expects real GDP growth of 1.8% in 2014, after 1.5% in 2013, thanks to a temporary pick-up in activity in 2Q and the slight rebound in tourism and real estate activity.  No major improvement in growth prospects is expected before the end of the Syrian conflict.

Budget deficit has risen above 9% of GDP since 2012, mostly due to the impact of low growth on revenues.  Fitch expects 2014 budget outturn to remain broadly in line with 2013, at 9.3% of GDP, as neither the revised wage scale nor the costs associated to coping with the Syrian refugees have yet materialized.  The decline in oil prices will alleviate subsidies to loss-making electricity company EDL, likely resulting in budget deficits below 9% of GDP in 2015-2016.  With the primary balance in deficit and low growth, public financing needs will again exceed 30% of GDP for the full year, pushing public debt up to above 143% of GDP by year-end (the third highest among Fitch-rated sovereigns).

However, financing of these needs has proven remarkably resilient thanks to the steady inflow of deposits into the large, liquid and well-regulated domestic banking system, which traditionally channels them into government financing.  Overall deposits increased by 7.5% yoy at October 2014, reflecting the differential with international deposit yields and continued confidence of the diaspora in the domestic banking sector and the long-standing peg to the US dollar backed by large and rising FX reserves ($33.1b at October 2014).  The dollarization rate of deposits, at 65.7% at October 2014, has also remained stable.  The financing of the government by domestic banks, together with the FX reserves, enables the sovereign to remain a net external creditor.

GDP per capita and broader human development indicators are in line with ‘BBB’ medians and are well above ‘B’ category peers. The government has an unblemished track record of public debt repayment and continues to have access to bond markets.

Rating Sensitivities:  The Negative Outlook reflects the following risk factors that may, individually or collectively, result in a downgrade:

  • -A major destabilization of Lebanon induced by more intense sectarian tensions, terrorist attacks or spill-overs from the Syrian conflict.
  • -A significant decline in the overall deposit base.
  • -A higher rise in public indebtedness than currently expected.

The current Outlook is Negative.  Consequently, Fitch’s sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to an upgrade.  However, future developments that may, individually or collectively, lead to a revision of the Outlook to Stable include:

–       Growing confidence in the sustainability of the domestic political situation.

–       A decrease in overall security risk associated to the conflict in Syria.

–       Improved economic performance.

Key Assumptions:  The ratings and Outlooks are sensitive to a number of assumptions:

  • Fitch assumes that sporadic security incidents will prevail as long as the Syrian conflict continues.
  • Fitch assumes that international oil prices will on average be lower in 2015 and 2016 than in 2013 and 2014, therefore benefitting the current account deficit and limiting budget transfers to the state electricity company, EDL.
  • Domestic banks continue to be willing to finance government needs.  (Fitch 12.12)

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 11.2  IRAQ:  Statement at the End of an IMF Mission on Iraq

A staff team from the International Monetary Fund (IMF) led by Carlo Sdralevich visited Amman, Jordan from December 2 – 7 2014 to conduct discussions with Iraqi Minister of Finance Hoshyar Zebari, Central Bank of Iraq (CBI) Deputy Governor Zuhair Ali Akbair, and other officials from the ministries of finance and planning and the CBI to assess the country’s recent economic developments.  Discussions focused in particular on the impact of the double shock of the Islamic State of Iraq and Syria (ISIS) insurgency and the decline in oil prices.  At the conclusion of the visit Mr. Sdralevich issued the following statement:

“Iraq’s GDP is expected to contract by about 0.5% this year largely because of the economic effects of the ISIS insurgency.  We estimate non-oil growth to have deteriorated since the start of the conflict due to the destruction of infrastructure, impeded access to fuel and electricity, low business confidence, and disruption in trade.  In contrast, as most of the oil infrastructure is in the south of the country and beyond the reach of ISIS, and taking into account the output of Kurdistan Regional Government (KRG), oil production should reach 3.3 million barrel per day (mbpd) in 2014, up from 3.1 mbpd in 2013, with exports remaining at 2013 levels of 2.5 mbpd.  Next year, growth is projected to rebound to about 2% as oil production and exports increase further, helped by the recent agreement between the central government and the KRG on oil exports from KRG and the Kirkuk oil fields.  End-October year-on-year inflation was 0.9% outside the conflict-affected provinces.

“The central bank has maintained the peg with the U.S. dollar.  The spread between the official and parallel exchange rates narrowed to 2.6% in September, thanks to steps taken by the CBI towards the liberalization of the foreign exchange market.  Nevertheless, high imports, combined with declining oil revenues and lower government sales of foreign exchanges to the CBI to finance government spending, contributed to a decline in international reserves from over $77 billion at end-2013 to about $67 billion at end-November.  The government also tapped the Development Fund for Iraq (DFI), the balances of which have now been transferred to the CBI; the DFI declined from $6.5 billion at end-2013 to about $4 billion in November.

“The government expressed its commitment to present a draft 2015 budget to parliament soon.  Lack of parliamentary approval of the draft 2014 budget has triggered a fiscal rule that has partly limited spending this year.  However, off-budget spending, particularly on security, has boosted the deficit, which will likely reach about 5% of GDP.  The staff team discussed with the ministry of finance the challenges related to formulating the draft 2015 budget, which is intended to address the ongoing exceptional spending pressures and the strong decline in oil prices.  As projected financing in 2015 will be limited, we expect the government deficit to decline to less than 2% of GDP.

“The IMF will continue to support Iraq through policy advice, technical assistance, and training.  The 2015 Article IV consultation discussions with the authorities will take place in the coming months.”  (IMF 09.12)

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 11.3  IRAQ:  Oil Deal a Sign of Hope Between Baghdad & Erbil

Al-Monitor related that as soon as the oil agreement signed 2 December between the Iraqi government and the Kurdistan Regional Government (KRG) was announced, optimism emerged in Iraqi and international circles, which considered the agreement to be the gateway to achieving a comprehensive Iraqi reconciliation.  The agreement put an end to years of conflicts over the mechanisms of oil investment and export, yet certain political parties expressed doubt, to a point where State of Law Coalition representative Hanan al-Fatlawi described the agreement as being a “national disaster.”

The agreement was signed in Baghdad by KRG Prime Minister Nechirvan Barzani and Iraqi Prime Minister Haider al-Abadi on 2 December.  It states that the KRG should send 250,000 barrels of oil per day to the Iraqi government, and it should export 300,000 barrels of Kirkuk oil through the KRG-Turkey pipelines.  In return, Baghdad will give the KRG its share of the Iraqi budget, amounting to 17%, in addition to sending support for the Kurdish peshmerga forces in terms of armament and salaries, considering them part of the Iraqi defense system.

Immediately after this announcement, the agreement received international support. US Secretary of State John Kerry described it as “a step forward in achieving stability in the region,” stressing that “the US has a great interest in the progress made by Abadi’s government.”

The Iraqi Oil Ministry told Al-Monitor there was confusion over the interpretation of the export of Kirkuk oil, as stipulated in the agreement.  The ministry’s spokesman, Assem Jihad, said Kirkuk’s oil production would be under the supervision of the North Oil Co., and that the current production plan aims at exporting 300,000 barrels per day through the KRG. In addition, a portion of the production will be transferred to the Baiji refinery.

Jihad considered the agreement “an important step to be closer to the KRG and overcome the pending issues.”  He said, “The agreement will allow benefiting from the Kirkuk oil production, which has stopped months ago, in addition to benefiting from the oil extracted from the KRG’s fields.  This agreement will address the crisis the country is currently facing as a result of the decrease in oil prices around the world.”

He said that committees were being formed to discuss the pending issues between the KRG and Iraq and that the oil agreement was a sample gateway to resolve the rest of the accumulated differences between the two parties.

Jihad said he does not currently expect Kirkuk oil production to exceed 300,000 barrels per day, since the previous export rate did not exceed this figure.  He said the agreement was subject to the 2015 budget, and in the event of increases in Kirkuk’s oil production, it would be taken into account in future budgets.  He said the Iraqi government has already contracted with the British company BP to prepare studies on oil development in Kirkuk, which would allow production in oil fields to increase.

Jihad denied that the agreement was a substitute for the “oil and gas law,” and said, “This law and others related to the oil issue, are being prepared in the Cabinet and will soon be transmitted for approval in the parliament to regulate the management of the oil wealth with the KRG and other [oil]-producing governorates.  Iraq still needs laws to regulate oil and gas management.”

Article 112 of the Iraqi Constitution stipulates: “The federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions, which were unjustly deprived of them by the former regime, and the regions that were damaged afterward in a way that ensures balanced development in different areas of the country, and this shall be regulated by a law.”

Meanwhile, Barzani denied that the agreement signed between Baghdad and Erbil happened under external pressure, and stressed that Washington, London and the United Nations were encouraging both parties to sign the agreement.

However, the economic version of the agreement does not seem separated from the political version.  It seems to be a response to the complex conditions of the relationship between Baghdad and Erbil.  As a result, the salaries of KRG employees were not paid during the last few months of the former Iraqi government’s mandate.  In addition, it led to political estrangement between both parties and the exchange of nonstop accusations in recent years.  It also represents a response to the reality of the common threat posed by the Islamic State on both parties.

The optimistic aspect in this oil agreement is that compromise is still possible in Iraq, despite the security situation and the political and economic challenges.  In addition, intentions of resolving issues instead of resorting to aggravation can actually lead to a fair solution.  (Al-Monitor 05.12)

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 11.4  OMAN: S&P Outlook Revised to Negative from Stable


  • The strong net external and government asset positions of the Sultanate of Oman remain key ratings strengths.
  • However, Oman lacks monetary flexibility because of the pegged exchange rate, has moderate institutional and governance strength, and economic diversification away from hydrocarbons output is happening slowly.
  • We see a possibility that the deterioration in the fiscal or external positions could be sharper than we currently expect, or that growth in real GDP per capita could fail to accelerate.
  • We are therefore revising our outlook on the long-term sovereign rating on Oman to negative from stable and affirming our ‘A/A-1’ long- and short-term sovereign ratings.
  • The negative outlook reflects our view that the deterioration in the fiscal or external positions could be sharper than currently expected, for instance due to an even deeper drop in oil prices than that now forecast, or due to continued strong growth in current or capital spending.

Rating Action

On Dec. 5, 2014, Standard & Poor’s Ratings Services ( revised its outlook on the Sultanate of Oman to negative from stable.  At the same time, we affirmed the ‘A/A-1’ long- and short-term foreign and local currency sovereign credit ratings on Oman.


We revised the outlook to negative to reflect the risk we see that the deterioration in Oman’s fiscal or external positions could be sharper than we currently expect, or that growth in real GDP per capita could fail to accelerate.  The affirmation reflects Oman’s strong net external and general government asset positions.  The ratings are constrained by our view that the quality of Oman’s public institutions and governance is moderate, that high fiscal, external and economic dependence on volatile hydrocarbons receipts will persist, and that monetary policy flexibility is limited by the pegged exchange rate.

Since our last review, in June 2014, we have significantly revised down our forecast for the price of Omani crude oil in response to the sharp drop in global oil prices in both spot and futures markets in recent weeks.  We now expect Omani crude oil to average approximately $80/barrel (bbl) in 2015-2017, compared with a slow decline to $95/bbl in 2017 in our previous forecast.  This has a negative impact on our assessment of Oman’s fiscal and external position, given the country’s high dependence on revenues from hydrocarbons and oil in particular.

Overall, we view Oman’s institutional and governance strength as moderate in a global comparison, and weaker than many similarly rated peers.  The country performs well on most measures of the World Bank’s World Governance Indicators, ranking above the 60th%ile for government effectiveness, stability, rule of law, and control of corruption.  However, Oman fares less well on voice and accountability (19th percentile), which tallies with its similarly weak showing in Reporters Without Borders’ Press Freedom Index (26th percentile).

Under the rule of Sultan Qaboos bin Said Al Said, who came to power in 1970, the country has seen a dramatic improvement in human development.  From being one of the least-developed countries in the world, Oman now ranks in the 70th percentile of countries in the United Nations Development Program’s Human Development Index.  Although in large part a consequence of the advent of significant hydrocarbon receipts during this period, we think this improvement is also a result of increasingly effective policymaking.  However, the sultan exercises absolute power in governance and decision-making, which could pose risks to the effectiveness and predictability of policymaking, in our view.

The sultan remains popular, in our opinion, but there are uncertainties regarding the eventual process of succession, given the country’s lack of recent experience of smooth transitions of power.  Nevertheless, we expect this process to be smooth and for it not to lead to any radical policy shifts.  Yet we do not rule out the possibility of it entailing a disruptive period of uncertainty if the royal family does not quickly agree on a successor.

We estimate per capita GDP at $21,500 in 2014. Although overall real GDP growth has been strong–boosted by steady expansion in Oman’s oil production since 2007 and large infrastructure and development investments – -our estimate of Oman’s weighted-average 10-year real per-capita GDP growth rate is significantly below that of peers with similar GDP per capita.  This reflects the boost to population growth from both the high birth rate in Oman (estimated in 2012 at 2.9 births per woman on average) and the high inflow of foreign workers (immigrants accounted for 44% of the population at midyear 2014).  Should Oman’s per-capita growth rate remain weak or deteriorate further, this could lead us to reassess the level of economic risk in the country.

The economy will continue to depend heavily on oil, which accounted for just under one-half of 2013 GDP, although this was down slightly on its share of 2012 GDP.  The sharp downward revision to our oil price outlook has led us to cut our real GDP growth forecast to an average of 3.6% a year in 2014-2017, compared with 4% forecast in June.  Given this and our expectations for population growth, we project broadly stagnant real GDP per capita over this period.

Investment in the oil sector could drop in line with lower prices, as most of Oman’s fields are mature and require relatively costly investments to maintain output levels and to explore for new reserves.  Nevertheless, we expect modest progress to be made toward economic diversification.  Investment in transport infrastructure, petrochemicals, and development of the Khazzan tight gas field will help drive economic activity in the next three years.

Sizable oil receipts in recent years have helped maintain Oman’s strong external position.  However, lower oil prices have led us to forecast a weaker trajectory for the current account balance in 2014-2017 than previously.  We now expect the traditional current account surplus, which was equivalent to over 10% of GDP in 2012, to turn to a small deficit in 2017, equivalent to 0.2% of GDP, as oil receipts drop and demand for imports of capital goods remains high.

Oman’s net external creditor position – as measured by liquid external assets minus external debt – will remain strong, but we expect it to decline as a percentage of current account receipts (CARs) from 62% in 2014 to just over 56% in 2017.  Meanwhile, we expect the country’s gross external financing requirements to rise gently from 95% of CARs and usable reserves in 2014 to just over 100% in 2017.  We expect net inflows of foreign direct investment (FDI) to pick up to the equivalent of 1% of GDP, which will help finance major projects such as the Duqm port and petrochemicals complex and the Khazzan gas project.

Expansion in recurrent public spending since 2011 has contributed to a steep narrowing in the general government surplus from 7% of GDP in 2011 to an estimated 2.8% in 2014 (including transfers to reserve funds and investment income).  We now anticipate slightly more substantial cuts than previously, given the lower oil revenue outlook, but still view the government’s room for maneuver as limited, given that nearly 50% of spending relates to public-sector wages and subsidies and exemptions, which are typically hard to cut.  We expect some drops in outlays on subsidies, as well as postponement of some defense spending and lower-priority capital expenditures.  But on balance, we now expect the surplus to turn to small deficits averaging just under 1% of GDP in 2014 – 2017, given the outlook for lower oil prices and receipts, which account for nearly 90% of government revenues.

We expect the government to finance these small deficits largely by liquidating some of its assets, although it may issue a Eurobond or sukuk in 2015 (partly to set a benchmark for corporate issuance).  Our base case is that gross government debt levels will stay broadly steady as a percentage of GDP in 2014-2017. The government’s large net asset position, which we estimate at equivalent to 76% of GDP in 2014, provides strong fiscal flexibility even at a time of weaker oil prices.

In our view, monetary policy flexibility is limited by the peg of the Omani rial to the U.S. dollar, although we note that the peg has provided a stable nominal anchor for the economy, particularly as contracts for the main export, oil, are typically priced in dollars.  The transmission of monetary policy is constrained by an underdeveloped local capital market, although we expect to see some growth in local debt and sukuk issuance over the next three years.  We forecast inflation to remain moderate but to pick up from recent lows of about 1% a year on average as subsidy outlays are reduced.


The negative outlook reflects our view that the deterioration in the fiscal or external positions could be sharper than we currently expect, for instance due to an even deeper drop in oil prices than that now forecast, or due to continued strong growth in current or capital spending.  We could also lower the ratings if we see trend growth in real GDP per capita slowing further.

We could revise the outlook to stable if economic growth picks up beyond our current expectations, perhaps owing to a bigger impact than currently forecast from the major capital investment projects under way, and if the external position looks set to be stronger than forecast, potentially owing to higher export volumes or prices, or lower demand for imports of capital goods.  (S&P 05.12)

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 11.5  OMAN:  Will Even Oman Now Face Turmoil?

Michel Gurfinkiel questioned in the Middle East Forum ( if Oman will survive the end of Sultan Qaboos?  The 74-year-old ruler, who modernized the country and kept it safe from most Middle East turmoil for almost half a century, is said to be terminally ill.  His birthday — the sultanate’s national holiday — was not celebrated last month – and Qaboos is childless.

He has selected three of his closest relatives as potential heirs.  The final choice will be made by the Royal Family Council.  Should any problem arise, the matter will be settled by the National Defense Council.

Upon landing in Muscat, the capital city, visitors immediately realize that Oman is very different from other Gulf countries.  Forget the skyscraper extravaganzas of Kuwait City, Manama, Doha, Dubai, and Abu Dhabi.  By law, buildings in Muscat must be built in stone or similar traditional materials and must follow a low-rise, castle-like architectural pattern.  Forget also the other states’ apartheid-style system of Bedouin minorities lording over majorities of immigrant workers: in Oman, 70% of the 3.2 million inhabitants are native citizens.

Oman differs from its neighbors in many more ways.  While the other Gulf countries are tiny enclaves no larger than New Jersey or even Rhode Island, Oman is big: 309,000 square kilometers, the size of Kansas, or Poland.  Admittedly, the hinterland is chiefly mountains and semi-desert.  Still, there is a sense of strategic width and strategic security.

While the other Gulf countries interact out of geographical necessity with the Arabian Peninsula (Saudi Arabia), the Fertile Crescent (Iraq and Syria) and Persia (the Islamic Republic of Iran), Oman is an Indian Ocean country.  The hinterland’s mountain ranges effectively sever it from the peninsula.  The monsoon winds have allowed the local population, from time immemorial, to trade with India and East Africa, and even to establish distant colonies like Zanzibar.  Throughout the past 500 years, the Omanis have been in touch with the European maritime powers: first the Portuguese, from the 16th century on, and then the British in the 19th and early 20th centuries.

Even more stunning is Oman’s religious singularity: most inhabitants do not belong to Sunni or Shiite Islam.  They follow a third way, Ibadism, an offshoot of Kharijism, which is also to be found in parts of North and East Africa.

Just like the early American Puritans, the Ibadis are both more strictly religious than the Sunnis and the Shiites, and much more tolerant and open-minded in political, social and even intellectual matters.  They have usually promoted good relations with Jews, Christians and even Hindus.  Moreover, they have comparatively democratic tendencies: they know not of hereditary kings-caliphs or hereditary imams, but rather of elected imams and secular kings or sultans.

By the beginning of the 20th century, Oman had lost its naval and commercial edge, and was so impoverished that the British did not even attempt to turn it into a full-fledged protectorate.  It was ridden with civil wars between imams based in the hinterland, and the Al-Said, a royal family based in Muscat.  In the 1950s, Sultan Said bin Taimur suppressed the last imamate rebellion with British help, and set up a reactionary and isolationist rule.  In the 1960s, however, a new rebellion flared up further south in the Dhofar province, a bizarre mix of tribal unrest and Marxist rhetoric.

Qaboos’ priority, in strategic and international terms, was to keep his country independent from any foreign interference and at peace with every nation.

Qaboos ibn Said, Sultan Said’s English-educated son, took over in a bloodless coup in 1970 and gradually suppressed the Dhofar insurgency, with much help from Britain, imperial Iran and Pakistan.  He then embarked on a resolute, if cautious, modernization program, supported by increasing oil revenues.  Oman’s GNP is now $90 billion.   The average income per capita is $30,000.

Qaboos’ priority, in strategic and international terms, was to keep his country independent from any foreign interference and at peace with every nation.  He very adroitly balanced American influence with strong British ties, and Saudi regional power with Iranian links.  Many American-Iranian conversations, from Reagan to Obama, took place in Oman.

Qaboos would have welcomed a complete peace between Israel and the Arab and Islamic world, and he knew that the Palestinian leadership under Yasser Arafat or Hamas was not helpful in that respect.  In the fall of 1993, he attended a discreet, high-level academic and political conference in the United States, where the Oslo Accords and many other issues were discussed.  He listened politely when a European journalist of Jewish origin attempted to vindicate Israel’s decision, and then left.  One of his aides stayed, however, and bluntly told the orator: “The Arabs will never forgive Israel for bringing back so prominently the Palestinians on the Middle East’s scene.”

The sultan’s shortlist for his successor is said to include Prince Fahd bin Mahmud Al Said, the acting prime minister; Prince Shehab bin Tariq Al Said, the minister of science; and Prince Haitham bin Tareq Al Said, the culture minister.  Sources say, however, that General Sultan bin Mohamad Al-Naamani, the head of the royal administration, will be the real kingmaker, and perhaps the next king.

Michel Gurfinkiel is the Founder and President of the Jean-Jacques Rousseau Institute, a conservative think-thank in France, and a Shillman/Ginsburg Fellow at Middle East Forum.  (MEF 08.12)

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 11.6  SAUDI ARABIA:  S&P Outlook Revised To Stable From Positive


  • In our view, Saudi Arabia’s per capita GDP will not increase enough for us to improve our assessment of its economic structure and growth prospects, as defined in our criteria, and given our downward adjustments to our medium-term oil price projections.
  • Still, we consider that Saudi Arabia’s government and external balance sheets remain strong and provide an ample buffer to withstand external shocks, including a drop in oil prices.
  • We are therefore revising our outlook on our long-term foreign and local currency sovereign credit ratings on Saudi Arabia to stable from positive. We are also affirming our ‘AA-/A-1+’ long- and short-term foreign and local currency ratings.
  • The stable outlook reflects our view that Saudi Arabia will keep its very strong fiscal balance sheet and net external asset position, while monetary policy flexibility remains limited and dependence on income from the hydrocarbons sector stays high.

Rating Action

On 5 December, Standard & Poor’s Ratings Services ( revised its outlook on the Kingdom of Saudi Arabia to stable from positive.  At the same time, the ‘AA-/A-1+’ long- and short-term foreign and local currency sovereign credit ratings on the kingdom were affirmed.


We indicated on June 6, 2014, that we could revise our outlook on Saudi Arabia to stable if we anticipated that weaker economic growth or sustained lower oil prices could lead to GDP per capita that was not commensurate with an improved assessment of economic structure and growth prospects, one of the five key factors that form the foundation of our sovereign credit analysis.  We base our outlook revision on our view that, although real economic growth remains relatively strong, we think Saudi Arabia is unlikely to achieve sufficient levels of nominal income to raise the ratings over the next two years.  We assume a Brent oil price of $80 per barrel (bbl) in 2015 and $85/bbl in subsequent years, which will place pressure on the GDP deflator because Saudi Arabia derives about 45% of its GDP from the hydrocarbons sector.  We now estimate GDP per capita at $23,400 in 2014-2017, down from our June assumption of $25,600.  Trend growth in real per capita GDP, which we measure using 10-year weighted-average growth, amounts to about 2% during 2008-2017.  This is in line with peers that have similar GDP per capita.

The ratings are supported by the very strong external and fiscal positions Saudi Arabia has built up over many years.  By managing high oil revenues prudently, the general government has retired virtually all of its debt, generating additional fiscal space for countercyclical policies.  We estimate the general government’s net asset position at 118% of GDP on average during 2014-2017.  Over the same period, we expect Saudi Arabia’s external debt, net of liquid external assets, will remain in a strong net asset position, averaging about 210% of current account receipts (CARs).  The country’s external liquidity is similarly strong, with gross financing needs averaging 78% of usable reserves and CARs by our estimate.

We note that government reforms are resulting in some improvements to the highly segmented labor market.  Saudi nationals’ share of private sector employment increased to 15% in 2013 from 13% in 2012, and women’s share of total employment increased to 9.4% from 7.7%.  However, the unemployment rate remains high for Saudi nationals, standing at 11.7% compared with 0.2% for non-Saudis, leading to an overall 5.6% rate in 2013.

We think uncertainty remains regarding whether the private sector can generate enough sufficiently attractive jobs to absorb the expected significant inflow of Saudi nationals into the labor market in the coming years.  Saudi demographic data show that about 40% of the population is younger than 20 years of age. Moreover, given that the employment of Saudi nationals generally leads to higher labor costs than for expatriates, unit labor costs could rise and then weaken overall economic competitiveness.

We view Saudi Arabia’s economy as undiversified and vulnerable to a sharp and sustained decline in the oil price, notwithstanding government policy to encourage non-oil private sector growth.  The hydrocarbon sector accounts for about 44% of GDP.  However, we find that the non-hydrocarbon sector relies to a significant extent on government spending (funded by hydrocarbon revenues) and downstream hydrocarbon activities.  About 85% of exports and 90% of government revenues stem directly from the hydrocarbons sector.  In its October 2014 Regional Economic Outlook, the International Monetary Fund indicated that Saudi Arabia’s fiscal breakeven oil price will rise to $106/bbl in 2015 from $98/bbl in 2014 and $89/bbl in 2013.  This is the oil price necessary to balance the government’s budget, all other things remaining equal.

Nevertheless, based on our oil price assumptions and our view that the government will adjust fiscal policy to incorporate a much lower oil price than in recent years, we expect the deterioration in Saudi Arabia’s fiscal balance to be contained.  The large public investment program (just over 30% of all central government spending is capital expenditures) affords the Saudi authorities with significant fiscal flexibility to react to the deteriorating terms of trade and concomitant detrimental government revenue trends.  We expect Saudi Arabia to achieve a broadly balanced fiscal position in 2014-2017, following an average surplus of 10% of GDP in the previous four years.

We see Saudi Arabia’s significant gas and oil revenues as supportive of the current ratings.  Sustained high oil prices over the past few years have helped bolster financial buffers, maintaining government liquid assets at more than 100% of GDP and significantly offsetting the concentration risk related to the economy’s hydrocarbon dependency.

According to our estimates, based on the 2014 BP Statistical Review of World Energy, Saudi Arabia’s annual production of both oil and gas – about 5 billion barrels of oil equivalent (boe) – could be maintained for the coming 66 years, given its 320 billion boe in estimated reserves.  However, in terms of years of hydrocarbon production at current levels, Saudi Arabia is surpassed by other Gulf Cooperation Council (GCC) countries: Qatar (106), Kuwait (91) and the United Arab Emirates (81).  As a result, alongside the high share of hydrocarbons in nominal GDP and exports, and a relatively high fiscal breakeven oil price, in our view, diversification away from the oil sector is a more pressing issue in Saudi Arabia relative to some other GCC countries.  We understand that Saudi Arabia is the oil producer with the largest estimated amount of spare oil production capacity globally.  In our view, this endows it with an additional layer of fiscal flexibility not enjoyed by other oil producers.

Saudi Arabia is an absolute monarchy in which decision-making is highly centralized with the king and the ruling family.  We find that this could make future policymaking more difficult to predict. Political institutions are still at an early stage of development compared with those of non-regional peers in the ‘AA’ rating category.  Establishing the Allegiance Council in 2007 – to formalize the procedure of appointing a crown prince once a new king ascends to the throne – may help institutionalize the succession process in Saudi Arabia.  However, we believe that this new framework will face a crucial test when the scepter is passed from a son of King Abdulaziz Al-Saud, who established the kingdom in 1932, to the next generation of rulers.  So far only the sons of King Abdulaziz have ruled after him.  We continue to view succession as an element of uncertainty over the next several years.

Given the Saudi riyal’s peg to the U.S. dollar, we view monetary policy flexibility as limited.  The long-standing currency peg helps to anchor the population’s inflation expectations but binds Saudi Arabia’s monetary policy to that of the U.S. Federal Reserve.  Furthermore, the authorities’ ability to transmit their monetary policy is affected by the underdevelopment of the domestic bond market.


The stable outlook reflects our view that Saudi Arabia will keep its very strong fiscal balance sheet and net external asset position, while monetary policy flexibility remains limited and dependence on income from the hydrocarbons sector stays high.

We could consider a positive rating action if, contrary to our current expectations, economic growth were to support further increases in Saudi Arabia’s per capita GDP to levels that would qualify for an improved assessment of economic structure and growth prospects, as defined in our criteria.

We might consider a negative rating action if fiscal or external balances were to significantly deteriorate beyond our current expectations.  The ratings could also come under pressure if domestic or regional events compromised political and economic stability.  (S&P 05.12)

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 11.7 SAUDI ARABIA:  Saudi Cabinet Changes Suggest Domestic Discontent

The Washington Institute’s ( Simon Henderson wrote on 8 December that the sudden removal of several ministers is most likely a response to popular dissatisfaction with the government’s performance at home.

A series of royal orders in the name of King Abdullah announced that eight new members had been appointed to the Saudi Council of Ministers, an unusually large turnover.  Although the news coming out of the kingdom in recent weeks has concentrated on falling oil prices, the threat of the so-called “Islamic State” (also known as ISIS) and Sunni jihadist attacks against the country’s Shiite minority, the latest cabinet changes were apparently spurred by other factors.  In particular, the shakeup seems to reflect Riyadh’s need to deal with mounting domestic discontent over the performance of several government ministries.

Six men have replaced ministers who each resigned at their own “request” — a standard formulation that, under the current circumstances, suggests the contrary.  Two other men were appointed to fill vacancies.  None of the ministers who have stepped down are members of the royal family, which retains the top posts of prime minister, deputy prime minister and second deputy prime, as well as the defense, foreign affairs, interior, national guard, education and municipal affairs portfolios.

Public criticism of the Transport and Health Ministries has been especially evident of late.  The construction of road and rail links has prompted complaints taken up by the kingdom’s Consultative Council, an appointed advisory body.  The Health Ministry has been led by the labor minister for several months because his predecessor was judged to have performed badly in coping with the outbreak of Middle East Respiratory Syndrome (MERS).

Also notable is that the outgoing minister of Islamic affairs, who was from the influential ultraconservative al-Sheikh extended family, was not replaced by another al-Sheikh, meaning that for the first time in decades this group does not have a ministerial portfolio.  Balancing the religious establishment’s influence is a perpetual challenge for the king — the information minister was sacked a month ago after he closed down a hardline religious television station that had applauded the murder of Shiites.  The station was allowed to resume broadcasting a day later.

Some of the cabinet changes may also stem from allegations of corruption — a persistent issue in Saudi Arabia, but one that the leadership never deals with openly.  Last year, the kingdom’s Grand Mufti stated that corrupt officials should not be exposed publicly, reflecting the Saudi preference for closing ranks when facing possible criticism.

The changes do not affect the Oil and Finance Ministries, even though Riyadh is no doubt concerned about oil prices that fell to a five-year low recently, with U.S. crude closing at just below $63 per barrel. This suggests that King Abdullah is not unhappy with current Saudi oil and macroeconomic policies, nor their apparent ripple effects abroad.

More broadly, the cabinet reshuffle highlights the potentially significant role that Saudi domestic opinion could play in the challenges facing ninety-one-year-old King Abdullah and the senior royals who advise him.  The new appointments suggest the monarch is still an active decision maker.  They also serve as a reminder to the rest of the world that what is happening inside the kingdom remains an important part of Riyadh’s calculus.

Simon Henderson is the Baker Fellow and director of the Gulf and Energy Policy Program at The Washington Institute.  (TWI 08.12)

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 11.8  TUNISIA:  IMF Completes Fifth Review Under Stand-By Arrangement

The Executive Board of the International Monetary Fund (IMF) completed the fifth review of Tunisia’s performance under an economic program supported by a Stand-By Arrangement (SBA).  The completion of the fifth review enables the disbursement of SDR 71.6 million (about $104.8 million), bringing total disbursements under the arrangement to SDR 787.87 million (about $1.15 billion).  The two-year SBA in the amount of SDR 1.1 billion (about $1.68 billion, 400% of Tunisia’s quota) was approved by the Executive Board in June 2013.

In completing the fifth review, the Executive Board approved the authorities’ requests to re-phase purchases under the arrangement and to modify end-December 2014 quantitative performance criteria on net international reserves, net domestic assets and the primary fiscal deficit.

Following the Executive Board’s discussion on Tunisia, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair issued the following statement:

“Tunisia is completing a successful political transition while navigating a challenging domestic and external environment.  Tunisia’s economy has been resilient, although large external and fiscal imbalances, high unemployment and rising banking fragilities call for forcefully pushing ahead with reform implementation.

“Performance under the Fund-supported program has been good with the successful attainment of all quantitative performance criteria.  However, structural reforms have been progressing slowly, with considerable delays in recapitalizing and restructuring public banks.

“Fiscal consolidation remains essential to reduce vulnerabilities.  The 2015 budget appropriately aims at anchoring macroeconomic stabilization while preserving priority social and capital expenditures.  Further reduction in energy subsidies and strict control of the public wage bill is welcome, as is the authorities’ intention to save any gains from lower international oil prices.  Growth-enhancing reforms, including of public enterprises and pensions, public financial management, and tax administration would help improve absorptive capacity, equity, efficiency, and risk management.

“A tighter monetary stance would help keep inflationary pressures in check, reduce exchange rate pressures, and eventually bring about positive real interest rates. Greater exchange rate flexibility, including through continuing to limit foreign exchange interventions to smoothing large fluctuations, will contribute to strengthening reserve buffers and correcting large external imbalances.

“Efforts to reduce financial sector vulnerabilities should be stepped up.  Recapitalizing and restructuring public banks in line with good international practices is urgent, in view of increased financial sector vulnerabilities and the need to support growth.  Modernization of the banking resolution framework, operationalization of the Asset Management Company, and an upgrade of the supervisory and regulatory framework would enhance financial stability and reduce moral hazard.

“Accelerated implementation of structural reforms is urgently needed to improve the investment climate and generate stronger and more inclusive growth.  Legislative approval of the bankruptcy, competition, and public private partnerships laws are key priorities.”  (IMF 12.12)

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 11.9  TUNISIA:  Tunisia and the Libyan Crisis

Ismail Dbara wrote in Fikra Forum ( that as Libya descends further into the throes of a civil war, Tunisians are growing increasingly wary of their eastern neighbor, which many fear will become a failed state.

In the recent presidential election, no candidate won a majority in the first round, and therefore the country will hold a run-off election between Moncef Marzouki, the interim president, and Beji Caid Essebsi, the leader of Nidaa Tounes, at the end of December.  The victor will remain in office for five years and play an important role in shaping Tunisian foreign policy, as the new constitution stipulates in Article 77.

In the lead up to the election, it was clear that security and defense figured prominently in the candidates’ platforms.  Given the chaotic situation in Libya — two Tunisian journalists were kidnapped by militias, and there are frequent border clashes — and the presence of terrorist groups in the mountains on the Tunisia-Algeria border, this will remain the case as Marzouki and Essebsi face off against each other.

For the most part, Marzouki and Essebsi’s rhetoric on Libya circles around three main issues.  First is border security.  Both candidates believe that as the security situation in Libya deteriorates, more weapons and extremists will enter into Tunisia.  Tunisians believe that the absence of a strong central authority in Libya means that Tunis must bear the burden of protecting the border.  The country’s interior ministry has revealed that thousands of young Tunisian men have ventured to Libya, some to undergo training with the intention of carrying out attacks in Tunisia, while others travel to Syria by way of Turkey.  Even the leader of the Tunisian militant group Ansar al-Sharia, Abu Ayyad al-Tunisi, lives in Libya.  His group is complicit in political assassinations and attacks against soldiers and security forces, and has vowed to carry out more attacks after its leaders and members gained support and protection in the turbulent region of eastern Libya.

The second is smuggling.  While smuggling has long been the only source of income for many border town residents, the flow of dangerous and profitable goods from Libya, including drugs and weapons, has become a source of concern for Tunis.  Smuggling has formed a parallel economy in Tunisia that is roughly half of the size of the official Tunisian economy.  The International Crisis Group links the alarming growth in smuggling operations to the security vacuum left in the wake of the uprising against the Ben Ali regime and the chaos resulting from the Libyan war.  Aside from being illegal, smuggling empowers jihadists, who bribe border and customs authorities to turn a blind eye toward the movement of goods into Tunisia.

The third is the Libyan refugee community in Tunisia.  According to official estimates, around 1.5 million Libyans fled to Tunisia in 2011.  The ongoing conflict in the country has prevented many from returning, and their continued presence in Tunisia has led to problems related to security, integration and the supply of goods and jobs.  On 4 November, the interior ministry issued a decree prohibiting Libyans from organizing political gatherings or activities without authorization. Violators of this new law could face expulsion and immediate deportation.

In any case, it seems that Tunisia is inclined to work with Western and regional partners to counter the thorny Libyan issue.  Tunis constantly encourages consultations with the Americans, Algerians, Egyptians and Europeans in order to find a peaceful, non-military solution to the crisis.  Given the current climate, it is likely that the new president, whether Marzouki or Essebsi, will take a similar tack.

Ismail Dbara is a Tunisian journalist and member of the executive committee of the Tunis Center for Press Freedom.  (Fikra 05.12)

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 11.10  ALGERIA:  IMF Executive Board Concludes 2014 Article IV Consultation

On 1 December 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Algeria.

Economic activity has picked up in 2014, with real GDP growth projected to reach 4.0% following 2.8% growth in 2013.  The hydrocarbon sector is expected to expand for the first time in eight years, while non-hydrocarbon growth remains supportive. Inflation has decelerated sharply to 2.1%, thanks in part to tighter monetary policy.

Algeria continues to enjoy substantial external and fiscal buffers, but threats to macroeconomic stability are growing.  For the first time in nearly 15 years, the current account is expected to record a deficit.  Deficits are projected to widen over the medium term, as strong domestic hydrocarbon consumption and lower oil prices weigh on exports, while imports continue to grow, driven by public spending.  The export base is undiversified, and Foreign Direct Investment (FDI) is hampered by restrictions on ownership.

The fiscal deficit is expected to widen to over 7% due to lower hydrocarbon revenue, a sharp increase in capital expenditure, and continued high current spending.

Non-hydrocarbon revenues are below their potential, the wage bill is high, and subsidies and transfers are costly, amounting to about 26% of GDP.  Fiscal savings are expected to decline for the second consecutive year.

Although Algeria has enjoyed macroeconomic stability, faster and more inclusive growth is necessary to provide enough jobs for the country’s youthful population.  Public investment efficiency is low, and private sector growth is hindered by a cumbersome business climate, an underdeveloped financial sector, and limited international integration.  Finally, rigidities in the labor market and skills mismatches reduce the impact of economic growth on job creation.

Executive Board Assessment

Executive Directors welcomed the rebound in economic activity, the further decline in inflation, and the sizeable policy buffers.  At the same time, Directors noted increasing vulnerabilities against the backdrop of falling oil prices, from the deterioration of the fiscal and current accounts and the decline in fiscal savings and foreign exchange reserves.  They called for prompt action to preserve macroeconomic stability, complemented with broad-based reforms to diversify the economy, enhance competitiveness, and promote inclusive growth and job creation.

Directors underscored the need for sustained fiscal consolidation anchored in credible fiscal rules to address the growing fiscal deficit and ensure fiscal sustainability.  They saw scope to increase non-hydrocarbon revenues, by broadening the tax base, strengthening tax administration, and reducing tax exemptions.  On the expenditure side, further efforts are needed to contain current spending, including the wage bill, and to gradually replace subsidies with a targeted cash-transfer system to protect the poor.  Directors welcomed the authorities’ intention to move to a medium-term budget framework and continue to strengthen public financial management.  A few pointed to the merits of establishing a sovereign wealth fund with oil savings aimed at supporting economic stabilization efforts and ensuring intergenerational equity.

Given the risk that inflationary pressures could reemerge, Directors encouraged the monetary authorities to remain prudent and stand ready to increase liquidity absorption and interest rates.  They supported increasing the issuance of treasury bills to help mop up liquidity, reducing the need to use the oil savings fund for budget financing while also deepening the capital market.  Directors welcomed the planned development of new monetary policy instruments, with Fund assistance, for liquidity management.

Directors agreed that safeguarding external stability is a priority, and requires an effective strategy aimed at diversifying the export base while enhancing the export capacity of the hydrocarbon sector.  They recommended greater efforts to increase trade openness, relax restrictions on foreign direct investment, and create a more export-friendly business climate.  They also welcomed the authorities’ commitment to allow the exchange rate to reflect fundamentals.

Directors highlighted the importance of broader structural reforms to accelerate private-sector-led growth and further reduce unemployment.  These include reforms to improve infrastructure, productivity, and public investment efficiency.  Directors also encouraged further efforts to relax labor market regulations, address skills mismatch, and promote female and youth employment.  A thorough assessment of active labor market policies would also be useful to assess their overall effectiveness.

Directors welcomed ongoing efforts to further strengthen the stability of the financial sector, including steps recently taken to transition to risk-based supervision and capital requirements under Basel II/III.  They looked forward to further progress in implementing the recommendations of the 2013 FSAP.  Directors also emphasized the need to improve small- and medium-sized enterprises’ access to finance and address remaining deficiencies in the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework.  (IMF 11.12)

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 11.11  MOROCCO:  Oil Explorers Continue Belief in Morocco’s Energy Potential

The Oxford Business Group ( stated that Morocco has seen an uptick in both onshore and offshore drilling activity in 2014 as international oil firms, including majors Chevron and BP, work to assess Morocco’s potential for oil and gas production – with some encouraging results.

While explorers have yet to announce major, commercially-viable offshore discoveries, improved technologies are helping to identify resources in previously overlooked areas along the Atlantic margin, a zone that has produced promising finds in Ghana and Brazil in recent years.  Initial drilling in 2014 has turned up a handful of interesting prospects, and additional exploration plans in 2015-2016 are expected to clarify the resource picture.

Oil potential still unclear

Anglo-Turkish explorer Genel Energy confirmed in October that the Sidi Moussa-1 well, drilled to a depth of nearly 3000 meters had encountered oil, representing a significant discovery of the year.  However, a month later, the company revealed that further testing had failed to produce a continuous flow and the well would be plugged pending further exploration.  Costs related to the testing of the wells stood at $22m, according to junior partner, San Leon Energy.

“Further evaluation of the well results and geological and geophysical data are required before any definitive conclusion can be drawn,” said project partner National Office of Hydrocarbons and Mines (Office National des Hydrocarbures et des Mines, ONHYM) in a statement.

Genel holds a 60% stake in the Sidi Moussa permit along with junior partners San Leon, Serica Energy and Longreach Oil & Gas which combined have a 15% share.  State-owned ONHYM holds 25%, which is the maximum allowed government participation as part of the incentives given to foreign oil majors.

Morocco has awarded dozens of permits to oil companies in the past few years, supported by its relative stability and growing indications of potential offshore and onshore reserves.

Genel, for example, confirmed in March the presence of heavy oil in the Upper Jurassic reservoir on the first offshore well (JM-1) drilled on its Juby Maritime license, which the company operates in partnership with Cairn Energy and ONHYM, with 37.5% and 25% stakes respectively.  The partners are currently evaluating the deposit’s commercial potential.

Onshore Potential

Explorers have reported smaller onshore finds in the last year, primarily in natural gas.  Ireland’s Circle Oil announced positive results at its Sebou permit, located in the Rharb Basin between Rabat and Tangier.  In June, the first well drilled on the Sebou permit this year showed gas deposits on three levels.  In October, a second well (CGD-12) also turned up natural gas reserves and will be completed for future production.  Four other wells will be drilled on Circle’s Sebou permit in the near-term.

Elsewhere, Australia’s Longreach Oil & Gas said in May that drilling at its onshore Sidi Moktar permit, near the southern city of Essaouira, had shown encouraging signs.  The firm encountered signs of gas at two levels inside a Jurassic formation at its Kamar-1 well.

Meanwhile, US-based explorer Kosmos Energy, alongside junior partner Cairn Energy, plans to drill the first well on its Cap Boujdour block before the end of 2014, noting that the unexplored Cretaceous basin along the Atlantic Margin holds significant potential for exploration.

Attracting Investment

The government is working to create a favorable investment climate to lure oil firms even though the kingdom’s resource potential remains uncertain after a year of drilling.  Morocco is a relatively under-explored frontier and energy firms scouring the region are attracted by the political stability and low-risk climate, an advantage that is relatively unique in North Africa.

The government has introduced several incentives to bolster exploration activities, including a 10-year exemption from corporate tax during production, as it aims to reduce one of the biggest drains on its budget, a reliance on energy imports.  The country imports about 90% of its energy needs, primarily fossil fuels.

Despite the lack of significant discoveries so far in 2014, the collection of seismic data and exploratory drilling has been greatly accelerated, which will help to clarify Morocco’s energy potential in the near-term.  To that end, explorers including oil firms such as Cairn Energy, Genel Energy, which is led by former BP chief executive Tony Hayward, and Kosmos plan to drill at least 10 offshore wells in Morocco between 2014 and 2016.  (OBG 04.12)

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 11.12  TURKEY:  IMF Report Forecasts Weaker Economic Performance for Turkey

The International Monetary Fund (IMF) predicts that Turkey’s medium term economic performance is likely to be weaker than in the recent past if the country does not change its economy policies.  “Without a change in policies, medium-term economic performance is likely to be weaker than in the recent past,” the IMF said in its 2014 Article IV Consultation-Staff Report on Turkey released on 5 December.

Stating that Turkey’s low domestic savings and challenges related to competitiveness are limiting investment and exports, the report said the IMF staff has revised annual medium-term growth to about 3.5% on current policies and national saving rates.  “The lower growth rate is expected to contain inflation and the deterioration of the current account, although both will remain elevated at about 6%,” the report said.  “Policies should focus on rebalancing the economy, reducing the external deficit—by boosting savings rather than decreasing investment—and lowering inflation to preserve competitiveness,” the report’s summary said.

Noting that Turkey’s economy has grown on average by 6% annually since 2010, the report said this has come at the expense of a persistently large external deficit making the economy sensitive to changes in external financing conditions.  “Inflation is high and above the authorities’ target, and real policy interest rates remain negative.  The exchange rate continues to be stronger than suggested by fundamentals,” it says.

According to the report, Turkish authorities broadly share staff’s outlook for Turkey. “They recognize downside risks to their original official growth forecast for 2014 and that inflation is likely to exceed their objective.  For 2015, however, the authorities see an acceleration of growth to around 4%, as they expect domestic demand to play a larger role.  They believe the real exchange rate is close to equilibrium and judge that the improvement in the external balance will continue with increased net exports,” the report said.

It added that Turkish authorities acknowledge that, in the medium term, rebalancing the economy towards investment and exports is necessary to avoid a decline in trend growth.  “However, they believe their reform program will be sufficient to achieve this objective,” it said.  (IMF 06.12)

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