Fortnightly, January 14th 2015

Fortnightly, January 14th 2015

January 6, 2015






1.1  US Internal Revenue Staff Visit Israel for Tax Evasion Talks
1.2  Israel Railways Reports First-Ever Profit


2.1  Israel Aerospace Industries Wins Cyber Security Deals
2.2  Supercom Buys Israeli Cyber Security Company Prevision
2.3  Five New Joint MIT-BGU Projects Approved
2.4  Elbit Systems Wins Aerial Firefighting Contract
2.5  IAI Signs Air Canada Maintenance Deal
2.6  Motorola Solutions Invests in VocalZoom
2.7  Micronet Selects CommuniTake to Enhance Customer Productivity
2.8  OurCrowd Record 2014 with $100 Million Raised for 56 Companies
2.9  China’s Hainan Airlines to Launch Tel Aviv-Beijing Route
2.10  MediSafe Raises $6 Million, Relocates Headquarters to the United States


3.1  Italy’s Eni Signs New Concession Agreement in Egypt


4.1  Green Ride’s INU is a Slick Urban Transportation for the New Age
4.2  Saudi Arabia’s AKWA Wins $2 Billion Solar Power Deal in Morocco


5.1  Survey Reveals Lebanese Spending Habits
5.2  Jordan’s GDP Rises by 3.1% in Third Quarter

♦♦Arabian Gulf

5.3  Kuwait Postpones Plan to Remove Petrol & Power Subsidies
5.4  UAE Records Highest Inflation Among GCC States
5.5  Dubai’s Ruler Approves $11.1 Billion Budget for 2015, up 9%
5.6  Oman 2015 Budget Raises Spending at Expense of Big Deficit
5.7  Saudi Arabia Considers Plan to Raise Cost of Hiring Expats
5.8  Saudi Arabia Discusses Opening Consulate in Iraqi Kurdistan

♦♦North Africa

5.9  Egypt Consumer Inflation Rose in December
5.10  Egyptian Exports Increased by Only 0.15% During 2014
5.11  Egypt’s Suez Canal Revenues Rise 6.8% in 2014
5.12 Last Foreign Carrier Quits Libya
5.13  Morocco Introduces Unemployment Benefits
5.14  Sales of Liquor in Morocco Decreased 13%


6.1  Turkey 2014 Inflation Increases to 8.17%
6.2  Turkey Lagging Behind Emerging Markets With 1980s Levels of FDI
6.3  Turkish Trade Deficit Hits Highest In a Year
6.4  Turkish Auto Sales Drop 10% in 2014



7.1  2014 A Record Breaking Year for Aliyah
7.2  Wide-Ranging Poll Finds Both Jews & Arabs “Proud To Be Israeli”


7.3  Saudi Arabia Set To Reopen Baghdad Embassy After 25-Year Hiatus
7.4  Essebsi Sworn In as Tunisia President
7.5  Turkey Approves First New Church in 90 Years


8.1  BGU Finds Alpha1-Anti Trypsin Combats Infections & Eradicates Bacteria
8.2  Otic Positive Results from a Phase 2 Trial of FoamOtic Externa
8.3  Teva Launches Generic Diovan in the United States
8.4  Innovative 3D Jawbone For Syrian Civil War Shooting Victim
8.5  BioLineRx Completes Trial for Novel Stem Cell Mobilization Treatment
8.6  cCAM Biotherapeutics Approved to Initiate Phase 1 Trial for CM-24
8.7  Compugen Predicted Antibody Drug Conjugate Targets Results
8.8  First Successful Transplant with Cryopreserved NiCord in Gamida Cell Trial


9.1  M-GO Partners with Beamr Video to Provide Best Streaming Quality
9.2  Celeno Announces New 802.11ac Wave 2 4×4 Portfolio


10.1  Israel 2014 Per Capita Growth Below OECD Average
10.2  Despite Gaza War, Tourist Numbers to Israel Fell Only 1% in 2014
10.3  Number of Israelis Traveling Abroad Hits All-Time High in 2014
10.4  Record New Car Deliveries in Israel In 2014

 11:  IN DEPTH

11.1  ISRAEL: 2014 Israeli High-Tech Exits Reach $6.94 Billion
11.2  IRAQ: Iraqi Cabinet Approves Budget Reforms
11.3  UAE: Dubai Year in Review 2014
11.4  OMAN: Year in Review 2014
11.5  SAUDI ARABIA: Year in Review 2014
11.6  EGYPT: Falling Oil Prices Both Blessing, Curse for Egypt
11.7  EGYPT: As Gulf Aid Dries Up, Egypt Struggles
11.8  TUNISIA: Can Tunisia Navigate the Cross-Currents of the Muslim World?
11.9  TUNISIA: Completion of Tunisia’s Political Transition in Sight
11.10  ALGERIA: Algeria Expands Fertilizer Production With New Plant
11.11  TURKEY: Life Sciences Fuelled by Favorable Investments & Reforms
11.12  GREECE: Elections – Shuffling the Deck



 1.1  US Internal Revenue Staff Visit Israel for Tax Evasion Talks

A delegation from the US Internal Revenue Service (IRS) visited Israel in early January to meet representatives of the Israel Tax Authority.  The purpose of the meeting was to implement the agreement for the exchange of information between Israel and the US concerning the accounts of US customers in Israel and Israeli customers in the US.  The parties signed the agreement several months ago, but it has not yet been implemented, and the goal of the meeting was to advance toward its implementation.

Besides preparation by the Tax Authority, it still remains to complete the legislation.  The bill on the matter passed its first Knesset reading, but the legislative process can be completed only after the elections are held two months from now.  Last October, US banks began to contact their Israeli customers to request they sign a declaration stating that their assets were reported to the tax authorities in Israel.  Customers who do not provide this form are being asked by the bank to close their account.

The trend towards sharing of information about foreign residents and their bank accounts has accelerated in recent years in the framework of the global war on tax evasion.  As part of this trend, the authorities in Israel and the US have signed such a cooperation agreement.  Banks in Israel have already demanded from their US customers a declaration that their assets were reported to the authorities in the US in the context of the Foreign Account Tax Compliance Act (FATCA) rules set in the US, which require every financial institution in the world to do this.  At the same time, it is clear that even though the information sharing agreement between Israel and the US has not yet been implemented, some US banks have begun to demand such a declaration from their Israeli customers.  (Globes 08.01)

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 1.2  Israel Railways Reports First-Ever Profit

Israel Railways finished the first nine months of 2014 with a NIS 143.8 million profit from current activities, according to the company’s third quarter reports.  This is the first time since the company was founded in 2003 that the company recorded a profit.  35 million passenger journeys were made during this period, 8% more than in the corresponding period last year.

Ahead of the company’s upcoming bond issue, Israel Railways can boast of an impressive performance: 4.7 passenger journeys in December 2014, the highest monthly figure in the company’s history.  The company’s revenue from passenger train operations totaled NIS 522 million in the third quarter, up NIS 43 million, compared with the corresponding quarter in 2013.  Revenue from cargo trains also grew, reaching NIS 129 million in the third quarter, up NIS 23 million, compared with the third quarter of 2013.  (Globes 06.01)

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 2.1  Israel Aerospace Industries Wins Cyber Security Deals

Israel Aerospace Industries ended 2014 with two cyber-solution contracts worth tens of millions of dollars.  The major deals were signed with strategic, foreign defense customers.  IAI has defined cyber security as a strategic sector and one of the company’s core areas of activity.  IAI develops advanced cyber solutions for intelligence, protection, monitoring identification and accessibility.  These capabilities are made possible by unique technologies developed by IAI’s R&D, and excellence centers.  The company offers its customers a number of approaches and channels for handling constantly-evolving cyber threats.  (Globes 07.01)

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 2.2  Supercom Buys Israeli Cyber Security Company Prevision

A little more than a year after its last acquisition, Herzliya’s SuperCom is acquiring another Israeli company.  In late 2013, SuperCom acquired a unit from Israeli OTI – On Track Innovations for $10 million.  SuperCom now plans to pay up to $2.5 million in cash for cyber-security company PreVision.  PreVision provides security solutions for the protection of strategic assets to governments, militaries, and large organizations, including critical infrastructures, and fields such as communications and finance.

SuperCom is active in the field of EID – electronic identification and smart passports, and M2M – machine to machine communications.  SuperCom has stated that the acquisition of ProVision is part of its strategy of offering supplementary security solutions to its client base.  SuperCom is traded on the Nasdaq with a market cap of $137 million dollars, after rising more than 1,600% in two years.  Since its peak in late October, the company’s share price has fallen 27%.  (Globes 07.01)

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 2.3  Five New Joint MIT-BGU Projects Approved

Five new Israeli-US academic projects in a variety of fields were recently approved for joint collaboration between faculty and research scientists at the Massachusetts Institute of Technology (MIT) and the Ben-Gurion University of the Negev (BGU).  The grants – to run January 2015 to August 2016 – were approved by the MIT-Israel-Ben-Gurion University of the Negev Seed Fund, part of the MIT International Science and Technology (MISTI) Initiative Global Seed Funds.  BGU and MIT signed the agreement in May 2014 to create the fund to promote and support early-stage collaborations.  It is the first seed MISTI seed fund in Israel, and covers travel and meeting costs to make international collaboration possible. (Israel21c 09.01)

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 2.4  Elbit Systems Wins Aerial Firefighting Contract

Elbit Systems was awarded an approximately $100 million contract from the Israeli Ministry of Defense (IMOD) to procure six new firefighting aircraft and operate the firefighting squadron, which will consist of a total of fourteen aircraft, including eight aircraft previously procured by Elbit Systems.  The contract, to be performed over an eight-year period, also covers flight hours, infrastructure upgrade, maintenance, airstrip operation, handling of fire retardants and other aspects of operating the squadron. The firefighting aircraft, manufactured by Texas’ Air Tractor, are single-engine aircraft, capable of carrying approximately 3,000 liters of water and flying three hours without refueling.

The Elad firefighting squadron was founded four years ago following the Mount Carmel forest fire and is named after Elad Riben, the fire scout that was killed in this fire. Since then, Elbit Systems has been cooperating with the IAF, firefighting units, the Jewish National Fund and the Israel Nature and Parks Authority in developing the squadron’s operational procedures and qualifying designated airstrips.  The aircraft will be flown by CHIM-NIR’s pilots, the project’s subcontractor.

Haifa’s Elbit Systems is an international defense electronics company engaged in a wide range of programs throughout the world.  The Company, which includes Elbit Systems and its subsidiaries, operates in the areas of aerospace, land and naval systems, command, control, communications, computers, intelligence surveillance and reconnaissance (C4ISR), unmanned aircraft systems (UAS), advanced electro-optics, electro-optic space systems, EW suites, signal intelligence (SIGINT) systems, data links and communications systems and radios. (Elbit Systems 05.01)

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 2.5 IAI Signs Air Canada Maintenance Deal

Israel Aerospace Industries’ Bedek Aviation Group signed an agreement with Air Canada to implement the airline’s B787 line maintenance requirements at Ben Gurion Airport near Tel Aviv.  Air Canada is very pleased with the line maintenance work performed and the excellent working relationship that it has developed with IAI’s Bedek Aviation Group.  This contract assures Air Canada of a quality solution for our B787 line maintenance needs at Ben Gurion International Airport through IAI Bedek’s extensive and proven capabilities in this field.  The selection of IAI Bedek has enhanced the existing contract for the B767 Heavy Maintenance MRO.  With over 60 years’ experience in servicing a wide range of narrow and wide body aircraft for Boeing and Airbus fleets, IAI looks forward to continuing to provide Air Canada quality, customer service and on-time delivery.  (Globes 08.01)

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 2.6  Motorola Solutions Invests in VocalZoom

Motorola Solutions, through its investment arm Motorola Solutions Venture Capital, has invested in Israel’s VocalZoom.  VocalZoom has developed a unique optoelectronic microphone able to substantially enhance a speaker’s voice over any background noise.  The technology creates a “virtual cube” in space, sensing sound from only within the cube.  This enables highly significant speech enhancement and precise speaker isolation, which are the key elements missing today to enable mass-usage of voice-driven applications for devices such as radios and smartphones.  Motorola Solutions’ investment in VocalZoom is part of its strategy to advance mission-critical communications by connecting public safety and commercial customers with real-time data and intelligence like never before.  As part of its ongoing effort to push the boundaries of innovation, the company believes VocalZoom’s technology can establish a new frontier in voice commands and sharing of intelligence with public safety personnel through devices, even in a noisy environment or in the heat of the moment with a perpetrator.  Voice-enabled technology is one of many ways that Motorola Solutions is defining the future of mission-critical public safety communications.

Yokneam’s VocalZoom was founded in 2009 with the mission to enable clear communication and voice recognition in any natural environment.  Its SEEON technology “zooms in” on an individuals’ voice using a proprietary optical sensor, that measures facial skin vibrations from the speaker’s face and is unaffected by any background noise.  VocalZoom’s patented technology singles itself out from all other Noise Reduction technologies, since it is the only technology that provides an independent and reliable reference audio signal, in any environment and with no physical contact.  (Motorola 07.01)

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 2.7  Micronet Selects CommuniTake to Enhance Customer Productivity

CommuniTake today announced that Azor’s Micronet, a leading provider of rugged mobile computing platforms designed for integration into fleet management and mobile workforce management solutions, has selected CommuniTake’s Machine Care software applications to power a unique automotive commercial fleet experience, unifying central management of its connected vehicles and high quality real-time remote support.  As connected automotive commercial vehicles tablets become more advanced and instrumental, the Telematics sector needs innovative ways to streamline tablets, vehicle, and driver performance.  It requires (1) connected machines to provide a high level of visibility into vehicle operations; (2) better information flow supporting real-time response to events in the field, to promote smarter decisions and greater operating responsiveness; (3) the ability to turn data into consolidated and valuable information; (4) automated service updates and on-device data software and reduced maintenance costs.  Micronet has chosen CommuniTake Machine Care over competing applications for several reasons, including the extensive out-of-the-box remote control and diagnostics functionalities, paired with CommuniTake’s smart, “one-and-done” machine management.

Yokneam’s CommuniTake crafts care, mobility and security solutions to provide people and businesses with the best mobile use. The CommuniTake Mobility Suite unifies comprehensive secure communications with multi-channel support tools and smart enterprise mobility management. CommuniTake’s proven success features best value; advanced technology; rich functionality; and flexible delivery methods. CommuniTake products are deployed by foremost operators and businesses worldwide. (CommuniTake 08.01)

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 2.8  OurCrowd Record 2014 with $100 Million Raised for 56 Companies

OurCrowd reported significant growth and expansion during 2014.  In under just two short years, OurCrowd has established itself as a major international leading force in the equity crowdfunding industry, raising over $100m for 56 portfolio companies, many of which won international awards.  CEO Jon Medved was voted CrowdFund Beat’s 2014 Person of the Year and the company was the top ranked equity crowdfunding platform on KPMG’s top 50 FinTech innovator list (ranked #22).  The OurCrowd community now includes 7,000 investors hailing from 94 countries with 67% of their investors investing in more than one company.  This past year, OurCrowd conducted 160 investor events in 12 countries.  The company now has offices on 3 continents with 70 employees throughout the world.  OurCrowd portfolio companies cover major investment sectors from Fintech, Cybersecurity, Medtech, Agritech, Big Data, the Internet of Things, Robotics and more, and received major international accolades and awards in 2014:

Jerusalem’s OurCrowd is the leading hybrid venture capital equity crowdfunding platform for accredited investors who wish to invest in Israeli and global early stage companies.  OurCrowd selects opportunities, invests its own capital and brings these startups to its accredited membership.  Members choose those deals they invest in via OurCrowd-managed partnerships.  OurCrowd investors must meet stringent accreditation criteria and invest a minimum of $10,000 per deal.  (OurCrowd 06.01)

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 2.9  China’s Hainan Airlines to Launch Tel Aviv-Beijing Route

China’s Hainan Airlines has filed a request with Israel’s Civil Aviation Authority to operate three weekly direct flights between Beijing and Tel Aviv from September.  The flights will operate on Tuesdays, Thursdays and Saturdays, days on which Israel’s El Al Airlines does not operate flights on the Tel Aviv-Beijing route.  The move by Hainan Airlines, China’s fourth-largest airline overall and largest privately owned one, to launch a Tel Aviv-Beijing route is the result of efforts by Tourism Minister Landau, Tourism Ministry Director-General Halevy and Israeli Ambassador to China Vilnai.  Over the past year, Israeli officials highlighted to Hainan Airlines officials the economic viability of operating regular flights between Beijing and Ben-Gurion International Airport. Until now, only El Al has operated flights on this route.  Hainan Airlines is one of the eight airlines in the world rated as five-star by Skytrax.  (Various 13.01)

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 2.10  MediSafe Raises $6 Million, Relocates Headquarters to the United States

Haifa’s MediSafe, a leading global medication management platform with over 1.3 million mobile downloads across iOS and Android smartphones and tablets, announced that it has raised a $6 million Series A Round led by Pitango Venture Capital.  Others participating in the round include 7wire ventures, as well as investors from previous rounds, including lool Ventures, TriVentures and Eyal Gura.  MediSafe’s mobile-first approach involves creating personalized interventions to the major causes of non-adherence – forgetfulness, lack of support, emotional distress, information overload, low engagement, and rising medication costs.  Through its platform, the company is enabling tighter care coordination between patients, caregivers or “MedFriends,” physicians, and other providers.

MediSafe will allocate the $6 million in new funding towards accelerating user growth in the U.S. market, where nearly half of Americans are prescribed at least one medication on a daily basis.  The company will focus on expanding the suite of medication management solutions available, enhancing overall user experience within its mHealth apps, and accelerating market penetration through a network of distribution, technology and data partnerships.  To support the market expansion, MediSafe has relocated its headquarters to Boston, Massachusetts.

MediSafe is a leading mobile medication management platform that reminds patients to take their medications via smartphones and tablets, serving to improve medication adherence rates and curb the growing annual health care costs globally.  (MediSafe 13.01)

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 3.1  Italy’s Eni Signs New Concession Agreement in Egypt

Eni, an Italian multinational oil and gas company, announced it signed a new concession agreement to operate in the South-West Melehia block in the Western Desert of Egypt, following the Egyptian General Petroleum Corporation (EGPC) 2013 international competitive bid round.  The block covers an area of 2,058 square kilometers and is located immediately south of Melehia license, operated by Agiba, a joint venture of IEOC and EGPC which manages Eni’s operations in the Western Desert.  Eni has been present in Egypt since 1954 and is the main producer of oil in the country, with an equity of approximately 210,000 boed.  (Various 09.01)

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 4.1  Green Ride’s INU is a Slick Urban Transportation for the New Age

Green Ride unveiled INU, a premium personal urban transportation vehicle; the perfect solution for travelling within the city and combines the latest technology with stunning design.  INU is a portable, green, stylish, state-of-the-art personal transportation vehicle.  It is the perfect solution for people who need to travel within the city and, unlike similar products, looks great in the office or your home when it’s not in use.  INU is essentially a brand-new new product category for adults who crave a new means of transport. Not long ago, the home espresso maker enabled people to enjoy luxury while still retaining a good value-for-money standard.  Green Ride’s INU is reinventing the personal vehicle category with a product that takes into account practicality, design and lifestyle.  It is a contemporary product that is designed with today’s world in mind.  Equipped with a phone dock, GPS and even GSM, the INU meets the highest standards of personal tech in vehicles.  The INU’s designer has also worked for Italian car-design studio Pininfarina, so it looks just as amazing folded as it does in motion.

Green Ride was founded three years ago by a group of senior automotive engineers and designers and business management experts who realized the time has come for a fundamental change in urban mobility. From the moment we leave home in the morning, modern urban residents become commuters rushing to meet their location-dynamic schedules. Convenient, safe and cost-effective transit is the key for individual freedom. These are the concepts that have motivated Green Ride in the creation of INU, this generation’s vehicle, which best represents the expectations of those who want to live their cities in a freedom never experienced before.  (Green Ride 07.01)

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4.2  Saudi Arabia’s AKWA Wins $2 Billion Solar Power Deal in Morocco

A consortium led by Saudi Arabia’s ACWA Power International won a $2 billion contract to build two solar power plants in the southern Moroccan city of Ouarzazate.  The two plants totaling 350 MW are the second phase of the 500 MW Ouarzazate project, which aims at producing 2 gigawatts of solar energy by 2020, according to the Moroccan Solar Energy Agency (MASEN).  ACWA Power is already building a 160 MW plant in the first phase of the project.  ACWA’s consortium, which includes Spain’s Sener, had priced its offer at 1.36 dirhams ($0.15) per kilowatt (KW) for the first 200 MW plant with parabolic mirror technology, while it priced the plant with solar power tower technology at 1.42 dirhams per KW.  Consortiums led by Spain’s Abengoa, GDF’s International Power and ACWA Power were pre-selected for the 200 MW (Noor II) tender.  The three groups were also pre-qualified for the 150 MW (Noor III) tender, along with another consortium led by Electricite de France (EDF).  The plants are scheduled to start generating power in 2017.  The Ourzazate project is expected to generate an equivalent of 38% of Morocco’s current installed generation capacity. (MWN 10.01)

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 5.1  Survey Reveals Lebanese Spending Habits

A recent American Express survey found 65 % of Lebanese prioritize spending on luxury experiences, which is above the regional average of 59%.  In Lebanon, a majority chooses to spend their money on holidays, with 54% ranking holidays their number one luxury spending priority.  This is well above the regional average of 43% and contrasts with the picture of the region as a whole, where social events such as sporting activities tend to attract the most spending.  When it comes to other experiences, Lebanese rank spending on club memberships as their second-most important spending category, with 50% ranking this as important to them.

Despite the focus on experiences, respondents in Lebanon are continuing to spend on luxury goods.  Luxury food ranks as the top category of expenditure with 27% of people choosing it as their number one focus, followed by high-end electronics (23%) and designer wear and fashion (21%) making up the second- and third-preferred category of expenditure.  (AME 30.12)

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 5.2  Jordan’s GDP Rises by 3.1% in Third Quarter

Jordan’s economy grew by 3.1% at constant market prices during the third quarter of 2014, the Department of Statistics (DoS) announced.  The DoS reported that most sectors recorded positive growth during the July-September period compared with the results achieved during the same quarter of 2013.  Mining industries recorded the highest growth rate which reached 43.7% when compared to the third quarter of 2013, followed by the construction sector, which expanded by 12.5%, according to DoS, which indicated that the agricultural sector also saw a tangible growth rate of 7.8%.  Producers of private services, a not-for-profit sector, grew by 7%, the official data said, adding that the growth of social and personal services stood at 4.6%.  Wholesale/retail trade and hotels/restaurants sector saw a growth rate of 4.4%, followed by net tax on products by 2.1%.  (DoS 31.12)

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♦♦Arabian Gulf

 5.3  Kuwait Postpones Plan to Remove Petrol & Power Subsidies

The plunge in oil prices in the past six months won’t affect Kuwait’s economic development projects and the government will continue to support capital expenditure in the economy, Finance Minister Anas Al Saleh said on 4 January.  Saleh and other ministers spoke at a news conference to explain the government’s fiscal policy and reforms to its lavish system of consumer subsidies.  On 1 January, the government moved to cut its subsidy burden by raising the price of diesel at wholesalers and fuel stations to 0.170 dinar ($0.59) per liter from 0.055 dinar.  The politically sensitive decision prompted heavy criticism of government policy by some members of parliament, who argued that the drop in oil prices should lead to lower, not higher, prices for consumers.  Oil Minister Ali Al Omair said the government had decided to postpone any removal of subsidies from petrol, electricity and water. He did not say when authorities might resume considering the reforms.  (AB 04.01)

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 5.4  UAE Records Highest Inflation Among GCC States

Inflation in the GCC ranged between 1.02% and 3.11% in October 2014, when compared to the same month in 2013, says a report from the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat).  According to the report from the GCC-Stat, UAE recorded the highest inflation at 3.11%.  Kuwait and Qatar came second with 3.0%, followed by 2.6% in Saudi Arabia and 2.5% in Bahrain. Oman registered the lowest inflation rate of 1.02%.  When compared to September 2014, the inflation rates in October witnessed a slight increase of 0.2% in Saudi Arabia, 0.11% in the UAE, 0.1% in both Oman and Qatar, while prices in Bahrain and Kuwait remained stable.

Food and beverage prices increased by 3.72% in the UAE, 3.5% in Saudi Arabia, 2.9% in Bahrain, 2.58% in Kuwait, and 1.04% in Oman, says the report.  Meanwhile, Qatar was the only GCC country where prices for food and beverages decreased in October by 0.6% when compared to the same month in 2013, it adds.  Figures show prices across the GCC region for housing, water, electricity, gas and other types of fuel witnessed the highest increase.  Qatar witnessed an increase of 8.2%, followed by 5.2% in Bahrain, 4.44% in Kuwait, 4.17% in the UAE, 2.8% in Saudi Arabia, and a slight increase of 0.24% in Oman.  (AME 30.12)

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 5.5 Dubai’s Ruler Approves $11.1 Billion Budget for 2015, up 9%

Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, approved a AED41 billion ($11.1 billion) budget for Dubai, an increase of 9% compared to last year.  The budget for 2015 will have an operating surplus of AED3.6 billion, will provide 2,530 jobs, and will continue to stimulate economic growth.  Abdulrahman Saleh Al Saleh, director general of Government of Dubai’s Department of Finance, said spending increases were included for infrastructure, communications, security, justice and safety, government services and excellence, and social development.  He added that government revenues were expected to rise by 11% in 2015 compared to the fiscal year 2014.

Revenue from government services, which represents 74% of total government revenue, is set to increase by 22% compared to 2014.  Oil revenues are set to account for only 4% of government revenue as economic diversification continues.  Dubai is planning to maintain the size of its investments in infrastructure over the next five years while support for social development in the areas of health, education, housing and community development will remain a priority.  The budget of 2015 also stresses support for security, justice and safety, with 22% of government spending allocated.  (WAM 03.01)

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 5.6  Oman 2015 Budget Raises Spending at Expense of Big Deficit

Oman’s finance ministry has released a state budget for 2015 that raises spending at the cost of a big projected deficit due to the plunge in oil prices.  Government expenditure this year is estimated at 14.1 billion rials ($36.6 billion), up 4.5% from last year’s original plan, the ministry said.  Revenues are projected at 11.6 billion rials, down 1%, leaving an anticipated deficit of 2.5 billion rials, equivalent to about 8% of Oman’s annual gross domestic product.  The ministry said it would look at a range of ways to cover the shortfall.  Grants from foreign donors could provide 200 million rials, international loans 200 million, borrowing from the local market 400 million, state reserve funds 700 million, and previous years’ surpluses 1 billion rials.  The state finances of all the Gulf oil exporters have been hit by the halving of crude prices in the past six months, with Brent crude now standing at about $57 a barrel.  But Oman’s oil resources are not as ample as those of its bigger neighbors and it has not built up their huge fiscal reserves, so it is more vulnerable than most.

The government has been spending heavily to build industrial projects and infrastructure to diversify the economy beyond oil, and it ramped up social spending to maintain stability after the 2011 Arab Spring uprisings elsewhere in the region.  It appears to have decided it cannot cut either form of spending sharply.  In November an advisory body to the government suggested sweeping spending cuts and tax rises, including a levy on liquefied natural gas exports, a royalty on the revenues of telecommunications operators, and a hike in royalties paid for mineral exploitation.  The ministry did not say which if any of these steps had been adopted.  Last month, Omani cement firms said the government would double the natural gas charges they pay.  A proposal to tax foreign workers’ remittances was rejected.  A privatization program will be carried out in the next three years, the ministry said without elaborating.  (Reuters 02.01)

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 5.7  Saudi Arabia Considers Plan to Raise Cost of Hiring Expats

Saudi Arabia is considering increasing the cost of hiring foreign workers in another measure designed to encourage more nationals into the private sector.  Labour Minister Fakeih said the Council of Ministers had asked his ministry to examine the issue, as well as penalizing private employers who forged Saudization quotas, state media reported.  Saudi Arabia has set minimum numbers of locals that must be employed by businesses in various sectors, with hefty penalties for non-compliance.  There are about 9 million expats in the kingdom, which has a total population of about 27 million.  (AB 06.01)

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 5.8  Saudi Arabia Discusses Opening Consulate in Iraqi Kurdistan

Saudi Arabia is reportedly in discussions with Iraqi authorities to open a consulate in Erbil following plans to reopen its Baghdad embassy, closed since 1990.  Erbil is the capital of the semi-autonomous Iraqi Kurdistan province in the north of the country.  One of the most stable areas of Iraq, it also is a key business hub and has vast oil reserves.  Saudi Arabia suspended bilateral ties with Iraq following former dictator Saddam Hussein’s invasion of Kuwait.  A spokesman for the Iraqi prime minister’s office, Saad Al Hadithi, said the Iraqi government was looking forward to a “remarkable breakthrough” in regional relations, particularly with strategic countries such as Saudi Arabia.  (AB 06.01)

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♦♦North Africa

 5.9  Egypt Consumer Inflation Rose in December

Food and housing costs pushed up Egypt’s annual consumer price inflation in December, CAMPAS said on 8 January, dampening expectations of an early interest rate cut.  Annual urban consumer inflation rose to 10.1% in December from 9.1% the previous month.

Egypt’s economy has been battered by four years of political and economic turmoil since the 2011 Arab Spring uprising.  President Abdel-Fattah al-Sisi’s government has been walking a fine line between restoring growth while keeping both the budget deficit and prices under control.  Inflation spiked in Egypt after the government slashed energy subsidies in July in an effort to strengthen its finances.  The central bank raised interest rates by 100 basis points in July to counter the inflationary impact of the subsidy cuts but has since kept them on hold as inflation steadied and global oil prices tumbled.  Egypt is a major energy importer and the oil minister has said that if global prices remain around $60 a barrel, it can save about 30% on its energy subsidies bill.

Core inflation, which strips out subsidized goods, including fuel and volatile items such as fruit and vegetables, fell to 7.69% in December from 7.81% the previous month, the central bank said.  (CAPMAS 08.01)

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 5.10  Egyptian Exports Increased by Only 0.15% During 2014

The total exports for 2014 registered $22.11b, representing a 0.15% increase to the corresponding period the preceding year.  The government set a target of $25b and succeeded in accomplishing 88.4% of its goal.  The government has surpassed its set targets for medical industry products, agricultural products and readymade garments.

The Foreign Trade Monthly Digest report highlighted that total exports of Egypt during December 2014 reached EGP 13.182b, around $1.844b.  Exports in December declined by 3.75% compared to the previous month.  In October, exports registered $1.309b, falling by 12.52% compared to the $1.47b total recorded in September.  In 2013, exports totaled $21.5b according to the ministry’s report. Top exports during the current year were raw materials and finished products namely batteries, plastics and fertilizers.  The report highlighted that Saudi Arabia was the largest importer in December, followed by Turkey, the United States and Italy.  During 2014, Egyptian imports from the United Kingdom grew by approximately 15% while exports climbed up by 30%.  (Various 09.01)

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 5.11  Egypt’s Suez Canal Revenues Rise 6.8% in 2014

The Suez canal saw 17,150 ships pass through carrying 962.8 million tonnes of cargo, leading to a 6.8% rise in revenues during 2014.  A project to expand the canal, currently underway, is estimated by the government to more than double the revenues by 2023.  Egypt’s net international reserves inched down to $15.33 billion at the end of November compared to $15.88 billion a month prior, shows the country’s central bank data.  (Ahram 08.01)

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 5.12  Last Foreign Carrier Quits Libya

Turkish Airlines, which had been the last foreign carrier offering flights to Libya, announced that it was suspending operations to the war-engrossed country on 6 January. The airline said that it was stopping flights to Misrata; last year it suspended flights to other Libyan cities including the capital Tripoli.  Turkish Airlines announced it is not operating any scheduled flights to Libya at the moment.  (AVB 07.01)

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 5.13  Morocco Introduces Unemployment Benefits

After 12 years of negotiations, Morocco’s Job Loss Allowance (IPE) law went into effect on 1 December.  Moroccan Employment Minister Seddiki told Magharebia that the IPE would be paid for through an initial fund of MAD 500 million set up by the government for three years.  Under the new law, workers in Morocco who lose their jobs are entitled to receive 70% of their average monthly wage from the previous 36 months.  The amount cannot exceed the statutory minimum wage, which is just over €230 per month.  Resignation, voluntary departure or abandonment of one’s post do not entitle anyone to receive this allowance, which protects entitlement to medical insurance for both the unemployed worker and his legal successors and preserves the right to family allowances and pensions.

According to the High Commission for Planning, there are approximately 3.6 million private-sector employees in Morocco, but the number of people required to pay into the CNSS – who are the only people entitled to receive the IPE – is just 2.9 million.  Just 59% of Moroccans have state medical insurance and only 33% pay into state pensions, according to the HCP.  The agency noted the lack of a social security system for self-employed people, who make up over 55% of the workforce and numbered more than 10.63 million at the end of 2013.  (Magharebia 07.01)

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 5.14  Sales of Liquor in Morocco Decreased 13%

Jeune Afrique Magazine has reported that sales of liquor in Morocco decreased by 13% during H1/14.  The magazine said that the decreasing level of alcohol sales in Morocco is due to a drop in demand because of increased government taxes on alcoholic beverages, as well as the fact that Ramadan occurred in the summer, when alcohol is usually consumed in high quantities.  Moroccans refrain from consuming alcohol that month.  In addition, Marjane Holding’s decision to stop selling alcoholic beverages in all of its supermarkets in Moroccan cities contributed to the drop in alcohol sales.  Marjane currently has thirty-two supermarkets in the main cities of Morocco.  These reasons contributed to the national drop in alcohol sales, as well the decline of wine-makers’ profits, which fell by approximately 43%.  This trend will continue in 2015, because other Moroccan supermarkets, such as Assima, will also stop selling alcohol.  Statistics regarding H2/14 have not been released yet.  (MWN 09.01)

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 6.1  Turkey 2014 Inflation Increases to 8.17%

Annual inflation in Turkey ticked up to 8.17% in 2014, slightly higher than 2013 and well over the Turkish Central Bank’s medium-term target.  However the figure was lower than expected by analysts, with inflation falling 0.44% in December from November.  The Turkish Central Bank had also forecast at the end of October annual inflation of 8.9% in 2014 while the government had predicted 9.4%.  Inflation in Turkey however remains well above the central bank’s medium term target of 5%.  Inflation in 2013 was 7.49%.  The central bank has so far defied pressure from the government and President Erdogan for aggressive interest rate cuts to stimulate economic growth, citing the need to keep a watchful eye on inflation.  Turkey’s economic performance is set to come under the spotlight in 2015 with the country holding the presidency of the G20 group of the world’s top economies.  (AFP 05.01)

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 6.2  Turkey Lagging Behind Emerging Markets With 1980s Levels of FDI

Turkey has lagged behind other emerging markets in competitiveness levels and returned to the 1980s in terms of attracting foreign direct investment (FDI) the World said on 6 January.  Turkey’s FDI figures are very impressive and the country’s FDI attraction rate increased to very high levels in 2007 compared to BRICS countries, Mexico and Nigeria.  However, Turkey is now seen back to 1988 rates in terms of luring FDI in comparison to other emerging markets, but very few in Turkey accept this fact. There are three obstacles that Turkey must overcome to become a high-income country: Increasing productivity, enabling the working population to participate in the economy more, and preparing Turkey’s institutional structures for the high-income group.  (HDN 07.01)

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 6.3  Turkish Trade Deficit Hits Highest In a Year

Turkey’s foreign trade deficit surged in November as exports plunged and imports rose, hitting the highest monthly figure since December 2013, government data showed. Figures from the Turkish Statistical Institute (TurkStat) revealed on Wednesday that the country’s trade deficit rose to $8.32 billion in November from $7.21 billion in the same month of 2013.  The trade deficit in November exceeds the median market estimate of $6.95 billion and is the highest since December 2013. Turkey’s exports fell 7.5% year-on-year in November while imports increased 0.2%, TurkStat said.  In the first ten months of 2014, trade deficit fell to $75.96 billion from $89.89 in the same period last year.  (Zaman 31.12)

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 6.4  Turkish Auto Sales Drop 10% in 2014

Turkish automotive sales fell 10.04% year-on-year in 2014 to 768,681 vehicles, the Automotive Distributors Association (ODD) announced.  Passenger car sales also fell 11.63% to 587,331 vehicles in 2014, ODD said.  In December alone, automotive sales had risen 13%.  (ODD 07.01)

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7.1  2014 A Record Breaking Year for Aliyah

Although Israel faced another war and tensions rose in Jerusalem, 2014 was a record-breaking year in terms of aliyah (immigration) statistics.  According to the end-of-year figures released by the Jewish Agency for Israel and the Ministry of Immigrant Absorption, aliyah hit a 10-year high in 2014 – with the arrival of about 26,500 new immigrants.  A total of 3,762 Jews from US and Canada and 525 from UK also arrived in Israel over the past year.

The year 2014 saw a 32% increase in immigrants, compared to the approximately 20,000 immigrants that made aliyah to Israel in 2013.  For the first time in Israel’s history, France has topped the list of countries of origin for immigrants to Israel – 7,000 new immigrants from France arrived in Israel in 2014, more than twice as much as the 3,400 French immigrants who arrived last year.  Furthermore, about 5,840 new immigrants came to Israel from Ukraine, compared to 2,020 in 2013.  The 190% immigration increase was primarily due to the ongoing instability in the Ukraine.

At the top of the list of cities that took in the most new immigrants in 2014 is Tel Aviv, which welcomed 3,054 new citizens.  Following Tel Aviv, Netanya came in 2nd place embracing 2,923 new immigrants and Jerusalem came in 3rd place with 2,808 new immigrants moving to the holy city.  Haifa received 1,785 new immigrants and in Ashdod, 1,523 new Israeli citizens moved to the southern coastal city.  (Ynet 31.12)

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 7.2  Wide-Ranging Poll Finds Both Jews & Arabs “Proud To Be Israeli

The extensive annual poll by the Israel Democracy Institute (a reliable centrist NGO) has found that both Israeli Jews and Arabs are proud to be Israeli.  The annual poll is used by both Israel and the international community as a barometer of Israeli public opinion.  This year’s poll found that 86% of Israeli Jews and 65% of Israeli Arabs said they were either “very” or “quite proud” to be Israeli.  Only 13% of Jews and 34% of Arabs said they were “not so proud” or “not proud at all” to be Israeli.  When asked which institutions they trusted the most, Israeli Jews said the IDF (88%), the Israeli president (71%) and the Supreme Court (62%).  The least trusted institutions are the Knesset (35%), Chief Rabbinate (29%) and the media (28%).  Among Israeli Arabs, the most trusted institutions are the Supreme Court (60%), the police (57%), the Israeli president (56%) and the IDF (51%).  (Various 05.01)

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 7.3  Saudi Arabia Set To Reopen Baghdad Embassy After 25-Year Hiatus

A Saudi delegation traveled to Baghdad to begin preparations to reopen an embassy in the Iraqi capital for the first time in 25 years.  A thaw in the once chilly relations between Sunni-ruled Saudi Arabia and Shi’ite-led Iraq could help strengthen a regional alliance against IS militants who have seized territory in Iraq and Syria.  Saudi Arabia closed its Baghdad embassy in 1990 after Saddam Hussein invaded Kuwait.  It has long accused Iraq of being too close to Shi’ite Iran, its main regional rival, and of encouraging sectarian discrimination against Sunnis, a charge Baghdad denies.  The Saudi move would help return Iraq to the Arab nation “after an absence since the toppling of the Saddam Hussein regime and the penetration of the Iranian regime into the joints of the Iraqi state,” said Abdullah Al Askar, head of the foreign affairs committee on Saudi Arabia’s Shoura Council, which advises the government on policy.  Saudi Arabia began cautious moves towards rapprochement after the appointment in August of Haider Al Abadias Iraq’s new prime minister.  Besides reopening its embassy, the KSA also plans to set up a general consulate in Erbil, capital of Iraq’s Kurdistan region.  (Reuters 03.01)

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 7.4  Essebsi Sworn In as Tunisia President

Anti-Islamist Beji Caid Essebsi, 88, was sworn in on 31 December as Tunisia’s first freely elected president, vowing to work for national reconciliation, four years after an uprising that sparked the Arab Spring.  The election of Essebsi, a veteran of previous regimes, is seen as a landmark for the North African nation, where longtime dictator Zine El Abidine Ben Ali was toppled in 2011.  Essebsi’s victory over outgoing president Moncef Marzouki capped Tunisia’s sometimes troubled transition to democracy and has won praise from Western leaders.

Essebsi also attended a handover ceremony at the presidential palace where he was embraced by the outgoing leader.  Marzouki, an exiled human rights activist during Ben Ali’s rule, was elected president at the end of 2011 by an interim assembly under a coalition deal with the then-ruling moderate Islamist movement Ennahda. Essebsi’s Nidaa Tounes movement, which includes many members of Ben Ali’s old ruling party, won landmark parliamentary elections in October.  Even so, the anti-Islamist lawyer has vowed a fresh start for Tunisia.

Essebsi took 55.68% of the presidential vote in a 21 December runoff against Marzouki — the first time Tunisians have freely elected their head of state since independence from France in 1956.  In a presidential statement, Essebsi resigned as head of Nidaa Tounes, in line with the constitution, and called for its deputy leader, Mohamed Ennaceur, to name a candidate to set up a new government.

Nidaa Tounes will need to form a coalition as with 86 MPs it fell short of an absolute majority in Tunisia’s 217-seat parliament.  Ennahda, which came second, has not ruled out joining a governing coalition.  Incumbent Prime Minister Mehdi Jomaa remains at his post until the formation of a new Cabinet.  (AFP 31.12)

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 7.5  Turkey Approves First New Church in 90 Years

Turkey’s Islamist AKP government has authorized the building of the first church in the country since the end of the Ottoman empire in 1923.  The church is for the country’s tiny Syriac community and will be built in the Istanbul suburb of Yesilkoy on the shores of the Sea of Marmara, which already has Greek Orthodox, Armenian and Catholic churches.  Turkey, which once had large Christian minorities, is now 99% Muslim, and critics of the ruling party AKP have accused it of trying to Islamize its officially secular society.  However, as part of its bid to join the European Union, Ankara has made efforts to widen minority rights and return some seized property and restore churches, monasteries and synagogues.  The country’s ancient Syriac minority, which now numbers less than 20,000, live mostly in the southeast, and tend to be either Orthodox or Catholic.  The church will be built on land given by the local council and paid for by a Syriac group, the government spokesman, who asked not to be named, said.  (AFP 04.01)

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 8.1  BGU Finds Alpha1-Anti Trypsin Combats Infections & Eradicates Bacteria

A research team at Ben-Gurion University (BGU) of the Negev has discovered that Alpha1-antitrypsin does a surprisingly good job killing bacteria as well as combating infections.  The researchers sought the answer for what would be the consequence of treating individuals with immune-compromised conditions using alpha1 in so far as susceptibility to infections.  Lead by researchers at the Lewis Lab at BGU, mice were directly infected with various strains of live bacteria at different infection sites, including lungs and gut.  The initial aim was to exclude the possibility of worsening infection progression in treated mice.  Yet the group stumbled upon highly unexpected outcomes: not only did the treated mice combat the infections better, but the bacteria that were directly introduced into the various compartments were practically eradicated by alpha1 therapy before the end of the first 24 hours; there were barely bacteria left to grow colonies on a plate.  The team says the clinical implications of these findings are immense. (TDT 06.01)

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 8.2  Otic Positive Results from a Phase 2 Trial of FoamOtic Externa

Otic Pharma announced positive clinical results of its lead product, FoamOtic Externa.  A single agent, steroid free product was studied in a Phase 2 clinical trial with 220 minor and adult patients with Acute Otitis Externa (AOE).  Once-daily dosing of FoamOtic Externa (ciprofloxacin 0.3% otic foam) demonstrated excellent safety and a similar clinical cure rate as twice-daily dosing of Ciprodex ear drops (0.3% ciprofloxacin and 0.1% dexamethasone otic suspension, Alcon), the world leading marketed ear drops for AOE.  The randomized, multicenter, parallel, comparative Phase 2 trial enrolled patients, ages six months and older.

FoamOtic Externa is a proprietary, foam-based extended-release formulation of ciprofloxacin antibiotic which has been designated for self-applied once-daily administration to treat AOE.  The FoamOtic platform addresses the inherent limitations of ear drops.  The foam expands, providing good coverage of the infected area; it does not drip out of the ear and while collapsing provides continuous release of the active pharmaceutical ingredients.  FoamOtic application is fast and easy, does not require tilting the head or lying on the side, can be self-administered and provides superior convenience compared to ear drops.

Rehovot’s Otic Pharma, established in 2008, is a clinical-stage company with a pipeline of improved, differentiated and user-friendly products for the treatment of ENT disorders, based on FoamOtic, a proprietary foam-based drug delivery system providing sustained exposure of drugs. Otic Pharma has three product candidates in development. FoamOtic Externa completed Phase 2 clinical trial in minor and adults AOE patients.  (Otic Pharma 07.01)

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 8.3  Teva Launches Generic Diovan in the United States

Teva Pharmaceutical Industries announced the Food and Drug Administration (FDA) approval and the launch of the generic equivalent to Diovan® (Valsartan) Tablets in the United States.  Diovan (Valsartan) Tablets, marketed by Novartis Pharmaceuticals, had annual sales of approximately $1.8 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 07.01)

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 8.4  Innovative 3D Jawbone For Syrian Civil War Shooting Victim

Israeli doctors at Rambam Health Care Campus used a groundbreaking procedure to implant a titanium jawbone in a Syrian shooting victim, who had come to Israel for medical treatment after a bullet demolished his lower jaw.  The 23-year-old Syrian man arrived at Haifa’s Rambam in critical condition after a rifle bullet had completely destroyed his lower jaw, rendering him unable to speak or eat.  Israeli doctors outfitted him with a custom-made jaw printed on titanium using 3D CT and then implanted it into the victim’s face.  Professor Rachmiel, director of Rambam’s Department of Oral and Maxillofacial Surgery, performed the ground-breaking operation with Dr. Leiser, who recently returned from training in Germany, where he specialized in restoring eye sockets, jaws and cheek bones.  One day after surgery, the patient was eating and speaking.  In the procedure, called a Patient Specific Implant (PSI), doctors created a jaw perfectly suited to the patient.  Rambam said that following this success, three additional patients are scheduled to undergo similar innovative treatments. (TiP 12.01)

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 8.5  BioLineRx Completes Trial for Novel Stem Cell Mobilization Treatment

BioLineRx completed the dose escalation stage of a Phase 1 trial for its novel oncology platform, BL-8040, as a novel treatment for the mobilization of stem cells from the bone marrow to the peripheral blood circulation.  All healthy volunteers completed the treatment phase and results are expected during Q1/15.  BL-8040 is being developed along multiple tracks for the treatment of hematological malignancies and other hematological indications, with multiple clinical milestones expected in 2015.  In parallel, BL-8040 is also undergoing a Phase 2 study for treating relapsed and refractory acute myeloid leukemia patients, the results of which are expected in the second half 2015.

The Phase 1 study consists of two parts. The first part is a randomized, double-blind, placebo-controlled dose escalation study exploring the safety and tolerability of escalating repeated doses of BL-8040 in healthy volunteers.  Secondary objectives include assessment of the efficacy of BL-8040 in mobilizing stem cells as a stand-alone therapy, as well as determining the pharmaco-dynamic and pharmacokinetic profile of the drug.  This part was performed in three cohorts, with eight healthy volunteers in each cohort. Following analysis of the data, the optimal safe and efficacious dose of BL-8040 will be selected to be used as a stand-alone therapy in the second part of the study.

Jerusalem’s BioLineRx is a publicly-traded, clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates. The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.  (BioLineRx 07.01)

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 8.6  cCAM Biotherapeutics Approved to Initiate Phase 1 Trial for CM-24

cCAM Biotherapeutics received approval form the US FDA to commence a Phase 1 trial for CM-24, a first-in-class immunomodulatory monoclonal antibody (mAb) for the treatment of various types of cancers.  The study is expected to commence during the first quarter of 2015.  CM-24 is directed against CEACAM1, a novel immune checkpoint protein that is expressed on activated effector lymphocytes and a variety of cancer cells.  CEACAM1 belongs to the Human CEA protein family, and preclinical data show that inhibition of CEACAM1-CEACAM1 homophilic interactions by CM-24 leads to enhanced activation of tumor specific immune cells.  The Phase 1 trial is a first-in-human, open-label, multicenter, dose escalation study assessing the effect of the CM-24 mAb in cancer patients with selected advanced or recurrent malignancies, including melanoma, non-small cell lung adenocarcinoma (NSCLC) and bladder, gastric, colorectal or ovarian cancer.  Primary objectives of the study are to assess the safety and tolerability of escalating multiple doses of CM-24 and to determine the recommended dose for Phase 2 trials with CM-24.

Founded in 2010, Misgav’s cCAM is a biopharmaceutical company focused on the discovery and development of novel immunotherapies to treat cancer.  Its lead product, CM-24, is a Phase 1 ready, first-in-class humanized anti CEACAM1 monoclonal antibody.  CM-24 was discovered by Dr. Gal Markel, Head of Research, Ella Institute of Melanoma, at Sheba Academic Medical Center Hospital.  Investors in the Company include Arkin Holdings, Orbimed and Pontifax.  (cCAM Biotherapeutics 06.01)

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 8.7  Compugen Predicted Antibody Drug Conjugate Targets Results

Compugen announced positive initial experimental results for the first two of five in silico predicted targets for antibody drug conjugate (ADC) cancer therapy disclosed in late 2013.  The two candidates demonstrate low expression levels in normal critical tissues, such as heart and liver and higher expression in multiple cancer types, such as colorectal and prostate cancers, for which there is high unmet medical need.  These results suggest that the two target candidates may serve for the development of ADC therapy in oncology.  Initial validation of the remaining three candidates, and further testing of these two, is ongoing. It is expected that a therapeutic antibody discovery program against a selected ADC target will commence later this year.

ADC cancer therapy destroys cancer cells by delivering high-potency cytotoxic agents (the “payload”) directly to the cancer cells.  The principle underlying ADC therapy is to impact only the cancer cells by linking the cytotoxic agent payload to an antibody or antibody fragment that specifically binds to a protein that is present on cancer cells and expressed at lower levels in healthy cells.  When administered to the patient, the antibody with the payload specifically targets this protein, and is internalized into the cells, where the toxic payload is released and activated.

Tel Aviv’s Compugen is a leading drug discovery company focused on monoclonal antibodies and therapeutic proteins to address important unmet needs in the fields of oncology and immunology.  The Company utilizes a broad and continuously growing integrated infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology capabilities for the in silico (by computer) prediction and selection of novel drug target candidates, which are then advanced in its Pipeline Program.  (Compugen 05.01)

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 8.8  First Successful Transplant with Cryopreserved NiCord in Gamida Cell Trial

Gamida Cell announced that the first person has been successfully transplanted with cryopreserved (frozen) NiCord in the company’s ongoing Phase I/II clinical study for blood cancer patients.  This is the first time that a patient has been successfully transplanted with umbilical cord blood stem and progenitor cells, that were expanded (population increased) ex-vivo (outside of the body), and cryopreserved.  The company also noted today that after thaw, the cryopreserved product maintained the advantage of NiCord in demonstrating very rapid engraftment (white blood cell recovery).  It is expected that this rapid engraftment will reduce the risk of opportunistic infections, will lower the morbidity associated with cord blood transplantation and shorten hospitalization.  NiCord is currently manufactured and shipped to the US and Europe from Gamida Cell in Jerusalem.

NiCord is derived from a single umbilical cord blood unit which has been expanded in culture and enriched with stem and progenitor cells using Gamida Cell’s proprietary NAM technology.  NiCord is in development as an investigational therapeutic treatment for blood cancers such as leukemia and lymphoma and for non-malignant hematological diseases.

Jerusalem’s Gamida Cell is a world leader in cell therapy technologies and products for transplantation and adaptive immune therapy.  The company’s pipeline of products are in development with a potential to treat a wide range of conditions including blood cancers, non-malignant hematological diseases such as sickle cell disease and thalassemia, neutropenia and acute radiation syndrome, autoimmune diseases, solid tumors and genetic metabolic diseases as well as conditions that can be helped by adaptive immune therapy such as solid and blood cancers refractory to chemotherapy.  (Gamida Cell 08.01)

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 9.1  M-GO Partners with Beamr Video to Provide Best Streaming Quality

Beamr and Los Angeles’ M-GO, a fast growing, premium transactional video on demand (TVOD) service and joint venture between Technicolor and DreamWorks Animation, announced that M-GO is using Beamr Video to provide a best-in-class user experience for the company’s premium streaming service.  Based on a patent-pending perceptual quality measure, Beamr Video automatically reduces the bitrate of any H.264 or HEVC HD and 4K video stream by up to 50% while retaining the full perceptual quality and format of the original file.  Beamr’s technology enables a smoother streaming experience with reduced buffering and faster stream starts, resulting in increased ARPU and higher customer satisfaction, in addition to reduced distribution costs.  M-GO is leveraging strategic partnerships with tier-one media companies to grow its vast premium content catalog, including 4K UHD titles.  Recently announced CE partnerships with Samsung and LG, along with availability on all major platforms, have also enabled the company to expand its VOD service offering.

Tel Aviv’s Beamr is an imaging technology company that works with the world’s leading web publishers, social networks and media companies to enable optimal user experiences across any user device or platform.  Led by serial entrepreneurs and technology experts with extensive experience in media compression and delivery, Beamr’s goal is to improve the user experience and reduce the costs associated with storing and transmitting media files through its JPEGmini and Beamr Video products. (M-GO 07.01)

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 9.2  Celeno Announces New 802.11ac Wave 2 4×4 Portfolio

Celeno Communications unveiled their 802.11ac Wave 2 compatible product family – the Quicksilver product family.  As well as providing the most advanced physical layer technology based on Celeno’s Smart Multi-User Multiple Input Multiple Output (MU-MIMO) architecture and algorithms, and support for 160 MHz channel width, the Quicksilver solution goes beyond other Wave 2 offerings by including Celeno’s industry unique channel aware Wi-Fi virtualization, QoS and QoE management technology, OptimizAIR 2.0.  Combined with Celeno’s industry-first OptimizAIR 2.0, the MU-MIMO capabilities of Wave 2 are significantly enhanced.  Quicksilver product family builds on Celeno’s field proven channel-aware scheduling algorithms to enhance multi-user groupings as part of the airtime management engine.  By introducing Smart MU-MIMO, Celeno goes beyond the industry standard to deliver a solution that not only provides greater Wi-Fi capacity by streaming simultaneously to multiple clients, but together with OptimizAIR 2.0, smartly distributes available throughput to optimize the user experience, especially with 4K video streaming use cases.

Celeno’s Quicksilver solution presents a unique opportunity for service providers and OEMs to fine-tune the multi-user experience by enabling significant improvements in performance for their customers across a wide range of Wi-Fi applications and challenges including: coping with the fast growing number of devices in the home; the ability to manage differentiated services such as data, video and homespots; prioritizing VoIP; allowing differentiation between similar services such as HD and 4K-UHD video; and smarter spectrum intelligence.

Ra’anana’s Celeno provides high performance Wi-Fi chips and software for demanding home networking applications.  Celeno’s extensive chip portfolio and OptimizAIR technology enable the wireless distribution of multiple and simultaneous HD video and data streams throughout the home with the highest levels of performance and reliability while ensuring a superlative quality of service and user experience.  (Celeno 05.01)

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 10.1  Israel 2014 Per Capita Growth Below OECD Average

The Central Bureau of Statistics estimated Israel’s economic growth in 2014 at 2.6%, a significant upward adjustment of its 2% forecast in November.  The cause is a faster than expected recovery in various economic sectors, following Operation Protective Edge.  At the same time, the figures show stagnation in exports and investments.  These figures for the national accounts do not include December.  Final 2014 figures will be presented in March 2015.

Israel’s growth rate is still higher than the 1.8% average for the members of the Organization for Economic Cooperation and Development (OECD).  In per capita economic growth, however, Israel’s growth was only 0.7%, lower than the 1.3% OECD average for the first time since 2008.  A 3% budget deficit is projected, with 4.4% growth in revenues and 3.9% in spending.  The downtrend in government debt as a proportion of GDP continued with a drop from 66.4% in 2013 to 65.5% in 2014.  Private consumption was up 3.8% in 2014, and 1.8% in per capita terms, compared with a 1.5% average in the OECD, a trend that began in 2011.  Consumption of durable goods shot up 7%, due mostly to a rise in vehicle purchases, while consumption of non-durable goods rose only 1.4%.  Overseas spending by Israelis jumped 6.1%.

Israel’s exports of goods and services were up only 0.6% in 2014, reaching $44 billion, 21% of which was to the US. Israel’s main sources of imports were the US and China.  Imports of goods and services rose 0.9%: imports of goods fell, while imports of services increased.  The increase in industrial output, which accounted for 21% of business product, was a negligible 0.4%, while output in financial and technical services was up 5.8%. Investments in fixed assets decreased in 2014.

The most alarming figures were a 2.7% drop in investments in fixed assets, putting Israel at the bottom of the OECD table in this category.  Investments in residential construction, which account for a third of all investments, fell 1.2%, while investments in business sectors were off 3.4%.  The biggest fall in investments was in transportation vehicles (13.4%) and other construction (8.4%).  (CBS 31.12)

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 10.2  Despite Gaza War, Tourist Numbers to Israel Fell Only 1% in 2014

A record 14.2 million passengers passed through Tel Aviv’s Ben Gurion International Airport in 2014.  The number of foreign visitors to Israel last year declined by just 1% despite the summer war with Hamas and the 24/7 sensational international media coverage of it.  Both before and after the war, tourist traffic was higher than in any previous year, according to the Israel Hotels Association and the Israel Ministry of Tourism.  The largest number of foreign visitors came from the United States, followed by Russia, France, Germany and Britain. Jerusalem was the top destination for visitors, followed by Tel Aviv and the Dead Sea.  Many Russian and other tourists are now avoiding Egypt because of political violence there and have switched their vacations to Israel.  (Various 05.01)

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10.3  Number of Israelis Traveling Abroad Hits All-Time High in 2014

The economic slowdown and Operation Protective Edge notwithstanding, a record 5.2 million Israelis traveled abroad in 2014, an 8% increase from the 4.8 million who went abroad in 2013, the Central Bureau of Statistics reported.  The first half of 2014 saw a jump of 12% in the number of Israeli trips abroad, while the second half of the year saw a more modest increase of 6.5% compared to 2013.  The drop in the second half of the year can be attributed to the fighting in the Gaza Strip in July and August and the large-scale reserves call-up it entailed.  Had it not been for the Gaza operation, the total number of Israeli trips abroad would have reached 5.5 million, the numbers indicate.  Nevertheless, more than one-quarter of Israelis’ trips abroad (1.3 million) took place in July and August, when the Gaza operation was in full swing.  According to the bureau’s data, the average age of Israeli traveling abroad last year stood at 40.  More than half (57%) were men. Children under the age of 14 comprised 11% of Israeli travelers.  (CBS 13.01)

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10.4  Record New Car Deliveries in Israel In 2014

Although 2014 ended with a low in the Israeli auto market with less than 10,000 new vehicles sold in December, a new all-time record was set in 2014.  Some 240,000 new private vehicles went on the roads in Israel during the year, with households, leasing companies, and various financing institutions spending NIS 23 – 25 billion on new car purchases alone.  The main reasons for the high figures are the lower prevailing interest rate enabled many people to buy a new car with long-term financing and almost none of their own money, competition in the market pushed prices down, and the entry of more leisure models and mini-models at relatively low prices lowered the threshold for entering the new vehicle market for many people.

In a division by brands, the dominance of the Israeli auto market by the South Korean brands stands out: Hyundai Motors, which owns the Hyundai brands (first place with 31,376 vehicles) and Kia Motors, its subsidiary (third place with 26,365 vehicles) jointly account for 24% of the market – an almost unprecedented market share for a single global auto manufacturer.  Adding the market share of Chevrolet, which finished in eighth place with 12,100 deliveries, brings the leading market share of South Korean cars to almost 30%.

Toyota set an all-time record for its sales in Israel with 27,834 vehicles, putting it in second place.  Mazda made a respectable comeback to fourth place with a 61% rise in deliveries, albeit still far from its sales during its peak years.  Skoda (fifth place) was the leading European brand, riding a rising tide of demand from leasing companies. Suzuki (sixth place) dominated the small cars and recreational vehicle segment with an increase of almost 30%.  Mitsubishi (seventh place) staged a stunning comeback with its small new cars, recording 13,141 car deliveries, more than double the previous year’s number.  Chevrolet almost doubled its sales this year, while Nissan and Renault remained fairly stable.

With almost no exceptions, the luxury brands were popular in 2014, despite the luxury vehicles tax imposed at the end of 2013 and despite the pro-social pressure in the media.  Audi bombarded the market with over 2,500 deliveries and Mercedes Benz put 1,985 new vehicles on the road, BMW added 1,733 vehicles, a third of them being jeeps and recreational vehicles.  Lexus doubled its sales with 1,000 deliveries, Volvo posted fine growth, US brand Jeep multiplied its sales many times over, and Cadillac also doubled its sales.  (Globes 06.01)

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 11.1  ISRAEL:  2014 Israeli High-Tech Exits Reach $6.94 Billion 

Key facts:

  • 2014 IPO activity highest in 10 years – $2.1 billion
  • Increase in deals ranging from $100m to $500m in 2014 – 18 deals vs 12 in 2013
  • Average time to exit: 9 years for all sectors, excluding cleantech
  • M&A return on equity ratio up sharply in 2014

Continuing the strong pace of the past two years, 99 Israeli high-tech exits totaled $6.94 billion in 2014, up 5% from $6.59 billion of 2013 (90 exits).  While 2014 final figures were close to those of the previous year, a detailed analysis performed by IVC Research Center and law firm Meitar Liquornik Geva Leshem Tal, reveals significant changes and interesting exit trends.

The year 2014 was characterized by notable growth in both the number and size of IPO exits.  Seventeen IPOs accounted for $2.1 billion, compared to eight IPOs that brought proceeds of some $0.36 billion in 2013.  MobilEye – the largest IPO of 2014 – raised slightly over $1 billion and was listed on the New York Stock Exchange. NASDAQ-bound firms underwent 11 Israeli high-tech IPOs in 2014, in amounts ranging from $35 million to $150 million.  The second largest IPO in 2014 was made by SafeCharge on London’s AIM.

Alon Sahar, Partner in law firm Meitar, noted that even though total capital raised through exits in 2014 wasn’t remarkably different from that of 2013, the blend of deals is instructive.  “The interesting finding of 2014 – in fact the reassuring one – is connected to the increasing number of IPOs,” said Sahar.  “Sometimes IPOs reflect a ‘market trend’ stemming from public readiness to invest in certain sectors, such as life sciences. In other cases, IPOs reflect the real ability of the industry to build larger companies for the long term.”

According to Sahar, a correlation can be found between the volume of IPOs and the number of growth round deals, which is also on the rise.  “In light of success stories such as Mobileye and CyberArk, two companies that brought on investors at later stages and then followed the IPO road, more companies can be expected to turn in the same direction,” noted Sahar.  “This trend and the appeal of building larger companies may also explain current findings on M&A proceeds, where the number of deals below $5 million dropped to the lowest in a decade, with only 25 deals.”

In 2014, deals involving Israeli and Israel-related companies that were acquired or merged were valued at $4.84 billion, a 22% decrease from $6.23 billion in 2013.  Analysis of M&As by deal size reveals a 45% increase in the number of deals ranging from $100 million to $500 million in 2014.  Sixteen M&As accounted for $2.91 billion, compared to 11 deals in 2013 with $2.57 billion.  Five deals ranging between $50 million and $100 million brought in $425 million, a 73% increase from four deals in 2013 that totaled $246 million.  The number of M&As ranging from $10 million to $50 million also increased – approximately 13% from the previous year.

Additional analysis of all exits shows that proceeds from deals ranging from $50 million to $100 million soared 156% from the previous year.  The increase reflected a large number of IPOs – 8 out of 13 exits – that accounted for 58% of total proceeds within the range.  There was also a decrease of 36% in exit proceeds below $5 million, continuing the trend from 2013.

Changes in the deal size appear to be responsible for two contrasting trends.  On the one hand, the average M&A deal in 2014 decreased to $59 million from $62 million in 2013, in deals below $1 billion.  On the other hand, in 2014 there was a notable jump in the M&A return on equity ratio, reaching an average of 6.22 from 4.29 in 2013.  The calculation is made as a ratio between capital from M&A exits and the total capital raised by companies prior to their exit.  The measure reflects the relative value received by company investors following a company’s exit.

Koby Simana, CEO of IVC Research Center said, “Although 2014 M&A figures show a decrease in total proceeds from the previous year, 2014 was actually far more successful in terms of return on equity for investors.  It’s important to remember that in contrast to an IPO, where investors may continue as shareholders and sometimes increase their shares, as happened following the Mobileye IPO, in M&A deals investors no longer have a stake following the exit,” explained Simana.  “Proceeds from M&A are divided among entrepreneurs, investors and sometimes company employees, and investors expect a positive return on equity. In the venture capital industry, it is customary to strive for a minimum return of three times equity.  In these terms, 2014 was an excellent year, especially in the life science, cleantech and communications sectors, with the highest annual return on equity.” concluded Simana.

Among 82 acquisitions of Israeli high-tech companies in 2014, 24 were performed by other Israeli companies, compared to 19 such deals in 2013.  The report also analyzed the number of M&A deals where Israeli companies were acquirers.  In 2014, 42 Israeli high-tech companies chose to grow through the acquisition of at least one company, Israeli or foreign, and were responsible for 57 deals, in total.

The IVC-Meitar report on exits 2014 examined the time to exit for the deals above $50 million, which provide most return on equity.  In general, an average of 10-12 years from the establishment of a company until exit provided the best returns, coinciding with the average VC fund lifespan.  Excluding cleantech, there was little difference among sectors in average time to exit performed in 2014, standing at 9 years from the company establishment until an M&A or IPO exit.

The report summarizes exits of Israeli high-tech companies in merger & acquisition deals and initial public offerings in 2005-2014. In addition, the report analyzes M&A deals, where Israeli high-tech companies were the acquirers over the same period.

IVC Research Center is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries.  Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel.  The IVC-Online Database showcases over 11,000 Israeli technology startups, and includes information on private companies, investors, venture capital and private equity funds, angel groups, incubators, accelerators, investment firms, professional service providers, investments, financings, exits, acquisitions, founders, key executives and R&D centers.  (IVC 06.01)

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 11.2  IRAQ:  Iraqi Cabinet Approves Budget Reforms

On 23 December Iraq’s Cabinet approved and submitted the 2015 federal budget to parliament.  Mustafa al-Kadhimi observed in Al Monitor on 2 January that this development occurred following months of study to review and reduce the initial budget’s large deficit, which Finance Minister Hoshyar Zebari estimated at $40 billion.

Iraq’s government has certainly tried to address the deficit in the version that was approved in December, in which the budget reached 123 trillion Iraqi dinars (nearly $100 billion).  Yet, in the end, all of these attempts cannot address Iraq’s budget crisis for 2015 or the following years, given the nature of the Iraqi economy, which mainly depends on oil production, as well as the ongoing failure to achieve alternative economic mechanisms.

The sharp decline in oil prices, which reached $70 per barrel in December and are expected to continue falling, was enough to plunge Iraq into a real financial crisis.  This is according to deficit rate estimates, which in 2013-14 were based on an estimated $80 – $90 per barrel.

Mazhar Mohammed Saleh, economic adviser to the prime minister, told Al-Monitor, “Oil prices estimations were changed in the 2015 budget and were based on the price of $60 per barrel, according to the current oil production ceiling, which could be up to 3 million barrels in 2015.”  Saleh added, “The budget deficit is of 23 trillion dinars (about $20 billion), and the Kurdistan region share amounts to 20 trillion dinars (about $18 billion).”

It should be noted that Iraq was unable to approve the 2014 budget, and the exceptional circumstances in the country with the worsening security crisis, the Islamic State’s occupation of large areas and the growing need to arm the military and the popular mobilization forces.  The latter has taken a toll on the budget, the largest part of which is expected to go to expenses of the Interior and Defense ministries in the coming years.

In light of the tense security situation that includes the need for arming, sheltering the displaced, reconstructing the affected areas by the military operations on the one hand, and the decline in global oil prices on the other, the Iraqi government has found itself facing a real test as to whether it can ensure the basic necessities for its people.

Although Zebari announced that the government intends to announce an austerity plan to address the developments in the financial crisis, the prime minister’s office denied its intention to announce the austerity plan.

This inconsistency is justified as the new government has found itself facing accumulated crises at all levels, the inherited mistakes in the management of Iraq’s economy and the procedures that failed for years to revitalize the Iraqi economy and diversify its resources.

The recent oil agreement between Baghdad and Erbil can be considered an attempt by the government to save what can be saved in the 2015 budget.

Nevertheless, all of these are formal and temporary solutions; Iraq needs an extensive economic rescue plan that allows to reform the inherited economic structures and shift the nature of the Iraqi economy from being a rentier economy, which works according to laws in socialist-totalitarian states, into a productive society that attracts investments and takes into account global economic developments.

In Iraq, nearly 6 million people receive salaries from the state, according to former Minister of Planning Ali Shukri, who revealed that “this figure is three times the need of the state institutions.”  This is a real knot that prevents any structural reform in the Iraqi economy, and that needs bold and revolutionary decisions and actions that include the promotion of foreign investments in conjunction with encouraging nonproductive employees to work in the private sector.

Yet, to reach this solution additional time is required.  Today, the government needs objective solutions to the crisis, and it needs to effectively implement measures and commitments pertaining to economic reform.

The first solution that must be sought is the application of provincial law itself, which allows a number of ministries to be dissolved and transfers their powers to the provinces, which minimizes waste and reduces the enormous functions in the country’s ministries. It also gives the provinces a chance to test the economic measures and attract investments.

Mustafa al-Kadhimi is an Iraqi writer specializing in the defense of democracy and human rights.  He has extensive experience documenting testimonies and archiving documentaries associated with repressive practices.  (Al Monitor 02.01)

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 11.3  UAE:  Dubai Year in Review 2014

The Oxford Business Group stated strong fundamentals and a diversified economy are keeping concerns at bay in Dubai, despite a potential cooling of investor sentiment across the region and weakening global conditions.

Dubai announced a balanced budget for 2015 at the start of January, as it plans to increase spending by 9% year-on-year, with spending and revenues both projected at Dh41b ($11.2b), according to an official statement.  The absence of a budget deficit – the first time since the global financial crisis – is expected to boost business activity and further stimulate the economy.

Growth is expected to accelerate in 2015 to reach 4.5%, according to Mohammed Lahouel, chief economist at Dubai’s Department of Economic Development (DED), speaking in December.  Real estate, manufacturing and the services sectors will be the largest contributors to growth while estimates for GDP growth in 2014 stand at 4%, slightly lower than the 2013 performance of 4.6%.

Speaking at the release of the UAE Economic Outlook 2015 report, Lahouel added that the sharp drop in oil prices may have mixed effects on the Dubai economy.  One benefit may come as transportation costs retreat but the negative impact of lower oil prices may be manifested through lower trade volumes through Dubai, especially driven by oil producers in the Middle East, Africa and Russia.

The Emirate’s lower exposure to hydrocarbons as a source of revenue will help cushion any fall. Unlike its neighbors, oil revenue is projected to contribute only 4% of Dubai’s revenues, according to the finance department.  At the same time, economic activity ahead of World Expo 2020 has the potential to mitigate falling oil prices, thanks to investments from the private sector, say economists.

Taking Precautions

Nonetheless, concerns over the impact of oil prices have spilled over into the local stock exchange, with property, banking and transport stocks all plunging.  Investors fear that reduced oil and gas revenues may prompt governments and the private sector across the region to scale back investment programs and spending.

By mid-December the market’s main index had shed all the gains made during the year, having been up almost 60% in May from the opening of trading in January. Analysts felt the sell-off was an overreaction, which would likely result in a correction.  Indeed, the Dubai Financial Market General Index (DFMGI) climbed at the end of December.

Restored confidence could see renewed interest in Dubai banking stocks, with the emirate’s lenders seen as well capitalized, having booked solid earnings during the year.  The banking sector’s outlook for 2015 is positive, with a report by Moody’s stating that strong growth in Dubai’s diversified economy is likely to fuel expansion of credit demand of 7-10% in 2015.

Expanding public transport continues to be a priority for Dubai with 13% of the 2015 budget allocated to infrastructure spending.  Extensions to the metro, a new airport and increasing use of marine transport all aim to improve connectivity and promote additional use of public transport.

The government committed to boost state spending by 11% in 2014, with much of the increased outlays directed to new or ongoing infrastructure developments.  Tenders for infrastructure developments to be undertaken for the World Expo 2020 are expected to be issued in the first quarter of 2015 with overall investment likely to fall between $6.2b and $8.7b, according to officials.

Property Market Remains Strong

The construction and real estate sectors are expected to be drivers of growth in 2015.  Real estate prices have surged in the past two years, with average prices climbing 18% in 2014 according to real estate consultant CBRE.  Soaring rents and housing costs have been the primary driver of inflation in 2014, according to government officials.  This prompted the UAE Central Bank to issue a warning in June of an overheating real estate market and concerns over a property bubble.

However, the market started to cool in the latter half of 2014 with residential sale prices rising just 3% in the third quarter and 2% in the fourth while rental prices were nearly flat, after rising 7% throughout the year, said CBRE in December.  According to data issued by real estate consultancy Frank Knight, mainstream residential prices eased by 5.2% in the third quarter for properties under Dh10m ($1.4m).

In the office segment, rents rose 44% in the 12 months to mid-December, according to real estate firm Cluttons.  The increased costs were fuelled by rising demand, led by strong interest from companies in banking and financial services, real estate and aviation, said the firm.  There was also increased demand for industrial and warehouse space, with costs rising at leading industrial sites across the emirate, with year-on-year rents up by almost 30%.

Even though concerns over oil prices continue to worry investors, Dubai has started the year with reassurance that its economy is in a strong position to ride out any potential obstacles in 2015.  (OBG 07.01)

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 11.4  OMAN:  Year in Review 2014

With earnings from oil accounting for more than 80% of government income, the halving of prices since June has eroded state revenue and could impact the extensive capital works program in 201, despite a government pledge to hike this year’s spending by 4.5% from its earlier plans.

Oman’s economy is expected to expand by 5% in 2015, against an estimated 4.4% growth in GDP last year, according to a Ministry of Finance statement in early January.  Growth in non-oil activities is expected to reach 5.5% while government expenditure is estimated at OR14.1b ($36.6b).  Revenues are projected at OR11.6b ($30.1b), which leaves an anticipated deficit of OR2.5b ($6.5b), equivalent to about 8% of Oman’s annual GDP.

The ministry said it would look at a range of ways to cover the shortfall including grants from foreign donors, international loans, borrowing from the local market, state reserve funds and previous years’ surpluses according to local media reports.

Oil Down, Pressure Up

Ratings agency Moody’s warned in December that Oman will come under pressure in 2015 because of the high energy prices needed to balance its budget and its more modest reserve buffers.  In January oil prices had dipped below the $50 per barrel mark, well below Oman’s estimated $107 break-even point.  Moody’s said that Oman is likely to bridge any fiscal gap through sovereign debt issuance in 2015.

Ratings agency Standard and Poor’s (S&P) also flagged concerns over the impact of oil prices on Oman’s economy, lowering its outlook for the sovereign rating from stable to negative in an investor note issued in early December.  It said that the deterioration in its fiscal or external positions could be sharper than expected because of the oil price slide.

Predicting a modest surplus in 2014, the agency forecasts that the budget will move into deficit and remain there until at least 2017.

Oman has already sought to find alternatives for oil and gas revenues by investing heavily in agricultural, industrial, fisheries, tourism and other sectors.  Indeed, the non-oil component of the economy recorded a solid growth rate in the first half of 7.3% against a modest contraction of the hydrocarbons sector of 0.4%, according to data issued by the Central Bank of Oman in mid-December.

S&P added that investment in transport infrastructure, petrochemicals and development of the Khazzan tight gas field will help drive economic activity in the next few years.

Cutting Costs

The government has already moved to bridge any budgetary gap, proposing a series of revenue raising measures.  In late November, a plan was mooted to increase royalty fees levied on telecommunications and mining companies, with the Oman Advisory Council, an advisory board to Oman’s government, suggesting lifting levies on revenue from 7% to 12%.  Another proposal is for a 2% levy on remittances transferred by foreign workers, along with cuts in state spending in development, defense and energy.

One measure that has been approved is for the doubling of the price of natural gas to companies, with the increase from the present rate of $1.50 per million British thermal units to $3 set to come into force as of 1 January.  Announced in late November, the decision includes a provision for annual increases of 3% in subsequent years.

The new tariff is expected to push up production costs for industry, despite the new tariff still being discounted on international market rates.  This has prompted warnings from some manufacturers that the higher prices will cut into growth and could result in business closures and job losses.  In particular, companies operating in the construction materials segment, producing cement, glass and metals used in the building trade, will see costs rise in 2015.  The new tariff will add to the price tags of both public and private infrastructure and construction projects.

The Muscat Securities Market (MSM) has felt the impact of the falling fortunes of the hydrocarbons sector, with the exchange’s index shedding 25% from the close of the third quarter to December.  With uncertainty remaining over when oil prices will find their base in 2015, the MSM may see a further volatility in 2015.  (OBG 12.01)

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 11.5  SAUDI ARABIA: Year in Review 2014

The Oxford Business Group said that despite the turmoil in global energy markets, Saudi Arabia moved towards the end of 2014 with its economy having outperformed many in the region.  Since around 90% of government revenue is derived from hydrocarbons, the Saudi economy has been hit by the decline in oil prices, a response to cooling demand and a glut on international markets.  Prices have fallen from $115 a barrel mid-year to under $60 at the end of the year, with Brent crude trading at a five-and-a-half-year low.

Though Saudi Arabia has ample fiscal reserves to support any price cutting campaign, such measures may come at a cost.  In a statement at the end of December, the kingdom said its budget deficit will widen to SR145b ($38.7b) in 2015 from SR54b in 2014.  The finance ministry estimates economic growth of 3.6% in 2014, slightly lower than analyst expectations.

Despite the sharp decline in oil prices, spending for 2015 is projected at SR860b ($229.3b), an increase of 0.6% compared to 2014.  Policy remains expansionary, supported by substantial reserves with analysts forecasting spending to remain in place over the next few years to keep growth of the non-oil sector at about 4%.

Oil Price

The kingdom has maintained production levels despite lower oil prices and extended its discounts on Arab Light sold to Asian countries, seeking to hold market share.

Such discounting may have a longer-term benefit in helping to shore up Saudi Arabia’s share of the global market.  With the US having surpassed the kingdom as the world’s leading oil producer in 2014, any further eroding of Saudi’s hold on international sales is likely to be strongly contested.

Although the OPEC member’s production costs are among the lowest in the world, its strategy will continue to raise concerns with investors and analysts in 2015.

Standard & Poor’s downgraded its outlook for Saudi Arabia to stable from positive in early December due to lower oil prices and what it termed the Kingdom’s undiversified economy.  In late October, the IMF warned that falling oil prices could reduce growth rates in Saudi Arabia and other GCC member states.  For some time the fund has advocated that the Kingdom, along with other Gulf states, rein in expensive energy related subsidies.

However, much of the infrastructure development being carried out is aimed at diversifying the economy away from its dependence on oil and boosting employment opportunities for locals.  Spending on transport systems, logistics, utilities, manufacturing and downstream industry has been stepped up in recent years as the government pushes a transition to a broader-based economy.

Market Lows and Potential Highs

Concerns over falling oil prices and a slowing economy hit the Saudi stock market, with the Tadwul All Share Index easing in the latter months of the year.  By the beginning of December, the main index had fallen back close to where it stood at the start of the year, erasing the gains made over the preceding 11 months.

However, plans to open the exchange’s doors to foreign investors, as early as April according to Bloomberg, is seen as a bright spot for 2015.

The regulator, the Capital Market Authority, announced in July that the cabinet had approved proposals to allow direct foreign investment on the bourse.  Under the draft regulations, foreign investors with a minimum of SR18.8b ($5b) of assets under management and at least five years’ experience in the business will be eligible to trade Saudi stocks.

As the largest equity market in the Middle East, with some 170 companies listed across a broad range of sectors and a capitalization over $500b, the opening up of the market is expected to attract strong interest from overseas.  Although Gulf oil producers such as Saudi Arabia have significant buffers to survive oil price differences, analysts will be watching closely in 2015 to see how the country fares with lower fiscal and export revenues.  (OBG 07.01)

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 11.6  EGYPT:  Falling Oil Prices Both Blessing, Curse for Egypt

Al Monitor’s Rami Galal posted on 6 January that Egyptian economists are watching the decrease in oil prices with satisfaction and anticipation.  Their satisfaction comes from the decrease, meaning a drop in the Egyptian budget deficit, because petroleum products were subsidized by the state to the value of EGP 100 billion ($14 billion) during FY 2014-15.  As for the anticipation, the drop will indirectly benefit the Egyptian workers in the Gulf, who are estimated to account for two-thirds of Egyptian workers abroad.  Remittances from Egyptians abroad form one of the most important hard currency resources in the country.

There are also concerns about the negative repercussions on the economy of the Gulf oil states supporting Egypt, as well as concerns about the vulnerability of the Egyptian tourism industry, which recently started to recover after instability had damaged the sector.

Former Minister of Economy Sultan Abu Ali told Al-Monitor that the decline in oil prices has a direct positive impact on the Egyptian economy, namely the reduction of the cost of petroleum derivatives.  He said, “Egypt has become a net importer of oil. Thus, any decline in world oil prices [means] a lower burden of energy imports.”

He added that there are also indirect negative effects as economies of the Gulf oil states, particularly Saudi Arabia and the United Arab Emirates, which have been strongly supporting the Egyptian economy, will be strongly negatively affected.  Their state budgets will take a hit, making these countries less able to maintain their foreign economic support.  The demand for Egyptian labor and the Egyptian workers’ remittances, by extension, will also drop.

Abu Ali pointed out that tourism will be negatively affected, especially Russian tourism. However, the Russian expenditure in the Egyptian tourism sector is relatively small.

Abu Ali also explained that the continued lowering of oil prices depends on supply and demand. On the supply side, Iraq’s large exports, the United States’ use of modern technology to extract oil from shale and the failure by the Organization of Petroleum Exporting Countries to reduce production in accordance with the falling prices are all factors that led to an increased supply.  As for the demand side, the economies of European countries are suffering from low growth rates and recession.  Thus, the demand for oil is low, and plans to stimulate European economies will impact oil prices.

For his part, former Prime Minister of Egypt Ali Lutfi confirmed to Al-Monitor that the decline in oil prices is working in favor of the Egyptian economy for two reasons. First, subsidies for petroleum products are being reduced to almost half the general budget. Second, there is decreasing pressure on the foreign exchange reserve, which is suffering from a severe outflow, as the dollars needed to buy oil will be reduced by almost half.

Lutfi pointed out that Egypt did not cut petroleum product prices for citizens following the global drop in oil prices, unlike some countries such as Jordan, as Egypt offers a greater amount of oil subsidies and the state is suffering from a large budget deficit.  He rejects the idea that the Gulf states will reduce their support for Egypt, because this support was intended for a limited period.  It is impossible for it to last forever, and Lutfi said that Egypt must rely on itself and not on others.

He added that the impact on the tourism sector will be limited, as Egyptian tourism has begun to recover on its own, according to statements made by Minister of Tourism Hisham Zazou, who confirmed that the sector has seen the number of visitors rise to 12 million tourists.

Petroleum and Mineral Resources Minister Sherif Ismail said in a 22 December press statement that the decline in world oil prices recently is expected to lead to a decline in subsidies for petroleum products during the second half of FY 2014-15 if oil prices continue at current levels.

He pointed out that the total subsidies on petroleum products in the 2014/2015 budget amount to about EGP 100 billion and this means that a limited amount will be saved during the first half of the fiscal year as the drop in the global oil prices began in November and the global oil prices were at high levels previously.  If the decline in world prices continues through the second half, the total support for petroleum products is estimated to decrease by about EGP 30 billion ($4 billion) over the entire fiscal year and dip to about EGP 70 billion pounds ($10 billion).

Ismail stressed that despite the savings, the state will continue to spend a large sum, the value of subsidies in one year.  He indicated that the total expected decrease in subsidies will not immediately be translated into liquidity in the oil sector and the Treasury because some sectors will still have problems settling the price of petroleum and natural gas products.  (Al Monitor 06.01)

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 11.7  EGYPT:  As Gulf Aid Dries Up, Egypt Struggles

Enas Hamed posted on Al-Monitor on 30 December that the regime of President Abdel Fattah al-Sisi is trying to unravel the economic crisis that has gripped Egypt since the overthrow of former President Mohammed Morsi in June 2013.  Complicating matters, aid from the Gulf states has become less reliable than many had hoped.

It started with the Kingdom of Saudi Arabia, which announced an aid package as soon as Morsi was isolated on 3 July 2013.  The Saudis offered Egypt $5 billion divided between a bank deposit of $2 billion, large quantities of oil products worth $2 billion and $1 billion in cash.  Abu Dhabi soon joined in, making a $1 billion grant, a deposit worth $2 billion and $4.9 billion to start a service project.  Kuwait came in third, with aid amounting to $4 billion.

Prior to Sisi’s election, aid was managed by the government of interim Prime Minister Hazem Beblawi.  Politicians and economic analysts had expected the aid to continue for a long time.  This expectation was clear in a Bank of America report, which read that the total Gulf pledge to Egypt amounted to $20.8 billion during the last fiscal year. However, Cairo received no more than $18 billion.  The report also predicted that Gulf support would increase following the presidential elections to help stabilize the Egyptian economy, stating that during the fiscal year (2014-2015) Egypt needs $12 billion to preserve its foreign exchange reserves at the central bank.

Did the Gulf stop aid to Egypt?

“The financial support from the Gulf for Egypt did not stop, but aid decreased substantially,” Omar al-Shaniti, the executive director of the Multi Plus investment group, told Al-Monitor.  “This aid was primarily for political reasons. Back then, the Gulf States, except Qatar, provided aid for Egypt to get rid of the regime of the Muslim Brotherhood.  However, Riyadh, Abu Dhabi and Kuwait did not make any grants during Morsi’s time in office.  In fact, it was clear that the funds would have not continued to flow in Cairo.”

Amr Adly, a non-resident scholar at the Carnegie Middle East Center, told Al-Monitor, “The decrease in aid has been reflected in two phenomena: a lack of funds provided to Egypt and unfulfilled promises of support.”  He said that funding states cannot guarantee the proper channeling of the grants they make.  In March, for instance, the UAE announced that it would build 1 million housing units in Egypt as part of a $40 billion project it has yet to initiate.

The decline in aid from the Gulf did not come as a surprise to Cairo, as the UAE has openly stated.  Minister of Foreign Affairs Mansour Bin Zayed Al Nahayan said in October 2013, “The Arab support for Egypt will not last long.”  Egypt, however, failed to tighten its belt and reduce the deficit.  “Beblawi’s government was supposed to continue with the austerity plan to control the deficit, but it did not,” Shaniti said.  “The generous Gulf aid contributed to the government’s expansionary policy, raising government spending so that citizens would feel economic improvement.”

For its part, the UAE assigned the French Lazard Bank, which specializes in providing consulting and effective solutions to financial problems, to report on Egypt’s financing needs and major economic problems.  Lazard’s report concluded that Egypt needed $30 billion a year for four years.  In fact, $15 billion was needed to bridge the financing gap for the Central Bank and preserve a safe level of foreign exchange reserves covering three months’ worth of imports.  Another $15 billion in investments was needed to achieve an average growth rate of 5% over the next four years.

Shaniti said that following Sisi’s taking power, everyone, including Sisi, anticipated significant aid from the Gulf states, which would fund giant national projects.  Indeed, giant projects have begun, such as the new Suez channel.  Nevertheless, the expected billions from the Gulf did not flow and the government had to resort to domestic financing.  The government of Prime Minister Ibrahim Mahlab raised energy prices during the first stages of the austerity plan in July.

Immediately after the announcement of Sisi’s victory, Saudi Arabia called for a conference of donors to help Egypt overcome its economic crisis.  Saudi King Abdullah bin Abdulaziz demanded that the state extend a helping hand to Egypt, saying, “Egypt is in dire need from us to be able to get out of the tunnel of the unknown.”

According to a government statement, the donors conference aims to finance projects exceeding $60 billion.

However, there are some steps the Egyptian government should take alleviate the situation and find other sources of money.  Economists have differing opinions about the impact of the decline in oil prices on the Gulf support of Egypt’s projects.  According to Shaniti, the oil crisis will adversely affect the Gulf states and thus the investment projects they contribute to.  According to Adly, it is too soon to talk about the repercussions of the oil crisis on Egypt’s economy. In his opinion, the Gulf states’ capital surpluses are too large (between $2 and $3 trillion) to be affected by the decline in oil prices.

According to Shaniti, “The Egyptian government ought to renege on launching the giant national projects that would dry up liquidity from the market but generate long-term returns.  This would be the essential step on the road out of the economic crisis weighing heavily on the state.”

He urged officials to expedite the agreement with the International Monetary Fund to obtain the financing and hard currency to defend the Egyptian pound and gain international confidence.  The government also ought to realize that tourism and foreign investments depend on security stability, all factors to consider when revising the local management strategy.  (Al-Monitor 30.12)

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 11.8  TUNISIA:  Can Tunisia Navigate the Cross-Currents of the Muslim World?

Amb. Freddy Eytan observed on 4 January in the Jerusalem Center for Public Affairs several aspects concerning recent developments in Tunisia.

The Background of the Revolution

In 1956, after 75 years of French colonial rule, Tunisia attained its independence. Bourguiba set up a one-party, autocratic regime and ran the country for 31 years.  In 1987, Zine El Abidine Ben Ali took power in a coup and he ruled with an iron fist until the beginning of 2011.  During his reign, Tunisia flourished economically and culturally, and relations with European countries, particularly Italy and France, grew stronger.  However, governmental corruption increased and human rights were trampled.

Since independence in 1956, the Tunisian people have known only two rulers, Bourguiba and Ben Ali.  On 17 December 2010, the first tremor occurred.  In the small peripheral town of Sidi Bouzid, far from Tunis the noisy capital, a young hawker named Muhammad Buazizi set himself on fire because the authorities had denied him permission to set up a vegetable and fruit stall in the local market.  His death ignited a wave of riots and protests all over the country against the regime and the economic hardships.  President Ben Ali ordered that the protests be harshly suppressed.

In violent riots, 670 people were killed, including about one hundred who were killed in escape attempts from prisons.

On 14 November 2011, President Ben Ali fled the country with his family and associates, escorted by Libyan warplanes provided by Libya’s Colonel Muammar Gaddafi. After French President Nicolas Sarkozy denied Ben Ali political asylum, he was smuggled into Saudi Arabia.  In Tunisia he was tried in absentia by a military court and sentenced to 35 years in prison with a $65 million fine.

Results of the Domino Effect in the Arab Countries

The fall of President Ben Ali and his humiliating flight to Riyadh was clearly a historic event that sent shock waves through the Arab world.  Tunisia’s “Jasmine Revolution” erupted in full force and spread to the other Arab countries, particularly Egypt, in what became known as the “Arab Spring.”  It led in Egypt to the ouster of President Hosni Mubarak and the rise of the Muslim Brotherhood; in Libya, to Gaddafi’s fall; and in Syria to the outbreak of the civil war and the empowerment of Islamist terrorist organizations that have wrought substantial changes throughout the Middle East.

For the first time in Tunisia, Arab masses dared to go out into the streets and squares to demonstrate against tyranny and corruption.  Calls for freedom and equality began to be heard that were unprecedented in an Arab country.  In other Arab cities, too, people demonstrated for the first time over domestic problems and not on behalf of Palestine and against the Israeli occupation.  Rallies and riots erupted against corrupt leaders who had benefited for years from the poverty and ignorance of the population and looted the treasury of the country, creating police states and intensifying the cult of personality.

In the 1950s and 1960s, changes and Arab regimes were only achieved via coups by colonels and megalomaniacs.  Today, revolutions are carried out in the light of day by the masses, the overwhelming majority of whom are unemployed youths adept at waging their struggle with cell phones, social networks, and websites.  Facebook and satellite TV have become the new weapons of these youthful throngs who have rejected totalitarian regimes.

The New Regime

On 23 October 2011, general parliamentary elections were held in Tunisia; the Islamist party Ennahda (Renaissance) won a majority of seats.  The secular parties intensely feared that Tunisia would become an Islamist country run according to sharia law, and again there were street demonstrations – this time demanding a new constitution and “new and fair” elections that would reflect the real wishes of the people.

After many struggles that lasted over two years, eventually a new constitution was ratified that combines Muslim religious values with universal and democratic ones.  It should be noted that since the first Tunisian republic was established in 1956, women have been granted equality, and they continue to hold positions of power.

In June 2012, 88-year-old Beji Caid Essebsi returned to the political arena.  A familiar figure going back to the days of Bourguiba and Ben Ali, he has served as chairman of the parliament, foreign minister, and for a short time prime minister.  He established a new, secular-leftist, anti-Islamist party called Nida Tunis.

In January 2014, the serving Islamist prime minister, Rashid Gannouchi, decided of his own free will to resign, along with the members of his Ennahda Party. Early parliamentary and presidential elections were announced.

On 14 December the secular Nida Tunis won a majority of the parliament, and the elderly Beji Caid Essebsi was elected Tunisia’s new president.

Will he succeed to unite the ranks and lead his country to stability and better days?  Is a more democratic future in store for the country or a return to the old, corrupt practices of Ben Ali?  At this point it is hard to say. Tunisia, the smallest of the Maghreb countries with a population of 11 million, mostly young and educated, has difficulty overcoming its economic and social problems.  Tunisia does not have abundant natural resources, neither oil nor gas like most Arab countries, and it is not a military power.  Its power is based on its strategic geographic location and its ability to compromise and prevent political frictions and conflicts with its neighbors.

Tourism is an important sector, and unless large numbers of tourists start returning to Tunisia the economy will collapse and unemployment will grow.  The new president will have to implement drastic measures – involving most of all the rehabilitation of the economy, with full cooperation and European, especially French, investment. President Hollande, who made an official visit to Tunis, promised to respond to the requests as well as to increase cooperation in the fight against Islamist terror.

The mounting unemployment has led many young Tunisians to emigrate to France; others have joined Islamist terrorist movements such as Islamic State.  Moreover, Tunisia borders Libya where chaos now prevails.  There too, radical groups are trying to undermine Tunisia’s new secular government through terrorist attacks.

Tunisian-Israeli Relations

Already before independence in 1956, Bourguiba’s emissaries enjoyed friendly relations with Israeli diplomats at the United Nations and in Paris, and in the following years they continued these relations in secrecy.  In that period a productive Jewish community of 100,000 lived in Tunisia; it contributed greatly to the economy and to the cultural flowering.  Earlier, for six months during the Nazi occupation of Tunisia during World War II, Jews had worn the yellow badge and were transported to labor camps, some even to extermination camps in Europe.  Today, there are only about 2,000 Jews in Tunisia, most of them elderly, concentrated on the on the island of Djerba.  On 11 April 2002, the local synagogue, considered one of the oldest in the world, was targeted by Al-Qaeda in an attack that killed 21 people, most of them tourists.

With the attainment of independence from France, President Bourguiba adopted a moderate, courageous approach to resolving the conflict between Israel and the Arab states.

In numerous talks this author held with former Tunisian Prime Minister Muhammad Mazali, it emerged that the founder of the Tunisian republic had tried several times to mediate between Arab and Israeli leaders in seeking a solution to the conflict.  This was also done with the help of former French Prime Minister Pierre Mendes France, who was a Jew and a fervent activist for peace with the Palestinians.  It was Mendes France who granted independence to Tunisia, and as a token of respect Bourguiba awarded him a holiday residence in Carthage where each year he would spend his summer vacation.

This author met often with Mendes France and he confirmed the contacts, which, unfortunately, did not bear fruit.

On 3 March 1965, at the refugee camp in Jericho, during a visit to Jordan with King Hussein and two years before Israel “occupied the territories,” Bourguiba gave a historic speech that resonated worldwide.  He was the first Arab leader to call for recognizing the state of Israel.  This brave step isolated him in the Arab world and Tunisia was expelled from the Arab League by Nasser.  It was also Bourguiba who agreed to provide refuge to Yasser Arafat and his fighters when, after the Israeli invasion of Lebanon in June 1982, they were expelled from Beirut in late August and the beginning of September.  The PLO opened offices in Tunis, which, as noted, were bombed by the Israeli air force in 1985.

Tunisia played a key role in the secret talks that led to the signing of the Oslo agreements in September 1993.  Upon the transfer of PLO headquarters to Ramallah on 22 January 1996, Israel and Tunisia established official diplomatic relations and interest offices, which operated as embassies in all regards.  Tunisian emigrants were allowed to come back and visit their homeland.

On 22 September 2000, with the outbreak of the Second Intifada, President Ben Ali announced that he was severing the ties, and to this day they have not been renewed. (JCPA 04.01)

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 11.9  TUNISIA:  Completion of Tunisia’s Political Transition in Sight

Fitch Ratings reported on 06 January that the prospect of a new Tunisian government in the coming weeks is positive for the sovereign’s credit profile.  The electoral process has proceeded smoothly despite security risks, and electoral outcomes have increased the likelihood of the formation of a stable, coherent government.

The secretary-general of Nida Tounes, which won the most seats in October’s parliamentary elections, said that Habib Essid had been nominated as Tunisia’s new prime minister.  The announcement follows the victory of Beji Caid Essebsi, also of Nida Tounes, in presidential elections held in late December.  Essid will now seek to form a coalition government and name a cabinet in the next month or so.

The formation of a new government following the Q4/14 elections would complete Tunisia’s political transition, which began with the fall of the Ben Ali regime in 2011.  The new parliament and president have been elected for five years in line with the new constitution adopted by the previous parliament; Tunisia therefore is on track to be the first Arab Spring country to complete a transition to democracy.

Nevertheless, politics remain fragmented and social tensions high, with no party winning an outright parliamentary majority.  The final timing and breadth of any coalition, including whether the second-largest parliamentary party, Ennadha, will participate, remains unclear.  But stabilization and capacity for compromise were demonstrated last year in the adoption of the new constitution, the formation of a caretaker government, the approval of the electoral law, and peaceful polling.  Combined with the mandate that victory in the parliamentary and presidential elections gives Nida Tounes, this suggests that a coalition that can be consistent and effective in policy-making can be formed.

This would be in line with our longstanding view that political transition will ultimately succeed and a new government take power in early 2015.

Political tensions have taken a toll on policy-making and performance.  The caretaker government has progressed with some reforms (e.g. further raising selected subsidized prices and strengthening tax administration), but key ones on banking sector restructuring and business environment improvement have yet to be finalized and implemented.

Reliance on official lenders including the IMF and World Bank should maintain the policy anchor.  We think the next government is likely to broadly comply with fiscal consolidation commitments made by the caretaker government in its 2015 budget (we forecast the deficit to narrow to 4.9% of GDP this year, from 5.6% in 2014).

The authorities recently announced their intention to launch a bond issue in their own name, the first since the revolution, by end-January 2015 to finance budget needs.

Progress in political transition will boost confidence, potentially lifting growth. Fiscal consolidation will slow expansion but lower oil prices, together with lower oil subsidies, will ease external and fiscal positions.  This will help improve Tunisia’s twin deficits, but sustainably unwinding them will take time. An improved policy stance would therefore be key to a revision to Stable of the Negative Outlook on Tunisia’s ‘BB-‘ rating in 2015. (Fitch 06.01)

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 11.10  ALGERIA:  Algeria Expands Fertilizer Production With New Plant

Fertilizer production is increasing in Algeria, reports the Oxford Business Group, thanks in part to two new major sites already online and a third due to start early 2015.  In the first nine months of 2014, export revenue from fertilizers almost tripled from a year ago to $657m, with ammonia and urea the biggest sellers, accounting for one-third of non-hydrocarbons exports, second only to oil derivative products.

Exports of ammonia alone doubled year-on-year to reach $421.7m between January and September 2014.  The highest growth rate, however, came from other mineral fertilizer products, primarily urea.  Mineral fertilizer exports jumped more than tenfold to $235.3m in the same period thanks to the addition of a second production plant, Sorfert, in August 2013.

The growth in fertilizer exports was the main reason behind a 31.7% rise year-on-year in revenue from non-hydrocarbon exports to $2.05b, although these still represented less than 5% of total exports.  Ammonia and urea allow for value addition by processing cheap gas feedstock – something which Algeria has ample supplies of, with 159trn cu ft. of recoverable gas reserves.

Output to Increase by One-Third

The sector is set to grow in 2015 as existing operators ramp up production and a third operator prepares to come online early in the year.  Sonatrach, the state-owned energy firm involved in both upstream and downstream activity, teamed up with Oman’s Suhail Bahwan Holding Group (SBGH) to create a third operator, Al Djazairia Al Omania Lil Asmida (AOA).

The recently-completed AOA plant is based in Arzew – a major center for the petrochemical industry – with the plant built at a cost of $2.6b.  A Sonatrach official said in November that they expect to launch production and the commercialization phase during the first quarter of 2015.  AOA will produce ammonia converted to urea in the initial stages, with an expected capacity of 2.4m tonnes, increasing national production by about one-third.

The project is moving forward after stalling over discussions related to the price of gas feedstock.  Details of the new contract have not been made public, but local press reports indicate gas will be indexed to international market prices, allowing Sonatrach, which has a 49% stake, to carve out a larger share of revenue.  The initial contract was based on subsidized gas prices.

International Ownership

The launch of the AOA plant follows the announcement of modernization and expansion plans at two other large ammonia and urea facilities.

Fertial, a joint venture between Spain’s Grupo Villar Mir and Sonatrach’s subsidiary Asmidal, announced that the company will invest €250m between 2014 and 2018 to modernize its two ammonia production sites in Arzew and Annaba and increase production capacity from 1.2m tonnes to 1.8m tonnes.  The American engineering firm KBR was awarded a contract in September to revamp Fertial’s plants and improve energy efficiency.

Sorfert has the capacity to produce 1m tonnes of ammonia and 800,000 tonnes of urea per year.  The firm, a joint venture between Egypt’s Orascom Construction Industries and Sonatrach, announced in November that it produced and exported 739,000 tonnes of ammonia and 750,000 tonnes of urea since its launch in August 2013, making total revenues of nearly $500m.

All three foreign partners are majority owners of the joint ventures as the initial agreements were signed before the implementation in 2009 of Algeria’s 51-49% law, which requires Algerian firms to be majority stakeholders.

Diversifying Downstream

Petrochemicals have major potential as Algeria looks to reduce its reliance on raw commodity prices.  Its main value-added products are methanol, liquid nitrogen and helium, with the latter produced in a joint venture between Sonatrach and Germany’s Linde at Arzew.  Petrochemical exports – including solvents, naphtha, methanol, helium and fertilizers – generated foreign receipts of $1.34b in 2013, two-thirds of total non-hydrocarbons exports.

Hydrocarbons accounted for nearly 96% of export revenues in the first nine months of 2014, almost flat year-on-year.  OPEC member Algeria has the fourth-largest oil reserves and second-largest gas reserves in Africa but production has plateaued in recent years.  (OBG 05.01)

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 11.11  TURKEY:  Life Sciences Fuelled by Favorable Investments & Reforms

Big pharmaceutical companies and foreign investors are flocking to Turkey to capitalize on its encouraging economic policies.  The establishment of technology development zones that exempt pharmaceutical entrepreneurs and academics from income taxes until 2023 has played a particularly crucial role in driving R&D activity in the nation’s life sciences industry.

New analysis from Frost & Sullivan, 2014 Life Sciences Outlook in Turkey, finds that the market earned revenues of $14.53 billion in 2013.  The study covers pharmaceuticals and clinical diagnostics.  The pharmaceutical segment was valued at $14.04 billion in 2013 and is estimated to reach approximately$21.65 billion in 2018 at a compound annual growth rate (CAGR) of 9.1%.  The clinical diagnostics segment accounted for the rest of the total life sciences market revenues in 2013 and is forecasted to hit$0.70 billion in 2018 at a CAGR of 7.4%.

“Biologics, oncology drugs and blood-based products are expected to support the development of the life sciences market in a big way,” said Frost & Sullivan Healthcare Senior Research Analyst Aiswariya Chidambaram.  “The biologics segment, which accounted for 11% of the total Turkish pharmaceutical market in 2012, is poised to expand at aCAGR of 15% between 2013 and 2018.  On the other hand, the oncology segment will witness strategic investments – including certain tax allowances, customs duty exemption and value-added tax exemption – worth more than$9 million.”

The Healthcare Transformation Program designed to improve healthcare services and access will remain instrumental to boosting spending across these segments. The strategic objectives of the program, along with rapid economic growth will ensure that Turkey’s life sciences market progresses faster than mature markets in the United States, Japan and Europe.

However, price ceilings that do not exceed 66% of drug reference prices and rigid reimbursement policies are adversely impacting foreign investors’ profits and overall market momentum.  The lengthy drug approval process and poor patent protection are also dampening the investment spirit in the Turkish life sciences industry.

“With the reimbursement amount for prescription drugs having decreased at an average AGR of 7.1% between 2009 and 2012, companies are increasingly foraying into the over-the-counter segment with different product offerings,” noted Chidambaram.  “This trend is expected to significantly boost domestic production and supply capacity.”

Eventually, Turkey will become the regional life sciences capital of the Middle East and North Africa.  The country’s inviting investment scenario and pharmaceuticals export potential of nearly$300 billion to neighboring countries will help it quickly attain a strong status in the region.

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies.  (Frost & Sullivan 09.01)

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 11.12  GREECE:  Elections – Shuffling the Deck

The Economist Intelligence Unit observed that Greek electoral law requires that parties poll 3% to enter parliament.  Those close to the threshold are combining before the general election on 25 January.


In a widely anticipated move, the former prime minister, George Papandreou, has broken with the Panhellenic Socialist Movement (Pasok) founded by his father, to form the Democratic Socialist Movement (To Kinima).  The move reflects the enmity between Mr. Papandreou and the president of Pasok, Evangelos Venizelos, whose leadership style he regards as autocratic.  The new party could have an adverse impact on the main left-wing opposition movement, Syriza Unifying Social Front (Syriza), whose ranks have been swollen by disaffected former Pasok members.

Syriza, meanwhile, scuppered potential collaboration with the former government coalition partner Democratic Left (DIMAR) by rejecting its sole condition for co-operation, namely that there be no unilateral moves by Syriza with regard to the country’s debt.  Syriza is understandably not eager to work with DIMAR, which is a breakaway from its ranks, but the government seized on the news to warn about the dangers to Greece’s euro zone membership of a Syriza government.

DIMAR has instead joined forces with the Greens-Solidarity, one of two factions of the Greek Green movement (the other, the Eco-Greens, has joined with Syriza).  The Greens together have a core following of about 1%, which could help DIMAR secure parliamentary seats, thereby eating into a Syriza lead.

To Potami (The River), a centrist formation which polled 6.6% in the European Parliament election of May 2014, has taken in many disaffected DIMAR voters and has just been joined by Drassi, a liberal splinter from the center-right senior government party, New Democracy (ND).  To Potami has rebutted criticism (mainly from Pasok) that it is DIMAR mark two, but it is looking to attract voters frightened of Syriza’s hard-left wing.  The liberals poll about 1%, but they too have split, with one part contesting the election independently.

The statutory deadline for party lists to be put forward is a matter of days away. Subsequent polls will give some indication of levels of popular support for the various political alliances, and illuminate the balance of political forces going into the election.

Impact on the Forecast

The outcome of Mr. Papandreou’s move is uncertain, and it could prove detrimental both to Pasok and himself. It may, however, shave enough off of Syriza’s lead to hand ND the 50-seat bonus (in a 300-seat parliament) that goes to the winning party.  (EIU 07.01)

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