Fortnightly, January 28th 2015

Fortnightly, January 28th 2015

January 28, 2015






1.1  Knesset Approves Raising Minimum Salary to NIS 5,000
1.2  Economy Ministry Launches $2.5 Million Arab Israeli Hi-Tech Program
1.3  Jerusalem Plan Tackles Air Pollution Caused by Commuter Traffic


2.1  Bottomline Technologies Buys Intellinx for $67 Million
2.2  AppsFlyer Raises $20 Million
2.3  O2O Startup Visualead Secures Investment from Alibaba Group
2.4  Cellomat Raises $2.25 Million
2.5  Netafim to Mark “50 Years of Shaping the Future” Throughout 2015


3.1  Canada’s Circle K Plans Major Middle East Shops Expansion
3.2  Big Mama’s & Papa’s Pizzeria To Develop In Mideast
3.3  The Habit to Open 50 Arabian Gulf Restaurants
3.4  Ashcroft Opens Sales Office in Istanbul
3.5  Spain’s Indra Wins $314 Million Tender for Riyadh Public Transport Project
3.6  Work on Africa’s Tallest Tower to be Started by Dubai Firm


4.1  Israeli Solar Power Technology to Light Up Ethiopia
4.2  $2.7 Billion in Solar Projects Set to be Unveiled in MENA in 2015
4.3  UAE’s Bee’ah Announces Landfill Solar Project Plan


5.1  Lebanon’s Trade Deficit Widens in 2014
5.2  Lebanese Auto Imports Grow in 2014
5.3  Jordan to See 20% Hike in Food Prices Expected As Electricity Costs Soar
5.4  Jordan’s Nuclear Research Reactor to be Completed by Year End

♦♦Arabian Gulf

5.5  Gulf States Plan Laws to Curb Fuel Smuggling
5.6  Kuwait CPI Inflation Rises to 3.1% in November 2014
5.7  Bahrain GDP Growth Reaches 5.1% in Third Quarter 2014
5.8  Qatar’s Inflation Remained Moderate in 2014
5.9  Qatar May Fund Energy & Other Projects in Venezuela
5.10  UAE’s Inflation Hits 6-Year High On Rising Housing & Utility Costs
5.11  Dubai Health Authority Treats More than 1 Million Patients in 2014
5.12 Saudi Arabia’s Fourth Quarter GDP Growth Lowest in Over a Year
5.13  Saudi Arabia’s Nuclear & Renewable Energy Plans Pushed Back

♦♦North Africa

5.14  World Bank Says Moroccan Economy to Grow 4.6% in 2015
5.15  Morocco’s Economy to Grow 4.8% in 2015
5.16  Morocco – Côte d’Ivoire Trade Exchange Tripled in 2009-2013


6.1  Turkish-Israeli Trade Booms Despite Harsh Rhetoric
6.2  More Than $35 Billion Left Turkey Illicitly Over Past 10 Years
6.3  Turkish Central Bank Slashes 2015 Inflation Forecast to 5.5%



7.1  Israel Public Transportation Accessible


7.2  Dubai Police Says Whole City Now Covered by CCTV
7.3  Greece’s Tsipras Sworn in as PM to Fight Bailout Terms
7.4  Tsipras Forms Government & Plans New Legislation


8.1  Oramed Granted Patent in Israel for Oral Administration of GLP-1
8.2  MediWound Expands Distribution of NexoBrid to Mexico
8.3  Teva FDA Approval for First Generic Nexium Delayed-Release Capsules
8.4  Can-Fite’s CF602 Efficacy in Treatment of Sexual Dysfunction


9.1  Stratasys Introduces Its Most Versatile 3D Printer for Digital Dentistry
9.2  Ex Libris Collaboration with CA API Management Software
9.3  Nubo Launches Virtual Mobile Infrastructure with HTML 5 Compatibility
9.4  Sri Lanka Telecom to Offer CYREN Cybersecurity Solution


10.1  Israel’s CPI Down 0.2% in 2014, Unchanged In December
10.2  IMF Offers Positive Outlook for Israel in 2015
10.3  Israeli Economic Growth in Third Quarter Revised Upwards
10.4  Flug Says Haredim Now Poorer Than Arab Israelis
10.5  Ultra-Orthodox Employment Rate for Men Rises to 56%
10.6  Israelis Spent 5% More on Cigarettes in 2014
10.7  Israeli Wine Exports Rose 10% in 2014


11.1  ISRAEL: Summary of Israeli Hi-Tech Capital Raising Q4/14
11.2  ISRAEL: Israeli Venture Capital Fund Raising – 2014
11.3  ISRAEL: American Food Brands More Widely Integrated on Israel’s Supermarket Shelves
11.4  ARAB WORLD: Rising Domestic Oil Consumption Challenges Arab States
11.5  LEBANON: Lebanon’s Economic Outlook for 2015
11.6  LEBANON: Lebanon’s Refugee Dilemma
11.7  KUWAIT: Kuwait Year in Review 2014
11.8  BAHRAIN: Bahrain Year in Review 2014
11.9  QATAR: Qatar Year in Review 2014
11.10  OMAN: After Qaboos, Who Will Be Oman’s Next Sultan?
11.11  SAUDI ARABIA: After King Abdullah, Continuity
11.12  SAUDI ARABIA: Succession in Saudi Arabia
11.13  EGYPT: Egypt Year in Review 2014
11.14  EGYPT: Egyptian Women Take to Social Media to Expose Harassers
11.15  MOROCCO: Year in Review 2014
11.16  TURKEY: Former Friends, Now Bitter Foes
11.17  GREECE: Fitch Revises Outlook on Greece to Negative; Affirms at ‘B’



1.1 Knesset Approves Raising Minimum Salary to NIS 5,000

Late on 21 January, the Knesset approved raising the minimum monthly salary in three installments to NIS 5,000. The minimum monthly salary will rise on 1 April to NIS 4,650 and then to NIS 4,825 in July and 2016, and finally to NIS 5,000 in January 2017. Earlier this month, Attorney General Yehuda Weinstein ruled that it was permissible to anchor the minimum salary hike in law, even during the run-up to elections, as agreed between the Histadrut (General Federation of Labor in Israel), the employers and government representatives. (Globes 22.01)

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1.2 Economy Ministry Launches $2.5 Million Arab Israeli Hi-Tech Program

The Ministry of the Economy announced the winners of a tender for the training and integration of Arab, Druze and Circassian academics into the hi-tech sector, with over $2.5 million to be transferred to the organizations over the next three years. The winners, Tsofen and ITworks, are to receive state funds to examine the manpower needs of hi-tech employers in northern and central Israel, where much of the Arab Israeli community is located, and to guide, train and place Arab students in hi-tech companies. While hundreds of Arab, Druze and Circassian students complete studies to work in hi-tech every year, they reportedly have trouble finding employment in the field.

In 2012, the Ministry of Economy adopted a program to encourage Arab employment on the recommendations of the Trajtenberg Committee which focused on socio-economic change. As part of that push, the proposal to implement a government program encouraging Arab employment in the hi-tech industry was approved. (Arutz7 19.01)

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1.3 Jerusalem Plan Tackles Air Pollution Caused by Commuter Traffic

The Environmental Protection Ministry plans to start funding projects that will let commuters leave their cars at home and get to work on time. The expected result is reduced air pollution and gas consumption; less traffic; and shorter commuting times. The proposed measures are part of the implementation of a national plan to cut air pollution that has been approved by the cabinet and is slated to go into action a few months from now. Some NIS 6 million ($1.52 million) will be put into the project.

The ministry is expected to support projects designed to encourage commuting by public transportation and using bicycles rather than cars. The plan, which is projected to cut back on hundreds of thousands of car tips annually, includes the establishment of a shuttle system to and from centers of business, as well as an expansion of Tel Aviv’s bike sharing system to all of the Gush Dan region. The latter initiative will also include upgrades to bike paths in the area.

Cities slated to benefit from the project include Tel Aviv and its surrounding cities Givatayim, Holon, Ramat Gan, and Petah Tikva, as well as Jerusalem. It should be noted that the amount of ministry support for the various municipal authorities is based on the cities’ population density and the data on annual carbon dioxide emissions from cars. The amount of aid is being set according to each city’s socio-economic status, with the poorer cities getting more money. Support from the Environmental Protection Ministry is conditional on each local authority submitting its own detailed plan to reduce air pollution and use of personal vehicles. (IH 20.07)

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2.1 Bottomline Technologies Buys Intellinx for $67 Million

US cloud-based payment provider Bottomline Technologies has acquired Israeli enterprise fraud detection and prevention company Intellinx for about $67 million. Intellinx has 100 employees at its headquarters in Or Yehuda and at its office in New Jersey. The company has 30 customers in Israel and over 200 customers worldwide including leading international banks, insurance and credit companies, health organizations and major government agencies. Intellinx’ solution has been adopted by financial organizations and other major agencies worldwide because of its unique ability to monitor in a non-invasive manner and reconstruct and analyze user behavior on multiple channels and warn about and immediately halt suspicious actions. In the sale, Intellinx and its founders were supported by founding partner Adv. Erez Mizrahi, and Advs. Ayelet Oscar and Nir Sade of the High-Tech Department of the Furth, Wilensky, Mizrachi, Knaani (FWMK) law firm. (Globes 13.01)

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2.2 AppsFlyer Raises $20 Million

Mobile advertising measurement platform, Herzliya based AppsFlyer, announced it raised $20 million in Series B funding. The round was led by Fidelity Growth Partners Europe (FGPE), with participation from AppsFlyer’s existing investors, Magma Venture Partners and Pitango Venture Capital. With this funding, the company has raised $28 million to date. AppsFlyer’s NativeTrack technology provides app marketers, brands and agencies with unbiased, independent measurement of campaigns across more than 800 mobile ad networks and media sources. The company’s universal software development kit (SDK) has been installed over 4 billion times and can be found in 9 out of every 10 smartphone devices. More than 4,000 advertisers currently use AppsFlyer software to measure and analyze over $1 billion in annual mobile ad spend. The company tracked more than 2 billion app installations in 2014.

AppsFlyer will invest the funds in R&D to accelerate development of its product offerings, including new tools to help marketers measure the impact of their advertising, marketing and retargeting campaigns. The company will also expand its international growth by opening new offices throughout the world to complement offices in San Francisco, Tel Aviv and Beijing. The company will also invest in its knowledge center to provide key insights and education that help the industry understand the rapidly evolving mobile advertising landscape. (Globes 20.01)

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2.3 O2O Startup Visualead Secures Investment from Alibaba Group

Tel Aviv’s Visualead, an Israeli O2O (Offline to Online) startup and pioneer of Visual QR Code technology, has secured B-round funding from Alibaba Group Holding Limited. Alibaba Group and Visualead also entered into a strategic cooperation agreement for the use of Visualead’s patents and technology across Alibaba Group’s ecosystem. Visualead will use the proceeds from the funding to develop next-generation O2O technology. The investment into Visualead is Alibaba Group’s first-ever investment in an Israeli company and it is a nod to the country’s prolific development as a booming technology startup scene.

Visualead is working closely with Mashangtao, the scannable code technology service of Alibaba Group, to provide innovative tools and solutions to sellers on Taobao Marketplace and, China’s two biggest online shopping platforms. Mashangtao recently utilized Visualead’s Visual QR Code technology to enable merchants to generate QR Codes. Visualead and Mashangtao are also engaged in joint projects in the areas of anti-counterfeiting, mobile and video. (Visualead 20.01)

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2.4 Cellomat Raises $2.25 Million

Smartphone servicing company Cellomat has raised $2.25 million from the mobile data technology company Cellebrite.

Petah Tikva’s Cellebrite is a global company known for its breakthroughs in mobile data technology for the cellular industry, delivering comprehensive solutions for both the mobile retail and law enforcement sectors. The company’s advanced solutions for mobile lifecycle, offer unique in-store phone-to-phone content transfer, backup and restore; in-store and remote diagnostics and repair avoidance; application and content delivery; automated BuyBack and secure device Wipe.

Netanya’s Cellomat is an automated point of sales/service device that is open 24/7. It can hold several hundred new, replacement or repaired phones and can be placed in malls, train or subway stations, office buildings and existing service centers. Cellomat improves the customer experience through better customer service. It grows sales, lowers costs and saves money. (Globes 26.01)

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2.5 Netafim to Mark “50 Years of Shaping the Future” Throughout 2015

Netafim will be marking its 50th anniversary throughout 2015 under the theme “50 Years of Shaping the Future.” Since introducing drip technology to the world upon its establishment 50 years ago, Netafim has been developing drip and micro-irrigation solutions to shape and advance agriculture. Committed to continue making a change in the world and shaping the future, Netafim, through its Indian subsidiary, Netafim JV, was chosen to participate in the world’s largest integrated micro-irrigation project in the country. The value of the deal for Netafim JV was $60 million, which covers nearly 30,000 acres of farmland and about 6,700 farmers located in the South Indian state of Karnataka. The farmers are mostly smallholders from 22 villages, and the project will improve their productivity and livelihood, while saving about 50% in water.

Tel Aviv’s Netafim is the global leader in drip and micro-irrigation solutions for sustainable productivity. With 28 subsidiaries, 16 manufacturing plants and over 4,000 employees worldwide, Netafim delivers innovative solutions in over 110 countries across the globe. Founded in 1965, Netafim pioneered the drip irrigation revolution, creating a paradigm shift toward low-flow agricultural irrigation. Today, Netafim offers a wide range of state-of-the-art irrigation and complementary solutions for agriculture, landscaping and mining. (Netafim 26.01)

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3.1 Canada’s Circle K Plans Major Middle East Shops Expansion

Circle K, one of the world’s largest convenience store operators, has announced plans to open 55 new branches across the Middle East in 2015. The move is part of the company’s plan to expand its foothold and offer enhanced services to its growing customer-base in the region, Circle K. It added that the company aims to open 28 new outlets in the UAE alone between Abu Dhabi, Dubai and other nearby emirates. These planned branches are expected to complement the company’s existing 38 outlets across the UAE. Owned by Canadian-based Alimentation Couche-Tard, Circle K is one of the most successful operators of convenience stores and has a presence in North America, China, Japan, Indonesia, Vietnam, Hong Kong, Guam and Mexico. (AB 17.01)

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3.2 Big Mama’s & Papa’s Pizzeria To Develop In Mideast

Big Mama’s & Papa’s Pizzeria (BMPP) has signed a deal with BinHendi Enterprises, Dubai, to develop the brand throughout the Mideast. BMPP features the largest delivered pizza in the world, the Giant Sicilian, at over 20 square feet (1.9 square meters), as well as their signature Big Mama and Big Papa pizzas. BinHendi Enterprises, based in Dubai, United Arab Emirates, was established by its current Chairman Mohi-Din BinHendi in 1974 and operates over 150 restaurant and retail locations throughout the entire region. (BMPP 26.01)

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3.3 The Habit to Open 50 Arabian Gulf Restaurants

A franchise agreement has been signed to bring US restaurant brand The Habit to the Arabian Gulf region, with plans to open 50 outlets over the next 10 years. Food Quest Restaurants Management has announced the signing of the franchise agreement with The Habit Restaurants for the brand’s first international deal. Food Quest has been given the exclusive rights to open restaurants in the UAE, Saudi Arabia, Qatar, Bahrain, Kuwait and Oman – with the first Habit Burger Grill expected to open its doors to diners in the UAE this year. Founded in 1969 in Southern California, The Habit currently owns and operates over 100 restaurants in the United States. Voted as America’s best tasting burger in a leading consumer magazine, The Habit Burger Grill is a fast casual restaurant that specializes in fresh, made-to-order, char-grilled burgers, sandwiches, and salads. (AB 17.01)

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3.4 Ashcroft Opens Sales Office in Istanbul

Stratford, Connecticut’s Ashcroft announced the opening of a sales office in Istanbul, Turkey. The office will support the company’s global growth strategy, and gives Ashcroft the opportunity for direct access, providing enhanced service and support to their customers in the region. Ashcroft manufactures gauges, thermometers, switches, transducers, transmitters, calibration equipment and isolators for pressure measurement, monitoring and control. As a global provider, Ashcroft maintains a network of manufacturing facilities, sales offices and distributors worldwide. (Ashcroft 20.01)

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3.5 Spain’s Indra Wins $314 Million Tender for Riyadh Public Transport Project

Spanish firm Indra has announced that it has won a $314 million contract to implement the world’s biggest ticketing system for the Riyadh public transport systems. ArRiyadh Development Authority (ADA), the company responsible for modernizing Riyadh’s infrastructures, has chosen Indra to deliver the project over 54 months. The contract also includes maintenance and technological assistance for 10 years. Indra will develop the entire advanced pricing management system for the city’s public transportation network. This includes a ticketing control center with information from the various systems, financial management software, the operator clearing house, and other systems for commercial management. Thanks to contactless technology, users will be able to access the entire public transportation system using only one card. (AB 17.01)

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3.6 Work on Africa’s Tallest Tower to be Started by Dubai Firm

The construction of Africa’s tallest tower will be carried out by Dubai based Middle East Development later this year. The 540 meter Al Noor Tower will be located in Casablanca, Morocco and will cover a total area of 335,000 square meters. The project is valued at $1 billion and is expected to be completed in 2 to 3 years. The tower will have 114 stories and will feature a number of offices, apartments, a seven star luxury hotel, an art gallery and an arcade of shops. In addition, French based Valode and Pistre have been awarded the design contract and ground breaking for this project is expected to take place in June 2015. (BC 18.01)

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4.1 Israeli Solar Power Technology to Light Up Ethiopia

Ethiopia is aiming to enhance access to affordable and environmentally-friendly renewable energy for its population, with the country’s Ministry of Water, Irrigation and Energy announcing last month that it had signed an agreement with an Israeli solar-hybrid power company to further this goal. The leading Israeli developer of solar-biogas hybrid power technology, AORA, will be the first to provide solar-biogas hybrid power solutions for rural communities in Ethiopia. Ethiopia often suffers from blackouts due to its lack of power and two-thirds of the country’s citizens have no electricity.

In November 2011, Ethiopia launched the Climate Resilient Green Economy Strategy which aims to achieve the development objective of becoming a middle income, green economy nation by 2025. A primary goal entails the generation of energy from renewable sources for domestic and regional markets.

AORA’s technology runs not only on solar radiation, but also on almost any gaseous or liquid fuel, including biogas, biodiesel and natural gas. This enables a variety of operational modes – from solar-only mode, where electricity is supplied from ample sunlight, to hybrid-mode when fuel helps generate full power when sunlight is insufficient. At night time or during days of heavy overcast, the fuel-only mode goes into operation. This guarantees an uninterrupted and stable power supply 24 hours a day in all weather conditions. The AORA tulip-shaped solar power plant, whose technology was developed by the Weizmann Institute, requires less land to generate usable power and heat than other systems as well as less water. Each Tulip station is small and modular, and adaptable to topography. Construction of the first pilot plant in Ethiopia is expected to begin by mid-2015. (Ynetnews 17.01)

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4.2 $2.7 Billion in Solar Projects Set to be Unveiled in MENA in 2015

Solar projects worth $2.7 billion are set to be unveiled in the Middle East and North Africa (MENA) in 2015, according to a new study by the Middle East Solar Industry Association (MESIA). The study showed that 1,800 MW worth of solar projects will be tendered or awarded during the next 12 months. Factoring in the prevailing project price of $1.5 million/MW, this equates to $2.7 billion. The figure represents a six-fold increase on last year when less than 300MW of solar projects were awarded. To put it in perspective, a 100MW solar PV power plant is capable of powering roughly 200,000 homes.

MESIA’s report also said solar will become more pan-regional. In the past the solar debate has been focused on only one or two countries. This year the industry will see solar projects take off in 11 different countries across MENA, from Morocco to Saudi Arabia, the report said. It added that in 2013, there were only three projects awarded larger than 10MW while this year, that number is expected to reach 40. Each of these projects will be worth at least $60 million and several will exceed $100 million.

MESIA also said as the solar market grows, the region will see niche segments emerging. One example is the rooftop sector. With Dubai having recently launched a landmark solar rooftop program, the MENA region will see for the first time an entire industry emerge focused on building solar PV systems on rooftops. MESIA is the largest solar trade association in the MENA region. The association represents over 120 organizations including investors, installers, manufacturers, law firms, consultancies and banks and is headquartered in Dubai. (AB 16.01)

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4.3 UAE’s Bee’ah Announces Landfill Solar Project Plan

Bee’ah, the Sharjah-based environmental company, has announced plans to establish its first solar power project on a landfill site in the UAE. The project will be built on the Bee’ah main landfill site at the Bee’ah Waste Management Centre in Al Saj’ah, Sharjah. The company said that it is seeking to identify a partner who will develop, build and set up the project. The solar power project will generate more than 20MW, of which part will be used to power all the Bee’ah facilities at the Waste Management Centre, with potential storage capacity to power the facilities during non-daylight hours. (BC 23.01)

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5.1 Lebanon’s Trade Deficit Widens in 2014

A fall in exports caused Lebanon’s trade deficit in 2014 to widen to 83.834% compared to 81.51% in 2013, the Customs Department said. Total exports in 2014 reached $3.313 billion, a drop of 15.8%, while imports stood at $20.494 billion, a decrease of 3.5% compared to 2013. Industrialists attributed the drop in exports to the ongoing war in Syria, the only overland export route for Lebanese-made goods. But in December 2014, Lebanese exports surged 10% to $268 million compared to the same month in 2013. Transit cargo, however, saw a big jump compared to 2013. The data showed that transit cargo in 2014 reached $440 million compared to $244 million in 2013, an increase of 80%.

As for the leading countries importing to Lebanon, China ranked first, followed by Italy, the United States, France and Germany. Saudi Arabia was the biggest destination for Lebanese-made goods, followed by the UAE, South Africa and Syria. Customs revenues in 2014 fell by 6% to $1.4 billion, while value added tax on imports fell by 3% to $2.058 trillion. (TDS 24.01)

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5.2 Lebanese Auto Imports Grow in 2014

According to the Association of Car Importers in Lebanon (AIA), there was a 4.6% year-on-year (y-o-y) increase in the number of registered new passenger and commercial cars to 40,135 cars. This was due to the 4.73% y-o-y surge in the registration of new passenger vehicles to 37,816 and in the number of registered commercial cars by 1.80% y-o-y to 2,319. Some 90% of the registered cars are small cars with selling prices less than $15,000, while luxury cars, with selling price above $100,000, represent only 3.5%. Looking at the car sales brand breakdown, Kia topped the list with a 22.10% share of the total, followed by Hyundai (18.86%), Toyota (12.87%), Nissan (12.61%) and Renault (3.47%). As for the top five distributors in Lebanon by December, NATCO SAL had the highest share of 20.80% of the total, followed by Century Motor Co (18.13%), BUMC (13.08%), RYMCO (13.25%), and Bassoul Heneine (7.41%). (AIA 14.01)

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5.3 Jordan to See 20% Hike in Food Prices Expected As Electricity Costs Soar

Jordanian food prices are expected to go up this year by nearly 20%, according to a leading sector representative, who also said that demand for commodities is projected to slow down. The representative of the food sector at the Jordan Chamber of Commerce attributed the anticipated increase in prices to the 15% rise in electricity tariffs, which went into effect at the beginning of this year. The increase in power tariffs will affect both imported and locally produced food products, and “consumers will ultimately pay the price.” Electricity prices represent a major part of the operational costs of shops and grocery stores. Refrigeration is a major cost since it is operated 24 hours a day. As living costs go up, employees at commercial outlets are expected to request pay raises. With prices inflating, demand for items will also slow-down, which will affect the profitability of businesses. Profits for Jordanian food stores and hypermarkets went down by nearly half in 2014 due to rising operational costs. Another concern for the sector is the recently endorsed Income Tax Law that raised the tax rate on commercial businesses with profits of more than JD100,000 a year to 20% from 14%. (JT 26.01)

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5.4 Jordan’s Nuclear Research Reactor to be Completed by Year End

Jordan’s nuclear research reactor project will be completed by the end of this year, the Jordan Atomic Energy Commission Chairman Khaled Toukan said on 26 January. At a meeting with the Lower House financial committee, he said the $130 million reactor, of which $70 million is funded under a Korean soft loan, will remain under experimental operation for six months. (Petra 26.01)

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►►Arabian Gulf

5.5 Gulf States Plan Laws to Curb Fuel Smuggling

Gulf countries including the UAE and Saudi Arabia are formulating new legislation to curb fuel smuggling. Smuggling of fuel, including diesel, gasoline and other products, is frequent across the borders of some Gulf Arab states, where different levels of fuel subsidies create price gaps that criminals can exploit. One way to eliminate smuggling would be for governments to adjust the billions of dollars of subsidies which they pay so that national fuel prices moved into line with each other. However, such changes could hurt consumers and would therefore be politically sensitive. The recent plunge in oil prices has prompted some Gulf governments to reduce, or consider reducing, some fuel subsidies, but complete reform remains distant. (AB 13.01)

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5.6 Kuwait CPI Inflation Rises to 3.1% in November 2014

Inflation in Kuwait inched up to 3.1% in November 2014. It had previously reached a 30-month high of 3.2% in September 2014, the highest level since April 2012. However, year-to-date, inflation in Kuwait remains stable averaging 2.9%.

During the month, food price inflation increased by 3.3% on an annual basis, up by 0.4% compared to the rate in the previous month. This increase can mainly be attributed to steady rises in the prices of fresh, chilled and frozen vegetables and fruits. Furthermore, it is worth mentioning that prices of food and beverages have a large weight of 18.4% in the CPI basket. Seeing as Kuwait imports most of its food items for domestic consumption, approximately 90.0%, thus the moderate inflation in food prices was in line with declining trends in international food prices in the past few months.

Furthermore, inflation in the furnishings & household maintenance component was at 4.4% y-o-y in November 2014, decreasing by 0.14% m-o-m due to minimal drops in the prices of its sub-components. It is noteworthy that the price in this category has grown significantly as it used to hover around 2.2% – 2.8% in April 2013 to August 2013 and has remained above the 4.0% level since October last year. The furnishing equipment & household maintenance category has a weight of 11.3% in Kuwait’s price basket; the third largest weight. The prices of tobacco and narcotics edged up slightly compared to last month witnessing an increase of 0.41% m-o-m, bringing the annual inflation for this CPI component up to 12.2% on the back of increases in the prices of tobacco and narcotics seen in the previous months.

Inflation in the clothing & footwear component increased by 1.1% y-o-y, inching upwards by 0.2% compared to the previous month. Inflation in the restaurants and hotels segment was remained unchanged compared to the previous month, and at 3.5% compared to the same period a year earlier. Education prices increased by 6.5% y-o-y in October 2014, unchanged from the previous month as well. (BI-ME 15.01)

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5.7 Bahrain GDP Growth Reaches 5.1% in Third Quarter 2014

The Bahrain Economic Development Board (EDB) said that the Kingdom’s Q3 GDP growth reached 5.1% year-on-year (YoY), which continues the momentum from earlier in 2014 and reflects the positive impact of the initiation of a number of significant infrastructure projects. Overall growth for 2014 is forecasted to have been in excess of 4%. The latest Bahrain Economic Quarterly (BEQ) also highlights the resilience of Bahrain’s non-oil growth. This was particularly apparent in the construction sector, which experienced acceleration from 3.6% annual growth in Q2 to 12.3% in Q3, making it the fastest growing sector of the economy. The hotels and restaurants sector also posted strong YoY growth of 7.4%. The hydrocarbons sector in Bahrain has continued to expand throughout the year, with a 4.7% YoY gain in Q3. (BI-ME 13.01)

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5.8 Qatar’s Inflation Remained Moderate in 2014

According to the Qatari Ministry of Development Planning and Statistics (MDPS), consumer price index (CPI) inflation remained roughly stable at 3.0% in 2014, from 3.1% in 2013. Key drivers of inflation in 2014 were higher rent inflation offsetting lower international food prices. Domestic inflation is forecast to accelerate, pushing inflation higher to 3.5% in 2015 and 4.4% in 2016. The combination of rapid population growth (estimated to have risen by 10.1% in 2014) and higher GDP per capita led to a strong increase in land prices. According to the latest Ministry of Justice data, land prices increased 92.7% year-on-year in December 2014. As a result, real estate developers raised rents in order to recoup higher land prices.

Accordingly, rent inflation rose to an average 7.0% in 2014, leading to overall domestic inflation of 3.3%. This is likely to continue over the coming years in line with the favorable outlook for the Qatar economy. Accordingly, domestic inflation is seen to rise to 5.0% in 2015 and 5.3% in 2016. Counterbalancing this, foreign inflation fell slightly to 2.0% in 2014 as international food prices fell on record global food harvests, large US stockpiles and weak demand. Given that Qatar has limited domestic food production, these lower international food prices are likely to continue pushing Qatar’s food inflation lower, albeit with a lag.

The QNB Group forecasts overall inflation to rise from 3.0% in 2014 to 3.5% in 2015 and 4.4% in 2016 on rising rent inflation. However, there is a risk that large investment spending and the growing population could lead to supply bottlenecks owing to limited domestic capacity. This could potentially push up domestic prices more than expected and lead to overall inflation rising above our baseline forecasts. (QNB Group 19.01)

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5.9 Qatar May Fund Energy & Other Projects in Venezuela

Qatar is considering funding projects in Venezuela, industry and diplomatic sources said, as the Latin American state lobbies fellow crude producers to help repair the damage done to its economy by plummeting oil revenues. Venezuela’s President Maduro said during a recent visit to Doha that his country was firming up billions of dollars of financing from Qatari banks. Industry sources in Qatar said the country was still studying the possibility of investing in Venezuela’s energy, real estate and tourism sectors.

Qatar’s current oil output capacity is around 900,000 barrels per day (bpd), one of OPEC’s smallest producers. Worsening financial conditions in Venezuela, which seeks an oil price of around $100, have fanned market anxiety about a possible sovereign default. Moody’s Investors Service said there was a high risk of this as it chopped the country’s credit rating further into junk territory, though Maduro has promised to pay bondholders and many economists doubt a default is coming soon. Venezuela is also looking to increase food exports to Qatar, which imports more than 90% of its food supplies, diplomatic sources in Qatar said. (AB 16.01)

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5.10 UAE’s Inflation Hits 6-Year High On Rising Housing & Utility Costs

Housing and utility costs soared by more than 5% in December as the UAE’s inflation rate rose to its highest level since February 2009. According to official data released by the UAE National Bureau of Statistics, the country’s year-on-year inflation rate rose to 3.1%, up from 2.8% the previous month. The December figure was well above the average inflation rate of 2.33% in 2014, the bureau said, adding that the December inflation matched the rate in October, which was the highest for nearly six years. The consumer price data showed that housing and utility costs, which account for over 39% of consumer expenses, jumped 5.4% from a year earlier in December and 1.3% month-on-month. Food and soft drink prices, which account for nearly 14% of the basket, rose 1.3% year-on-year but fell 0.9% from the previous month. (AB 25.01)

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5.11 Dubai Health Authority Treats More than 1 Million Patients in 2014

More than one million patients were treated at Dubai Health Authority (DHA)-run hospitals and specialty centers in 2014. The exact number of patients that visited Dubai, Rashid, Latifa and Hatta hospital, as well as specialty centers including Dubai Diabetes Center, Thalassemia Center, Airport Medical Center and Dubai Gynecology Center were 1,102,336. Of the total of patients, 35% visited Dubai Hospital, 30% visited Rashid Hospital, 16% visited Latifa Hospital and 10% visited Hatta Hospital. The remaining 9% of patients visited the specialty centers. The total number of outpatient visits across these facilities were 596,953, number of accident and emergency cases were 4,24,880 and the remaining 80,503 were admissions. According to the DHA’s Health Strategy 2013 – 2025, DHA will build new hospitals and will have 40 primary healthcare centers by 2025. Currently the expansion of the trauma center is ongoing – 60% of the expansion is complete and the center will be ready in June. The expansion will add 160 beds and will cost AED161 million. Al Jalila Children’s Specialty hospital is another project that will be operational in 2015, he said. (AB 17.01)

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5.12 Saudi Arabia’s Fourth Quarter GDP Growth Lowest in Over a Year

Saudi Arabia’s economic growth fell to its lowest level in more than a year in the fourth quarter of 2014, a sign that the plunge in oil prices may be causing growth to slow, data from the state statistics office showed. GDP, adjusted for inflation, expanded 2.0% from a year earlier last quarter, down from 2.4% in the third quarter and 4.9% in the final quarter of 2013. For all of 2014, GDP grew 3.6%. The statistics office changed the base year for its calculations to 2010 from 1999 previously, making it impossible to compare growth rates further back in time.

The oil price slide has slashed Saudi Arabia’s state revenues but will not affect GDP growth directly unless the volume of oil output changes. Saudi crude oil output has edged down only slightly in recent months, to 9.62 million barrels per day in December from 9.85 million bpd last June. GDP in the oil sector shrank 2.3% year-on-year in the third quarter of 2014 but was flat in the fourth quarter. Growth of non-oil GDP slowed sharply, however, to 3.7% from 6.4%. (AB 21.01)

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5.13 Saudi Arabia’s Nuclear & Renewable Energy Plans Pushed Back

Saudi Arabia’s plans to build nuclear and solar energy projects will take about eight years longer to complete than originally intended, the head of the government body in charge of overseeing the projects said. In 2012, the world’s top oil exporter said it would install 17 gigawatts of nuclear power by 2032 as well as around 41 GW of solar capacity. Currently it has no nuclear power plants. The plan started by looking at 20 years down the road, with 2032 as the major milestone for long-term planning. Recently, however, a revised outlook focuses on 2040 as the major milestone for long-term energy planning in Saudi Arabia. Although Saudi Arabia has ample financial resources to build the projects, it faces technical challenges, limited supplies of water for use in the plants, and potential bureaucratic obstacles.

Power demand in the desert kingdom is growing 8% annually, forcing state-run Saudi Electricity Co, the Gulf’s largest utility company, to spend billions of dollars on projects to add capacity. Nuclear and solar power stations would reduce the diversion of Saudi Arabia’s oil output for use in domestic power generation, leaving more available for export. Despite a government initiative calling for energy efficiency, Saudi Arabia’s peak electricity demand was expected to exceed 120 GW by 2032. (AB 19.01)

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►►North Africa

5.14 World Bank Says Moroccan Economy to Grow 4.6% in 2015

The World Bank has forecast an average growth of 4.6% for Morocco in 2015. The World Bank biannual report said Morocco’s nonagricultural output remained flexible, adding that it was driven by private consumption and a surge in exports of manufactured goods (including cars and electrical items) and phosphates. The report said that Morocco has been able to make progress despite political opposition to increasing prices of basic goods and services. Morocco’s efforts are also beginning to reduce deficits and recent declines in oil prices offer an opportunity to remove the country’s heavy energy subsidies. The World Bank also said that growth in the developing countries of the Middle East and North Africa recovered in 2014 to 1.2%. (MWN 15.01)

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5.15 Morocco’s Economy to Grow 4.8% in 2015

Morocco’s economy is expected to grow by 4.8% in 2015 compared to 2.6% last year, the High Commissioner for Planning announced. This economic growth is expected to create 170,000 jobs, bringing to 9.6% the national unemployment rate, instead of 9.8% in 2014. The 2015 forecasts are based on a good 2014-2015 crop year and an increase in global demand for Morocco to 4.5% in 2015 compared to 4.1% in 2014. Similarly, transfers from Moroccans living abroad are expected to increase at the same rate as 2014, which is 1.2%. This year, tourism receipts are expected to increase by nearly 1%, while foreign direct investments are expected to grow by 10%. Inflation is expected to reach 0.8% in 2015 compared to 0.4% in 2014, despite an expected drop in imported inflation. (MAP 21.01)

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5.16 Morocco – Côte d’Ivoire Trade Exchange Tripled in 2009-2013

Trade exchanges between Morocco and Côte d’Ivoire tripled between 2009 and 2013, Moroccan Economy & Finance Minister Boussaid said. Côte d’Ivoire is the Morocco’s eighth largest import source and the fifth largest customer for Moroccan goods. On 27 January, several bilateral cooperation agreements were signed in the presence of King Mohammed VI and Ivorian President, Alassane Dramane Ouattara. The main agreement covered mutual administrative assistance in customs matters. It provides for promoting partnership and cooperation opportunities between the two countries. (MAP 21.01)

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6.1 Turkish-Israeli Trade Booms Despite Harsh Rhetoric

Turkey’s mutual trade volume with Israel reached over $5.6 billion in 2014, representing a nearly 50% rise over 2009 despite lingering diplomatic tension between the two. Data from the Turkish Statistics Institute (TurkStat) shows that mutual trade volume reached $2.6 billion in 2009. Turkish exports to Israel jumped to $2.92 billion in 2014 from $1.5 billion in 2009, while imports from Israel increased to $2.7 billion from $1.1 billion in the same period.

The escalation in tension between Turkey and Israel after the Davos crisis, when then-Prime Minister Erdogan stormed out of a panel discussion after lambasting Israeli President Shimon Peres, and over the Mavi Marmara flotilla, did not prevent trade between the two from rising steadily. Official data reveals that only a small portion of Turkish exports to the Palestinian Authority constituted total sales to Israel. In 2009, Turkey sent goods worth $29.8 million to the PA, this figure surged to $75 million in 2013. Common exports include iron and steel, electrical machinery, vehicles, minerals and textiles. (TurkStat 20.01)

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6.2 More Than $35 Billion Left Turkey Illicitly Over Past 10 Years

A total amount of $35.6 billion flew out of Turkey illicitly in the past ten years, according to the latest report by from Global Financial Integrity (GFI), a Washington-based advocacy organization which aims to curtail global illicit financial flows. The December 2014 report from GFI found that developing and emerging economies lost $6.6 trillion in illicit financial flows from 2003 through 2012, with illicit outflows increasing at an staggering average rate of 9.4% per year – roughly twice as fast as global GDP.

According to the report, Turkey ranked 26th in the list of countries with largest average illicit financial flows with $3.5 billion having flown out of the country on average per year between 2003 and 2012. The report found that while $1.9 flew out of Turkey illicitly in 2003, the amount increased to $3.4 in 2007 and to $10.7 billion in 2011. (Cihan/Today’s Zaman 17.01)

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6.3 Turkish Central Bank Slashes 2015 Inflation Forecast to 5.5%

The Central Bank of Turkey cut its mid-point inflation forecast for the end of this year to 5.5% from a previous 6.1%. At a news conference to announce the bank’s quarterly inflation report, the Central bank also said the midpoint of the bank’s 2016 year-end inflation forecast was 5%. The revision of the forecast comes as oil prices continue to slide. Oil was trading at more than $90 in October, when the central bank prepared its inflation report for 2015. It is now trading at almost half of this, at $48. (Zaman 27.01)

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7.1 Israel Public Transportation Accessible

As of December 31, 2014, there is a new law on the books in Israel mandating that all public transportation must be wheelchair-accessible. Still, this does not completely solve the issue of mobility difficulties on buses, trains and taxis for people with disabilities. “Galgalim Darom” (“Wheels in the South”), an innovative program tailor-made for Israel, was recently launched for people whose physical or mental challenges hinder their ability to get around independently. Galgalim’s mission is to provide various forms of transportation assistance to individuals with different kinds of special needs, so that they can be as active participants in society as everyone else. The program will help the 67,000 residents of southern Israel with a disability – and eventually all of Israel’s approximately 697,000 disabled adults between the ages of 21 and 65 — to get to work or shop at a mall without the added pressure of calculating how they are going to manage the trip itself. The program will include an information hotline to provide assistance in planning rides on public transportation and everything connected with travel, such as advance purchase of tickets and eligibility for discounts. This line will also serve as the address for receiving “first aid” advice and for filing complaints. The bulk of the program, however, will revolve around an extensive network of volunteers teaching the target population how to use public transportation, often accompanying disabled travelers to their destinations. (DT 14.01)

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7.2 Dubai Police Says Whole City Now Covered by CCTV

Dubai Police have access to CCTV cameras on virtually every street in the city, according to its security director. While the exact number of cameras wasn’t revealed by the International Centre for Security and Safety at Dubai Police Academy, it is believed to substantially higher than the 25,000 that was recorded in 2010. The number of CCTV cameras has almost doubled in Dubai Airport, from 1,600 to 3,000, as police look to increase their ability to track criminals in the city. The announcement came after police were able to catch a thief, who allegedly stole $9.5 million (AED35m) worth of gems, after tracking him throughout the city. (AB 14.01)

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7.3 Greece’s Tsipras Sworn in as PM to Fight Bailout Terms

Greek left-wing leader Alexis Tsipras was sworn in on 26 January as the prime minister of a new hardline, anti-bailout government determined to face down international lenders and end nearly five years of tough economic measures. The decisive victory by Tsipras’ Syriza in 25 January’s snap election reignites fears of new financial troubles in the country that set off the regional crisis in 2009. It is also the first time a member of the 19-nation euro zone will be led by parties rejecting German-backed austerity. Tsipras’ success is also likely to empower Europe’s fringe parties, including other anti-austerity movements across the region’s economically-depressed south. The trouncing of the conservatives represents a defeat of Europe’s middle-ground political guard, which has dallied on a growth-versus-budget discipline debate for five years while voters suffered.

Syriza won 149 seats in the 300-seat parliament, leaving it just two seats short of an outright majority and in need of a coalition partner. The Independent Greeks won 13 seats. The alliance is an unusual one between parties on the opposite end of the political spectrum brought together by a mutual hatred of the €240 billion bailout program keeping Greece afloat at the price of budget cuts. The alliance suggests a hardline stance against Greece’s creditors, who have dismissed Tsipras’ demands for a debt write-off and insisted the country stay on the path of reforms and austerity to get its finances back on track.

For the first time in more than 40 years, neither the New Democracy party of Samaras nor the center PASOK, the two forces that had dominated Greek politics since the fall of a military junta in 1974, will be in power, beaten by a party that has until recently always been at the fringe. Tsipras also intends to talk to the heads of two other parties, the centrist To Potami and the communist KKE to seek outside support for his coalition. (Reuters 26.01)

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7.4 Tsipras Forms Government & Plans New Legislation

Radical left SYRIZA leader and newly sworn-in Greek Prime Minister Alexis Tsipras is trying to form his first cabinet after being sworn in as prime minister on 26 January, following his agreement with Independent Greeks leader Panos Kammenos to form a coalition government. A number of Tsipras’ close allies are expected to take key roles in the new cabinet. One of his closest advisers, Nikos Pappas, is expected to become minister of state, with responsibility for coordinating the government’s efforts. Prominent economist Yanis Varoufakis is due to take on the role of finance minister, with Euclid Tsakalotos as his deputy. Another economist, Giorgos Stathakis, is expected to be put in charge of the Development Ministry, which will be enlarged to incorporate other departments that currently operate separately.

The agreement between Tsipras and Kammenos was relatively straightforward. The right-wing party has agreed to back SYRIZA’s economic policies, as set out by Tsipras at the Thessaloniki International Fair in September, as long as the new prime minister does not forge ahead with changes in areas where Kammenos’ party has objections. This includes foreign policy issues, such as reaching an agreement with the Former Yugoslav Republic of Macedonia (FYROM) on a composite name, which Kammenos disagrees with. SYRIZA has also agreed to put on hold any plans for a separation between the Church and state. Kammenos gave the green light for SYRIZA to bring to Parliament as soon as possible the legislation it has prepared with the aim of implementing the pledges made in Thessaloniki. The first bill is expected to raise the minimum wage back to €751 and reintroduce regulations regarding collective wage bargaining.

The second draft law will focus on measures for taxpayers to be given better terms to repay overdue taxes and social security contributions. The bill foresees the new payment plans leading to no more than between 20 and 30% of taxpayers’ annual income going toward repaying their debts. The new government also wants to pass legislation that will end the mobility scheme and evaluation process in the civil service. This will lead to some people who have lost their jobs as a result of these measures being rehired. SYRIZA and Independent Greeks have further agreed to form an investigative committee in Parliament to look into the circumstances that led to Greece being forced to sign its first troika bailout in 2010, including how the country’s debt spiraled. (Various 27.01)

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8.1 Oramed Granted Patent in Israel for Oral Administration of GLP-1

Oramed Pharmaceuticals announced that the Israel Patent Office has granted the Company’s patent for its invention, titled “Methods and Compositions for Oral Administrations of Exenatide.” Glucagon-like peptide-1 (GLP-1) is an incretin hormone that stimulates the secretion of insulin from the pancreas. Exenatide, a GLP-1 analog, is currently marketed in injectable form only, and is indicated for treatment of type 2 diabetes. Exenatide induces insulin release at increased glucose levels and causes a feeling of satiety, which results in reduced food intake and weight loss. Oramed’s oral GLP-1 capsule based on the company’s PODTM technology could significantly increase compliance and become a valuable tool in the treatment of diabetes.

Jerusalem’s Oramed Pharmaceuticals is a technology pioneer in the field of oral delivery solutions for drugs currently delivered via injection. Established in 2006, Oramed’s Protein Oral Delivery (PODTM) technology is based on over 30 years of research by top scientists at Jerusalem’s Hadassah Medical Center. Oramed is seeking to revolutionize the treatment of diabetes through its proprietary flagship product, an orally ingestible insulin capsule (ORMD-0801). Having completed separate Phase IIa clinical trials, the company anticipates the initiation of separate Phase IIb clinical trials, in patients with both type 1 and type 2 diabetes under an Investigational New Drug application with the U.S. FDA. In addition the company is developing an oral GLP-1 analog capsule (ORMD-0901). (Oramed 16.01)

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8.2 MediWound Expands Distribution of NexoBrid to Mexico

MediWound announced the signing of an agreement granting COVALEO SA de CV exclusive rights to market and distribute NexoBrid in Mexico for the treatment of severe burns. Severe burns are primarily treated at approximately 20 hospitals and burn centers in Mexico. NexoBrid is an easy-to-use, topically-applied pharmaceutical product that removes dead or damaged tissue, known as eschar, in approximately four hours without harming the surrounding healthy tissue. This innovative treatment for severe burns has received marketing authorization from the European Medicines Agency for the removal of eschar in adults with deep partial and full-thickness thermal burns, and was commercially launched in Europe and Israel. Sales of NexoBrid in Mexico will commence after receipt of local regulatory approval, which will be filed with the Mexican regulatory authorities by COVALEO and is expected to be granted within a year or possibly longer. In addition to this agreement in Mexico, MediWound has executed exclusive distribution agreements for NexoBrid to treat severe burns in Argentina, Russia and South Korea.

Yavne’s MediWound is a fully-integrated biopharmaceutical company focused on developing, manufacturing and commercializing novel therapeutics based on its patented proteolytic enzyme technology to address unmet needs in the fields of severe burns, chronic and other hard-to-heal wounds. MediWound’s first innovative biopharmaceutical product, NexoBrid, received marketing authorization from the European Medicines Agency for removal of dead or damaged tissue, known as eschar, in adults with deep partial and full-thickness thermal burns and was launched in Europe. (MediWound 20.01)

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8.3 Teva FDA Approval for First Generic Nexium Delayed-Release Capsules

Teva Pharmaceutical Industries announced the US FDA approval of the first generic equivalent to Nexium (esomeprazole magnesium) Delayed-Release Capsules in the United States. Teva is preparing to launch the product in the near future. Nexium Delayed-Release Capsules, marketed by AstraZeneca, had annual sales of approximately $6 billion in the United States, according to IMS data as of November 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 26.01)

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8.4 Can-Fite’s CF602 Efficacy in Treatment of Sexual Dysfunction

Can-Fite BioPharma has received positive data regarding its CF602 drug candidate in preclinical studies conducted by a third party. CF602 was tested in an experimental animal model of diabetic rats, which similar to diabetic patients, suffer from sexual dysfunction. Erectile dysfunction was assessed by monitoring the ratio between intra-cavernosal pressure (ICP) and mean arterial pressure (MAP) as a physiological index of erectile function. The ICP/MAP for the CF602 treated group improved by 118% over the placebo group. This data is similar to that achieved earlier by sildenafil (Viagra) in preclinical studies. In addition, treatment with CF602 reversed smooth muscle and endothelial damage, in a dose dependent manner, leading to the improvement in erectile dysfunction. CF602 is a novel A3 adenosine receptor allosteric modulator, enhancing the affinity of the natural ligand adenosine to its A3 adenosine receptor. Based on positive results from this preclinical study, the Company recently announced its plans to initiate a pre-clinical development program for CF602 in order to file an investigational new drug application (IND) with the U.S. FDA to allow human Phase I studies for the indication of sexual dysfunction.

Petah Tikva’s Can-Fite BioPharma is an advanced clinical stage drug development Company with a platform technology that is designed to address multi-billion dollar markets in the treatment of cancer and inflammatory diseases. The Company’s CF101 is in Phase II/III trials for the treatment of psoriasis and the Company is preparing for a Phase III CF101 trial for rheumatoid arthritis. Can-Fite’s liver cancer drug CF102 is commencing Phase II trials and has been granted Orphan Drug Designation by the U.S. FDA. CF102 has also shown proof of concept to potentially treat other cancers including colon, prostate, and melanoma. (Can-Fite 27.01)

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9.1 Stratasys Introduces Its Most Versatile 3D Printer for Digital Dentistry

Stratasys introduced the Objet Eden260VS Dental Advantage 3D Printer. The new system delivers expanded solutions for digital dentistry. Engineered to meet the demanding production needs of mid-size dental labs and mid-to-large-sized orthodontic labs, the Objet Eden260VS Dental Advantage supersedes Stratasys’ popular Objet Eden260V Dental Advantage platform with new capabilities.

Offering productivity enhancements and greater cost-effectiveness for users, the new 3D printer is compatible with all Stratasys dental materials – VeroDent, VeroDentPlus and VeroGlaze – and it adds a soluble support option, previously unavailable on PolyJet dental systems. Soluble support technology allows the easy cleaning of dental parts with fine features, such as small removable die inserts in dental models. Additional benefits include automated support removal, which offers further advantages for dental labs by enabling lower labor cost per part. For complete flexibility, users have the ability to switch between soluble and water jet modes to balance low-cost automation with the occasional need for hands-on support removal.

Stratasys, headquartered in Minneapolis, Minnesota and Rehovot, Israel, is a leading global provider of 3D printing and additive manufacturing solutions. The company’s patented FDM, PolyJet and WDM 3D Printing technologies produce prototypes and manufactured goods directly from 3D CAD files or other 3D content. Systems include 3D printers for idea development, prototyping and direct digital manufacturing. Stratasys subsidiaries include MakerBot and Solidscape, and the company operates the digital parts manufacturing service, Stratasys Direct Manufacturing. (Stratasys 16.01)

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9.2 Ex Libris Collaboration with CA API Management Software

CA Technologies announced that Ex Libris Group, a leading provider of cloud-based SaaS solutions for library automation serving academic, research and national libraries, is using CA API Management to manage and securely expose APIs in its recently launched Developer Network to foster collaboration and innovation for developing enterprise applications. The implementation was completed by the CA Israel partner EMET Computing.

With more than 5,500 customers worldwide, Ex Libris software solutions enable institutions to manage print, digital and online library materials and processes, and enable users to discover and obtain information quickly and easily, anytime and anywhere. Demonstrating its commitment to openness, Ex Libris recently launched the Developer Network, an advanced platform accessible to customers and to the developer community, with the objective of collaborating, sharing, and developing new applications, integrations and extensions to Ex Libris solutions. To securely expose its enterprise application APIs and facilitate access to developers, Ex Libris selected CA API Gateway and CA API Developer Portal.

Herzliya’s Ex Libris is a leading provider of automation solutions for academic, national, and research libraries. Offering the only comprehensive product suite for electronic, digital and print materials, Ex Libris provides efficient, user-friendly products that serve the needs of libraries today and will facilitate their transition into the future. (CA 14.01)

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9.3 Nubo Launches Virtual Mobile Infrastructure with HTML 5 Compatibility

Nubo Software announced the launch of their new and enhanced Virtual Mobile Infrastructure (VMI) platform which can now be accessed from any computer with an internet browser. The first enterprise mobility solution in the world to develop VMI technology, Nubo’s new Version 2 client is the only remote workspace that is compatible with all HTML 5 web browsers, in addition to all Android and iOS devices. BYOD professionals can now access customized enterprise applications from desktops and transfer data seamlessly to and from smartphones, tablets and laptops. Version 2 of the VMI platform also features a robust control panel on which administrators can load selected enterprise apps and programs as well as manage employee devices and define access to all corporate network services.

The first company to develop Virtual Mobile Infrastructure (VMI) for enterprise mobility, Airport City’s Nubo Software has created one, secured remote virtual workspace that is tailor-made for today’s mobile workforce. With Nubo, corporations own their data and applications, and employees own their devices. Nubo’s innovative approach to mobile security stores zero data on personal devices while providing users with a native app experience and the freedom to choose their own applications. (Nubo Software 20.01)

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9.4 Sri Lanka Telecom to Offer CYREN Cybersecurity Solution

CYREN signed Sri Lanka Telecom (SLT) as one of its latest resellers. SLT will now offer the cloud-based CYREN WebSecurity solution that provides advanced cybersecurity and zero-hour threat protection. As the national information and communications technology provider and the leading broadband and backbone infrastructure services provider in the country, Sri Lanka Telecom serves more than six million end users and 10,000 organizations, including the region’s largest corporate and government entities as well as small and medium-sized businesses.

CYREN WebSecurity will be offered through SLT’s new “akaza” cloud computing service. Managed by CYREN’s security and operations experts on a purpose-built cloud platform, CYREN WebSecurity delivers best-of-breed protection without requiring akaza customers to purchase hardware or acquire in-house security expertise. Through a proven Security as a Service (SecaaS) model, CYREN WebSecurity provides rapid identification of advanced cyber threats in combination with leading malware and phishing protection for devices and data regardless of type or location.

Founded in 1991, Herzliya’s CYREN is a long-time innovator in cybersecurity solutions. Offering cloud-based Security as a Service (SecaaS) and security technology components for embedded deployment options, CYREN provides mobile, endpoint, web and email security solutions that are relied upon by the world’s largest IT companies to protect them and their billions of customers from today’s advanced threats. (CYREN 27.01)

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10.1 Israel’s CPI Down 0.2% in 2014, Unchanged In December

The Central Bureau of Statistics announced that Israel had deflation last year for the first time since 2006. The Consumer Price Index (CPI) fell 0.2% in 2014, after remaining unchanged in December. Deflation of 0.2% is well below the government’s inflation target range of between 1% and 3%. Prominent price decreases included fruits and vegetables (-8.8%), gasoline (-2.2%), and hospitality, vacation and excursions (-6.5%). The leading price increases were in housing (0.1%), taxis (0.8%), footwear (4%), overseas and inland travel (1.7%) and clothing (6.9%). Pundits predicted that prices would drop 0.1% in December. (CBS 15.01)

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10.2 IMF Offers Positive Outlook for Israel in 2015

A new report by the International Monetary Fund offered a favorable forecast for Israel’s economic growth in 2015, pegging it at 3% amid otherwise conservative projections for the global economy. The IMF’s projections attributed the sluggish growth in Israel’s economy to the overall slowdown in Europe’s economy, as well as to Operation Protective Edge last summer. The projections coincide with the growth forecast released by the Bank of Israel on 29 December.

Only four nations’ projections exceeded Israel’s growth forecast: China’s economic growth in 2015 was set at 6.8%, followed by India (6.3%), the United States (3.6%) and Mexico, whose economy is projected to grow by 3.2%. Saudi Arabia’s economy also enjoyed a favorable forecast of 2.8% growth. Favorable predictions were also made for Iraq’s economy (+1.5%), and the Iranian economy, which is projected to grow by 2.2% over the international community’s agreement to mitigate some of the economic sanctions imposed on Tehran over its nuclear program. Russia’s economy, however, is projected to shrink by 3% over weakening ruble rates, as well as the drop in oil prices. (IMF 20.01)

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10.3 Israeli Economic Growth in Third Quarter Revised Upwards

The Central Bureau of Statistics announced that Israel’s economy grew by 0.2% in the third quarter, projecting 2% growth for 2014. This follows 2.8% and 1.9% growth in the second and third quarters of the year, respectively, according to Q3/14 estimates. It was initially estimated that the economy shrank 0.4% in Q3/14 due to Operation Protective Edge.

Imports of goods and services jumped 12.6% in the third quarter, while exports of goods and services were up 4.6%. The moderate rise in GDP reflects increases of 3.4% in private consumption and 4.4% in public spending. At the same time, business product fell 0.5%, and investments in fixed assets were down 6.5%. Based on preliminary figures for the first eight months of 2014, the Central Bureau of Statistics predicts that growth in 2014 as a whole will be only 2%, compared with 3.2% in 2013. (CBS 18.01)

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10.4 Flug Says Haredim Now Poorer Than Arab Israelis

The Bank of Israel Governor says that social spending in Israel is too low. Haredim (Ultra-Orthodox Jews) became poorer than Arab Israelis Arabs in 2013, while the relative incidence of poverty among them increased as the employment rate rose. This was according to revised figures presented on 14 January by Governor of the Bank of Israel Karnit Flug. Flug’s figures for employment of haredi men, which came from the Bank of Israel, differed substantially from the results of a 2013 Central Bureau of Statistics survey. The reason for the difference is probably different definitions.

In her speech, Flug reviewed macroeconomic developments in Israel, with an emphasis on weak and strong points in areas such as employment, productivity, poverty, and higher education. She presented data indicating that in addition to public civilian spending in Israel being low by international comparison, social spending (on health and welfare services, etc.) was also low, which affected the ability to provide these services on a high level. She noted the inadequate civilian spending, especially investment in infrastructure, was alarming.

At the end of her remarks, the Governor commented on the actions needed to encourage general sustainable economic growth extending to populations with a low rate of labor force participation, involving an increase in their human capital and earning power, and in productivity. In this context, Flug presented figures showing that the relative incidence of poverty among Haredim had risen to 52.1% in 2013, compared with 46.7% in 2014, while the relative incidence of poverty in the Arab sector fell from 54.3% in 2012 to 47.4% in 2013.

The relative deepening of poverty among Haredim comes at a time when the trend in participation in the labor force among them is upward. The employment rate among haredi women rose from 58% in 2009 to almost 70% in Q3/14, while the rate among men rose more moderately, from 42.4% to 44.5%. Among Arabs, the employment rate among men rose from 72.8% in 2009 to 75% in 2013, and among women from 25.1% to 32.7%. According to the Bank of Israel, the employment rate among Haredi men was significantly lower than the figure published yesterday by the Central Bureau of Statistics, whose employment survey found a 56% employment rate among Haredim (compared with 44% according to the Bank of Israel). (Globes 15.01)

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10.5 Ultra-Orthodox Employment Rate for Men Rises to 56%

According to an Israel Central Bureau of Statistics report, the employment rate of ultra-Orthodox community is on the rise, reaching 56% for men and 68% for women in 2013. In 2011, only 50% of haredi men aged 25-64 were employed, as compared with 40% in 2002. The rate for female ultra-Orthodox employment was the same as for men in those years. Employment rates among Arab women are also on the rise, reaching 33% in 2013. That marks a jump from 25% in 2011 and only 16% in 2002. Some 38% of employed adults reported that they are “very satisfied” with their work, while 48% said they were “mostly satisfied.” (IH 15.01)

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10.6 Israelis Spent 5% More on Cigarettes in 2014

Israeli consumers spent NIS 8.262 billion on cigarettes alone in 2014, according to StoreNext figures obtained by Globes. The entire fast moving consumer goods (FMCG) market in 2014 was only five times that amount. For example, dairy sales totaled NIS 7.52 billion, 10% less than cigarettes.

The cigarettes market grew 4.9% in monetary terms in 2014, but the entire increase was due to the tax increase on cigarettes, which boosted the price of a pack of cigarettes. In quantitative terms, the market continued to shrink last year, dropping 3.5%, a trend that has continued now for three years. Quantitative cigarette sales have now fallen 11.2% in two years.

Three cigarette companies operate in Israel: global company Philip Morris, which constitutes a monopoly with a 58.9% market share; Globrands, with a 27.9% share; and Israeli company Dubek, with a 13% share. While Philip Morris and Globrands improved their performance, Dubek continued its negative trend, with monetary sales down 10.2% and quantitative sales down 17.4%. Philip Morris makes four cigarette brands sold in Israel: Marlboro, Next, L&M, and Parliament. Israeli consumers spent NIS 4.86 billion in 2014 on the company’s brands. The Marlboro brand continues to lead the market, and has become even stronger. In contrast to the overall market trend, Marlboro sales grew 7% in quantitative terms in 2014 and 14% in monetary terms. Israeli consumers spent NIS 2.124 billion in 2014 on just the Marlboro brand, which accounted for 25.7% of all cigarettes sold in Israel. (Globes 14.01)

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10.7 Israeli Wine Exports Rose 10% in 2014

2014 was another good year for Israel’s wine industry, according to figures published by the Israel Export and International Cooperation Institute. Exports of wine and spirits rose 10% last year to $40 million. The Israel Export and International Cooperation Institute attributes the rise in wine exports to growing demand in North America, Europe and Asia. In 2014, 58% of wine exports amounting to $23 million ($20 million to the US) went to North America, $13 million (up 12%) to Europe and $2.2 million (up 27%) to Asia. In Europe, France is the biggest market for Israeli wine. Israel Export and International Cooperation Institute figures show that wine and spirits exports have grown consistently over the past five years, having more than doubled from $19 million in 2009. Israel has 250 wineries of which 50 operate commercially. Overall annual sales of Israeli-made wine reached $220 million in 2014. (Globes 26.01)

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11.1 ISRAEL: Summary of Israeli Hi-Tech Capital Raising Q4/14

In 2014, Israeli high-tech capital raising set an all-time record as 688 companies attracted $3.4 billion. The amount was up 46% from $2.3 billion raised by 659 companies in 2013.

In Q4/14, 184 Israeli high-tech companies raised a whopping $1.1 billion – the most raised in one quarter since 1999. The amount was up 58% from the $701 million raised by 170 companies in Q3/14 and ahead 39% from the $795 million attracted by 190 companies in Q4/13. In comparison, the past decade’s quarterly average was just $470 million. The average company financing round increased to $6.0 million in Q4/14 from $4.12 million in Q3/14 and $4.18 million in Q4/13.

Koby Simana, CEO of IVC Research Center, remarked, “The hike in capital raised by Israeli high-tech companies directly reflects the continuing increase in the number of large deals, which we described a few months ago. Our annual review of the findings shows that large deals accounted for 3% of total deals, at most, until 2014, while in 2014 the share doubled. Capital raised in large deals more than doubled in 2014, totaling over $1.3 billion. This demonstrates that not only is the number of large deals growing, but their size is increasing as well, with a number of very prominent deals reflecting the trend, such as the Landa Corp., IronSource and Kaminario extra-large rounds,” observed Simana.

Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group commented that “during 2014, some 39 companies completed financing rounds exceeding $20 million, positioning these companies to continue their market expansion. We believe that the maturity level of Israel-based companies in 2015 will attract private equity investors, resulting in even higher amounts raised per revenue-growth company.”

Simana addresses the findings, saying “The fact that the number of deals in the $5 million to $20 million range increased consistently throughout the past year shows the ability of Israeli technology companies to attract capital. It has been said by some that you raise money whenever it’s possible. It certainly looks like Israeli entrepreneurs are learning the lesson well, using the opportunity to raise more capital whenever the market allows the, which also explains why the relative number of small deals below $5 million has somewhat declined, though they still constitute the largest portion of deals,” he concluded.

In Q4/14, 110 VC-backed deals attracted more capital than in any previous quarter in the last six years – $845 million or 76% of total capital invested. The amount soared 78% from that of the Q3/14 and 41% from Q4/13. The average VC-backed deal reached $7.7 million, which compared with a six-year $4.3 million average.

In 2014, 392 VC-backed deals totaled $2.36 billion or 69% of total capital invested. This compared to $1.7 billion (75%) in 2013 and $1.3 billion (73%) in 2012. The average VC-backed deal size reached $6 million, well above the six-year $4.3 million average. Ofer Sela believes this trend will persist, saying “with the strong positive sentiment in US public markets and current economic conditions, we expect 2015 to be a robust year for VC-backed Israeli companies.”

Israeli VC Fund Investment Activity

In Q4/14, Israeli VC funds invested $192 million in Israeli high-tech companies, a 48% increase from $130 million invested in Q3/14 and 37% above the $140 million invested in Q3/13. Israeli VC funds accounted for 17% of all investments, equal to their average throughout 2014, but slightly under the 19% share of the previous quarter and 18% of Q4/13.

First investments by Israeli VCs in Q4/14 slipped to 20% from 43% in the previous quarter, but rose slightly from 19% in Q4/13. First investments, however, remained well below the 30% quarterly average of the last six years.

In 2014, Israeli VC funds invested $574 million (17%) in Israeli high-tech companies, just 2% more than the $561 million (24%) invested in 2013, but up 11% from $515 million (29%) invested in 2012. First investments in 2014 accounted for 33% of total Israeli VC investments, slightly above the 31% of 2013, but were lower than the 37% of 2012.

Capital Raised by Sector and Stage

In Q4/14, 36 Internet companies led capital raising, as in the previous quarter, with $320 million or 29% of total capital raised. This was the largest amount ever raised by the sector in one quarter and compared to $212 million (30%) attracted by 39 companies in Q3/14 and $178 million (22%) invested in 61 internet companies in Q4/13. The life sciences followed with $250 million (23%) and software with $230 million (21%).

The internet, life sciences and software were the leading sectors in 2014, attracting 28, 24 and 22% of capital raised, respectively. The previous year differed only slightly as both the life sciences and the Internet attracted 22% and were followed by software with 21%.

In Q4/14, 22 late stage companies continued to lead all investments – as they did throughout 2014 – with $381 million (34%). Fifty-seven early stage companies raised $366 million (33%), while seed investments attracted 4%, in contrast to the unusually strong previous quarter when seed accounted for a 9% share of total capital raised.

Interestingly, the share accounted for by firms in the initial revenue stage in 2014 dropped to 26% from 47% in 2013, when the stage led all investments. At the same time, capital raised from late stage companies accounted for 39%, compared to just 20% in 2013. Seed companies maintained their 5% share over the two last years.

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. (IVC 21.01)

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11.2 ISRAEL: Israeli Venture Capital Fund Raising – 2014

In 2014, 12 Israeli venture capital funds raised $914 million, the most raised by Israeli venture capital funds in six years. The year’s fund raising was up 68% from the $544 million raised by 11 VC funds in 2013, and was 18% above the 10-year average of $777 million.

Four veteran Israeli VC funds managed to raise more than $100 million each and accounted for 64% of total capital raised in 2014. Carmel Ventures’ fourth fund attracted the largest amount – $194 million, while Magma raised $150 million for its fourth fund, less than two years after closing its previous $110 million fund. JVP made a first closing of $160 million of a targeted $180 million for its seventh fund. In addition, Vintage’s seventh fund, a fund of funds, attracted $144 million, 50% of which is being allocated to Israeli investments.

The average fund size in 2014 reached $76 million, 55% above 2013’s $49 million average, and up 46% from the $52 million of 2012. The increase reflects the raising of more medium sized funds and fewer micro VC funds than in each of the previous two years.

During the 2011-2014 period, micro venture capital funds – managing capital below $50 million – accounted for 14% or $439 million of the total amount raised by venture capital funds. However, the micro VC trend seems to have abated, as only three new funds were established in 2014, compared to an average of nine over the previous three years.

Koby Simana, IVC CEO, said, “A favorable window of opportunity for fund raising, has enabled a number of management companies to progress from a micro VC model to mid-size range, which offers more investment flexibility. Funds having scaled up include Amiti Ventures and Glilot Capital, but it remains to be seen if more of the existing micro-VC funds will follow suit or choose to maintain the micro VC fund model.”

On the other side of the spectrum, there is an awakening of late and growth stage VC funds that focus on companies with proven product viability and expanding sales. Many such companies have the potential to develop into large global corporations and are stimulating the demand for more late stage funding. Qumra Capital, founded by former Evergreen partners Boaz Dinte and Erez Shachar, and Agate Korea are two examples of firms active in the growth market. In addition, at least five more funds are in various stages of capital raising and are focused at late stage companies and growth funding. Interestingly, funds in this group opt for a wide variety of investment mechanisms that include growth venture capital, venture lending, mezzanine financing and private equity.

Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, explains that “The record number of Israeli portfolio companies with valuations of hundreds millions of dollars, together with positive investor sentiment in NASDAQ, has made it easier for VC firms to show good returns and raise capital. In the past 24 months, global and Israeli VC returns have been among their highest ever. This has encouraged new limited partners from China and Israeli institutional investors to join the more traditional investors in Israeli VCs, such as university endowment and US public pension funds.”

The growth of Israel’s venture capital industry is traced to six cycles of fundraising that peaked in 2000 when $2.9 billion was raised, and declined until 2003 when only $64 million was raised. The industry’s sixth cycle, which started in 2011, began a recovery and raised a total of $3 billion over the four years through the conclusion of the cycle in December 2014. A seventh cycle, underway now in 2015, already looks promising.

Marianna Shapira, Research Manager at IVC, said, “Our data show that 19 funds, including six new VC players, are currently in the process of raising capital with an aggregate target of $1.8 billion. We expect that the majority of these funds will raise capital in 2015, and believe as much as $1.2 billion could be raised by the end of the year. We’ve already seen the first $200 million, with the 83North closing announced last week.”

At the beginning of 2015, some $1.8 billion was available for investment by Israeli venture capital funds. Of this amount, $462 million (25%) is earmarked for first investments. The remainder is reserved for follow-on investments.

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. (IVC 14.01)

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11.3 ISRAEL: American Food Brands More Widely Integrated on Israel’s Supermarket Shelves

Kosher Today reported on 26 January that Israelis are increasingly eating American branded foods, so much so that it set off alarm bells at Osem, one of Israel’s largest food companies which is owned by Nestle’s. With a 66% market share of the ketchup business, Osem is complaining that Heinz ketchup is a fraud, pure and simple. Osem’s complaint was directed at supermarkets, warning that the Heinz ketchup distributed in Israel contains only about 20% tomato concentrate, much less than the 61% minimum required by Israeli regulations.

For years Israeli manufacturers paid little attention to the American brands, often licensed by Israeli importers. They believed that the American products were not compatible with the taste buds of the average Israeli and that in any case they were too expensive. A good example is American coffee, which Israelis don’t consider real coffee to the point that Starbucks closed several years ago. But supermarket executives say that Israelis are increasingly buying the American brands, hence the dramatic charge that the world’s best known and probably oldest ketchup isn’t real ketchup after all.

For the approximate half million Americans who live in Israel, the American products are heaven sent, much like Israelis here covet Israeli products. The taste buds of customers does play a key role in the popularity of American brands, which explains why Americans living in Israel would go the extra mile to buy Kedem Grape Juice as opposed to Israeli grape juice brands which customers say is far “more grapey and smells like a vineyard.”

Osem appears to have taken the fight against a popular American brand to a new level by dispatching warning letters to supermarkets and Diplomat Group, the Heinz distributors in Israel. In addition, two lawyers, Yaacov Spiegelman and Amit Ido, have filed a motion for a class-action suit on behalf of consumers who purchased Heinz ketchup in Israel over the past seven years. The lawsuit is seeking some $18.5 million in damages. But Osem’s attempts at thwarting Heinz may be futile as American brands become more popular in Israel. Osem is also finding more competition in the US. For example, its coveted soup croutons are now competing with such American kosher brands as Shibolim, Gefen and Paskesz. Once again, the Osem argument is that they are all about quality which they say is not the case for its competitors. Ultimately, it will be for customers to decide. (KT 26.01)

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11.4 ARAB WORLD: Rising Domestic Oil Consumption Challenges Arab States

Al Monitor posted on 15 January that the increase in the rate of energy consumption in Arab states constitutes an important challenge to those responsible for the petroleum sector, in light of the high annual increase in domestic demand and its effect on exports in the coming two decades. The Organization of Arab Petroleum Exporting Countries (OAPEC) issued a study on current consumption rates and future expectations. The study was prepared for the Tenth Arab Energy Conference, held in Abu Dhabi last month.

The study divided the Arab countries into two groups according to the availability of energy sources and consumption patterns. The first group was made up of the countries that are members of OAPEC, namely the UAE, Bahrain, Tunisia, Algeria, Saudi Arabia, Syria, Iraq, Qatar, Kuwait, Libya and Egypt. This group consumes 89.8% of all energy sources in the region, while accounting for 68% of the population and 86% of Arab GDP. The second group, meanwhile, comprised the other Arab countries — Jordan, Djibouti, Sudan, Oman, Somalia, Lebanon, Morocco, Mauritania and Yemen.

The study notes an increase in energy consumption in the Arab states, from 6.4 million barrels per day (bpd) in 1995 to 13.7 million bpd in 2012. This represents nearly a twofold increase, with an annual growth rate of 4.6%. The study adds that the countries of the first group accounted for 90% of this increase, caused by rapid population growth and the expansion of energy-intensive industry. OAPEC considered the growing reliance on gas, especially for power plants, to be one of “the most prominent signs of the evolution of energy consumption” in the Arab world. The increasing reliance on gas was accompanied by a decrease in oil dependency, especially within OAPEC member states.

The reasons for the increase in gas consumption include its abundance in many countries of the region and the benefits of its use, as it has a high thermal capacity. Furthermore, gas is relatively cheap and has a lower environmental impact compared to other energy sources. Thus, the electricity generator sector saw an increase in the use of gas. This was followed by a smaller increase in the energy-intensive sectors, especially the fertilizer and petrochemical industries, which rely on gas to supply production. This is in addition to gas use in desalination plants, the establishment of liquefied natural gas projects and its continued use as fuel in the cement, iron and steel industries. Therefore, gas’ share in overall energy consumption increased in the Arab world from 40.7% in 1995 to 47.5% in 2012, an increase of 6.8%.

The share of domestic consumption in overall energy use has seen a rise from 25.8% in 1995 to 35.1% in 2013, an increase of 9.3%. While oil and gas consumption still dominate energy consumption, the share of oil is decreasing while that of gas is increasing. The combined share of the two sources comprised 96.9% of all energy consumption in 1995, rising to 98.5% in 2012. Hydroelectric energy consumption remained limited, due to a lack of water sources, not to mention that most Arab countries lack nuclear capabilities. As for coal, it remained the least used energy source, despite its abundance in Egypt, Algeria and Morocco. There is also a growing interest in solar energy. While Arab countries have huge resources for the latter, its exploitation is still minimal.

The study warned that “the Arab states’ adoption of policies that support energy subsidies over the past four decades has led to encouraging wasteful consumption and harmed the competitiveness of renewable energy. Moreover, these policies have contributed to general deficits in these states’ budgets, especially in energy-importing Arab countries. The latter face difficulties in dealing with global price fluctuations, something they cannot bear in the future.”

OAPEC presented three future scenarios in its study: a high-growth scenario, a low-growth one and an “indicator” scenario. The last is the most likely, and predicts that energy consumption in the Arab states will grow annually at a rate of 2.51% to reach 24.3 million bpd by 2035.

Statistics from the annual reports of OPEC and OAPEC indicate that total hydrocarbon liquid (crude and condensate oil) production in the Arab countries amounted to 22.897 million bpd in 2013. Moreover, total crude oil exports from Arab member states of OPEC — the most important Arab exporting states — reached 16.652 million bpd in 2013, distributed as follows: 744,000 bpd for Algeria, 2.390 million bpd for Iraq, 2.058 million bpd for Kuwait, 7.571 million bpd for Saudi Arabia, 2.701 million bpd for the UAE, 589,000 bpd for Libya and 599,000 bpd for Qatar.

This means that production amounted to 22.897 million bpd in 2013, with exports accounting for 16.652 million of this. Meanwhile, it is expected that domestic consumption will reach 24.3 million bpd in 2035 (compared to an average consumption rate of 13.7 million bpd in 2012), i.e., domestic demand will outstrip current production after two decades. The important question is: How will the demands of global markets be met by exports that are the primary source of the Arab economies? There are wide-ranging energy reserves of both oil and gas that are continually being developed by Arab countries. However, will future rates of production be able to meet the challenges resulting from sterile economic policies and the destruction inflicted by terrorists on oil facilities in Libya, Iraq, Syria and Algeria? (Al Monitor 15.01)

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11.5 LEBANON: Lebanon’s Economic Outlook for 2015

Sami Nader posted on 9 January in Al Monitor that on an economic level, 2014 was not the best year for Lebanon. All indicators of growth and production declined, as the World Bank recorded a 1.5% growth rate for 2014. The treasury deficit is expected to reach 10.2% of the GDP compared to 9.4% in 2013. The situation does not bode well for the coming year, although these challenges are to be expected in a country that is affected by the repercussions of the Syrian war, especially on the security level.

Perhaps the best indicator showing a strong correlation between security and the economy is the Consumer Confidence Index, which is issued in partnership between the Byblos Bank and the American University in Beirut. The Consumer Confidence Index recorded a recovery in the first half of 2014, as a result of the formation of the government in February and a relative improvement in the security situation, after a halt in the series of bombings, which rocked Beirut and Tripoli from March 2013 to January 2014. Thus, the indicator stood at 29 in H2/13 and reached 33.5 in H2/14.

This recovery in H1/14 boosted the construction sector, which is traditionally a key driver of consumption. According to the World Bank’s Lebanon Economic Monitor report that was released in the fall of 2014, there has been a slight increase in consumption reflected in an increase in loans in the private sector, which rose by 7.4%, compared to 4.1% for the same period in 2013.

However, this improvement faded with the outbreak of the fighting between the Lebanese army and Syrian militants in the summer of 2014, which caused the security situation to further deteriorate. The Consumer Confidence Index reached “a record level in decline in the second half of 2014,” Nassib Ghobril, head of the economic studies at Byblos Bank, told Al-Monitor. This has caused consumer loans to decline, as shown in the statistics carried out by the financial company Kafalat.

Regarding his predictions for the future, Ghobril said, “This depends on the political situation. If things remain the same in terms of anxiety and uncertainty, the recession will persist. If a breakthrough is to happen at the political level, and a president is elected with a government seeking to implement reforms, this would be directly reflected on the confidence index and we could see a 4% growth rate.”

Another key driver of growth is tourism, which did not significantly improve. There has been a slight increase in the number of tourist arrivals by 5% compared to 2013, which was met with a decline of 5% in the profitability of hotels, according to a Byblos Bank Report. This is because in the second half of the year, hotels were forced to cut their prices to attract tourists, as they had been adversely affected by the security events.

The sit-ins and the closure of roads by the families of the kidnapped Lebanese soldiers — who have been abducted by jihadist groups in August 2014 after their raid on the Arsal village in the Bekaa Valley — in an attempt to draw attention to the eligibility of their cause, made things worse and did not benefit their cause, although it was highly publicized.

Exports, which reflect the competitiveness of the Lebanese economy, saw a decline of 18%, while the trade deficit widened by 0.4% to reach $16 billion at the end of November 2014. There is no doubt that the recession in Europe and the slowdown in economic activity for the Gulf states, as a result of falling oil prices, were a reason behind the overall drop of Lebanese exports, especially to Europe and the Gulf states, which are leading importing markets for Lebanese products and services.

However, there is a silver lining in all this. It is true that falling oil prices had a negative impact on some Lebanese exports; however, they served as good news for the Lebanese economy. The productive sector will see a decline in the cost of production, which would enhance its competitiveness. This could also be positively reflected on exports, especially if producers redirected their exports toward the markets that have also benefited from falling oil prices. Producers could invest what has been saved in the oil sector into other consumption fields.

In the same framework, Ghobril said that the decline of the euro rates against the US dollar — which has been positively influenced by the recent fall in oil prices — will help reduce the trade deficit, especially since a high proportion of imports come from Europe. This is not to mention that falling oil prices will save the Lebanese treasury around $800 million because the Lebanese government has been paying a high bill for oil consumption used for electrical power, which in 2014, constituted 50% of the treasury deficit.

The bottom line is that an opportunity arises on the horizon, which would allow Lebanon to get out of this tunnel. However, it might be lost as many other opportunities in the past, because the Lebanese, and specifically the governing political forces, are not aware of the need to move away from the region’s conflicts and to distance themselves from the warring parties. (Al Monitor 09.01)

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11.6 LEBANON: Lebanon’s Refugee Dilemma

On 16 January, Justin Salhani posted in Sada that new rules restricting the entry of Syrians into Lebanon are only a stopgap measure in the government’s effort to curb and ultimately control the refugee population.

Driven by national security, political appeasement, and a dire need for greater foreign aid, Lebanon’s government is looking to rein in and ultimately control the Syrian refugee population through a new series of stringent visa regulations. On 31 December 2014, Lebanon’s General Security Directorate announced the latest rule change. Previously, a Syrian national could receive a six-month renewable visa free of charge upon entry into Lebanon. The new six visa classes – tourist, business, student, transit, short stay, or medical – represent Lebanon’s attempt to exert control over the world’s second-largest refugee population and account for unregistered Syrians.

Lebanon has to date accumulated over 1.1 million registered Syrian refugees since the civil war started four years ago. In October, in a move widely condemned by aid groups, the government announced that only “exceptional humanitarian cases” would be considered for refuge and registered refugees would no longer be able to travel back to Syria without forfeiting their status (and therefore aid eligibility). Although the new restrictions build on the October ones, they are more far-reaching. The 300,000 unregistered Syrians who regularly traverse the borders can no longer do so with ease. Many are temporary laborers who drift from job to job in order to support their families. Since the Syrian war’s onset, a large number of these laborers have moved their families to Lebanon to escape war. While they may be able to obtain visas, getting their families sponsored will be difficult.

To date, the latest measure has been met with relatively little resistance from aid groups, partly because Social Affairs Minister Rashid Derbas has ensured that card-carrying refugees registered with UN agencies will not be affected. Although the Lebanese government has already pursued measures meant to reduce the number of Syrians in Lebanon, who now make up between one-quarter to one-third of the population, they realize mass eviction is not feasible and would draw widespread condemnation from international agencies, local aid workers, and human rights organizations.

Nonetheless, the government claims that security concerns make the increasingly tight restrictions a necessity. Recalling the presence of Palestinian militias in pre-civil-war Lebanon, Derbas and other senior level officials have repeatedly warned of disastrous consequences should Syrians in Lebanon take up arms against the state. Although some Syrians have been involved in terrorist attacks and some opposition fighters are present among the refugee population, there is little evidence to suggest a wide-scale rebellion against the state. Even though the Syrian war has triggered a number of battles around the country, including routine clashes in Tripoli, the June 2013 battle of Sidon, and the summer 2014 clashes in Arsal, most refugees are preoccupied with basic subsistence needs. Parts of Tripoli are riddled with extreme poverty and Arsal’s location on the periphery of the Lebanese state has meant it has long been overlooked in terms of infrastructure and other basic needs. In Abra, which is near Sidon, political tension between the marginalized Sunni community and Hezbollah had been growing for some time. The Syrian civil war acted as the tipping point, but socio-economic factors cannot be ignored.

Complicating the state’s response is the heavy traffic of Syrians crossing the border each day. Lebanese authorities have long struggled to differentiate between those that pose a security risk and those that do not. On 10 January, for instance, and despite a series of security plans since last April, Jabhat al-Nusra carried out a double suicide attack on Tripoli’s Alawite enclave of Jabal Mohsen that left at least seven dead. The two suicide bombers were Lebanese but trained by Jabhat al-Nusra in the Qalamoun mountain range, an indication of just how porous the borders have been and of the limited success of the Lebanese state in containing fallout from the Syrian war.

Yet while no public information is available to suggest that Syrians who cross the border legally are putting the state at risk, increased coordination between security apparatuses and foreign intelligence agencies have unveiled several cases of radical Islamists operating within state lines. In October, a Lebanese national and high level operative for the Islamic State of Iraq and al-Sham (ISIS), Ahmad Mikati, was arrested in the northern town of Dinniyeh. Mikati was part of an alleged terror cell comprised of both Lebanese and Syrian nationals (According to an intelligence source, about 3,000-4,000 jihadis are operating in the region).

These security threats have led some politicians to oppose the Syrian presence in Lebanon more forcefully. Foreign Minister Gebran Bassil has been the most vocal, campaigning to set a cap on the number of refugees, a move supported by large sections of Lebanon’s Christian community. Bassil has regularly clashed with other members of the cabinet, who emphasize Lebanon’s responsibility to accept the refugee community with open arms. However, recently a consensus appears to be emerging among politicians in favor of harsher restrictions on refugees, especially following the Arsal clashes in August after ISIS briefly seized the border town and as over 20 soldiers and security personnel remain in captivity since the Lebanese army retook the town.

The clashes in Arsal, along with other security incidents, have also unraveled much of the initial support for welcoming refugees with open arms. The Sunni community in particular had long been largely sympathetic to their Syrian coreligionists, who make up the bulk of the opposition there. Areas like the predominately Sunni city of Tripoli proudly received wave after wave of refugees, but hosting more than 285,000 Syrian refugees in north Lebanon has brought forth crippling economic hardship and social unrest. Locals’ tolerance is now waning, and refugees prefer to keep a low profile to avoid verbal or physical abuse. Politicians have aptly taken note of these economic, infrastructural, and social frustrations in the country, and the latest regulations are in part their attempt to allay local concerns.

Moreover, as the Syrian war looks set to drag on indefinitely and as Lebanon struggles on nearly all fronts – socially, economically, and in security – the government is hoping that the latest adopted measures will send a message to foreign governments that Lebanon cannot assume the burden alone. Some government officials, including Minister of Education Elias Bou Saab, are asking the international community to provide funds or emergency supplies for the tented refugee communities scattered across Lebanon. But the government also wants the international community to accept more refugees. Many regional states, particularly in the Gulf, have declined to resettle Syrian refugees and Western countries have let in relatively few. Figures released by Amnesty International show that only 1.7% of Syrian refugees have been offered sanctuary outside of Lebanon, Jordan, Turkey, Iraq or Egypt. Lebanon in particular is reeling from the burden, as services such as water and electricity are already insufficient to serve the local population.

Considering the severity of the refugee crisis, the Lebanese government’s latest stopgap measures will do little to offset the social and economic burdens of the over 1.1 million registered Syrians. Nor will they make living conditions for unregistered Syrians any better, in fact they almost certainly will do the opposite. These measures risk further exacerbating discontent or anger among an under-aided Syrian refugee community whose sheer numbers already make them well beyond the state’s control. As the refugees continue to suffer and the state attempts to take back some of the control it lost over the last four years, the latest regulation may well be too little, too late.

Justin Salhani is a Lebanese-American journalist, writer, and producer based between Washington, DC and Beirut. (Sada 16.01)

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11.7 KUWAIT: Kuwait Year in Review 2014

Oxford Business Group said non-oil growth and higher domestic consumption combined to drive up economic activity in Kuwait in 2014, although plunging world oil prices and relatively flat domestic production look set to weigh on the state’s finances.

Bolstered by rising capital expenditure and a host of infrastructure projects set for roll-out between 2015 and 2019 during the mid-term phase of the Kuwait Development Plan (KDP), 2015 should see continued growth in non-oil sectors.

Kuwait posted a $45b surplus during the 2013/14 fiscal year – its second-largest on record – with oil revenues climbing to KD29.3b ($99.6b), according to the latest data issued by the Ministry of Finance. The IMF forecasts that the current account and fiscal surpluses should remain high into 2015, following years of record budget surpluses. However, these are likely to slip due to recent developments in the global oil market.

According to an IMF report published in December, non-oil expansion will reach 3.5% in 2014, driven by increasing domestic consumption and steady growth in public capital spending and private investment. The fund said it expected non-oil activity to support real GDP growth of 1.3% in 2014, with inflation likely to remain steady at about 3%.

Oil prices take their toll

However, lowering oil prices are taking their toll on the economy. Government revenues declined by 8.1% year-on-year (y-o-y) to reach KD17.2b ($58.6b) in the seven months to October, according to official data in December.

A drop in global oil prices is likely to continue to eat into revenues in 2015, with analysts and global watchdogs forecasting further falls this year. The International Energy Agency said in its monthly report mid-January that a price recovery is not imminent, but signs were mounting that the situation will change, most likely in the second half of the year.

The National Bank of Kuwait (NBK) said that the fiscal surplus is likely to shrink from 26% of GDP in 2013/2014 fiscal to 17% during the 2014/15 fiscal year, sliding further to 11% in 2015/16, as a result of falling oil prices with a slight projected decline in oil production in 2015.

The government has moved to reduce the estimated $17b in subsidies it pays annually. The finance minister, Anas Al Saleh, announced plans to cut diesel subsidies in June 2014, while also confirming the government’s plans to reduce assistance with kerosene and electricity.

All eyes on infrastructure

Economic diversification will play a critical role in future growth, as a national drive to transform the state into a financial and trade center by 2035 under the KDP gains pace.

Divided into five half-decade plans, the KDP’s first iteration ran from 2010-14. The second, scheduled for launch in April 2015, is focused on the construction of a raft of megaprojects and heavier private sector involvement. Initiatives include a $20b metro and rail project, expected to break ground in 2017, the $1.2b Mubarak Port project and Media City. The long-term plan also allows for increased private sector participation in economic development.

Capital expenditure is rising, with NBK reporting that spending increased 33% y-o-y to KD600m ($2.05b) in the seven months to October. Transportation and equipment spending increased by 57% y-o-y, while spending on maintenance and land purchases also rose by 32% y-o-y.

Construction on a roll

Construction contracts soared in 2014. Data issued by NBK showed that more than $20.7b worth of contracts had been awarded by the end of August, almost double the full-year total for 2013. Big-ticket awards in 2014 included $12b in contracts for the clean fuels refinery upgrade project. In a separate move, a consortium comprising Kharafi National and Turkey’s Limak Holding was awarded a $4.8b contract in November 2014 for the construction of a terminal, runway and 30 gates at Kuwait International Airport.

The government is planning to spend KD45.5b ($155 b) on projects over the next five years despite the plunge in world oil prices, according to parliament’s financial and economic affairs committee secretary, Mohammad Al Jabri speaking in January. Oil revenues in the new budget from April will be calculated on the basis of $45 a barrel, down from $75 a barrel in the current fiscal year, Jabri added.

Despite the weakening global conditions, Kuwait’s fiscal position remains solid. Its sovereign wealth fund and other government investments are valued at $500b, or 310% of GDP, while the IMF describes Kuwait’s medium-term economic outlook as favorable on the back of an anticipated surge in new infrastructure investment and domestic consumption. (OBG 19.01)

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11.8 BAHRAIN: Bahrain Year in Review 2014

While a combination of high break-even prices and lower levels of fiscal reserves could see falling oil prices push Bahrain further into the red, the Oxford Business Group said the kingdom is still set to post respectable economic growth for the year, buoyed by a solid performance from its non-hydrocarbons sector.

A sharp decline in oil prices saw Bahrain’s revenue trimmed in the second half of 2014, while earnings look likely to fall at a similar rate in 2015. The kingdom’s budget deficit widened towards the end of the year, exacerbated by lower oil prices, and it is forecast to rise to 6.2% of GDP in 2015 from an estimated 3.7% of GDP in 2014.

Budgetary pressures

Bahrain is coming under pressure due to its relatively low levels of reserves and high break-even prices, with oil needing to return to $117 per barrel for Bahrain’s budget to balance this year, according to a report issued by Moody’s Investors Service in early December. The ratings agency noted that Bahrain and Oman would be hit harder by falling oil prices than other Gulf states, while Bahrain may have to tap the markets for funds by raising additional sovereign debt issuances in the coming year to cover its expanding deficit.

Standard & Poor’s (S&P) echoed the same note of caution in mid-December, when it revised its economic outlook for Bahrain from stable to negative, citing the drop in oil prices as its main reason. While maintaining its basic ratings for the kingdom, it noted that the downturn in prices could expose weaknesses in the structure of public finances due to 65% of Bahrain’s revenues coming from oil receipts.

Although trailing its Gulf neighbors in oil output – producing about 50,000 barrels per day (bpd) – Bahrain receives a large portion of its state budget revenue from the Abu Safa oilfield, which it shares with Saudi Arabia. At the same time, lower non-oil exports to other regional markets – where a drop in revenue from hydrocarbons is beginning to take its toll – could put further strain on Bahrain’s economy.

S&P, however, acknowledged that the kingdom’s vulnerabilities were mitigated by expectations of continued support from other members of the GCC. This comes despite increasing demands for social expenditure.

Firm footing

Even with lower oil prices, Bahrain’s economy maintained strong growth towards the end of 2014, with annualized GDP expansion of 5.1% in the third quarter. The construction industry proved to be the main driving force for non-oil growth, growing by 12.3%, while the financial sector rose by 3.5%.

The banking sector – a cornerstone of the economy – also remained strong in 2014, with assets and deposits rising steadily over the 12 months ending June 30. A report issued by ratings agency Fitch at the beginning of December described the outlook of the five Bahraini banks it assessed as stable.

The stock exchange proved to be an island of stability in a region where markets have been particularly volatile. Although its main index dropped from August highs of just under 1500 points, Bahrain Bourse managed to maintain some of the gains made since the beginning of the trading year, when the index closed at 1247 points. By late December, the all-share index was trading at around 1400 points, having made a modest recovery after retreating at the end of November in response to falling oil prices.

To spend or rein in

Analysts have speculated that Bahrain’s new Cabinet, installed in December after national elections in November, could opt to reduce public spending, rather than increase debt levels, in 2015. Bahrain boosted its annual budget expenditure by nearly 24% between 2010 and 2012 after protesters took to the streets of Manama in early 2011 demanding political reforms.

The Cabinet is also expected to continue underwriting large-scale investment in initiatives across transport, logistics and industry, which are seen as key to diversifying the economy away from its energy base. In the medium term, the $5b plan announced in September to construct a second causeway linking Bahrain with Saudi Arabia is expected to greatly improve the flow of goods and labor, while also strengthening the manufacturing sector. (OBG 21.01)

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11.9 QATAR: Qatar Year in Review 2014

Despite falling oil prices, Oxford Business Group said the economy in Qatar maintained a steady rate of expansion throughout 2014, with targets of even more robust growth this year, fuelled by the non-hydrocarbon sector.

Qatar, the world’s largest exporter of liquefied natural gas (LNG) and one of the smaller oil producing countries, estimates the non-hydrocarbons share of GDP will overtake that of oil and gas in 2015. According to official figures in December, GDP is forecast to grow by 7.7% in 2015, compared with a projected 6.3% in 2014. The Ministry of Development Planning and Statistics said that the overall fiscal balance is expected to stay in surplus in 2015, though it is set to narrow as public spending gathers pace. Domestic risks to the economy are centered around the scale and complexity of Qatar’s planned infrastructure projects before it hosts the 2022 FIFA World Cup football tournament, the ministry said.

However, investors across the region have taken flight over a gloomy outlook for oil prices in 2015, with the Qatar Exchange slumping in the fourth quarter and early January, after posting strong growth in the first three quarters of 2014.

Gas over oil

Qatar may feel less pain than most other major producers due to its focus on gas over oil in terms of export commodities. With much of its liquefied natural gas (LNG) exports locked in by long-term contracts, it is less vulnerable to market fluctuations; nonetheless, historically gas prices lag oil prices by six months. An additional factor supporting earnings is that most of its LNG output is shipped to Asia, which is still expected to post solid growth in 2015, thereby maintaining demand for energy.

With the price of Brent crude plunging from a mid-year high of $115 to below $50 at the start of January, the finances of energy exporters around the world are under pressure. At the end of December, credit ratings agency Moody’s put Qatar’s break-even oil price at $59, one of the lowest of any major producer while its budget this year is based on an assumed an oil price of $65.

In spite of the non-hydrocarbon sector being the primary driver of growth in recent years, hydrocarbon receipts generated about 86% of the government’s revenues in 2013 and have been largely responsible for Qatar’s fiscal surpluses, according to the report. Moody’s added that oil prices could become a key risk to the economic outlook if their slide continued, but noted that the wider economy was likely to be shielded by the strength of state finances.

Infrastructure boom

Ongoing investments in infrastructure are providing further stimulus. Some of these are related to hosting the 2022 World Cup, while others are being driven by increased spending on transport and logistics. Just under $27b worth of large-scale infrastructure projects were awarded in 2014, according to a Standard Chartered report, a figure that is set to rise to around $34b in the coming year, as Qatar moves to meet its expanding social and economic needs.

While these investments will support growth in the construction sector, the growing pace of development is putting upward pressure on both building costs and the price of land, which was 73% higher year-on-year as of October. Much of this increase in construction activity was due to the sharp rise in population during 2014, which expanded by some 10% – a result of both natural growth and an influx of foreign workers to support new projects.

Although greater demand for housing and services, along with rising land and materials costs, will seep into the consumer price index (CPI), inflation remained steady in 2014, running at an annualized 3.6% at the end of the third quarter. However, this could rise, as increases in rental and accommodation costs, which have a significant weight in the CPI, have witnessed upward movement in the final months of the year.

Strong fiscal fundamentals

The state is also taking steps to reduce borrowing and pay down debt. Public loan levels fell 6% in the year-to-date in early December, according to a Morgan Stanley report, while total system loans were up 9%, the slowest rate in nearly four years. Despite the slowing of public borrowing, the report forecast private loan growth to continue at a strong pace, in the 10-20% range, with corporate credit demand to remain elevated. As of December, almost 60% of domestic loans held by Qatari banks were taken out by the private sector, up from 55% the year before.

Much of this private borrowing has been used to fund investments and growth in the non-oil and non-state sectors of the economy. As of early December, private sector growth in 2014 was expected to top the 11% seen in 2013 and nearly double the rate of GDP expansion, according to the prime minister, Sheikh Abdullah bin Nasser bin Khalifa Al Thani. Nonetheless, a recent report by the IMF noted that banks in the GCC will struggle to diversify their credit portfolios due to the dependence of the non-oil sector on the hydrocarbons segment, with banks’ net income highly correlated to oil-driven fiscal developments.

Higher domestic demand and relatively steadier energy earnings should see Qatar’s economy maintain solid growth into 2015, as private sector activity continues to expand and state-funded investments broaden the base of economic development. (OBG 15.01)

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11.10 OMAN: After Qaboos, Who Will Be Oman’s Next Sultan?

Bruce Riedel posted on Al Monitor on 25 January that the death of King Abdullah bin Abdulaziz of Saudi Arabia turns the focus of succession speculation in Arabia to the Sultanate of Oman. Sultan Qaboos, the longest-serving ruler in the Middle East, has been in Germany for unspecified health reasons since last summer. While the Saudi succession was transparent, Oman’s is opaque.

Qaboos was born on 18 November 1940, in Salalah, the capital of Oman’s western province of Dhofar, which borders on Yemen. He is the 14th-generation descendant of the founder of the Al Bu Sa’idi dynasty that created the sultanate in the 1600s after expelling the Portuguese from Muscat. He was educated in India and the Royal Military Academy at Sandhurst, then spent a year with the British Army of the Rhine in Germany. When he returned home to Salalah, his father kept him isolated and under virtual house arrest in the palace. The father was notoriously averse to any modernization of the country.

Qaboos came to power in July 1970 in a coup orchestrated by British intelligence using army officers seconded to the Omani army. British officers took control of the palace, lightly wounded the sultan in a short gunfight and then Qaboos’ father was flown out of the country on a Royal Air Force jet, never to return. London was convinced regime change was essential because the country was in a civil war with a communist insurgency backed by the Soviets and their then proxy, the People’s Democratic Republic of Yemen. The country had only 10 kilometers of modern roads, virtually no education or health infrastructure and seemed about to become the next Arab monarchy to collapse.

With British encouragement, Qaboos asked the Shah of Iran and King Hussein of Jordan for help. The Iranians sent a regiment of troops and the Jordanians sent advisers. The communist insurgency in Dhofar was defeated and many of its leaders defected to the new government. Qaboos modernized the country, established a parliament and created one of the most stable and well-governed countries in the Middle East. Oman had a miniature version of the Arab Spring in 2011, during which the Sultan ordered further reforms to answer calls for change, and demonstrations petered out. The majority of Oman’s 4 million residents have never known any ruler except Qaboos.

While maintaining special ties to the United Kingdom, Qaboos has also been a close ally of the United States. Oman was the staging base for the ill-fated American hostage rescue mission in 1980 to get the American diplomats home from Iran. Oman participated in Operation Desert Storm to liberate Kuwait. Later Oman became a useful intermediary for sending messages from Washington to Tehran. Most recently, Oman has hosted secret talks between the US and Iran on Iran’s nuclear program.

In July, the Sultan traveled to his residence in Munich for medical tests. He has not left since and last year he missed the Omani National Day (his birthday) celebration for the first time since his coup. He also failed to travel to Saudi Arabia for Abdullah’s funeral, a notable omission for a fellow Gulf monarch. He is widely reported to be suffering from terminal cancer. He has barely spoken to the nation since he traveled to Germany, giving only a brief address on National Day.

The sultan has no sons and has not publicly designated an heir. The royal family is supposed to choose a successor within three days of the sultan’s death. If the family cannot agree, it is to open a sealed letter that Qaboos has written that contains the name of his choice. The three men believed to be the most likely candidates are the sons of Qaboos’ late uncle, Tariq bin Taimur, who served as the sultan’s first prime minister (Qaboos now holds the position himself). None appears to have been groomed for power: Assad bin Tariq is a Sandhurst-educated businessman; Haitham bin Tariq is Oman’s culture minister; and Shihab bin Tariq led the navy for 14 years, but retired from the post a decade ago. No successor will have the legitimacy Qaboos has earned.

The royal family has every incentive to make the succession smooth. The country faces two dangers. Like the other GCC states, Oman depends on oil for most of its income, but it has relatively small reserves. The decline in oil prices is a much bigger challenge for Oman than for its richer neighbors because it has far smaller financial reserves.

The more immediate danger is the chaos in Yemen. The collapse of the central government and the resignation of President Abed Rabbo Mansour Hadi’s government means Oman faces near-anarchy on its sensitive western border. Qaboos and his successor will face a long-term problem of keeping the Yemeni civil war and its violence from damaging Omani interests.

The succession in Saudi Arabia was scripted well in advance and went off like clockwork. King Salman was quick to put in place the long-term succession arrangements for the kingdom by appointing Crown Prince Muqrin bin Abd al Aziz and Second Deputy Prime Minister Prince Mohammad bin Nayef to the No. 2 and No. 3 positions. Oman’s succession appears far less orderly from an outside, public point of view. Since Oman sits at the opening of the Straits of Hormuz, the whole world has an interest in a smooth and stable transition.

Bruce Riedel is director of the Intelligence Project at the Brookings Institution. His most recent book is “What We Won: America’s Secret War in Afghanistan, 1979-1989.” (Al Monitor 25.01)

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11.11 SAUDI ARABIA: After King Abdullah, Continuity

On 23 January, Frederic Wehrey, Senior Associate at the Carnegie Middle East Program wrote that a king has passed away in Saudi Arabia. Yet, despite the breathless speculation over the seismic effects of succession, the kingdom’s foreign policies are likely to remain unchanged. What is often overlooked is that Saudi foreign policy has been remarkably consistent since the reign of King Fahd bin Abdul Aziz. The Al Saud family is a tightly knit, conservative coterie that shares a similar vision of the world and Saudi Arabia’s place in it.

There are several indications to suggest that the Saudi succession is unlikely to lead to major changes in policies over the short term. King Abdullah had been largely incapacitated before his death, functioning for, at most, a couple hours a day. The new king, Salman bin Abdul Aziz, and Crown Prince Muqrin bin Abdul Aziz had represented King Abdullah at various functions in the past few years. The new head of the royal court is also the new defense minister, Mohammed bin Salman. At only thirty-four years old, he’s a young son of King Salman, but he has been head of Salman’s court as crown prince. As Salman’s health has deteriorated (he’s reportedly suffering dementia), Mohammed bin Salman has grown very powerful and influential over his father, which has made many Saudi royals very concerned about his power.

On particular issues, Saudi Arabia is unlikely to significantly change its policies with the death of King Abdullah. The general contours of U.S.-Saudi relations, particularly against the Islamic State, seem to be under the control of the new deputy crown prince, the Minister of Interior Prince Mohammed bin Nayef. The centerpiece of U.S.-Saudi relations has always been at the interior ministry–intelligence level. The elevation of Mohammed bin Nayef’s position to handle the Syria portfolio last year only cemented this bond.

Saudi policy is likely to remain unchanged on the Iran front too. The Saudi distrust of Iranian power in the region is shared by many first generation princes. It is true that Abdullah spearheaded the Saudi-Iranian détente in the 1990s under former Iranian president Hashemi Rafsanjani. But with regard to current relations, King Abdullah was always suspicious about whether President Hassan Rouhani could deliver with the hardliners in Iran’s Revolutionary Guard Corps actually making decisions. Given recent events in Yemen as well as the ongoing conflicts in Syria and elsewhere, the enmity between Saudi and Iran is likely to continue under King Salman bin Abdul Aziz.

With the purview of Prince Mohammed bin Nayef on Syria and Prince Bandar bin Sultan on Egypt, one should expect Saudi policies toward the two countries not to change with the coming of a new Saudi king. Saudi aid to Egypt has already been curtailed and there are moves to pressure Egyptian President Abdel Fatah el-Sisi to make subsidy reforms. The Saudis cannot sustain the aid indefinitely with the declining price of oil and a projected budget deficit of more than 1% in 2015, the highest deficit in its history.

There are mainstream Saudis who recognize the threat posed by the Islamic State to the kingdom, but at the same time, they may tacitly acknowledge the virtues of the jihadist group as a Sunni buffer against an expanding Shia crescent. The Saudis have definitely instructed their official clerical establishment to demonize the Islamic State, but the fact remains that the Islamic State’s textbooks and ideology draw heavily from Saudi religious scholars. None of this is likely to change under the leadership of King Salman, who is thought to be more conservative than King Abdullah. The Saudi authorities under Abdullah have imprisoned Salafi clerics who opposed King Abdullah’s reforms and this trend of controlling clerical discourse will continue.

Saudi oil policy has been largely controlled by technocrats, headed by Ali al-Naimi, the Saudi minister of petroleum and mineral resources. Further, one of the most influential figures in the ministry is Abdulaziz bin Salman, the son of King Salman. Thus, again, one should not expect the change in monarch crisis to affect the Saudi oil policy in the short term. Saudi Arabia is likely to continue to favor preserving its market share even as this means the decline of the price of oil.

The swift appointment of Interior Minister Mohammed bin Nayef as the new deputy crown prince has finally shown how power would move to the next generation in Saudi Arabia. Mohammed bin Nayef, a grandson of the founder of Saudi Arabia, has led Saudi counterterrorism efforts since the early 2000s. While some may hope for reforms, as the throne moves to younger generations, one should not expect much in future years.

The current crown prince, Muqrin bin Abdul Aziz, is rumored to be a liberal, but he has reportedly argued for the suppression of Shias in the Eastern Province. Further, Minister of Interior Prince Mohammed bin Nayef may be effective at counterterrorism, but his appointment as deputy crown prince is no good news for liberal activists, as his position at the interior ministry has meant that he has responsible for the suppression of all sorts of dissent at home, including by liberals. (Carnegie 23.01)

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11.12 SAUDI ARABIA: Succession in Saudi Arabia

Bruce Riedel posted on 22 January in Brookings that the announcement of King Abdallah’s death puts Saudi Arabia in the hands of his designated successor, Crown Prince Salman.

Salman, born on 31 December 1935, is also defense minister and has been chairing cabinet meetings for several months and handling almost all foreign travel responsibilities for the monarchy since he became the heir in 2012. He has visited China, Japan, India, Pakistan, the Maldives and France since becoming crown prince after the death of his predecessor, Prince Nayif.

Salman was governor of Riyadh province for 48 years. When he became governor in 1963, Riyadh had 200,000 inhabitants — today it has more than seven million. Salman presided over this remarkable transformation with a record for good governance and a lack of corruption. Since most of the royal princes and princesses live in Riyadh, he was also the family sheriff, ensuring any transgressions were dealt with smoothly and quietly, with no publicity.

Salman also oversaw the collection of private funds to support the Afghan mujahedeen in the 1980s, working very closely with the Kingdom’s Wahhabi clerical establishment. In the early years of the war — before the U.S. and the Kingdom ramped up their secret financial support for the anti-Soviet insurgency — this private Saudi funding was critical to the war effort. At its peak, Salman was providing $25 million a month to the mujahedeen. He was also active in raising money for the Bosnian Muslims in the war with Serbia.

Salman’s sons include the first Muslim astronaut, Prince Sultan, and the governor of Medina, Prince Faisal. Another son, Prince Khaled, is a fighter pilot in the Royal Saudi Air Force and led the first RSAF mission against Islamic State targets in Syria last year. The family controls much of the Saudi media.

Salman has his own health issues and has had a stroke. His successor was announced in February 2013 to ensure continuity. Prince Muqrin, who until now served as second deputy prime minister, was born on 15 September 1945 and was educated at the Royal Air Force College in England before becoming a pilot in the Royal Saudi Air Force. Later, he was governor of Medinah province and then head of Saudi intelligence.

Abdallah, Salman and Muqrin are sons of the modern Kingdom’s founder, Abdelaziz Ibn Saud, who had 44 recognized sons. The survivors and their heirs constitute the Allegiance Council, which Abdallah created in 2007 to help choose the line of succession. In practice, it has only ratified the king’s decisions after the fact.

Muqrin is widely believed to be the last capable son of Ibn Saud. So if and when Muqrin ascends to the Crown Prince position, the Kingdom will face the unprecedented challenge of picking a next-in-line from the grandsons of Ibn Saud. That will raise questions of legitimacy not faced in the last century of Saudi rule.

Abdallah has been the de facto ruler of the Kingdom since King Fahd suffered a debilitating stroke in 1995; he became king a decade later when Fahd passed away. A progressive reformer by Saudi standards, Abdallah gave the Kingdom 20 years of stability. Salman is likely to provide continuity. The House of Saud values family collegiality and harmony highly. The two previous Saudi kingdoms in the 18th and 19th centuries were wracked by internal family squabbles, which their foreign enemies exploited.

With the Arab world facing its worst crisis in decades the royals will want to present an image of stability and strength. This is especially true with the collapse of the pro-Saudi government in Yemen, which will be Salman’s first crisis. (Brookings 22.01)

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11.13 EGYPT: Egypt Year in Review 2014

The Oxford Business Group reported that with investor confidence growing, Egypt is looking forward to a sizeable boost to its economic performance in 2015. A peaceful conclusion to presidential elections in June, along with slowing inflationary pressures, a slew of crucial fiscal reforms and rallies on both the EGX and in the tourism sector, have helped pave the way for reasonably robust expansion over the coming 12 months.

Signs of recovery

Egypt posted growth of 2.2% for the fiscal year ending June 2014, in line with tepid activity following the Islamic-led revolution in 2011. However year-on-year growth rose to a provisional 6.8% in the first quarter of the 2014/15 fiscal year, from 3.7% in the previous quarter. The increase in economic activity is expected to continue, with the IMF and the government forecasting 3.8% growth in this fiscal year.

The outlook has helped sustain the stock market with share prices rallying 32% during the year, making the Egyptian Exchange (EGX) the top Arab stock market in 2014, albeit from a low base.

The encouraging forecast for GDP has also come about from improved budgetary indicators. Moody’s changed its outlook to stable from negative in October, though refrained from upgrading the credit rating, citing still-weak government finances.

The more positive outlook on Egypt is closely connected with, among other things, the government’s push to pay back debts owed to international oil and gas companies, an issue that had constrained upstream investment in a crucial revenue-generating industry. Egypt’s fuel bill rocketed in the wake of the 2011 revolution due to oil being purchased from IOCs and then sold to its own domestic market at subsidized rates, with the bill hitting nearly $7b at its peak. By November, the outstanding debt was already down to $4.9b and the government has assured investors the remaining portion will be repaid within six months, with two additional payments totaling more than $400m being made more recently.

Egypt’s efforts to make good on outstanding oil debts have helped thaw the investment freeze. In early December, BP announced that it planned to invest $12b over the next five years and to double its gas supplies to the domestic market in the next decade.

Subsidies in check

Another source of relief for the economy is the reduction in huge energy subsidies, the Achilles heel of the economy that has been driving up government deficit and debt, as well as draining foreign currency reserves. Energy subsidies reached LE128b ($17.9b) in 2013/14 – representing about 7% of GDP – from a targeted LE99b and equal to over 22% of the government’s budget, according to the Minister of Petroleum Sherif Ismail speaking in November.

The government took the first substantive step in July to rein in subsidy spending with an across-the-board fuel price hike with energy subsidies slashed by about a third, sending a signal to investors that it is serious about structural reform.

Subsidy cuts are also set to become easier in the coming months, thanks to plummeting global oil prices. With Brent crude trading at 5.5-year lows, Egypt stands to save LE30b ($4.2b), or 30% of its fuel subsidy bill originally planned for the 2014/15 fiscal year, provided prices remain at current levels, according to a statement from Ismail at the end of December.

Suez Canal project

Central to the government’s plan to kick-start the economy and stimulate growth in labor-intensive sectors, as well as lower the unemployment rate of 13.1%, is an $8b project to widen and deepen the Suez Canal. The enlarged transit route is part of a development plan for the whole Suez Canal Zone (SCZ), which comprises 75,000 sq. km. of land on either side of the canal that is earmarked for industry.

The project, launched in August and to be completed in just one year, aims to cut average transit times from 18 to 11 hours while quadrupling traffic. The government estimates the improvements in the canal will more than double annual revenues, which currently stand at more than $5b.

The Suez project, together with a string of related projects in technology, infrastructure, commerce, tourism and agriculture, is set to improve Egypt’s position as an industrial and logistics center. Egypt is also aiming to attract investments worth $10-$12b over the next four years at a major economic summit in March in areas such as energy, transport, water, grain storage.

The Minister of Tourism, Hisham Zaazou, has also embarked on an aggressive campaign to revive tourism and expects the sector to return to its pre-revolutionary levels by April 2015. Between July and September, tourism revenues surged 112% year-on-year (y-o-y) to $2b, while October data showed this upward trend continuing with a 79.5% y-o-y increase in tourist arrivals according to official data. Projections for 2014 put tourism revenues at $7b, catering to 10m tourists.

Despite challenges on the horizon, such as energy shortages, red tape and a lack of visibility over economic plans tabled by the government, political risks appear to be diminishing. Investors have also been encouraged by the government’s infrastructure stimulus funded by Gulf money that will help stimulate the economy and boost employment. (OBG 19.01)

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11.14 EGYPT: Egyptian Women Take to Social Media to Expose Harassers

Al Monitor says Egyptian women have been using a number of hashtags — among them #Idon’tFeelSafeOnTheStreet, #AntiHarassment and #ExposeHarasser — on social networking sites to speak up about the daily sexual harassment they experience. These campaigns are part of an effort to expose harassers and break the silence surrounding their crimes, which are haunting women in Egypt. Women have tweeted myriad incidents along with advocating the courage to expose and confront harassers.

Nancy Atieh, 20, published a post on Facebook Jan. 12 in an attempt to expose a man in his 50s who regularly takes the bus from a station downtown, during which time he molests females. She took and posted a picture of him to warn her colleagues who transit the same station. “Photographing harassers and exposing them is the best way to confront them,” she wrote.

Haitham Tabi, an Egyptian journalist, called on women to tweet their concerns using the hashtag #Idon’tFeelSafeOnTheStreet, after a number of reports he wrote on the public harassment of women. “Let people know that your concerns about walking on the streets are real and not exaggerated,” he told Al-Monitor of his encouragement to women. Tabi also said, “Calling on girls to talk about their suffering was a way to challenge those who are in denial about widespread sexual harassment.”

He said people should be careful since the situation has degenerated, stressing, “Women are greatly threatened in Egypt.” Tabi emphasized the need for the state to protect women and make them feel safe. “The state, which is fighting terrorism, has to protect girls on the streets,” he said.

On Dec. 8, a 19-year-old woman jumped into the Nile from the Qasr al-Nil bridge and drowned in a bid to escape a harasser who had been following her. No passersby intervened to protect her. Eyewitnesses said that the offender threatened to throw nitric acid on her.

Former interim President Adly Mansour issued a decree 6 June 2014, amending some provisions of the penal code to deal with sexual harassment. Days later, on 10 June, a woman suffered severe burns after she was sexually abused in Tahrir Square during the inauguration of President Abdel Fattah al-Sisi.

The Egyptian penal code includes three articles relating to sexual harassment. They stipulate the issuance of sanctions for crimes committed by force or threat or involving obscene acts toward women. In such instances, harassers face six months to five years in prison, in addition to a fine of up to 50,000 Egyptian pounds ($6,991).

No law in Egypt, however, addresses sexual harassment as a social problem, and the punishments do not suit the level of physical, sexual or verbal abuse. Moreover, the laws do not clearly state implementation mechanisms or compel the state to provide security for women.

Egyptian official and security institutions have stressed through the media that they have taken action to address the phenomenon of sexual harassment against women, including creating departments in the police force to combat it. Despite this, many women have complained of the ill-treatment they received at police stations when they tried to lodge complaints against harassers.

Amani Abboud, 26, told Al-Monitor, “I was verbally and physically abused by a man about 50 years of age in a public transport vehicle in the city center and in front of a police station.” She said, “Judging by the traffic in the street, I thought I could expose the harasser, so I tried to scream and pull him toward the police station. To my surprise, the police refused to issue a citation against him.” Abboud stated, “The officer told me that a citation would be of no benefit to me and that it was better for me to go home without causing problems.”

Amani later tried to lodge her complaint with human rights organizations in Egypt. “I have given up on being granted my right to police protection,” she said.

Fathi Farid, coordinator of the I Saw Harassment initiative, told Al-Monitor, “The laws in Egypt have failed to deter sexual harassment against women.” According to him, “The law that is supposed to prohibit sexual harassment should be amended. The amendments should include a clear definition of what an anti-harassment law is as well as protect witnesses and informants from media defamation.”

Not many people have high hopes of being able to rely on the Egyptian police to fight sexual harassment in the streets. “We cannot trust the anti-harassment division in the regular police when the person in charge of this department believes that harassment is only triggered by revealing female attire,” Farid said.

A 26 December report by I Saw Harassment on a case of sexual harassment 100 days into Sisi’s term pointed to the involvement of some police officers and administrators in violations against women. At the time, the most recent such incident had occurred 21 December and involved the rape of a university student in a police car.

Said Sadiq, a professor of political sociology, told Al-Monitor, “The lack of the security and judiciary performing their role and the weakness of the concept of respect for personal freedoms are both behind the exacerbation of the problem in Egyptian society.”

Sadiq described sexual harassment, an act of violence against women, as a “complicated issue” in Egypt. “No solutions can be found as long as the official institutions do not realize the seriousness of the issue,” he said.

Campaigns and initiatives are being launched to address sexual harassment in Egypt, and training sessions are being held for women to protect themselves on the streets. Many women are also daring to speak publicly, on social networking sites, about what they have experienced. The political establishment must act to protect women from the daily violence they are being exposed to since the state’s attention does not appear to be focused on fighting harassment. (Al Monitor 16.01)

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11.15 MOROCCO: Year in Review 2014

Morocco’s economy is estimated by the Oxford Business Group to have expanded by around 3% in 2014 on the back of automotive and electronics exports increasing by more than a quarter in the first 11 months of the year and the government reining in public spending. However, poor weather conditions weakened agricultural output, increasing the importance of food imports.

Morocco’s economic growth slowed to an annualized rate of 2.7% in the fourth quarter, according to official data released in early January. The IMF and the World Bank forecast GDP growth of 3% in 2014. However it is hoped the rate will rise in 2015 as agricultural output picks up. In addition, lower energy spending and an improving trade balance are set to help lift GDP growth to 4.4% in 2015 according to the government.

The country entered the new year with stronger fiscal fundamentals. The budget deficit shrank to 5.4% of GDP in 2014 from a peak of 7.3% in 2012, a result of higher social spending and the continuing impact of high oil prices and subpar export demand. In 2013, the government adopted an expenditure-reduction policy, cutting its subsidy bill to 4.7% of GDP and reducing its spending on wages and pensions.

Rosy outlook

The rosier outlook is in part a result of exogenous factors. Importing more than 90% of its energy needs, Morocco has benefitted from the recent decline in global oil prices, which is set to continue. Energy spending dropped 8.3% year-on-year (y-o-y) to Dh85.4b (€7.57b) between January and November 2014.

Despite a bad harvest and higher-than-average cereal imports, overall import spending fell by 0.3% y-o-y. Combined with a 6.7% uptick in exports in the same period, Morocco’s trade deficit shrank by 6.8% y-o-y to Dh170b (€15b).

In December, the central bank, Bank Al Maghrib, made an unprecedented move in cutting its benchmark interest rate twice in two consecutive meetings, which it hopes will encourage lending. The benchmark rate was reduced by 25 basis points in September and December, bringing it to 2.5% at the close of 2014.

African Ambitions

A boost in lending will help spur growth in the financial sector in Morocco, which had already seen a raft of reforms launched in 2014. Parliament gave final approval to a long-awaited Islamic finance bill in November, for example, which will permit the creation of Islamic banks and allow private firms to issue sukuk – a move which has caught the attention of several Gulf-based banks.

While the domestic market is expanding its offerings, a number of initiatives are looking to build upon the country’s links with fast-growing markets elsewhere in Africa. The development of Casablanca Finance City (CFC) – a combination of special zone and financial district – is helping to attract new funds and expand the sector’s regional clout. The zone, which among other targets aims to help channel capital into West African markets, was officially opened in 2013 and 60 companies have been granted CFC status, including a number of foreign financial institutions and professional services firms. The number is expected to rise to 100 by the end of 2015.

In many ways, CFC is building upon what has been a growing trend in Morocco’s financial services industry, with an increasing number of institutions acquiring or opening up subsidiaries in West Africa. Morocco’s three largest banks, Attijariwafa Bank, Banque Centrale Populaire (BCP) and BMCE Bank, have all rolled out new operations from Senegal to Gabon in recent years, aided in part by a push from the government to strengthen bilateral links. The head of state, King Mohammed VI, and a major business delegation went on a three-week tour through Mali, Cote d’Ivoire, Guinea and Gabon in March, signing several joint venture agreements on economic co-operation.

Natural Wealth

Banks and insurance companies are far from the only ones consolidating ties with sub-Saharan markets. Moroccan phosphates giant, Office Cherifien des Phosphates (OCP), is also planning its expansion in the region with a $600m fertilizer plant in Jorf Lasfar dedicated entirely to sales on the African market.

Phosphate prices are expected to remain volatile through 2015 due to a global production surplus, but the OCP is pushing ahead with investments worth Dh145b (€12.86b) until 2025 that should position the country well for a recovery in prices.

Phosphates have traditionally accounted for 10% of Morocco’s GDP and with prices recovering slightly in 2014, Office Cherifien des Phosphates (OCP) revealed strong third-quarter sales which boosted total revenue in the first nine months of 2014 by about 3% y-o-y to $3.7b. The increase was largely driven by sales of processed fertilizers, which surged 63% y-o-y to 1.5m tonnes in the third quarter.

International oil firms accelerated exploration in Morocco’s untapped, but also unproven, offshore acreage in 2014. At least 10 offshore wells are slated to be drilled between 2014 and 2016, twice the number drilled in the last decade although some companies saw greater success in onshore blocks, such as Circle Oil which announced a “significant” gas discovery in its onshore Sebou block in mid-December. (OBG 23.01)

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11.16 TURKEY: Former Friends, Now Bitter Foes

Ilhan Tanir observed on 14 January in Sada that Erdogan’s hardball politics with other Islamic groups, including the conservative Gülen movement, are discrediting his party’s democratic credentials.

The two most influential Islamic groups in Turkey – namely the Justice and Development Party (AKP) led by President Recep Tayyip Erdogan and the Gülen movement led by Pennsylvania-based retired Imam Fethullah Gülen – have been openly at war with each other for over a year. The Gülen movement, a former Islamic ally of the AKP, has tended to eschew partisan politics in favor of media and cultural influence within Turkey, yet it has become the target of Erdogan’s “with us or against us” rhetoric and governance style.

These developments mark a dramatic reversal. When it first took office in 2002, the AKP government sought to build alliances with other Islamist parties, liberals, and religious movements. Acutely aware that the first Islamist Prime Minister, Necmettin Erbakan, was ousted in 1997 by an army-engineered soft coup, Erdogan and his men strove to enlarge their ruling circle with other stakeholders to resist secular backlash. Gülen entered a partnership (albeit short-lived) with the AKP, becoming an effective powerhouse in Turkey and expanding its media empire and educational program, including thousands of schools and dormitories. Indeed, Gülen invested heavily in the education sphere as part of his decades-old strategy to raise a pious, nationalist, and conservative elite that would hold sway in the Turkish state and society.

Although the AKP and the Gülen movement disagreed in their interpretation of Islam, they have cooperated since the early 2000s in their campaign against military tutelage. Consequently, when the Turkish military was severely weakened by the so-called Ergenekon or “coup” trials of 2008-13, which sent hundreds of active and retired military officers as well as other dissidents to prison, disputes between the AKP and Gülen began surfacing. The major cleavage, however, occurred on 17 December 2013, when a corruption scandal rocked the AKP. Dozens of businessmen known to be Erdogan’s close allies, including four influential ministers and three of their sons, were implicated by leaked tapes and photos (published mostly in Gülen-affiliated media, and then shortly thereafter in the mainstream press) that showed bribes being delivered to a minister’s office. During a follow-up investigation, the police seized $17.5 million in cash allegedly used for bribery. Some of that money was reportedly found stashed in shoe boxes at two of the implicated ministers’ homes in addition to the home of the director of the state-owned Halkbank. The leaked tapes published on social media and in Turkish newspapers also implicated Erdogan’s son.

Responding to the scandal, Erdogan and the AKP criticized the prosecutors and police chiefs behind the investigations, arguing that the incident was a Gülen-organized plot to overthrow the government. That Erdogan’s government announced a measure in November 2013 to shut down test preparation schools, a major recruitment tool for Gülen, might have pushed the movement to expose the corruption scandal.

Nonetheless, Erdogan has since rallied his supporters in what he has dubbed an “independence war” with Gülen. Although the president fired four ministers following the corruption scandal, he maintains that the claims are a Gülen conspiracy in collaboration with “dark foreign forces.” Similarly, other AKP officials have accused Gülen of orchestrating the media campaign and operating the anonymous Twitter accounts that first leaked the corruption claims. To date, the Gülen movement denies involvement and no evidence exists linking it to the social media campaign. Several probes by newly appointed prosecutors continue to explore the link.

The Gülen movement, though only comprising between 2 to 3% of Turkey’s electorate, holds considerable sway in other spheres, especially the media. Zaman, the most circulated Turkish newspaper, selling nearly one million copies a day, is Gülen-affiliated. More than half a dozen nationwide television channels, hundreds of local television and radio stations, and other newspapers and magazines are Gülen-owned or affiliated. In total, the movement is estimated to have shares in 15 to 25% of Turkish media. Gülen also commands a global lobbying power unrivaled in Turkish politics, a Gülen umbrella assembly group headquartered in Washington, DC has over 200 branches across America. This enormous soft power is now shaping opinion in many Western capitals in favor of regime change in Turkey.

But for now, Erdogan and the AKP appear to have the upper hand. The government has passed legislation to increase the authority of the intelligence services and police, granting them more detention powers. These laws have led to thousands of detentions and pretrial arrests in the government’s campaign against opposition groups, including Kurdish activists, twitter users and Gülen movement members. Additionally, following Erdogan’s and the AKP’s electoral wins in the 2014 presidential and local elections, the bribery charges were dropped altogether later in December. Erdogan appears to have kept his promise to “boil or molecularize” the Gülen movement to “sterilize” it as part of an offensive against Gülen-affiliated media, financial institutions, and business forums. Yet this apparent domestic victory is only half the picture. While the Erdogan government seems ahead in domestic hardball politics — purging the Gülen followers and even arresting the president of Samanyolu Media Group, a flagship TV channel of Gülen — his approach and tactics are creating a backlash. Already, Erdogan’s tactics have tarnished his democratic credentials, and most foreign governments and media, particularly in the West, view him as an autocratic leader.

Although only a few years ago Turkey was considered a model Muslim democracy, Ankara is now viewed as an isolated or pariah state. Transparency International’s annual Corruption Perceptions Index has documented the country’s growing corruption, and Freedom House downgraded Turkey to “Not Free” in its 2014 rankings. Despite these developments, there seems to be no alternative political movement emerging to replace the AKP. A number of small right-of-center parties were recently founded by former AKP members but, for now, none are likely to command much support in the general elections slated for early June.

After decades of repression under the secular Turkish Republic, the recent direction taken by Turkey’s AKP has increasingly discredited its reputation. Erdogan’s crackdown on rival religious groups reflects the AKP’s growing authoritarianism and attempts to consolidate power. But for now, in spite of Erdogan’s confrontational personality and largely unchecked authority, limits enshrined in the current constitution will make it difficult for him to fully dominate the Turkish state. Erdogan is looking to the June elections to see if his AKP can secure a wide enough victory to overhaul the constitution and move Turkey from a parliamentary to presidential system. If the AKP secures the electoral victories it is hoping for, considering that the rule of law has already greatly eroded within the past year, Erdogan is likely to become an ever-more unquestionable and unaccountable leader.

Ilhan Tanir is a Turkey analyst and freelance journalist based in Washington, DC. (Sada 14.01)

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11.17 GREECE: Fitch Revises Outlook on Greece to Negative; Affirms at ‘B’

On 16 January 2015, Fitch Ratings revised the Outlook on Greece’s Long-term foreign and local currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at ‘B’. The issue ratings on Greece’s senior unsecured foreign and local currency bonds have been affirmed at ‘B’. The Short-term foreign currency IDR has been affirmed at ‘B’ and the Country Ceiling at ‘BB’.

Key Rating Drivers

The revision of the Outlook to Negative reflects the following key rating drivers and their relative weights:

High – The current period of political uncertainty has increased the risks to Greece’s creditworthiness as official financing, and any potential reopening of market access, could be delayed for some months. The early elections held on 25 January have made the direction of Greek policymaking more uncertain. Prolonged political deadlock until the summer is not Fitch’s expectation, but would increase the risk of financing difficulties and a return to recession.

In Fitch’s view, an agreement between a new Greek government and the Troika remains likely as there are strong incentives on both sides for a deal. This holds in the event of a Syriza victory in the election, which is the most probable outcome. Nevertheless, there is a wide gap between the policy proposals of both sides, such that negotiations would be complicated and subject to risks.

Syriza has moderated its policy stance since 2012. It advocates remaining in the Eurozone and has committed to maintaining a budgetary primary surplus and to honoring Greece’s obligations to IMF and private creditors. However, the privatization program would most likely stall under a Syriza-led government and there would be upward pressure on the public sector wage bill.

A further round of elections in 2015 is a risk, but not Fitch’s baseline. The negotiations with the Troika will exacerbate frictions between and within Greek political parties and could cause a weak coalition to collapse. Alternatively, the initial formation of a coalition may prove impossible, as happened in 2012.

In an adverse scenario, prolonged political turmoil combined with a lack of funding would place serious strains on the government’s cash flow by the summer. Tighter liquidity conditions in the general economy would risk derailing the recovery in the Greek economy.

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

The general government budget is on track to meet its 2014 objective, underscoring a remarkable budgetary adjustment in recent years in the face of severe cyclical headwinds. The adjusted primary surplus measure used under the Troika program is forecast by Fitch at 1.5% of GDP this year. The headline deficit forecast (EDP basis) is 1.6% of GDP. Achieving and maintaining a primary surplus relies on continued tight fiscal discipline and a sustained recovery in growth.

The economy is bottoming out, with real GDP having expanded modestly in Q1/14-Q3/14. Fitch forecasts GDP growth of 0.5% in 2014, rising to 1.5% in 2015, a downward revision of 1pp since our last review in November 2014, reflecting domestic policy uncertainty and a weaker growth outlook in the Eurozone.

Greece’s external debt burden is very large but inexpensive to service due to its largely concessionary nature. Greece is running a current account surplus of 1% of GDP aided by reduced imports, buoyant tourism receipts and a significant step-up in net EU transfers. Fitch considers price competitiveness to have been restored, although the export base remains narrow.

Fitch’s Banking System Indicator for Greece is ‘B’, indicating weak standalone creditworthiness. The banks are well capitalized but their asset quality is weak. No further capital injections are required as a result of the ECB’s Comprehensive Assessment.

Greece’s ratings are underpinned by high income per capita and measures of governance (well above ‘B’ and ‘BB’ medians).

Key Assumptions

The ratings and Outlook are sensitive to a number of key assumptions.

Greek banks make no further material demands on the sovereign balance sheet; EUR37b (20% of GDP) has been injected to date. If Greek banks incur losses that are not covered by private shareholders, this would lead to a cash call on the government as guaranteed tax credits are converted into equity.

General government gross debt/GDP will have peaked at 178% in 2014, subsiding gradually thereafter. These assumptions do not factor in any OSI on official loans that may be agreed over the medium term. The projections are sensitive to assumptions about growth, the GDP deflator, Greece’s primary balance and the realization of privatization revenues.

Social stability is maintained. Greece remains a member of the Eurozone and does not impose capital controls. Greece and the Eurozone as a whole will avoid self-sustaining deflation over the medium term, such as that experienced by Japan from the 1990s. Several more years of deflation, resulting in low growth in nominal GDP, would be highly damaging to Greek public debt dynamics. (Fitch 16.05)

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