Fortnightly, June 17th 2015

Fortnightly, June 17th 2015

June 16, 2015





1.1  Kahlon Unveils Plan to Lower Israeli Home Prices
1.2  Cabinet Approves Tax Hike on Homes for Investment
1.3  Israel’s Defense Budget Increases by 9%
1.4  Delek and Noble Present Aphrodite Development Plan


2.1  German Firm Opening Cybersecurity R&D Center in Israel
2.2  Tel Aviv Light Rail Contract with PB Likely to Change
2.3  OurCrowd Launches Global Seed Stage Fund
2.4  Eltek Announces Relocation of Its US Subsidiary
2.5  illusive networks Raises $5 Million
2.6  Camtek Receives Multiple Orders for its New Eagle-i System


3.1  GSE Systems Opens New Office in Bahrain to Serve Customers in Middle East
3.2  Japan’s 7-Eleven to Open First Dubai Store in September
3.3  UAE’s Hotbrands Opens Three New Restaurants Across GCC
3.4  Mecca to Host World’s Largest Holiday Inn Hotel
3.5  Oshkosh Subsidiary Chosen by Saudi Aramco to Supply Multi-Purpose Firefighting Trucks
3.6  Particle Measuring Systems (PMS) Announces New Greece-Based Distributor


4.1  Israel’s First Ever Natural Gas Powered Vehicle is an Iveco Stralis
4.2  Jordan’s Largest Solar Project Launched
4.3  Dubai Firm Set to Launch Solar Plant in Uganda in 2015


5.1  Lebanon’s Trade Deficit Plunged by 22% to $4.64 Billion by April
5.2  Lebanese Gross Public Debt Reached 145.12% of GDP by March
5.3  Lebanese Airport Passengers Increased by 8.93% by May
5.4  Jordan Economy Recovering from Regional Upheaval

♦♦Arabian Gulf

5.5  Gulf Expatriate Workers Sent Home $100 Billion Last Year
5.6  Qatar Earmarks Five Sites for New Hospitals
5.7  IMF Says Cheap Oil to Push UAE into First Fiscal Deficit Since 2009
5.8  Saudi Arabia Said to Increase Military Spending to $60 Billion by 2020
5.9  Saudi Arabia Considers 40 Hour Working Week

♦♦North Africa

5.10  Food Price Shocks Drive Egypt’s Inflation to Highest in Five Years
5.11  Egypt Signs African Free Trade Deal as Part of 2063 Plan
5.12  Egypt, Sudan and Ethiopia Agree to Form Supreme Trilateral Council
5.13  Egypt’s Total Expenditure on Basic Education Reached 6.6% of Total Spending
5.14  Morocco Shows Second Highest Growth Performances in MENA
5.15  WEF Says Morocco Most Competitive Country in North Africa
5.16  Half of Moroccan Households Have Internet


6.1  Turkey’s Unemployment Rate Rises to 10.6%
6.2  Greece Willing to Compromise with EU/IMF Government
6.3  Greek PM Seeks Long-Term Deal, Sees Debt Restructuring Problems



7.1  Double-Decker Buses to Return to Israel’s Roads


7.2  UAE Private Sector Working Day to Be Cut By 2 Hours During Ramadan
7.3  Cairo Has 33 Hospital Beds for Every 10,000 Patients
7.4  Erdogan Loses Majority in Turkish Election
7.5  Turkey Set For Parliament with Highest Female Representation Ever


8.1  Research Underlying BioLineRx’s Treatment of Type 1 Diabetes Wins Hebrew University Award
8.2  Compugen Novel Cancer Immunotherapy Targets Candidate and Infrastructure
8.3  Algatechnologies & Fujifilm Join to Promote Natural Astaxanthin
8.4  Accellta Grants Rights for its Feeder-free Stem Cell Culture Medium
8.5  Israeli Health Breakthrough Awarded Gates Foundation Grant
8.6  Israeli Micro-Antenna to Treat Tiny Digestive Tract Cancers
8.7  ApiFix Reaches Milestone to Treat Adolescent Idiopathic Scoliosis After CE Approval
8.8  Teva Announces FDA Acceptance of the Biologics License Application for Reslizumab
8.9  Tikcro to Proceed with CTLA4 and PD1 Antibody Generation Plan
8.10  Nutrinia Granted FDA Orphan Designation for NTRA-9620 for Short Bowel Syndrome


9.1  Comtrend Chooses Celeno’s Smart Wi-Fi Technology for Powerline Extenders
9.2  Komoona’s Yield Optimization ‘RTB Router’ Helps Publishers to Better Monetize their Content
9.3  CYREN Cyber Intelligence Enables Fastest Phishing Protection for Cyveillance
9.4  AudioCodes Plays Key Role in American Axle & Manufacturing Communications Migration
9.5  Opgal Expands Therm-App Product Family
9.6  Leading HDD Manufacturer Adopts Jordan Valley’s Metrology Platform
9.7  IAI Expands Heron TP Capabilities by Integrating it with M-19HD EO Payload
9.8  Successful Flight Demonstrations for HAROP Loitering Munitions
9.9  OriginGPS Unveils Smallest Multi-GNSS Module with Integrated Antenna
9.10  Sckipio First to Deliver NETCONF YANG Support on a DPU


10.1  Israel’s CPI Rises by 0.2% in May
10.2  Israel’s First Quarter Growth Revised Downward
10.3  Israeli Exports to India Double in First Quarter
10.4  Israeli Exports Drop During March to May Period
10.5  Israel’s Private Sector Shrinks As Public Sector Grows
10.6  Israel Ranked Fifth Most Expensive Country for Gasoline Prices
10.7  Only 6% of Israelis Have Never Used Facebook


11.1  LEBANON: Fitch Affirms Lebanon at ‘B’; Outlook Negative
11.2  JORDAN: Foreign & Local Workers at Odds in Jordan’s Labor Market
11.3  BAHRAIN: Fitch Downgrades Bahrain to ‘BBB-‘; Outlook Stable
11.4  QATAR: Bank Audi Qatar Economic Report – 2015
11.5  UAE: IMF Staff Completes 2015 Article IV Mission to the United Arab Emirates
11.6  SAUDI ARABIA: Cost of Oil’s Slump – Saudi Economy Shows Slowdown Signs
11.7  SAUDI ARABIA: Saudi Arabia’s Real GDP to Grow 3.4% in 2015
11.8  EGYPT: Egypt Government to Require Use of Fuel Subsidy Cards
11.9  EGYPT: Is There Hope for Egypt’s First Space Odyssey?
11.10  MAURITANIA: IMF Staff Concludes Visit to Mauritania
11.11 TURKEY: Fitch Says Election Heightens Political, Policy Uncertainty
11.12  TURKEY: Turkey’s Exports Sharply Decline


1.1  Kahlon Unveils Plan to Lower Israeli Home Prices

After a long period of rumors, Minister of Finance Moshe Kahlon has unveiled the measures he plans implementing in his housing plan.  Kahlon said that since entering office, he has held dozens of meetings on the matter and recently he met Prime Minister Netanyahu to finalize his plan.  This plan will be submitted for approval to the next housing cabinet meeting.  The plan includes the following measures: encouraging converting apartments used as offices into residential apartments, fast track for splitting apartments for rent while maintaining decent residential spaces, promoting construction of homes on publicly zoned land, and broadening the definition of a location’s young generation for allocations from the Israel Land Administration (ILA).  In ILA and Construction and Housing Ministry tenders, Kahlon will expand the price for tenant program but it is unclear if all tenders will be issued using this method. Kahlon also said that he will expand discounts on tenders and broaden the criteria for first time buyers.  The plan also relates to the work force in the construction sector.  The Ministry of Finance intends providing grants to encourage a change in regulations regarding industrialization, increasing the number of workers in the sector by training Israelis and adding foreign workers.  The plan also includes tax changes to “restrain demand for homes for investment.” The Ministry of finance wants to increase purchase tax to 8-10%.  (Globes 11/06)

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1.2  Cabinet Approves Tax Hike on Homes for Investment

On 16 June, Israel’s cabinet unanimously approved the most prominent element in the reform as far as the public is concerned: raising the purchase tax on purchases of apartments for investment.  Minister of Finance Kahlon’s housing reform may be brought before the housing cabinet for approval in its upcoming session on 22 June.

According to the proposal that was approved, the purchase tax will be raised to 8% on the first NIS 1 million and 10% above that amount for the purchase of an apartment that is not the purchaser’s residence.  Under the current tax brackets, which are still valid until the end of the month, purchasers of apartments for investment paid 5 – 7% up to NIS 4.6 million.

At this point in time, it is unclear how raising the purchase tax will affect the demand for apartments for investment.  An internal probe by the Ministry of Finance budget department estimates that raising the tax to 8% will reduce the number of deals in the apartments for rent market by only 10 – 15%.  According to the same calculation, raising the tax brackets will increase state revenues by NIS 600 million, from NIS 1.8 billion to NIS 2.4 billion.  (Globes 14.06)

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1.3  Israel’s Defense Budget Increases by 9%

Since the beginning of the year, Israel’s Ministry of Defense has been budgeted NIS 26.5 billion, 9.1% more than during the corresponding period last year, according to figures released by the Ministry of Finance Accountant General.  Spending by the civilian ministries was up 4.6% during the same period, compared with the corresponding period last year.  The budget deficit rose to 2.7% during the past 12 months, even though the country is being run on a temporary budget with a constrictive fiscal policy.  In annualized figures, defense spending stands at over NIS 63 billion, meaning that at a time when a temporary budget is in operation (one twelfth of last year’s budget being spent every month this year), the Ministry of Defense is receiving the highest gross budget in its history.

The increase in defense spending is attributable mainly to money given to the Ministry of Defense in the framework of the exceptions committees.  Under the law, the Ministry of Defense receives each month one twelfth of what it received during all of 2014.  The defense budget in the 2014 budget is the original budget approved by the Knesset, NIS 51.2 billion.  The NIS 9 billion supplement received by the Ministry of Defense in 2014 is not included in the calculation of the temporary budget.  (Globes 07.06)

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1.4  Delek and Noble Present Aphrodite Development Plan

Aphrodite (Block 12) partners Noble Energy and Delek Group units Avner Oil and Gas and Delek Drilling Limited Partnership have presented the Cypriot government with the development plan for the offshore gas field.  The partners plan to build an independent floating production installation in the Aphrodite field, which will have the ability to produce 800 million cubic feet of natural gas per day, or 8 billion cubic feet per year.  A gas pipeline from Cyprus to Egypt will also be laid.  The Aphrodite gas field contains 4.54 trillion cubic feet of natural gas and nine million barrels of condensate.  Noble has a 70% stake with Avner and Noble Energy holding 15% each. Delek Group is in talks with Noble Energy to buy an additional 19.9% stake.  In February, the Cypriot government and Egypt signed an energy cooperation agreement in which Cyprus is exploring the option of gas exports to the domestic Egyptian market.  At the same time, Cypriot President Anastasiades visited Israel on 14 June to discuss possible energy cooperation with Israel.  (Globes 11.06)

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2.1  German Firm Opening Cybersecurity R&D Center in Israel

Germany’s Fraunhofer Institute, the largest organization for applied scientific research in Europe, plans to open a Cybersecurity Innovation Center in Israel at the end of June.  The organization announced it would cooperate with leading Israeli academic research institutions toward bridging the innovation gap and to “accelerate the development of secure software, systems and services.”  The Institute will join forces with Israel, which is widely regarded as the nation with the biggest experience and a very well trained workforce in this area, as well as one of the highest innovation capacities worldwide.  The center will open its doors as part of a series of events marking 50 years of diplomatic relations between Israel and Germany.  (Israel Hayom 14.06)

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2.2  Tel Aviv Light Rail Contract with PB Likely to Change

The terms under which PB was hired to provide management services to the Tel Aviv light rail project will be changed, sources involved in the project believe.  The team appointed to examine the terms is expected to publish its findings shortly, and the value of the contract is likely to be reduced.  The scope of the contract was set before an Israel project management company was selected for the project. Meanwhile a tender is underway to find an Israel project management company, which in any case will reduce the scope of the work carried out by PB.

Meanwhile, it is not clear whether the tender published by NTA Metropolitan Mass Transit System Ltd. for rolling stock for the Red Line of the light railway will be cancelled.  Sources involved in the project say that representatives of Chinese company CNR, which was considered the favorite, are thought to be behind reports that “the Chinese are furious” at the intention to cancel tender.

The tender, worth some NIS 2 billion, was frozen at a very advanced stage, following allegations of shortcomings in the way it was being conducted by international companies.  Among other things, it was claimed that the tender was tailor made to fit the Chinese, since 70% of the points were for the level of the financial bid, in the knowledge that the Chinese light rail manufacturers offer much lower prices than their Western counterparts.  The rolling stock tender has been deferred four times and if it is cancelled now this will cause a considerable delay in the project.  (Globes 04.06)

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2.3  OurCrowd Launches Global Seed Stage Fund

OurCrowd announced the launch of OurCrowd First, a specialized $10M global early stage fund focusing on seed and Pre-A startups.  With its OurCrowd First fund, OurCrowd will leverage its established infrastructure to bring equity crowdfunding to approximately +20 seed-stage companies providing OurCrowd investors even earlier access to promising opportunities.  With an investment minimum of $50k participation for accredited investors, OurCrowd First is further democratizing the world of seed stage investment funds, since most other funds require million dollar minimum investments.  The fund is launching with six early stage companies already in its portfolio representing diverse sectors, such as the Internet of Things, Energy, Mobile infrastructure, 3D Printing, and Digital Radiology.  Jerusalem’s OurCrowd is a leading global equity crowdfunding platform for accredited investors to invest in Israeli and global companies.  OurCrowd vets and selects opportunities and invests its own capital alongside its accredited individual investors.  OurCrowd investors must meet stringent accreditation criteria and invest a minimum of $10,000 per deal of their choice.  OurCrowd provides post-investment support to its portfolio companies, assigning industry experts as mentors and taking board seats.  (OurCrowd 09.06)

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2.4  Eltek Announces Relocation of Its US Subsidiary

Petah Tikva’s Eltek, a leading Israeli manufacturer of advanced circuitry solutions, including complex build-ups of rigid and flex-rigid printed circuit boards, announced that it has completed the relocation of its US-based subsidiary, Eltek USA, into a new facility.  Located in downtown Manchester, New Hampshire, within one of the largest re-purposed historic mill buildings (Waumbec Mill) in Manchester, the Company’s US facility is now located closer to the Manchester Airport and to major hotels and restaurants.

Eltek specializes in the complex high-end of PCB manufacturing, i.e., HDI, multilayered and flex-rigid boards. Eltek’s technologically advanced circuitry solutions are used in today’s increasingly sophisticated and compact electronic products.  (Eltek 08.06)

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2.5  illusive networks Raises $5 Million

illusive networks (illusive) announced that it has raised $5 million in Series A funding from Team8, the leading cybersecurity foundry.  Illusive is taking on the hardest cybersecurity problem facing organizations today – targeted attacks.  Targeted attacks and Advanced Persistent Threats (APTs) are not about the malware, but about the people behind it.  These attacks are orchestrated by human teams that penetrate an organization’s network and slowly begin collecting data, analyzing it, and making their next move.  They do not stop until they find what they are looking for – the credit card database or the file-sever with client-sensitive information.

illusive’s agentless solution prevents targeted attacks and APTs by proactively “baiting” an organization’s IT network with a woven layer of deception.  When attackers act upon baited information, it both neutralizes the attack and instantly triggers a breach report, enabling security administrators to detect, track and contain the attack in its early stages.  illusive also provides security administrators real-time forensics information, collected at the exact moment attackers take the bait and before they have time to clean their tracks.  Because illusive triggers a breach report only when attackers act on false information, security administrators no longer have to worry about being flooded with millions of daily “false positive” alerts.

Tel Aviv’s illusive networks provides innovative solutions that combat Advanced Persistent Threats (APT) by exploiting the weakest link of any cyber-attack: the human team behind it. By proactively deceiving and disrupting attacks, illusive networks detects breaches with high confidence at very early stages, mitigating any potential damage.  (illusive networks 08.06)

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2.6  Camtek Receives Multiple Orders for its New Eagle-i System

Camtek announced the receipt of multiple orders totaling over $3m for the Eagle-i, its new generation of 2D surface inspection and metrology system, from a world leading Outsourced Semiconductor Assembly and Test (OSAT).  Installation of these systems began in the first quarter and is expected to be completed by July 2015.  Migdal HaEmek’s Camtek provides automated and technologically advanced solutions dedicated to enhancing production processes, increasing products yield and reliability, enabling and supporting customer’s latest technologies in the Semiconductors, Printed Circuit Boards (PCB) and IC Substrates industries.  Camtek addresses the specific needs of these interconnected industries with dedicated solutions based on a wide and advanced platform of technologies including intelligent imaging, image processing and functional 3D inkjet printing.  (Camtek 09.06)

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3.1  GSE Systems Opens New Office in Bahrain to Serve Customers in Middle East

Sykesville, Maryland’s GSE Systems, a global energy services solutions provider, opened a new office in Manama, Bahrain to better serve current and future customers in the Middle East, Northern Africa and surrounding area.  The office officially opened in May 2015 and is meant to make it easier for GSE’s Middle Eastern and other regional customers to communicate with the company and have access to its innovative workforce and plant performance solutions for the global energy industry.  “The intention of this office is to be closer to their customers, partners and those who are passionate about performance improvement services and technology.  This marks GSE’s tenth office worldwide, in addition to locations in the US, UK, Sweden, China and India.  (GSE 09.06)

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3.2  Japan’s 7-Eleven to Open First Dubai Store in September

The first 7-Eleven convenience store will open in Dubai in September as part of a franchise deal with Seven Emirates Investment.  Khamis Al Sabousi, president of Seven Emirates Investment, said the opening is part of plans by the Japanese convenience store brand to launch more than 820 stores in the region over the next 10 years.  In a joint statement with Dubai’s Department of Economic Development (DED), Al Sabousi said bringing a leading retailer like 7-Eleven to the region is part of his company’s efforts to develop existing supply chains, provide innovative nutritional solutions, and encourage young people to explore franchising as a business model.  There are currently more than 56,000 7-Eleven stories in 16 countries worldwide.  (AB 05.06)

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3.3  UAE’s Hotbrands Opens Three New Restaurants Across GCC

UAE-based food services company, Hotbrands International (HBI), has announced the opening of three quick service restaurants in new locations in the GCC.  The retailer said the launches were part of its on-going expansion aimed at further consolidating its wide footprint in the region.  HBI has opened both Shamiana and Magic Wok restaurants at the Dubai Airport Freezone, while Magic Wok also opened in Avenues Mall in Oman and a new-look Magic Wok re-opened in the Mall of the Emirates following refurbishment.  HBI’s flagship brand Shamiana serves authentic Indian cuisine and Magic Wok is renowned for its Chinese flavors.  The new outlets are part of a plan to increase HBI’s portfolio of multi ethnic food concepts offering cuisines of different countries and cultures.  HBI opened its first outlet in Dubai 23 years ago, and has now grown to more than 50 outlets in the GCC, India and United States.  (AB 05.06)

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3.4  Mecca to Host World’s Largest Holiday Inn Hotel

InterContinental Hotels Group (IHG) announced the signing of a management agreement with Al Majd Al Arabiah Company to operate the world’s largest Holiday Inn hotel in Saudi Arabia.  Holiday Inn Makkah Abraaj Al Tayseer is due to open in the holy city of Mecca and will comprise 5,154 rooms across five towers.  Holiday Inn Makkah Abraaj Al Tayseer will take the site of the current Abraaj Al Tayseer pilgrim accommodation and open in phases.  Nearly 1,650 rooms across two towers are due to open its doors to guests by the end of this year.  The remaining 3,500 rooms are slated to open over the following three years.  The opening of Holiday Inn Makkah Abraaj Al Tayseer will cater to the growth in pilgrim visits to Mecca.  Hajj visit numbers are expected to more than double, growing from 2 million in 2013 to exceed 5 million by 2025.

IHG is one of the largest international hotel groups in Saudi Arabia with 25 hotels (5,900 rooms) operating across three brands.  The company has nine properties in the pipeline due to open in the next three to five years, including Hotel Indigo Riyadh King Abdullah Financial District (KAFD), the first Hotel Indigo property in the Middle East and the world’s second largest Holiday Inn – also due to open in Makkah in 2016.  (AB 06.06)

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3.5  Oshkosh Subsidiary Chosen by Saudi Aramco to Supply Multi-Purpose Firefighting Trucks

Oshkosh Fire & Emergency Group, part of Oshkosh Corporation, has been selected by Saudi Aramco to engineer and manufacture 22 heavy-duty industrial multi-purpose firefighting apparatus.  Custom engineered by Oshkosh Corporation subsidiary Pierce Manufacturing (North America’s leading apparatus brand), the vehicles will be placed into service beginning in mid-2016 at Saudi Aramco facilities.  All 22 of the vehicles are built on a heavy-duty Pierce custom chassis and are specifically engineered for the unique requirements of industrial firefighting applications.  Service and support will be provided by Oshkosh Fire & Emergency Group.  Last month, Oshkosh announced an expanded presence in the Middle East to better serve Oshkosh and Pierce customers throughout the region.

Saudi Aramco is headquartered in Dhahran, Saudi Arabia.  The state-owned oil company of the Kingdom of Saudi Arabia, Saudi Aramco is a fully integrated, global petroleum enterprise and a world leader in exploration, production, refining, distribution, marketing and petrochemicals manufacturing.  (Oshkosh 05.06)

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3.6  Particle Measuring Systems (PMS) Announces New Greece-Based Distributor

Colorado’s Particle Measuring Systems (PMS) finalized an agreement making Link Lab a new distributor of its products and services.  As the official distributor for PMS in Greece, Link Lab will sell and install PMS products. PMS is the largest particle counting manufacturer in the world.  The partnership between PMS and Link Lab will offer customers key advantages, such as convenient installation of PMS products, direct contact with the manufacturer, expedited services and enhanced customer support.

Link Lab has established itself as a trusted business serving the pharmaceutical, hospital, food and microelectronics industries.  In 20 years the company has grown from its initial focus on laboratory instruments to include a wide array of laboratory-related products and services.  To keep its products performing at the highest level, Link Lab conducts all product-performance measurements using International Organization for Standardization (ISO) guidelines. Link Lab also ensures that PMS handles product repair in strict accordance with ISO guidelines.  (PMS 10.06)

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4.1  Israel’s First Ever Natural Gas Powered Vehicle is an Iveco Stralis

CNH Industrial and Fiat Chrysler Automobiles (FCA) announce an important achievement and milestone for the Israeli vehicle market: the commercialization of the first ever natural gas vehicle.  This order falls under the recently signed Memorandum of Understanding (MOU), which foresees a partnership between the companies and Israel’s Fuel Choices Initiative (IFCI).

IFCI is a ten-year Israeli Government program, managed through the Prime Minister’s Office, which is dedicated to reducing the World’s dependency on oil for transport and supporting the development of alternative fuels.  The signed MOU specifies that FCA and CNH Industrial, along with several of their brands, will assist in the research, development and implementation of natural gas based fuels for transportation.

The vehicle in question is a Stralis 4×2 heavy truck from CNH Industrial’s commercial vehicles brand Iveco. It is powered by an Iveco Cursor 8 Compressed Natural Gas (CNG) Euro VI engine.  The Stralis CNG will be supplied to Fridenson Group, one of Israel’s leading logistics companies with an existing fleet of over 140 trucks and trailers.  This delivery is being managed by MCA, the exclusive importer of Iveco as well as several brands belonging to FCA for Israel.  Fridenson Group plans to use the CNG truck in a pilot program that demonstrates its commitment to ensuring a cleaner environment.  As expressed by the Group, this first step will lead to the replacement of a significant number of diesel engine trucks in favor of CNG-powered models.  Further to this development, MCA will also be importing a 12-metre CNG urban bus from CNH Industrial brand Iveco Bus. A series of demonstrations of the bus’s capabilities will be carried out in the country over a two-month period.

The companies’ partnership with IFCI seeks to assist the Government of Israel in fulfilling its set objective to establish the country as an alternative fuels knowledge hub. The IFCI program calls for the increased use of alternative fuel technologies in Israel’s transportation sector with a significant portion of the vehicle fleet being so equipped by 2020.  (CNH Industrial 15.06)

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4.2  Jordan’s Largest Solar Project Launched

The Shams Maan Solar Photovoltaic Project, the largest solar energy project in Jordan, was launched by Prime Minister Abdullah Ensour on 8 June.  Ensour said Amman encourages innovative projects in the governorates in line with Royal directives, and is focusing on alternative energy projects.  The premier noted that the project is needed as Jordan has suffered from the repercussions of the Arab Spring, especially with the halt in Egyptian gas supplies, leading to losses estimated at JD3 billion.  He noted that Jordan has been leading the region in drafting the Renewable Energy Law in 2012 as part of the national energy strategy for the years 2015-2020.  The national strategy seeks to diversify energy sources, setting a 10% renewable energy contribution to the total energy mix by 2020.  Ensour also cited the solar power projects established at the planning and transport ministries, as examples of the government’s commitment to renewable energy.  The prime minister highlighted the importance of establishing the project in Maan, 330 km south of Amman, which has one of the world’s highest annual daily averages of solar irradiance.  Jordan has an estimated 330 days of sunshine per year.  The 52.5 megawatt (MW) project, with investments worth around $170 million, is being built on a 2-million square-meter area, and is expected to cover 1% of the Kingdom’s total annual consumption of energy upon completion.  (JT 08.06)

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4.3  Dubai Firm Set to Launch Solar Plant in Uganda in 2015

Access Infra Africa, a Dubai-based company, will launch what it says will be Africa’s largest privately-owned solar plant in Uganda this year, part of plans to develop electricity projects in 17 African countries, mainly based on renewable energy.  The company will spend $500 million in the next three years on power generation plants, including in Egypt, Ghana, Uganda, Tanzania, Kenya and Mozambique.  By 2018, the company’s portfolio would generate nearly 1 gigawatt of electricity, about enough energy for 700,000 homes.

In Uganda, Access Infra Africa’s 10 MW solar and wind power station will start generating electricity later this year, the first of its plants to become operational.  Two institutions, FMO, the Netherlands’ development bank and London-based Emerging Africa Infrastructure Fund, provided debt funding for 70-80% of the project’s costs, with Access Infra Africa committing the remainder in equity.  French energy group EREN Developpement has a shareholding in Access Infra Africa.  Access Infra Africa will own and operate the plant for 20 years, selling power to Uganda’s national grid, while capacity may be increased to 40 megawatts.  In 2016, Access will also launch a 50-megawatt solar and heavy fuel oil hybrid plant in Benin and a 200-megawatt solar and wind plant in Egypt.  (AIA 09.06)

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5.1  Lebanon’s Trade Deficit Plunged by 22% to $4.64 Billion by April

Lebanon’s trade deficit dropped by 22% year-on-year (y-o-y) by April 2015 to record $4.64b due to a 20% decrease in overall imports outpacing the 8.7% decline in total exports.  This was mainly due to the prominent trend of the depreciating Euro and falling international oil prices, over the same period.

Total imports, in the first four months of the year, tallied $5.61b compared to $7.04b during the same period last year.  The three major product categories that were imported to Lebanon by April were mineral products (16.6% share of total imports), machinery and electrical instruments (11.9% share of total imports) and products of the chemical or allied industries (11.7% share of total imports).  The yearly change in imported mineral products, displayed a substantial drop of 47.13% from April 2014.  With demand for that commodity being inelastic, the nose dive in mineral imports goes hand in hand with the average 44.20% decrease in the price of international oil since April of last year.  In addition, machinery and electrical instruments went down by 16.6% y-o-y by April, despite the increase in tonnage imported from 78 tons by April 2014 to 334 tons this year.  So this downturn might be attributed to the drop in overall Chinese prices and the depreciating Euro since China and Europe sells about 40% of electrical appliances to Lebanon.  Similarly, total exports fell yearly by 8.71% to $978.58m by April 2014 in parallel with the 2.41% decrease in volume of overall exports to 568 tons.

Exported prepared foodstuffs, beverages and tobacco (16.6% share of total exports) experienced a yearly contraction of 4.75% by April due to the 6.31% fall in exported volume to 104 units.  Furthermore, exported pearls, precious stones and metals constituting 15.7% of total exports, went down by 23.6% y-o-y partially due to the average 4.51% y-o-y fall of international price of gold to 1,192.46 $/ounce. Furthermore, Machinery and electrical instruments (14% share of total exports) underwent an annual 5.46% shrinkage in the value of exports due to the rise in prices as the volume slumped by 17.39% to 19 tons.  In terms of the major destinations of the Lebanese exports, Saudi Arabia, UAE and Iraq grasped respective weights of 13.25%, 10.58% and 8.28%.  (Blominvest 14.06)

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5.2  Lebanese Gross Public Debt Reached 145.12% of GDP by March

The Lebanese Gross Public Debt (GPD) amounted to $69.43 billion by March 2015, broadening by 6.56% year-on-year (y-o-y) and 4.29% year-to-date (y-t-d).  Hence, Lebanon’s public debt reached 145.12% of GDP compared to 135.46% in March 2014.  Debt in domestic currency, representing 60.44% of total gross debt, grew by a yearly 8.23% to reach $41.96 billion, while foreign currency debt increased by 4.07% y-o-y to stand at $27.46 billion, over the same period.  For the past years, investors have been more enticed to subscribe to domestic currency debt rather than the one denominated in foreign currencies due to the yields being more attractive on local debt securities.  In fact in 2008, the local debt to foreign debt was actually at parity.  The Net Public Debt, which excludes public sector deposits at commercial banks and the Central Bank (BdL), widened by 7.57% annually to $58.51 billion and registered a 2.10% y-t-d increase by March 2015.  Commercial banks remained the largest subscribers of Treasury bills and bonds with a share of 49.2%, followed by 34.1%% stake for BdL and 16.7% for the non-banking sector (largest contributor is NSSA).  (Blominvest 04.06)

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5.3  Lebanese Airport Passengers Increased by 8.93% by May

Rafic Hariri International Airport (RHIA) activity progressed during the first 5 months of 2015, where the total number of passengers improved by 8.93% year-on-year (y-o-y) to 2.52 million, compared to a lower number of 2.31 million by May 2014.  Specifically, the number of arrivals went up by a yearly 9.62% to 1.23 million in May 2015, as well departures amounting to 1.28 million, rising by an annual 8.46%, over the same period.  In contrast, transit travelers dropped by 24.59% to 4,700.

Taking the month of May alone, the total number of airport passengers augmented by 6.57% yearly to reach 545,151, partly due to improving security situation in Lebanon, and the summer season under way.  Arrivals increased by 5.80% to 276,056, and departures went up by 7.59% reaching 268,339.  However, transit travelers went down from 1,212 in May 2014 to 756 in the same month this year.  (Blominvest 05.06)

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5.4  Jordan Economy Recovering from Regional Upheaval

Jordan’s economy will continue to recover from the ramifications of the Arab Spring at a steady but slow pace and the real GDP is projected to grow by 3.5% in 2015.  However, turmoil in the region – namely, in Syria and Iraq – and rising oil prices remain the top two challenges facing the Jordanian economy, a report by Jordan’s Ministry of Planning and International Cooperation and the World Bank reveals.  The report highlights the resilience of the Arab country’s economy to withstand shocks and challenges arising from the political and security unrest in the region.  According to the report, small and medium enterprises continue to face major hardships in finding access to financing.  It notes that economic expansion and additional fiscal controls by the government have helped in narrowing the financial deficit.  Real GDP is projected to hit 3.5%, driven by strong consumption and the growing volume of investments.  (AME 03.06)

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►►Arabian Gulf

5.5  Gulf Expatriate Workers Sent Home $100 Billion Last Year

Foreigners working in the energy-rich Arab states of the Gulf sent more than $100 billion in remittances to their home countries last year,  The figure was twice as high as remittances in 2010, an indication of strong growth, the Kuwait Financial Center (Markaz) announced.  Around 25 million expats live in the Gulf Cooperation Council states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – which is equal to the native population.

The remittances are estimated at 6.2% of the combined GDP of the six GCC states of $1.6 trillion, the report said, citing IMF and World Bank figures.  In comparison, foreigners in the United States and Britain sent home just 0.7% and 0.8% of GDP, respectively.  Saudi Arabia topped the list with its estimated 10 million expats sending home $44 billion, followed by UAE with $29 billion.  Remittances from Kuwait and Qatar were $12 billion and $9.5 billion, respectively, while smaller transfers were made out of Oman and Bahrain.

The majority of Gulf expatriates originate from India, Egypt, the Philippines, Bangladesh and Pakistan, as well as Indonesia, Sri Lanka and Yemen.  The report attributed the high level of remittances to curbs applied by GCC states on foreign ownership and investment.  Unlike in Western countries, foreigners have no hope of acquiring citizenship in GCC states regardless of the duration of residence.  The report advised GCC states to encourage expats to invest by launching specialized services and opening up their markets to foreign residents, especially the real estate sector.  (AFP 10.06)

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5.6  Qatar Earmarks Five Sites for New Hospitals

Qatar’s government has identified five plots of land to build new hospitals in partnership with the private sector.  The hospitals will be built in four areas of Doha – North of Qatar University, Ain Khaled, Abu Hamour and Al Furoush (in the north) — on plots ranging in size from 10,000 sq. m. to 14,000 sq. m.  They will be dedicated for women and childcare, mental health and “other relevant specialties.  The proposed new development is a joint venture by the Ministry of Economy and Commerce and the Supreme Council of Health, aimed at attracting private sector investment in hospital “build and operate” schemes.  The government has now launched a public survey seeking feedback on the plans. Afterwards, a tender will be launched for potential new investors.  (AB 14.06)

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5.7  IMF Says Cheap Oil to Push UAE into First Fiscal Deficit Since 2009

The United Arab Emirates is set to post its first fiscal deficit since 2009 because of lower oil revenues, but it can avoid any serious economic slowdown, the International Monetary Fund said.  The UAE’s consolidated fiscal balance is expected to swing to a deficit of 2.3% of GDP in 2015 from a 5.0% surplus last year.  The deficit posed no threat to the economy, for at today’s oil prices, the UAE could keep spending at current levels for at least 30-40 years, drawing on its ample financial reserves.  Brent crude is currently around $63 a barrel.  But, UAE authorities are considering ways to consolidate spending as a matter of prudence.  The IMF predicts a 2.2% fiscal surplus next year.

The IMF is urging the UAE to consider slowing growth in current spending – expenditure in areas such as wages and raw materials – while expanding its revenue base with new taxes.  One option would be to introduce a value-added tax, which Gulf nations have been discussing.  It would probably have to be adopted region-wide to avoid smuggling and distortions to individual countries’ economies.  The IMF also suggested the UAE consider introducing excise taxes and a uniform corporate tax for both local and foreign companies.  At present there is little corporate taxation outside the oil sector, apart from a 20% levy on foreign banks in Dubai.  The IMF predicts GDP growth will slip to 3.0% this year from 4.6% in 2014, but edge up to 3.1% next year.  (AB 06.06)

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5.8  Saudi Arabia Said to Increase Military Spending to $60 Billion by 2020

Saudi Arabia will reportedly increase military spending by almost a quarter over the next five years, according to a report by IHS Jane’s.  Riyadh is forecast to boost its arms budget to $60 billion by 2020 from a current level of $49 billion, following a slowdown in the short-term caused by the lower price of oil.  The increase in spending will make Saudi Arabia the world’s fifth-largest military spender, up from eighth.

In April, a report by the Stockholm International Peace Research Institute (SIPRI) said Saudi Arabia, which is currently leading a coalition of allies fighting Houthi rebels in Yemen, oversaw one of the largest increases in military spending in 2014.  Saudi Arabia currently heads a coalition of predominantly Sunni nations fighting Houthi rebels in Yemen it says are backed by Iran, and is part of a US-led coalition carrying out air strikes against ISIL fighters in Syria, along with Jordan, Bahrain and the UAE.  Saudi Arabia’s defense spending rose by 17% compared to the previous year, according to figures released by SIPRI.  (AB 07.05)

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5.9  Saudi Arabia Considers 40 Hour Working Week

The Saudi Shoura Council will again consider introducing a two-day weekend for the private sector, a year after it was blocked by business chambers.  Labor Minister Mufrej Al Haqbani said the Council of Ministers had requested a feasibility study.  Private sector employees, who work longer hours than those in the public sector (who are typically Saudi nationals), have been calling for parity, claiming it would improve productivity, their personal lives and social relationships.  It also would help expedite the kingdom’s Saudization program, which is reportedly also being reviewed.  But the Council of Saudi Chambers last year argued it would increase business and labor costs, affecting the economy.  (AB 15.06)

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►►North Africa

5.10  Food Price Shocks Drive Egypt’s Inflation to Highest in Five Years

Egypt’s annual headline inflation hit a five year peak in May at 13.11% compared to 10.96% in April on the back of food price hikes.  Inflation accelerated in Egypt as the government first slashed energy subsidies in July of last year, raising prices at the pump by up to 78%.  Egypt’s annual core inflation, which excludes volatile items to look at long-term inflationary pattern, accelerated to 8.14% from 7.19% in April, the country’s central bank (CBE) announced.  Core inflation shows a more objective view, reaching two year lows between January and April of 2015. The rise of core inflation in May would only be worrying if it becomes a pattern in the coming months.  (CBE 10.06)

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5.11  Egypt Signs African Free Trade Deal as Part of 2063 Plan

Egypt signed on 10 June an agreement to form Africa’s largest free trade area (FTA), as part of a larger-scale African agenda for the year 2063.  The deal brings together 26 African countries that are members of the three regional economic committees (REC): COMESA, EAC and SADC.  It aims to create free trade zones for goods immediately with the hope of introducing services and intra-continent investor opportunities at a later stage.  It involves connecting African countries with a strong infrastructural network, including transportation, energy and telecommunication.  Egyptian President El-Sisi referred to the construction of a road network connecting the south of Africa to its northern shores.  He said Egypt had recently completed a road connecting it to Sudan and is currently finishing the construction of crossings on the road.  The FTA includes 26 countries with 57% of the African population and over 60% of African GDP.  An FTA covering the whole African continent is expected to be formed by 2017.  (Ahram Online 10.06)

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5.12  Egypt, Sudan and Ethiopia Agree to Form Supreme Trilateral Council

On the fringes of the African economic summit in Sharm El-Sheikh, Cairo, Addis Ababa and Khartoum move to cement economic and political coordination between the three Nile nations.  Egyptian President Abdel-Fattah El-Sisi, Sudanese President Omar El-Bashir, and Ethiopian Prime Minister Hailemariam Desalegn agreed on 10 June to form a supreme council for mutual economic and political issues.  The council is another step to strengthen ties between Egypt and Ethiopia after Cairo voiced fears over the Addis Ababa’s Grand Renaissance Dam project and its possible effect on Egypt’s share of water from the Nile.

Addis Ababa has repeatedly affirmed that the 6,000 megawatt dam, which will be Africa’s biggest hydro-electric station, would not harm downstream countries Egypt and Sudan.  In April, the three countries selected two international consultancy firms to conduct studies determining the impact of the contested dam on Egypt and Sudan.  In March, Egypt, Sudan and Ethiopia signed a declaration of principles on the dam, agreeing to safeguard the interests of all three countries.  (Ahram Online 10.06)

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5.13  Egypt’s Total Expenditure on Basic Education Reached 6.6% of Total Spending

The expenditure on primary education reached LE45.3 billion, which constitutes 6.6% of total public expenditure and 56% of total expenditure on education in 2013/2014, according to CAPMAS.  CAPMAS said that the most important issues related to primary education include widespread abstention from enrollment, insufficient classroom capacity, high amount of pupils in classes and school dropouts.  The number of elementary schools has increased to 28,500 in 2013/14, CAPMAS said, expecting the number to reach 34,200 schools by 2024/25. The number of elementary school pupils reached 14.2 million in 2013/14, while the number of teachers reached 636,900 in the same period.  The average amount of pupils in classes in the primary stage reached 42.8 per class in 2013/14.  The highest amount was witnessed in Giza, Qalyubia and Kafr al-Sheikh, while the lowest was registered in South Sinai.  The average amount of students in elementary schools is 40.3 students per class in 2013/14.  The number of dropouts reached 73,300 students in the primary stage, compared to 187,600 students in preparatory stage, between the years 2011/12 and 2012/13.  The rate of enrollment in primary schools reached 95.2% in 2013/14.  (CAPMAS 08.06)

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5.14  Morocco Shows Second Highest Growth Performances in MENA

The World Bank’s latest Global Economic Prospects (GEP) report stated that the Moroccan economy is expected to grow by 4.6% in 2015.  Morocco showed one of the highest growth performances in the MENA region.  The kingdom comes second only to Djibouti, which is expected to grow by 6.5% this year.  In 2016-2017, growth of the Moroccan economy is expected to rebound to 4.8 and 5.0%, respectively.  According to the report, economic gains will be supported by a return to normal agricultural output and successful diversification reform efforts.  In contrast, growth slowed sharply in 2014 to 2.6% due to a contraction in agricultural output and weak exports to the Euro area.  To maintain competiveness, Morocco’s central bank depreciated the Dirham by 4 – 8% against the U.S. dollar in the first three months of 2015.  Growth is expected to remain flat at 2.2% in 2015 in the MENA region.  For 2016-2017, growth is expected to reach 3.7%.  This is mainly thanks to improving external demand, strengthening confidence in some oil-importing countries, and the assumed gradual stabilization of security.  (WB 11.06)

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5.15  WEF Says Morocco Most Competitive Country in North Africa

Morocco is the most competitive country in North Africa, according to a World Economic Forum (WEF) report released on 4 June.  Morocco moved up five places to the 72nd in the World Economic Forum’s 2014-2015 Global Competitiveness Report, making it the fourth most competitive country in the African continent behind Mauritius (39th), South Africa (56th) and Rwanda (62nd).  According to the WEF report, a reduced budget deficit (between 2012 and 2013) and improvements in the primary education and innovation support the country’s rise in the rankings.  The report recommends that Morocco should continue its successful efforts to address key competitiveness challenges.  Necessary measures, the report suggests, include boosting education (104th) in terms of both quality and access, and reforming its labor market (111th).  (MWN 06.06)

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5.16  Half of Moroccan Households Have Internet

The internet penetration rate in Moroccan households reached 50.4% in 2014, an increase of 5% compared to 2013, said the National Telecommunications Regulatory Agency (ANRT).  The preferred mode of access to the internet is the mobile connection used by nearly 36% of households, while only 5% of households have access to the internet via a fixed connection.  Some 9% of households with no internet access intend to get it during the next 12 months, choosing mainly a mobile connection (63.4% of them).  Households that did not have internet access in 2014 cite the high cost of equipment (47.2%) and the lack of utility (46.7%).  The cost of internet service, according to these households, comes in 3rd position and has declined compared to 2013.  The ANRT said that in 2014 Morocco there were nearly 17.3 million internet users, one million more than in 2013, which stands for 56.8% of the Moroccan population.  (MWN 10.06)

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6.1  Turkey’s Unemployment Rate Rises to 10.6%

Turkey’s unemployment rate rose to 10.6% in the three months starting in February, 0.9% higher than in the same period of last year, according to the Turkish Statistical Institute (TUIK) on 15 June.  The number of unemployed aged 15 years old and above rose by 322,000 to 3,069,000 in the period of March, including February, March and April.  In the same period, the non-agricultural unemployment rate rose by 1% to 12.6%, while youth unemployment rate including the 15-24 age group soared by 1.9%age points to 18.6%.  The unemployment rate for the 15-64 age group rose by 0.9% to 10.8% over the same period.  Turkey’s unemployment rate is expected to rise by 0.5 points to 11.4% in 2015, from 9.9% in 2014, and rise further to 11.6% in 2016.  (HDN 15.06)

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6.2  Greece Willing to Compromise with EU/IMF Government

Greece is willing to compromise to reach a deal with its EU/IMF creditors that is acceptable to both sides and is ready to negotiate until the end of June to achieve this, Athens said on 8 June.  The comments struck a more conciliatory note after Prime Minister Alexis Tsipras’s earlier outright rejection of a proposal from lenders and suggested Athens is willing to make concessions despite anger within the ruling Syriza party over the austerity cuts needed to secure a deal.  Athens badly needs the creditors to release remaining funds from the bailout program to meet debt repayments by the end of June, but neither side has agreed to each other’s proposals.  The original extension to the €240 billion bailout program is due to expire at the end of this month.  Greece delayed a €300 million payment to the IMF, saying it would repay the money along with other debts due this month to the lender by the end of June.  (Reuters 08.06)

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6.3  Greek PM Seeks Long-Term Deal, Sees Debt Restructuring Problems

Greek Prime Minister Alexis Tsipras said on 16 June that Athens was seeking a viable, long-term deal that would pull the country out of economic crisis but faced a deadlock with creditors over debt restructuring.  Tsipras said the main factor blocking a deal was difference between its European and IMF creditors over debt restructuring.  (Various 16.06)

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7.1  Double-Decker Buses to Return to Israel’s Roads

After a very long absence, double-decker buses are set to make a comeback on Israel’s roads this year.  The National Public Transport Authority in the Ministry of Transport is to carry out a pilot study in which about five double-decker buses will be bought for a trial on Egged and Dan urban routes.

Over a decade ago, Egged was using double-decker buses from Neoplan on inter-city routes, but because of recurring operational problems they were abandoned.  The new trial will be of more advanced buses currently designed for urban use only, and among other things the option is being examined of buses with hybrid power systems.  If the trial succeeds, these buses could represent a good solution to the problems of public transport at peak traffic times, with a near-double passenger capacity, the same area on the road, and about half the air pollution, of the single-decker buses currently in use.  (Globes 16.05)

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7.2  UAE Private Sector Working Day to Be Cut By 2 Hours During Ramadan

The UAE’s Ministry of Labour has announced that working hours across all enterprises, institutions and private sector companies in the country will be reduced by two hours per day during Ramadan, with no reduction in wages.  The announcement came in a circular issued by the Ministry of Labour.  The Ministry of Labour will maintain services to customers from 09:00 to 17:30 during the month, except on Fridays and Saturdays.  The ministry applies flexible working hours amongst its employees to ensure service provision throughout the day.  WAM also announced that working hours for UAE public sector employees during Ramadan will be from 9am to 2pm.  Earlier, it was reported that the first day of Ramadan in the UAE this year will likely be 18 June.  (WAM 15.06)

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7.3  Cairo Has 33 Hospital Beds for Every 10,000 Patients

The Egyptian Centre for Economic and Social Rights (ECESR) said only 33 beds are available for every 10,000 citizens in Cairo’s hospitals.

A campaign was launched on Facebook by an anonymous group of doctors in early June, who published images inside public hospitals across different governorates in Egypt.  The page shows images of snakes, cats, rats and other animals roaming inside clinics and on patients’ beds.  The pictures also showed patients lying on the floor for treatment, damaged tools and infrastructure, and poor-quality dorms used by doctors and nurses.

Prime Minister Melheb visited the Imbaba cardiology center on 6 June in an alleged inspection of its conditions.  During the visit, he decided to switch the health minister’s office to the center for one week and make it rotational for other medical centers and hospitals in Egypt.

The ECESR report mentioned that the amount of governmental expenditures on healthcare in Egypt is 5.4%, which is far less than other countries in Africa, such as Djibouti, which has healthcare expenditures upwards of 14%.  The government is reportedly negotiating with the World Bank to receive a new loan of $300m to support healthcare in government hospitals.  This is set to occur through the provision of medical equipment and the removal of deficient drugs from government hospitals.

In February, the World Bank loaned $275m to the Egyptian government to support and provide comprehensive health care to all Egyptian families during the next five years.  The selected families reside in the poorest 1,000 villages, 93% of which are based in Upper Egypt.  (DNE 10.06)

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7.4  Erdogan Loses Majority in Turkish Election

Turkey’s dominant Justice and Development Party (AKP) lost its parliamentary majority in elections on 7 June.  Though it retained a plurality of seats after receiving 41% of the vote, the election marked its worst showing since 2002.  Analysts say it may struggle to form a coalition government — already, three opposition parties have said they will not partner with the AKP — and the leadership may bid for new elections if a majority cannot be found quickly.

For the first time in Turkish history, a Kurdish party, the People’s Democratic Party (HDP), passed the 10% threshold to be seated in parliament.  The party received 12% of the vote with a list that included Kurds (some with ties to the armed resistance to the Turkish government), women and gays.  Turkey’s traditional secular party, the Republican People’s Party, received 25% of the vote.

The elections complicate President Erdogan’s ambitions for a program of sweeping constitutional reforms that would further empower his executive office and thin the system of checks and balances.  That looks less likely without an AKP majority in the parliament.  The resurgent popularity of Turkish opposition parties, including votes for the HDP, are in part a backlash to AKP policies that have stoked tensions with secularists and minority groups, which have been more visible since the Gezi Park protests in 2013.  The Turkish lira sank quickly as the election results were announced, with analysts citing the most political uncertainty in more than a decade, though Turkey’s central bank has moved to lessen the economic damage.

After the final official results are confirmed, there is a 45-day period in which a new government needs to be formed, or new elections will be called.  (Various 08.06)

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7.5  Turkey Set For Parliament with Highest Female Representation Ever

All four parties represented in Turkish parliament, except the ruling Justice and Development Party (AKP), have increased the number of their women deputies, thus labeling the 25th term of parliament as one with the highest number of women deputies in Turkey’s history of democracy.  In the previous election, 79 women made their way to parliament, while in the 7 June election, 97 women won a seat at the male-dominated parliament.

Out of those 79 women, 46 of them were from the ruling AKP, 19 from the main opposition Republican People’s Party (CHP) and three from the Nationalist Movement Party (MHP), while 11 of them were elected as independent candidates for the Labor, Democracy and Freedom Bloc supported by the Peoples’ Democratic Party’s (HDP) predecessor, the Peace and Democracy Party (BDP).

This time, the AKP was able to send 41 women deputies to parliament, while the HDP enhanced the number its women deputies the most.  Having passed the 10% threshold in order to become represented as a party at parliament, the HDP increased its women deputy number to 30.  In the new assembly, the CHP will have 22 seats for its women deputies, while the MHP will only have four.  The HDP, which has the strongest representation of women, proved its gender policy promises with the votes they received.  According to HDP rules, a man and a woman must share the chairpersonship.  The HDP’s co-chair system ensures that a man and woman share all positions, from deputy chairpersonship to mayoral positions.  (HDN 08.06)

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8.1  Research Underlying BioLineRx’s Treatment of Type 1 Diabetes Wins Hebrew University Award

BioLineRx announced that research underlying BL-9020, for the treatment of Type 1 diabetes, won the Hebrew University’s prestigious Kaye Innovation Award.  The award was granted to Hebrew University immunologist Professor Ofer Mandelboim, who studied the function of a protein receptor called NKp46 in the development of Type 1 diabetes.  Prof. Mandelboim showed that NKp46 present on Natural Killer cells has a critical role in the development of the disease in mice, and that inhibition of the receptor almost entirely prevented the development of diabetes.  This groundbreaking research is the basis for BioLineRx’s BL-9020, a novel monoclonal antibody which targets the Natural Killer (NK) receptor NKp46 for the prevention and treatment of Type 1 diabetes.

In January 2014, BioLineRx entered into a collaboration agreement with JHL Biotech for the further development and commercialization of BL-9020 in China and additional Southeast Asia countries. Under the terms of the agreement, BioLineRx retains the development and commercialization rights in the rest of the world.

BL-9020 is a novel monoclonal antibody treatment designed to prevent immune-mediated destruction of insulin-producing beta cells in the pancreas.  It was developed to treat Type 1 diabetes in early stage patients, during what is known as the “honeymoon period,” where the pancreatic beta cells have not been completely destroyed and continue to secrete insulin.  BL-9020 targets NKp46, a unique target that is involved in the innate response against the pancreas.  Pre-clinical studies in mouse models of Type 1 diabetes suggest that BL-9020 can inhibit beta cell death, thus preventing full maturation of the disease.  This effect could significantly delay, and potentially prevent, the need for chronic insulin use by Type 1 diabetes patients, as well as provide a potential benefit in minimizing diabetes-related complications.

Jerusalem’s BioLineRx is a publicly-traded, clinical-stage biopharmaceutical company dedicated to identifying, in-licensing and developing promising therapeutic candidates.  The Company in-licenses novel compounds primarily from academic institutions and biotech companies based in Israel, develops them through pre-clinical and/or clinical stages, and then partners with pharmaceutical companies for advanced clinical development and/or commercialization.  (BioLineRx 03.06)

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8.2  Compugen Novel Cancer Immunotherapy Targets Candidate and Infrastructure

Compugen disclosed an additional novel immune checkpoint target candidate, CGEN-15029 and initial experimental validation data for this candidate at its Analyst and Investor Day in New York City.  In addition, the Company disclosed a new computational infrastructure, LINKS, which is designed for the comprehensive and comparative assessment of drug targets.  Initial usage of this new infrastructure resulted in the selection of five target candidates, including CGEN-15029, as the highest priority immune checkpoint target programs to be advanced by the Company.

CGEN-15029 is one of eleven novel B7/CD28-like immune checkpoint candidates discovered by Compugen.  Initial validation studies show that expression of CGEN-15029 in T-cells inhibits their activation by melanoma cells, consistent with an immune suppressive role of the target in the tumor microenvironment.  The target possesses signature immune-checkpoint receptor characteristics, including expression in relevant subsets of T- and NK-cells, with particularly high expression in lymphocytes that populate the tumor microenvironment (known as tumor infiltrating lymphocytes or TILs).  A binding partner for CGEN-15029 has also been identified, which enables a clear path towards selection of inhibitory antibodies and their therapeutic development.

The LINKS infrastructure is a novel, proprietary, in silico platform designed to allow comprehensive characterization and differentiation of drug target candidates.  LINKS was designed to integrate and analyze extremely large amounts of patients’ disease and clinical data to associate novel drug targets with specific disease conditions, clinical attributes and disease-associated mechanisms of action.  During the past several months, this new infrastructure was applied to analyze Compugen’s pipeline of immune checkpoint target candidates and to compare them to one another as well as to differentiate them from known immune checkpoints.  This analysis included immune subpopulations, regulatory mechanisms and cancer-specific immune signatures and enabled Compugen to compare and differentiate its large portfolio of novel immune checkpoint programs, other than the two that are subject to a collaboration agreement with a pharma partner.  Based on this assessment, as well as experimental data for the target candidates, Compugen selected five target programs as highest priority, including CGEN-15029, representing various aspects of cellular immune biology and therefore potentially addressing multiple therapeutic applications and indications.

Tel Aviv’s Compugen is a leading predictive drug discovery company focused on monoclonal antibodies and therapeutic proteins to address important unmet needs in the fields of oncology and immunology.  The Company utilizes a broad and continuously growing integrated infrastructure of proprietary scientific understandings and predictive platforms, algorithms, machine learning systems and other computational biology capabilities for the in silico (by computer) prediction and selection of novel drug target candidates, which are then advanced in its Pipeline Program.  (Compugen 08.06)

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8.3  Algatechnologies & Fujifilm Join to Promote Natural Astaxanthin

Algatechnologies signed a supply and long-term collaboration agreement with Fujifilm Corp. (Fujifilm) in Japan, for its AstaPure natural astaxanthin ingredients.  Fujifilm recently took over Algatech’s major distributor in Japan and will promote astaxanthin raw materials.  The company already has been using Algatech’s natural astaxanthin as the main active ingredient for its nutrition supplement and cosmetics product line named Astalift.

Kibbutz Ketura’s Algatechologies is a rapidly growing biotechnology company, specializing in the commercial cultivation of microalgae.  Founded in 1998, Algatechnologies is a world leader in the production and supply of AstaPure – a premium natural astaxanthin – one of the world’s most powerful antioxidants sourced from the microalga Haematococcus pluvialis.  (Algatechnologies 08.06)

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8.4  Accellta Grants Rights for its Feeder-free Stem Cell Culture Medium

Accellta has granted worldwide non-exclusive rights to Thermo Fisher Scientific for manufacture and distribution of proprietary cell culture medium and ancillary products and methods.  Accellta’s patented technology is an important addition to stem cell growth, expansion and manufacturing technologies.  It was designed by Accellta to enable homogeneous growth of stem cell production by enabling culturing of the cells in feeder-free, serum-free and xeno- free media.  Accellta’s approach for culturing of pluripotent and differentiated stem cells in feeder-free conditions has been experimentally validated in numerous stem cell lines, including embryonic and induced human pluripotent stem cells.

Haifa’s Accellta was established in 2012 by the Technion and AMIT (the Alfred Mann Institute at the Technion).  The company offers a range of revolutionary solutions for better affordability and quality of stem cell culturing and for developing specialty media and stem cell lines and services.  Accellta’s unique solutions are the result of over 15 years of pioneering research and development at the Stem Cell Center of the Rappaport Faculty of Medicine at the Technion – Israel Institute of Technology. Accellta has also granted licenses to other multinational life-science companies, including STEMCELL Technologies, Ajinomoto, and Miltenyi Biotec.

Accellta is currently focused on creating strategic partnerships with biopharma and stem cell companies for developing large-scale and cost-effective tailor-made manufacturing processes for cell products. The company also plans to expand the use of its technologies for potential therapeutic applications of stem cells.  (Accellta 08.06)

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8.5  Israeli Health Breakthrough Awarded Gates Foundation Grant

Haifa’s Technion, the Israel Institute of Technology, has been awarded a grant as part of the Bill and Melinda Gates Foundation Grand Challenges Exploration program.  The Technion grant will go to Professor Hossam Haick of the Chemical Engineering Department and Russell Berrie Nanotechnology Institute, who is developing cutting edge biomedical technology, including a self-administered electronic patch for the detection of tuberculosis via skin.  More than 2 billion people around the world are estimated to have tuberculosis, and 10% of them will experience active symptoms in their lifetimes.  Some 95% of tuberculosis sufferers live in developing countries where inhabitants subsist on incomes of $1 per day.  The goal of Haick’s project is to develop a self-administered diagnostic method based on the adhesive patch.  The diagnosis, which uses a skin sample, would take up to five minutes, and it would be less expensive and more accessible than the current diagnostic tools.  (Various 11.06)

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8.6  Israeli Micro-Antenna to Treat Tiny Digestive Tract Cancers

Students at the Hebrew University in Jerusalem are developing an innovative micro-antenna able to focus radiation at tiny tumors in the digestive tract.  The university noted that there is currently no treatment for tumors in the early stages of cancer, when they measure less than 5 millimeters (0.19 inches).  The new antenna would eliminate the need to wait for the tumors to grow big enough to be treated, as well as eliminate the need for complicated, invasive surgery.  The micro-antenna would be inserted into the patient’s stomach via an endoscopic ultrasound tube and would allow radiation to be focused on the tiny tumors, if any such are discovered.  Development of the technique is expected to be completed within a year, pending funding.  (Israel Hayom 15.06)

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8.7  ApiFix Reaches Milestone to Treat Adolescent Idiopathic Scoliosis After CE Approval

Misgav’s ApiFix announced that the company’s ApiFix system has now been used to correct scoliosis in 50 adolescents since the system was approved for marketing in Europe.  ApiFix is a commercial-stage company that has developed the CE-marked ApiFix System — a non-fusion minimally invasive treatment alternative for Adolescent Idiopathic Scoliosis (AIS).  Scoliosis surgery is the most invasive procedure in spine.  The average procedure fuses 10 vertebrae together using 20 screws, resulting in significant and permanent loss of spine mobility.

A clinical study of The ApiFix® System published this year in the peer-reviewed medical journal Scoliosis concluded that “there are many drawbacks to the current gold standard of AIS surgery, which are almost nonexistent with the use of ApiFix: considerable blood loss leading to blood transfusions, neurologic deficit including spinal cord lesions, late infections, pseudoarthrosis, limitation of spinal motion also affecting non-fused levels, back pain and disc degeneration in the non-fused spinal segments. Almost all of these complications can be avoided by the use of Apifix.”  (ApiFix 15.06)

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8.8  Teva Announces FDA Acceptance of the Biologics License Application for Reslizumab

Teva Pharmaceutical Industries announced that the U.S. FDA has accepted for review the Biologics License Application (BLA) for reslizumab, the company’s investigational humanized monoclonal antibody (mAb) which targets interleukin-5 (IL-5), for the treatment of inadequately controlled asthma in adult and adolescent patients with elevated blood eosinophils, despite an inhaled corticosteroid (ICS)-based regimen.

The BLA for reslizumab includes data from Teva’s Phase III BREATH clinical trial program.  The program consisted of four separate placebo-controlled Phase III trials involving more than 1,700 adult and adolescent asthma patients with elevated blood eosinophils, whose symptoms were inadequately controlled with inhaled corticosteroid-based therapies.  Results from these studies demonstrated that reslizumab, in comparison to placebo, reduced asthma exacerbation rates by at least half and provided significant improvement in lung function and other secondary measures of asthma control when added to an existing ICS-based therapy.  Common adverse events in the reslizumab treatment group were comparable to placebo and included worsening of asthma, nasopharyngitis, upper respiratory infections, sinusitis, influenza and headache. Two anaphylactic reactions were reported and resolved following medical treatment at the study site.

Teva Pharmaceutical Industries is a leading global pharmaceutical company that delivers high-quality, patient-centric healthcare solutions to millions of patients every day.  Headquartered in Israel, Teva is the world’s largest generic medicines producer, leveraging its portfolio of more than 1,000 molecules to produce a wide range of generic products in nearly every therapeutic area.  In specialty medicines, Teva has a world-leading position in innovative treatments for disorders of the central nervous system, including pain, as well as a strong portfolio of respiratory products.  (Teva 15.06)

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8.9  Tikcro to Proceed with CTLA4 and PD1 Antibody Generation Plan

Tikcro Technologies announced that it will proceed with a pre-clinical plan for the generation and verification of new antibodies targeting the modulation of CTLA4 and PD1 cancer checkpoints.  Based on a novel approach, it is expected that such new antibodies will be generated and validated throughout 2015. These antibodies are expected to have greater specificity and binding qualities over existing antibodies.  CTLA4 and PD1 are acknowledged as key elements for harnessing a patient’s own immune system in cancer treatments.  Antibodies targeting these checkpoints were approved for clinical use. Interim clinical results show strong synergistic benefit for a combination treatment of such antibodies.

Tel Aviv’s Tikcro Technologies supports early stage development in growth areas, with a focus on biotechnology projects originated in Israeli academic centers.  The Company is currently engaged with development of certain antibodies, selected and verified in pre-clinical trials with a focus on antibodies binding to cancer immune checkpoints PD1 and CTLA-4.  (Tikcro 15.06)

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8.10  Nutrinia Granted FDA Orphan Designation for NTRA-9620 for Short Bowel Syndrome

Nutrinia announced that the U.S. FDA granted orphan drug designation for the company’s orally-administered drug for treating short bowel syndrome (SBS) in patients of all ages.  Nutrinia plans to begin a pivotal clinical trial in this indication.  The new treatment is aimed at helping thousands of patients worldwide, reducing their dependence on parenteral nutrition, which puts them at a higher risk for liver disease, infections, and other complications.  Subsequent to Nutrinia’s Investigational New Drug (IND) application, the company expects to launch a U.S. and European multi-national study in this patient population.  The company also plans to run a separate, concurrent clinical program of NTRA-2112 for the treatment of gastrointestinal (GI) malabsorption caused by intestinal immaturity in preterm infants.  Nutrinia formulated its products with excipients that are considered very safe and are already approved for infant consumption.  Early clinical studies suggest that the therapies increase enteral nutrition absorption, which is associated with improved long-term outcomes.

Ramat Gan’s Nutrinia is developing drug products to treat acute to chronic intestinal failure based on its proprietary insulin based technology.  These drug products are targeted at rare diseases of the gastrointestinal tract and improve short- and long-term outcomes for infants, children, and adults.  The company plans to launch its U.S.-based studies to support NDAs of its two lead clinical programs to treat short bowel syndrome in infants and GI malabsorption in pre-term infants.  (Nutrinia 15.06)

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9.1  Comtrend Chooses Celeno’s Smart Wi-Fi Technology for Powerline Extenders

Celeno Communications announced that Celeno’s Wi-Fi chipsets and smart Wi-Fi technology OptimizAIR 2.0 have been selected to power Comtrend’s Powerline Wi-Fi Extenders.  Designed to meet the growing demand for perfect connectivity and coverage across multiple devices connected concurrently throughout the home, the Powerline Wi-Fi Extender wall plugs allow consumers to take Wi-Fi with them anywhere throughout the home or backyard and enjoy a seamless wireless experience.  With Celeno’s chips and smart Wi-Fi technology powering the extenders, consumers can seamlessly access high bandwidth services wherever they are in the home as Wi-Fi capacity remains high no matter how far coverage is extended.

Ra’anana’s Celeno provides high performance Wi-Fi chips and software for demanding home networking applications.  Celeno’s extensive chip portfolio and OptimizAIR technology enable the wireless distribution of multiple and simultaneous HD video and data streams throughout the home with the highest levels of performance and reliability while ensuring a superlative quality of service and user experience.  Celeno’s OptimizAIR 2.0 technology provides unprecedented capabilities to provision and manage both Wi-Fi capacity and radio spectrum.  (Celeno 03.06)

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9.2  Komoona’s Yield Optimization ‘RTB Router’ Helps Publishers to Better Monetize their Content

Komoona provides publisher-side technology built to maximize publisher yield in today’s programmatic buying environment.  Integrated with all major Supply-Side Platforms (SSPs) and Exchanges, Komoona’s RTB Router is able to determine in real-time utilizing machine learning algorithms which buyer on what platform is offering the highest CPM, and then routes the impression to that bidder.  Komoona’s RTB Router supports display, mobile, and video advertising, in tandem with any existing publisher SSP relationships. The company works on a ‘minimum floor price’ model ensuring a win-win situation.  Publishers integrate Komoona by adding a simple tag into their ad server.

The company’s RTB Router currently handles over 25 billion ad impressions every month for over 1000 publishers. Komoona’s R&D center is in Tel Aviv, Israel, with sales operations in New York, San Francisco and London.  (Komoona 05.06)

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9.3  CYREN Cyber Intelligence Enables Fastest Phishing Protection for Cyveillance

CYREN signed a multi-year agreement with Reston, Virginia-based Cyveillance.  Under the agreement, Cyveillance will incorporate the CYREN Phishing Intelligence Feed into its own anti-phishing service.  CYREN Phishing Intelligence, a part of the company’s Cyber Intelligence Suite, provides an unparalleled view into global phishing attacks from the earliest moments, enabling Cyveillance to deliver crucial extra protection for its customers.  CYREN Phishing Intelligence contains real-time data on global phishing campaigns that have been identified by the CYREN Cyber Intelligence Platform that analyzes more than 17 billion transactions each day.  Cyveillance Anti-Phishing solutions protect organizations from the earliest stages of a phishing attack, including pharming and malware, to the takedown and removal of phishing websites, and include an Anti-Phishing Detection Guarantee, Response Service 100% Commitment Pledge, and a Takedown, Staydown Lifetime Guarantee.

Founded in 1991, Tel Aviv’s CYREN is a long-time innovator in cyber intelligence, offering next generation Security as a Service solutions to enterprises and powering the security solutions of more than 200 of the world’s largest IT and security technology providers.  Providing real-time detection of cyber-attacks in many of the largest networks, CYREN maintains the broadest and deepest real-time Internet threat database in the world.  (CYREN 08.06)

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9.4  AudioCodes Plays Key Role in American Axle & Manufacturing Communications Migration

AudioCodes announced that American Axle & Manufacturing (AAM), a global Tier-One automotive supplier of driveline and drivetrain systems, has completed a global migration of their communications systems from legacy Nortel PBXs to Microsoft Lync, utilizing AudioCodes Mediant networking solutions and professional services.  AAM is a leading, global Tier-One automotive supplier of driveline and drivetrain systems and related components for light trucks, SUVs, passenger cars, crossover vehicles and commercial vehicles.  With a goal to avoid costly upgrades of their aging Nortel PBX systems and reduce conferencing service costs, AAM initiated a search for a new state-of-the-art Unified Communications system, eventually selecting Microsoft Lync and AudioCodes Mediant networking equipment for their global deployment.

Lod’s AudioCodes designs, develops and sells advanced Voice-over-IP (VoIP) and converged VoIP and Data networking products and applications to Service Providers and Enterprises.  AudioCodes is a VoIP technology market leader, focused on converged VoIP and data communications, and its products are deployed globally in Broadband, Mobile, Enterprise networks and Cable.  (AudioCodes 08.06)

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9.5  Opgal Expands Therm-App Product Family

Opgal has announced two new models of Therm-App.  The new Therm-App TH device, dedicated for thermography applications, allows professionals to take accurate temperature measurements captured on high resolution thermographic photos & videos and immediately transmit them via email, messaging or file sharing platforms.  The device offers an exciting suite of thermography features including full radiometric capability, multiple color palettes, video and sound recording, as well as efficient reporting and data analysis.  In addition, like all other Therm-App models, Therm-App TH enables users to benefits from important Android smartphone features including touchscreen capabilities, round-the-clock connectivity, ongoing application updates, and more.

Opgal is also announcing another member of the Therm-App family: Therm-App Hz, a high-end solution for security, safety and other night / outdoor applications.  Through its higher 25 Hz frame rate, Therm-App Hz delivers smooth thermal images, especially when the user or the targets observed are on the move, using a variety of interchangeable lenses ranging from 6.8mm to 35mm.

Karmiel’s Opgal Optronic Industries is a leading global provider of innovative infrared imaging systems and advanced vision and surveillance solutions.  Using state-of-the-art thermal and other imaging technologies, Opgal leverages advanced electro-optics and image processing expertise to create high performance, versatile visualization products.  (Opgal 08.06)

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9.6  Leading HDD Manufacturer Adopts Jordan Valley’s Metrology Platform

Jordan Valley received a repeat order from a leading HDD manufacturer who selected the new JVX7300RF metrology system for their advanced process control.  The JVX7300RF system provides high-value in-line metrology capabilities and combines Jordan Valley’s unique convergentbeam XRR and the vertical small spot XRF measurement channels on their latest generation tool platform.  The tool provides product wafers metrology solutions for complex multilayer stacks, ultra-thin layers (<10?) and small pads.  The JVX7300RF provides excellent ROI and  CoO for inline metrology of magnetic stacks used in latest generation of read-heads and allows non-destructive thickness and composition measurements at high throughputs prior to head assembly.  The customer noted that the JVX7300RF was ordered after successful evaluation of the combined XRR/XRF technology in multiple production sites last year.

Migdal HaEmek’s Jordan Valley Semiconductors (JVS) is the leader in X-ray metrology and defect detection tools for the semiconductor industries. Jordan Valley’s tools are fully automated non-contacting and non-destructive tools designed for production control on patterned or blanket wafers.  The company offers the semiconductor industry the most comprehensive portfolio of advanced metrology and defect inspection tools, based on X-ray technologies such as XRR (X-ray reflectometry), XRF (X-ray fluorescence), XRD (X-ray diffraction) and others.  (Jordan Valley 08.06)

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9.7  IAI Expands Heron TP Capabilities by Integrating it with M-19HD EO Payload

Israel Aerospace Industries (IAI) is enhancing its Heron TP UAV’s capabilities with long-range persistent surveillance options and area dominance capabilities by integrating it with its high definition M-19HD EO payload, developed and produced by IAI’s Tamam Division.  The M-19HD has successfully completed flight tests onboard manned and unmanned platforms, including the Heron 1 UAS and is currently being offered to various customers.  The M-19HD is a High-Definition, multispectral, multi-sensor observation and targeting payload (which can simultaneously incorporate up to seven sensors).  The M-19HD enables continuous day/night surveillance under all weather conditions and provides outstanding acquisition ranges due to its powerful sensors, high stabilization and unique image processing capabilities.  The M-19HD reduces operator workload and improves situational awareness by virtue of its multimode automatic video tracker (AVT). It also provides accurate geo-location capabilities using an embedded IMU/GPS (Inertial Measurement Unit/Global Positioning System).  (IAI 09.06)

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9.8  Successful Flight Demonstrations for HAROP Loitering Munitions

Israel Aerospace Industries (IAI) recently completed a series of flight demonstrations of its HAROP Loitering Munitions in Israel for a foreign customer.  These demonstrations follow various other successful operational exercises performed in the last few months for different customers.  The HAROP demonstrated augmented capabilities in the field of observation, flight altitude and loitering, in addition to better maneuvering and target destruction.  During the exercises, the missile loitered for several hours until the target was selected.  Then, with maximum precision it dived directly on to it.

A HAROP unit is comprised of launchers and a Mission Control Shelter (MCS) which enables missile control with a man-in-the-loop operation, engagement or abort attack capability in real time, thereby avoiding collateral damage.  HAROP, with a warhead of 15kg., can be used in a range of battle scenarios, including low and high intensity conflict, urban warfare and counter terror operations.  HAROP is launched from transportable launchers and navigates towards the target area, where it can loiter and search for targets for up to six hours. Once a target, whether stationary or moving, is detected, it is attacked and destroyed.  The attack can be performed from any direction and at any attack angle, from flat to vertical.  To date, hundreds of HAROP systems have been sold to different customers, for an accumulated amount of hundreds of millions of dollars.  (IAI 07.06)

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9.9  OriginGPS Unveils Smallest Multi-GNSS Module with Integrated Antenna

OriginGPS announced the launch of the Multi Micro Hornet, the world’s smallest patented fully integrated multiple constellation antenna module.  The innovative architecture packs the most functionality and high-quality components in the smallest space by volume, to improve wearables’ fashion and function.  The Multi Micro Hornet is ideal for devices that require a small form factor, low power consumption and high sensitivity.  In keeping with the company’s “Mini + Mighty” corporate mantra, it has once again pushed the boundaries of what’s possible and reduced the total volume in size by over 68% of other leading GNSS antenna modules without sacrificing performance.  The Multi Micro Hornet boasts several key features that will improve the navigation experience of wearables and other Internet of Things devices.  Additionally, the Multi Micro Hornet module combines OriginGPS’ proprietary low-profile GPS+GLONASS antenna with a dual-stage LNA, RF LDO, SAW filter, TCXO, RTC crystal and RF shield with market-leading SiRFstarV GNSS SoC.

Airport City’s OriginGPS is a world-leading designer, manufacturer and supplier of miniaturized GNSS modules (Spider family), antenna modules (Hornet family) and antenna solutions.  OriginGPS introduces unparalleled sensitivity and noise immunity by incorporating its proprietary Noise Free Zone technology for faster position fix and navigation stability even under challenging satellite signal conditions.  (OriginGPS 10.06)

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9.10  Sckipio First to Deliver NETCONF YANG Support on a DPU

Sckipio Technologies announced the first Distribution Point Unit (DPU) that is SDN-controlled via the Network Configuration Protocol (NETCONF) and using the standard YANG data model; and with traffic managed via OpenFlow.  The support for NETCONF YANG and OpenFlow is part of Sckipio’s new Management Stack, the first management stack designed from scratch to enable software-defined network (SDN) control on devices.  This state-of-the-art management platform and networking stack includes NETCONF YANG, CLI, SNMP, IGMP, DHCP, MSTP, Y.1731 and CFM support, and is designed to comply with all relevant Broadband Forum management specifications (WT-301, WT-318/355 drafts) as they are released.  The Sckipio Management Stack is available now and runs on the PMC-Sierra WinPath family of network processors.

Ramat Gan’s Sckipio is the leader in modems and is dedicated to delivering ultra-broadband using next-generation Fiber-to-the-distribution point (FTTdp) architectures.  Sckipio offers a complete solution – chipsets bundled with software – for a variety of access and mobile backhaul applications based on the ITU G.9700 and G.9701 standards, to which Sckipio is a leading contributor.  (Sckipio 11.06)

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10.1  Israel’s CPI Rises by 0.2% in May

The Central Bureau of Statistics announced that after a period of negative inflation, Israel’s Consumer Price Index has now risen for three successive months.  The CPI rose by 0.2% in May; after a period of negative inflation, the CPI has now risen for three successive months, although inflation since the start of 2015 is still -0.5% and -0.4% over the past 12 months.  There were notable price rises in fresh fruit (15.3%), fuel and oil (1.6%), culture and entertainment (0.9%) and housing costs (0.3%).  Notable declines were in internal and overseas flights (1.1%), fresh vegetables (2.4%) and transport (0.3%).  (CBS 15.06)

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10.2  Israel’s First Quarter Growth Revised Downward

On 16 June the Central Bureau of Statistics published its second reading for the first quarter of the year, showing annualized growth of 2.1%, compared with its previous 2.5% estimate.  GDP was up 6.5% in the fourth quarter of 2014 and only 0.8% in the third quarter.  The Central Bureau of Statistics said that first quarter growth reflects an increase in spending on private consumption, combined with decreases in exports of goods and services and investments in fixed assets.  (CBS 16.06)

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10.3  Israeli Exports to India Double in First Quarter

Israeli exports to India totaled $370 million in Q1/15, double the exports in Q1/14, according to figures from the Israel Export and International Cooperation Institute.  Export Institute economists who analyzed the figures said that Israeli exports to India had risen in all sectors, including telecommunications equipment, measuring and control equipment, industrial equipment, etc.  The Export Institute added that this rise indicated improvement in the economic situation in India, now rated as Israel’s sixth largest export destination, compared with 15th place in Q1/14.

Total Israel exports reached $12.5 billion in Q1/15, compared with $12.6 billion in Q1/14.  The slight drop in exports in the first quarter resulted from the euro’s weakness against the dollar and lower global prices in chemicals and energy.  These figures show that Israeli exports to Russia totaled $200 million, down 27%, compared with the first quarter of 2014.  The fall in exports to Russia resulted from a 16% drop in agricultural exports to Russia, partly caused by a steep fall in the ruble-dollar exchange rate and the economic crisis in Russia.  Exports to Turkey plunged 30% to $510 million in the first quarter, and exports to Italy sank 34% to $250 million.

Israeli exports to the US totaled $2.9 billion, up 13% in Q1/15, compared with Q1/14, led by the pharmaceutical sector, in which exports rose 47%, compared with the corresponding quarter last year, with exports of goods in other sectors also posting increases.  (Globes 07.06)

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10.4  Israeli Exports Drop During March to May Period

The Central Bureau of Statistics announced on 16 June that Israel’s exports of goods, excluding ships, planes, and diamonds, were down by an annualized 9.7% in the March – May period.  This is a reversal of the upward trend that saw exports of goods rise by an annualized 6.8% in December 2014 – February 2015.  The steepest fall was in chemicals and chemical products, in which the value of exports was halved, compared with the three preceding months.  The Central Bureau of Statistics reported that exports of goods in May totaled NIS 18.8 billion.

High-tech exports, which account for half of all industrial exports, excluding diamonds, continued their upward path with a 17.5% annualized rise in March to May.  Here, too, however, the performance was poorer than in the three preceding months, when high tech exports surged by an annualized 52.0%.  Mixed technology exports, which account for 31% of all industrial exports, plunged by an annualized 39.7% in March-May, an average of 4.1% per month, following an annualized 27.3% decline in December 2014-February 2015 (an average of 2.7% per month).  A breakdown of exports into branches shows an annualized 50% drop in exports of chemicals and chemical products in March-May (an average of 5.6% a month).  (CBS 11.06)

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10.5  Israel’s Private Sector Shrinks As Public Sector Grows

The number of salaried jobs in Israel’s private sector has fallen since the beginning of the year, while the number of public sector jobs has risen rapidly, according to figures presented by the Ministry of Finance.  According to Bank of Israel figures, 10,000 public service jobs were added in Q1/15 (representing a 0.9% rise) and at the same time the number of private sector jobs fell by 16,400 (representing a 0.7% decline).  Trend analysis shows that the public sector’s share of total jobs in the economy has risen in recent years, as a result of the much higher rate of growth in jobs in this sector than in the private sector.  Since 2012, the average annual rate of growth in jobs in the public sector has been 3.3%, compared with just 2% growth in the private sector.

Employment in the public sector, as is well known, promises greater security and other advantages, alongside lower pay.  The average gap between public sector and private sector salaries is currently NIS 850 per month: an average monthly salary in the public sector of NIS 8,733, versus NIS 9,583 in the private sector.  In Q1/15, public sector salaries grew by 1.3% and private sector salaries by 1.2%.  (Globes 15.06)

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10.6  Israel Ranked Fifth Most Expensive Country for Gasoline Prices

Israel is the fifth-priciest country in the world when it comes to how much consumers pay for unleaded gasoline, an international study by the financial website This is Money shows.  Israelis are paying $1.53 per liter ($5.79 per gallon), despite the fact that world oil prices have dropped to $66 per barrel since April 2012.  According to the study, the price of unleaded gasoline is highest in Norway, followed by Turkey, Hong Kong, and the Netherlands.  Italy is tied with Israel for fifth place, and Denmark, Britain, Portugal, Belgium, Finland and Greece round out the top 10 nations with the most expensive gasoline.

The study also showed that Israel is ranked fourth internationally in terms of how much of consumers’ monthly salary is funneled into paying for gasoline:  An Israeli car owner spends an average of NIS 900 ($233) a month at the gas pump, an amount equal to 11% of the average monthly salary.  Turks spend the largest part of their earnings on gasoline, with an average of 39% of their monthly salaries going into their cars’ gas tanks.

According to the study, the gasoline tax in Israel, 60% of the pump price, is within the accepted range for Europe.  In Turkey, tax on gasoline comprises 64.5% of the final price at the pump, while in Britain taxes are higher – 65.7% of the final gasoline price.  In both Israel and Europe, drivers pay a gasoline tax that is three to four times as high as what Americans pay.  (Israel Hayom 07.06)

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10.7  Only 6% of Israelis Have Never Used Facebook

Universal McCann’s 2015 social media study found Israelis spend more time on the internet and smartphones than the global average.  Only 6% of Israelis have never used Facebook, while 66% have never used Twitter, according Universal McCann’s study.  The study reveals that 18.5% of Israelis have never used Skype and 57% have never used LinkedIn.  Low exposure rates are even more notable in niche social networks – 80% of Israelis have never used the blogging platform Tumblr and a similar percentage have never used Snapchat.

About half of Israelis have never used Instagram, and about a quarter of Israelis have never used Google+.  YouTube had the highest exposure rate among Israelis – just 0.6% of the population has never used the video platform.  The study also indicates that 70% of Israelis are on Facebook at least once a day, up 11% from last year, and much higher than the global average of 45%.  Some 44% of Israelis visit YouTube at least once a day (compared with 30% globally) and 22.5% visit Google+ on a daily basis.  Another 66% of Israelis between the ages of 25 and 44 say that social networks are an integral part of their social lives.

The study also addresses smartphone and internet usage: 30% of Israelis surf the web for more than five hours a day almost double the global average, which is 15.5%.  In Italy, the rate is 21%, and the US rate is 16%.  As for general smartphone usage, the study indicates that 22% of Israelis use their smartphones for more than five hours a day, compared with a global average of 17.4%.  The smartphone penetration rate in Israel is 90% compared with 84% globally.  This is an increase of 15.5% compared with last year. More Israelis have smartphones than desktop computers (70%) or laptop computers (78%).  (Globes 14.06)

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

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

Key Rating Drivers

The affirmation of Lebanon’s IDRs and Negative Outlook continue to capture political risks exacerbated by the Syrian conflict, as well as very weak public finances, an increasingly costly funding structure, and weak economic performance relative to peers.  These weaknesses are counterbalanced by Lebanon’s strong external liquidity, continued non-resident deposit inflows, and other structural strengths.

Political risks remain.  A consensual government was formed in early 2014, but the country has been operating without a president since May 2014 as a result of multiple failed attempts to reach a necessary quorum in parliament.  Strong political allegiances on opposing sides of the Syrian conflict suggest that the deadlock is likely to persist until the conflict has abated.  Nevertheless, Lebanon has managed to avoid major security incidents or sectarian tensions despite the arrival of approximately 1.2 million refugees from Syria since the start of the conflict compared with an official resident population of 4.5 million.

Public finances are very weak. General government debt is the third highest among Fitch-rated sovereigns at an estimated 134% of GDP in 2014.  High debt levels have also contributed to an exceptionally high interest bill, at nearly 40% of government revenues.  Persistent budget deficits will contribute to a further increase in the public debt stock through the forecast period.

The funding structure has become increasingly costly.  The financing of Lebanon’s sizeable budget deficits appears to have become reliant on a funding structure that results in the Banque du Liban running annual losses in order to attract US dollar deposits from the banking sector.  A growing unclassified asset account on the central bank balance sheet suggests that seigniorage expenses could be 5%-6% of GDP per annum, but insufficient disclosure complicates more precise analysis.

Lebanon’s economic performance has been weaker and more volatile than peers since the onset of the Syrian conflict in 2011.  Real GDP growth declined to a five-year average of 3.2% versus the ‘B’ category median of 4.4%, despite favorable revisions to the historical GDP growth series in late 2014.

Lebanon has strong external liquidity.  Its stock of foreign reserves was estimated at $43b as at end-2014, supported by deposit flows from the Lebanese diaspora.  Reserve coverage is higher than peers, at 12.8x current external payments versus the ‘B’ median of 3.2x.

GDP per capita and broader human development indicators are well above ‘B’ category peers, and more in line with the ‘BBB’ median, although governance indicators are slightly weaker than peers.  The government also has an unblemished track record of public debt repayment.

Rating Sensitivities

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

  • A major destabilization induced by rising sectarian tensions, security risks, or spill-overs from the Syrian conflict.
  • A reversal of the domestic banking sector’s willingness and/or ability to continue funding the government.
  • Continued deterioration in public debt dynamics beyond our base case assumptions.

Given the Negative Outlook, Fitch’s analysis does not currently anticipate developments with a material likelihood of leading to an upgrade. However, future developments that may, individually or collectively, result in a revision of the Outlook to Stable include:

  • Evidence of continuing resilience in Lebanon’s financing model notwithstanding ongoing domestic and regional political risks.
  • Growing confidence in the sustainability of the domestic political situation.
  • A reduction in public debt levels, whether through fiscal tightening or improved economic performance.

Key Assumptions

  • Sporadic security incidents will prevail as long as the Syrian conflict continues.
  • Domestic banks continue to be willing to finance government needs.
  • The global economy performs broadly in line with Fitch’s Global Economic Outlook, including average Brent price assumptions of $65 in 2015 and $75 in 2016.
  • Normalization of monetary policy rates in the U.S. begins toward end-2015 and proceeds in an orderly manner. (Fitch 12.06)

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11.2  JORDAN:  Foreign & Local Workers at Odds in Jordan’s Labor Market

Elisa Oddone posted in Al Monitor of 3 June that as the civil war drags on in their country, Syrian refugees in Jordan are left jobless or exploited in increasingly unwelcoming host communities across the kingdom.

The unemployment rate among Jordanians is increasing, as Syrian refugees in Jordan are willing to work for longer hours and lower wages.  Munir, who didn’t want his real name to be published, is a 20-year-old refugee from the southern Syrian city of Daraa who crossed into Jordan in 2012, where he has worked illegally ever since.

A job working 14-hour shifts in a cafe in Zarqa, 25 kilometers (15 miles) northeast of Amman, has so far been his sole means of feeding his parents, two small sisters and a younger brother who was left unable to walk after a bullet struck his femur during a protest back in Syria.  “I earn seven Jordanian dinars a day [$10].  I don’t have a break, and eating a falafel sandwich is my only treat.  My boss is kind but it is undeniable that I am exploited,” Munir told Al-Monitor.

Munir’s account is not unique.  He’s one of some 1.4 million Syrians living in Jordan, according to government estimates, only half of whom are registered with the UN refugee agency.  The vast majority, some 80%, live in Jordanian cities and not in refugee camps.

The swelling number of Syrians has stoked increasing resentment toward them among locals, whose thinning patience over the more than four-year conflict has pushed them to blame the new arrivals for stealing their jobs.

Although government figures show an average of 12.5% unemployment among Jordanians in the past decade, a recent study conducted by the International Labour Organization pointed out that around 22% of locals were out of work in 2014, up from 14% prior to the Syrian crisis.

According to the study, about half of Syrian men living outside the camps are active in Jordan’s undocumented labor market, with only 10% having legal work permits.  “There are some signs of Syrian refugees entering into jobs that were part of the job market that existed prior to their arrival, hence they do to some degree push Jordanians out of the labor market,” the study read.  An even steeper increase in the kingdom’s unemployment rate was registered among young people, with 35% of those under 24 out of work compared with a pre-crisis figure of 19%.

Highly skilled and willing to work for lower wages, Syrians are simply pushing Jordanians out of the workforce, according to Jordanian Minister of Labor Nidal Katamine.  He told Al-Monitor, “Syrians are competing with Jordanians over jobs. … Syrians have probably higher standards of training than the Jordanians and, in some cases, job opportunities are more suitable for them.”

Zayyan Zawaneh, a Jordanian economist who once worked for Jordan’s Central Bank, told Al-Monitor that the study’s findings were “shocking,” especially since Jordan already had problems in this sector prior to the Syrian conflict.  “Syrian refugee workers are crowding out Jordanians in the labor market,” the economist said.  “They are especially affecting the construction and agricultural sectors and retail trade.”

This also poses very deep social economic, political and security threats to Jordan, according to Zawaneh.  He said, “Jordan is surrounded by conflicts.  Extremism and terrorism are on the Jordanian borders.  So what do young people who are unable to find jobs do?  One choice could probably be to join extremist groups.”

At last month’s regional World Economic Forum at the Dead Sea, where political and business leaders discussed a future of growth and investment for a region mired in turmoil, Jordan’s Minister of Planning and International Cooperation Imad Najib Fakhoury said that Syrians accounted for 20% of Jordan’s population of about 9 million.  “In some northern towns and villages, the majority of the dwellers are Syrians,” Fakhoury said.  “We estimate that at least 120,000 Syrians are working in the kingdom, displacing Jordanians’ jobs and pushing wages down,” Fakhoury said.

The minimum wage in Jordan is set by executive decree as JD 190 ($268) per month, with eight hours of work per day and 40 hours a week.  But Syrians work for longer hours and accept much lower wages.  “The facts are not what people are claiming, looking from the outside and easily saying that Jordan should give work to refugees,” Fakhoury said.  “One needs to be really cautious concerning what recipient countries are pushed to do.”

Jawad Anani, a leading Jordanian economist and former deputy prime minister, takes a milder stance.  “There is a widespread perception among Jordanians that Syrians are crowding the country’s labor market to their detriment,” Anani told Al-Monitor.  “At the same time, Jordanians have started showing interest in jobs that they previously shrugged off and that Syrians are accepting, like station attendants, garbage collectors and fruit or vegetable pickers in the Jordan Valley.”

Anani also pointed out that it’s not Syrian laborers who have replaced Jordanians in the market but other foreigners, especially the 600,000 mainly Egyptian guest workers currently employed in the kingdom.  He said, “Egyptians’ wages went up and Syrians have replaced them, because they are not only asking for lower wages, but also show more technical skills and competence.”

In most cases, Syrians accept lower wages because assistance from international agencies provides them with extra income.  Anani said the combination often surpasses the wage that a Jordanian worker would make with a single job.  “If Jordan starts giving Syrians work permits, locals will cry wolf as they see themselves as the government’s priority.  On the other hand, if we turn a blind eye on the issue, what will Syrians do?” he asked.

Jordanian economist Yusuf Mansour is one of the few voices in the kingdom calling on the government to grant work permits to Syrians.  He wrote in a recent Venture Magazine op-ed, “Syrians not only increase the supply of labor, but they also concomitantly increase demand, using their wages to rent apartments, buy goods and services, putting factories and retailers to work.“  As for the 100,000 or so Syrians confined to refugee camps in Jordan, Mansur sees them as a capable work force whose dignity and well-being are being harmed every day by the aid they receive.

Habib Jabar, a Syrian from Homs, arrived in Jordan with his wife and five children in 2014 and found refuge in the country’s Azraq refugee camp.  “Life is very difficult here,” Jabar told Al-Monitor.  “Water is far away.  There’s no electricity, no jobs and prices in the mall increase every day.”  Jabar is planning to go back to Syria or even considering trying to reach Europe on one of the overcrowded boats sailing from Africa.

“If I got a work permit, I would think of staying here.  It would be safer for all of us, but unfortunately, it’s forbidden,” he said.  “In Syria, I was a printer.  Here I am nothing.  I stay in my prefabricated house all day and wait.  We cannot work, we cannot earn money, we cannot pay rent outside, so we are stuck here with the flies.”  (Al-Monitor 03.06)

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11.3  BAHRAIN:  Fitch Downgrades Bahrain to ‘BBB-‘; Outlook Stable

Fitch Ratings on 05 June downgraded Bahrain’s Long-term foreign currency Issuer Default Rating (IDR) to ‘BBB-‘ from ‘BBB’ and Long-term local currency IDR to ‘BBB’ from ‘BBB+’.  The Outlooks are Stable.  The issue ratings on Bahrain’s senior unsecured foreign and local currency bonds have also been downgraded to ‘BBB-‘ from ‘BBB’ and ‘BBB’ from ‘BBB+’, respectively.  The agency has simultaneously affirmed Bahrain’s Country Ceiling at ‘BBB+’ and Short-term foreign currency IDR at ‘F3’.

Key Rating Drivers

The downgrade of the IDRs and senior debt ratings reflects the following key rating drivers and their relative weights:

High:  Lower oil prices have added to the strain on Bahrain’s fiscal position.  Fiscal deficits have been recorded each year since 2008 and based on Fitch’s oil price assumptions, the deficit is forecast to reach double digits, estimated at -10.9% of GDP in 2015 from -5.5% of GDP in 2014, before falling into high single digits in 2016 and 2017.  Fitch estimates Bahrain’s fiscal breakeven oil price to be around $130/bl compared with an oil forecast for Brent to average $65/bl in 2015, highlighting the fiscal challenges confronting the country.  The policy response has been modest, with the authorities taking a cautious approach due to social and competitiveness considerations.

The emergence of sizeable fiscal deficits has led to a rapid rise in the general government debt burden, which reached 45.1% of GDP in 2014, materially above the ‘BBB’ median of 41.1%.  Fitch forecasts the government debt will continue climbing, reaching 54.2% of GDP in 2015 and 58.6% of GDP in 2016 on current policy settings.

Bahrain’s ‘BBB-‘ IDRs also reflect the following key rating drivers:

Economic growth is above peers and has been unaffected by the fall in oil prices.  Real non-oil growth was 4.9% in 2014, driven by tourism, social and personal services and construction.  Execution of GCC-financed project work by local subcontractors will support non-oil growth of 4 – 4.5% over the forecast period.  The tourism industry, which is driven by the Saudi Arabian market, is also expected to continue registering high growth.  Major expansions to manufacturing projects will contribute to growth.  Inflation is forecast to stay below the peer median.

Bahrain’s external balance sheet is stronger than its ‘BBB’ rated peers.  The net external creditor position of 164% of GDP compares with a peer median of -5.4% of GDP.  After 12 consecutive years of current account surpluses, a small deficit is forecast for 2015.  The current account is forecast to return to surplus in 2016.  Although gross oil exports are over 50% of current external receipts (CXR), Bahrain also imports oil from Saudi Arabia to refine for export products, meaning net oil exports are 25% of CXR.

Governance indicators are below the peer median.  There has been no progress in resolving the political stalemate since the opposition Wefaq party boycotted the elections of November 2014.  The boycott appears to have lost Wefaq support and the government does not seem inclined to deal with the party’s current leadership.  Sporadic low-level violence continues in some Shia villages, but the government has this under control and there is no disruption to business activity.

Bahrain’s financing flexibility has allowed it to be a regular Eurobond issuer, most recently raising $1.25bn at a 30-year maturity in August.  The domestic capital market continues to provide the main source of financing.  The government has active conventional and Islamic issuance programs and issued its first 10-year domestic sukuk in January 2015.

GDP per capita and broader human development and business environment indicators exceed the ‘BBB’ median.  The strong regulatory framework and local skill base, combined with low costs, are key supports to the financial sector.

Bahraini banks have enjoyed strong profitability, rising capitalization, and declining NPLs.  The smaller Islamic banks have continued to merge.  The sector is in the process of preparing for the implementation of Basel III regulations, and the Central Bank is overseeing measures aimed at improving corporate governance and oversight.

Rating Sensitivities

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

– A rise in government debt/GDP above our current forecasts, for example owing to an inadequate policy response or a sustained period of oil prices below out current forecasts.

– Severe deterioration of the domestic security situation.

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

– Significant fiscal measures which reduce the budget deficit and are consistent with the stabilization and then decline of the government debt-to-GDP ratio in the medium term.

– A broadly accepted political solution that eases political unrest.

– A recovery in oil prices that improves public finances.

Key Assumptions

Fitch forecasts that Brent crude will average $65/b in 2015 and $75/b in 2016.

Fitch assumes that Bahrain will continue to benefit from savings through the implementation of GCC development projects financed by Kuwait, Saudi Arabia, and the UAE.  Lower oil prices are not assumed to impact the flow of funds from these countries.

Fitch assumes there will be no challenge to the rule of the royal family or the current succession.  Fitch assumes no material deterioration in the internal security situation but also does not expect a comprehensive political solution to be achieved in the near term.

Bahrain is in a volatile region and its rating factors in existing tensions and conflicts which are assumed to continue.  Fitch assumes that regional geopolitical conflicts will not directly impact Bahrain or its ability to trade.  (Fitch 05.06)

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11.4  QATAR:  Bank Audi Qatar Economic Report – 2015

Bank Audi’s reported that the Qatari economy grew by 6.1% in 2014 (almost similar to 2013) and is set to rebound to 7.1% in 2015 according to the International Monetary Fund.  The strong performance of the past year was actually driven by an 11.8% expansion in the non-mining and quarrying sector which included a 17.7% year-on-year increase in the construction sector while the hydrocarbon sector shrank by 1.5% in 2014.  Other non-energy growth drivers last year included financial services and the hotel and restaurant trade.  The continuing influx of foreign workers and resultant rapid population growth is increasing local consumption and the demand for housing and financial services.

Lower External Surpluses Amidst a Slump in Oil Prices

Qatar’s external sector came under pressure within the context of a slump in oil prices.  The State’s overall trade surplus contracted by 4.5% in 2014 as compared to a 3.1% growth in 2013, as per the Central Bank of Qatar, and the current account surplus fell to 26.1% of GDP in 2014, compared to 30.7% of GDP in 2013.  A detailed look at the trade activity shows that total imports retreated by a tiny 1.0% year-on-year to reach $31.2 billion in 2014. Total exports declined by 3.7% in 2014 to reach $131.7 billion.

Decrease in Government Surplus Reflecting Lower Hydrocarbon Revenues

Driven by a drop in hydrocarbon revenues, growth in Qatar’s government balance has turned negative.  According to data released by the IMF, the government surplus has decreased by 30% to reach $ 29.4 billion in FY 2014/2015, reversing the trend registered in the last few years, of which an increase of 53% recorded in the FY 2013/2014.  Following a rise of 22.1% in FY 2013/2014, revenues went down by 9.1% to $96.6 billion in FY 2014/2015. On the other hand, expenditures totaled $67.3 billion in FY 2014/2015, up by 4.5% from the previous FY during which they had risen by 8.1%. Gross government debt is estimated at 31.5% of GDP as of March 2015.

Contained Inflation Along With Stability in Money Supply

Qatar’s monetary conditions were marked during the first four months of the year 2015 by contained price pressures, a fall in international reserves, sustained low policy rates in the context of an accommodative monetary policy, and relative stability in monetary aggregates.  Qatar’s Consumer Price Index grew by a mere 0.9% year-on-year in April 2015, after rising by 3.0% on average in 2014, mainly due to the direct and indirect effects of falling oil and non-oil commodity prices and due to methodological changes adopted by Qatari authorities in compiling CPI data.

Strong Activity Growth Coupled With Robust Financial Soundness

Qatar’s banking sector registered yet another year of solid private sector activity growth in 2014 and so far this year.  Measured by total assets of banks operating in Qatar, total sector activity reported a 10.4% growth before registering a tiny one in this year’s first four months (+0.4%), reaching a total of $277.2 billion at end-April 2015.  Financial soundness indicators continue to be robust, with a liquidity ratio of 23.1% of total deposits, a non-performing loan ratio of 1.7% of total loans, a capital adequacy ratio of 16.3% and ROAA of 2.1% and ROAE of 16.5%.

Mixed Price Movements in Capital Markets

Qatar’s capital markets saw mixed price movements over the first five months of 2015.  The equity market registered price declines following strong price rally observed over the past couple of years, with Qatari stocks posting the highest earnings multiple in the MENA region by year-end 2014.  The Qatar Exchange general index declined by 1.9% during the first five months of 2015, after rising by 18.4% in 2014.  On the other hand, the fixed income market in Qatar witnessed mostly upward price movements, given the ample liquidity in the market and in the absence of new bond issues over the first five months of 2015.  (Bank Audi 09.06)

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11.5  UAE:  IMF Staff Completes 2015 Article IV Mission to the United Arab Emirates

An International Monetary Fund (IMF) mission visited the United Arab Emirates (UAE) from 24 May to 4 June 2015 for the annual Article IV discussions.  The consultation will conclude with the preparation of a report that, subject to management approval, will be discussed by the IMF Executive Board tentatively scheduled for July 2015.  At the end of the mission the IMF issued the following statement:

“The outlook for economic activity is expected to moderate with non-hydrocarbon growth projected at 3.4% in 2015 amid lower oil prices and an appreciation of the real effective exchange rate.  Sales prices in the real estate market have stabilized, but increases in rents more than offset the dampening effect of U.S. dollar appreciation on imported prices, pushing up inflation, which is expected to reach 3.8% on average in 2015.

“The UAE has benefitted from building up large external and fiscal buffers over the years thanks to its hydrocarbon wealth.  However, with the decline in oil prices, the fiscal balance this year is projected to turn negative for the first time since 2009 to record a deficit of 2.3% of GDP, and fiscal expansion over the last few years has increased vulnerability to oil prices and moved the fiscal position away from the level consistent with inter-generational equity.  The current account surplus is also projected to decline substantially, to 4.1% of GDP.

“Against this backdrop, the macroeconomic policy mix should focus on fiscal consolidation, while maintaining the peg and supporting conditions for credit growth.  With large buffers, fiscal consolidation should be gradual and designed in a way to minimize its growth impact.  It should preserve investment spending, control the public wage bill, phase out subsidies while strengthening safety nets, reduce transfers to Government Related Entities (GREs) and mobilize more non-hydrocarbon revenues.  The authorities could also build on their success in fiscal policy coordination to develop a consolidated medium-term fiscal framework and strengthen the budgeting process.

“The banking sector is resilient and has enough capital and liquidity buffers to withstand an adverse shock.  It is also well prepared for the ongoing transition toward Basel III capital and liquidity requirements, which need to be timely implemented along with strengthening risk-based supervision and enforcing existing concentration limits.  Sectoral macro-prudential measures helped address real estate market risks, and illustrate the importance of establishing a full-fledged macro-prudential policy framework.  Continued repair of GREs balance sheets is also important to contain systemic risks, and further deepening of the domestic debt market could help reduce GREs’ reliance on external funding and bank lending.

“The UAE is one of the most diversified economies of the region and ranks favorably on competitiveness indicators.  Structural reforms should aim at further diversifying the economy and accelerating private sector-led job creation for nationals.  These could include: further opening up foreign direct investment, improving selected areas of business environment, transitioning toward a knowledge-based economy, easing access to finance for startups and SMEs, and creating the right incentives for entrepreneurship and job creation.

“The team met with H.E. Minister of State for Financial Affairs Obaid Humaid Al Tayer, H.E. Governor of the Central Bank Mubarak Al Mansoori, the heads of economy and finance departments of the emirates, as well as other senior officials and representatives from the business and financial community.  (IMF 04.06)

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11.6  SAUDI ARABIA:  Cost of Oil’s Slump – Saudi Economy Shows Slowdown Signs

Saudi Arabia’s oil-fueled economic boom is showing signs of losing steam.  Official data released in early June showed demand for loans growing at the slowest pace since 2011 and currency reserves plunging for a third month in a row.  An index reflecting the performance of the non-oil private economy fell to the lowest level in a year in May.

The numbers signal that the drop in oil prices is starting to hurt the biggest Arab economy at a time when the kingdom is undergoing sweeping political changes at home and waging a regional war.  The government is moving ahead with spending plans that will widen the budget deficit to 20% of economic output, the International Monetary Fund says, fueling speculation it will tap debt markets to plug the gap.

While overall growth levels are likely to remain stable, the “quality of that growth will be more reliant on government consumption and investments,” said Raza Agha, chief Middle East and Africa economist at VTB Capital Plc in London.  “The private sector will be hit more by negative oil-price sentiment, and perhaps even regional dynamics.”  Bank credit to private businesses and consumers grew 9.5% in April, the slowest pace in four years. ATM withdrawals, which reflect consumer spending, dropped, indicating that the impact of a two-month bonus to public-sector employees ordered earlier this year has faded.

King Salman has made sweeping leadership changes since he took power in January, shuffling his Cabinet twice and naming his son as second-in-line to the throne.  The government is also allowing foreigners direct access to the stock market for the first time starting this month.  The “political changes” have led to uncertainty over the government’s investment program, according to Simon Kitchen, a strategist at Cairo-based investment bank EFG-Hermes.

Gross domestic product is set to expand 2.5% this year, the slowest pace since 2009, according to economists’ estimates on Bloomberg.  Non-oil GDP growth, which averaged 7% between 2000 and 2011, will slow to 4.5% in 2015, the IMF predicts.  “There has been a lot of optimism surrounding the stock market opening,” said Jason Tuvey, Middle East economist at Capital Economics in London.  “But valuations still look stretched, oil prices are likely to remain low and economic growth is set to be much weaker in the coming years than in the previous decade.”

Still, the backdrop of the decline in oil prices will likely make prices relative to corporate earnings cheaper, Kitchen said.  Investors also “may see some positive announcements – say on housing, or deficit financing – in the second half of the year.  This could change the growth outlook,” he said.

For now, the government is financing its budget shortfall by drawing down its deposits at the central bank, accelerating the decline in currency reserves.  Net foreign assets dropped $11.5 billion in April, taking their three-month plunge to more than $45 billion – about 7% of the total.

Economists and the IMF expect authorities to plug part of the deficit through the bond market.  Bond sales will likely be a major source of financing if lower oil prices sustain.  This has been the case in the past: by 1999, Saudi government debt was over 100% of GDP.  The ratio dropped to less than 2% last year as the government used revenue from high oil prices to reduce its debt.

Tim Callen, the IMF Saudi mission chief, said Saudi banks have plenty of funds “so I would imagine there’s a good demand for government debt in the local markets.”  Still, the IMF says Saudi Arabia will need “a sizable fiscal policy consolidation” after years of government spending to support growth.  (TDS 05.06)

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11.7  SAUDI ARABIA:  Saudi Arabia’s Real GDP to Grow 3.4% in 2015

Saudi Arabia will face a moderate business cycle during 2015 and 2016, growing around 3% in real terms, the National Commercial Bank said in its “Saudi Economic Perspectives 2015-2016” report themed “Tackling Challenges on Solid Ground”.  The report said the assumption centers on lesser contribution from the oil sector and moderation in the non-oil sector.  The Bank projects real GDP growth of 3.4% for 2015 due mainly to the non-oil sector maintaining last year’s pace of around 5%.  The series of royal decrees announced in January and April 2014 will provide favorable stimulus to the non-oil private sector, with the construction and retail sectors the key beneficiaries, especially from the bonus payment of two salaries to all public sector employees,” the report said.

Last year, the economy grew for the fifth year in a row, with the Kingdom’s annual growth rate of real GDP registering 3.6%.  Nevertheless, economic growth in nominal terms at 1.09% was lower than 2013, on the back of marginally lower oil prices.  By the end of 2014, the Arabian light average spot prices registered $97.2/bbl, an 8.6% decline compared to 2013.

However, the insignificant real growth in the oil sector at 1.72% was offset by the non-oil private sector that grew by around 5.7%.  The private sector had increased its contribution to real GDP to around 39.5%, which illustrates the growing role that private enterprises are assuming in the Saudi economy.

The main drivers of private sector growth were construction, manufacturing, and trade that grew by 6.70%, 6.54%, and 5.97% respectively.  There is little doubt that oil markets are currently oversupplied, with demand dynamics and supply factors suppressing oil prices, a scenario that is expected to persist in the remainder of H1/14.  Yet, the unraveling shale model and OPEC’s June meeting will be instrumental in shaping the landscape of oil markets during the second half of the year.  “We do believe that the market will balance as US crude production inflects to the downside, breaking the anomaly of lower rigs and higher production, as the shale oil business model faces tough economic realities.  Hence, we see Arabian light prices protected at a floor of $50/bbl and on average to settle at $65/bbl in 2015.  According to our estimates, Saudi crude oil production is expected to rise by an average of only 100 thousand b/d, reaching 9.8 MMBD.

“The demand for oil will continue to be hampered by global economic growth that continues to be revised downwards, with the IMF in January reducing its forecast for global growth in 2015 to 3.5%, down from an October prediction of 3.8%.  Notably, this was the third revision downwards by the IMF since January 2014, underscoring the headwinds facing the global economy.”

Besides, “the weak and uneven economic recovery of the Eurozone will remain a hanging cloud on world markets, with the Greek debt crisis far from over and deflation lurking in the background.  Despite the sharp decline in prices since June, demand has not edged higher, with the IEA predicting just tentative signs of recovery, with global oil demand growth expected to register 1 MMBD in 2015,” NCB said in the report.

Moreover, monetary policy in Saudi Arabia is exhibiting a high degree of stability and predictability compared to most emerging markets that suffer from structural deficiencies, which entangled their monetary policy in a balancing act between supporting economic growth and defending currencies.

SAMA is mainly concerned these days with price stability and money supply dynamics. On a medium-term note, with the Fed expected to raise its target funds rate by the end of the year and gradually thereafter, SAMA will follow suit by increasing the repo and reverse repo rates for the first time since 2009, NCB said in the report.

Further, the weaker prospects for most advanced economies and export-dependent emerging markets will act as headwinds that could potentially drive global growth projections lower.  Downside risks emanating from Chinese economic slowdown, disinflation/deflation, geopolitical risks in Ukraine and the Middle East as well as Greece’s debt debacle will remain key themes in 2015, the report noted.  (Saudi Gazette 10.6)

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11.8  EGYPT:  Egypt Government to Require Use of Fuel Subsidy Cards

Safiaa Mounir posted in Al Monitor on 7 June that Egypt plans to start requiring the use of fuel subsidy cards in mid-June in a preliminary step toward restructuring energy subsidies, which are costing the government about EGP 100 billion ($13 billion) this fiscal year.  The Egyptian government, in an effort to eventually reduce fuel subsidies, plans to start requiring the use of fuel subsidy cards to keep track of the fuel consumed by each vehicle.  Owners of vehicles of all types will not be allowed to fill up on fuel without the smart cards.

The Egyptian government said on 28 April that starting in mid-June, fuel cards will have to be used for any type of vehicles, be they private cars, taxis, buses, public transportation vehicles, or tourism or school buses.  The e-finance company, tasked with building a system for recording the use of cards, started distributing cards to citizens in April 2014. By mid-June, citizens will not be allowed to fill up their cars without these cards.

Khaled Abdul Ghani, the project director for the fuel subsidy cards at e-Finance, told Al-Monitor that “citizens who did not obtain a fuel card through their car-license administration will have to use the cards available in gas stations.”  Abdul Ghani said private car owners should obtain fuel cards from the traffic management office they are registered with.  If someone owns more than one vehicle, that person must obtain a card for each vehicle.

E-Finance started making the cards in June 2013.  The government started implementing the smart-card system in Port Said in October 2014, and the system is to be applied to the rest of Egypt by mid-June.

The government’s aim is to determine the fuel quantities consumed by each vehicle through the fuel subsidy cards.  Once determined, fuel will not be subsidized above this amount at a later date to be determined by the Egyptian government.  The cards will calculate the amount of fuel consumed by each vehicle, Planning Minister Ashraf El-Arabi said in a 13 May statement.  It should be noted that the government aims to reduce petroleum subsidies in the budget of the next fiscal year (2015-16).

On 11 August 2013, both the Finance and Interior Ministries signed a cooperation protocol allowing e-Finance to receive data about vehicles registered at traffic management offices to speed up the process of manufacturing smart cards.  The company gets data about vehicles belonging to different provinces to manufacture the cards and deliver them to traffic management offices, which, in turn, deliver them to citizens.

The Ministry of Finance is expected to launch, in cooperation with the Ministry of Petroleum and Mineral Resources and e-Finance, an advertising campaign to publicize the cards, explain how to receive and use them and set dates for their receipt from traffic management offices.

According to the government plan, as soon as subsidized fuel amounts are determined on smart cards, private cars will be allowed about 1,800 liters (475.5 gallons) of subsidized fuel per year, meaning 5 liters (1.3 gallons) per day.  Cars that run on diesel fuel will be able to obtain about 10,000 liters (2,642 gallons) of subsidized diesel fuel annually.  The government is seeking to liberalize the prices of petroleum products within five years.  Based on its plan, it started to raise fuel prices at the beginning of July 2014 by about 70 to 75 pennies ($0.09 to $0.10) per liter.

The price of a liter of normal-80 motor gasoline has risen by about 70 pennies and reached 1.60 pounds ($0.21) per liter ($0.79 per gallon).  Also, the price of a diesel liter increased by the same amount and reached 1.80 pounds per liter ($0.24), while the price of a liter of (unleaded) gasoline 92 increased by 92 pennies ($0.12) and reached 2.60 pounds ($0.34), or $1.29 per gallon.

E-Finance has manufactured about 2.5 million smart cards since the launch of the smart-card system in June 2013 in order to distribute petroleum products to citizens.  Back then, the company allowed citizens to register their vehicle data on the system’s website.  However, due to the lack of public participation, the government stopped registration on the website and allowed the company to obtain data on the vehicles from traffic management units in order to get the information it needed to manufacture the rest of the cards.

As for individuals who acquired smart cards for petroleum products but have not used them yet, Abdul Ghani said that they have to go to gas stations to fill their vehicles with the necessary fuel so that the survey can be as close to reality as possible. If anyone did not receive their card, they can go to gas stations and get one.

The Egyptian government will start implementing the new smart-card system in mid-June to determine the fuel amount needed for each vehicle.  This is the first step of the government’s plan to control fuel consumption and determine the amount that can be used by each car annually at subsidized prices.  The amount that exceeds this subsidized amount will be sold to citizens at world market prices.  (Al Monitor 07.06)

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11.9  EGYPT:  Is There Hope for Egypt’s First Space Odyssey?

Mohamed Saied wondered in Al Monitor on 4 June if there is hope for Egypt’s space plans.  The Egyptian dream of establishing a national space agency has often enticed the country’s scientists.  Yet, after the 30 June Revolution, the idea has again been revived.  The National Authority for Remote Sensing and Space Sciences (NARSS), a center affiliated with the Ministry of Scientific Research, submitted a draft law in September 2013 to then-interim President Adly Mansour to create an Egyptian space agency.

The establishment of an Egyptian space agency is not too distant a dream, as several scientists and politicians are promoting an Egyptian law to promote such an agency.

In 2013 and 2014, Essam Heggy, a scientific adviser to Mansour, said the presidency was formulating a draft law to establish an Egyptian space agency.  He added that the goal of this agency would be to study Egypt’s water resources, study climate change and search for available subterranean water sources.

Speaking at a December 2013 NARSS workshop, Heggy said the presidency had set a number of priorities, including the establishment of an Egyptian space agency.  During a January 2014 interview broadcast on MBC Egypt, Heggy reiterated these claims, stating that the establishment of an Egyptian space agency would be announced within two months, by late March 2014.

Heggy previously worked for NASA.  He was appointed by presidential decree as Mansour’s adviser for scientific affairs in July 2013, before current President Abdel Fattah al-Sisi accepted his resignation in June 2014.  His resignation was not attributed to any apparent political reasons.

Mosalam Shaltout, chairman of space environment research at the Egyptian Space Program and vice president of the Arab Union for Astronomy and Space Sciences, said that an Egyptian space agency indeed already exists, as 100 acres have been allocated for it in the Fifth Settlement in the Cairo suburbs.  He said this area has been named “Space City,” and a part of it was designated to establish an African space agency.  Shaltout told Al-Monitor that the lack of official work toward establishing the agency stems from Egypt being in a transitional phase, with its priorities focused on economic development.  He said the new Suez Canal project has preoccupied the state.  “The time will come to establish the Egyptian Space Agency,” he said.  “This project will be part of what distinguishes the country in the region and on the African continent, especially since Egypt is technologically and scientifically qualified to have its own space agency.”

NARSS Chairman Medhat Mokhtar attributed the delay in establishing an Egyptian space agency to the political leadership, which is not convinced of the need for such an organization. He said that he had submitted a request to the presidency a year ago to establish the agency, but had yet to receive a response.  In press statements just in April, Mokhtar said that the delay in the launch of an Egyptian space agency was causing a migration of Egyptian scientists, noting the importance of a speedy decision on its establishment.

Egyptian space scientist Farouk El-Baz, director of the Center for Remote Sensing at Boston University and a member of Sisi’s advisory board, said that Egypt had already entered the field of space science through NARSS, yet limited capabilities posed an obstacle to the country expanding in this domain.  Baz said in May 2015 that the lack of an Egyptian space agency has set Egyptian satellite technology back 50 years compared to the United States.  “Egypt does not have radar satellites, nor those that take thermal images,” he said.

Shaltout said there are challenges facing the establishment of an Egyptian space agency, first and foremost the need for a decision by Sisi to establish it, especially since the draft law for creating the agency was presented to Sisi by Mokhtar when the president assumed office in June 2014.

Shaltout told Al-Monitor that the second challenge facing the agency’s establishment is funding, emphasizing that creating any space agency would require at least 1 billion Egyptian pounds ($131 million).  “The funding problem can be overcome through cooperation between the Egyptian Space Program and Saudi Arabia’s space program, to achieve integration,” he said.  “Furthermore, there is the possibility for financing from a number of Gulf states such as the UAE, for the project to serve as a nucleus for the establishment of a unified Arab space program in the coming period.”

Ayman El-Dessouki, former NARSS chairman, said that creating an Egyptian space agency has become an urgent necessity, as its establishment would provide considerable support to the country’s space program.  “From a scientific, strategic and security standpoint, Egypt needs to establish a space agency,” Dessouki told Al-Monitor.  “Egypt needs more advanced technology at the current time, and could use a space agency to monitor the country’s borders and coastlines through satellite imagery.  In addition, it could take advantage [of this technology] for border demarcation.”

As for the money needed for the agency, Dessouki said it is difficult to place a preliminary estimate on how much financial support would be required.  Regarding timing, he noted that one year would be sufficient to establish the agency, during which a strategy would be developed for it, in addition to developing an integrated organizational structure.

The former NARSS chairman said that statements claiming that everything was in place for the creation of a space agency and all that remained was a decision from Sisi, were overly optimistic.  He said that many procedures are required before work can begin to establish the agency, including taking some 15 years to develop a strategy, in addition to training human resources and identifying the agencies that will coordinate on space science.  (Al-Monitor 04.06)

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11.10  MAURITANIA:  IMF Staff Concludes Visit to Mauritania

An International Monetary Fund (IMF) mission visited Nouakchott from 27 May to 4 June 2015.  The mission reviewed recent macroeconomic developments and the outlook of the Mauritanian economy, following the Article IV Consultation that concluded in January 2015.  At the end of the visit, the IMF issued the following statement:

“Following several years of growing export demand and high commodity prices, the Islamic Republic of Mauritania is now facing a more difficult external environment, in line with the risks highlighted in the most recent Article IV Consultation.  Heightened uncertainty about the global economic outlook and negative developments in global iron ore markets are altering the economic outlook for Mauritania. Economic growth is expected to decelerate to about 4.5% during 2015 amid contained inflation.

“Fiscal and external buffers built in recent years through prudent macroeconomic policies, together with renewed efforts to mobilize external support, will help sustain economic activity and strengthen the external and fiscal positions during 2015.

“The authorities remain committed to macroeconomic stability over the medium term and the mission welcomes the authorities’ steps to assess the need for a gradual adjustment in the policy mix.  Looking ahead, the main challenges are to improve the fiscal and external positions, as well as support inclusive growth and job creation, in line with the recommendations discussed in the most recent Article IV Consultation.  Supporting macroeconomic stability in the near and medium term will require renewed efforts for fiscal consolidation in view of lower-than-envisaged revenues; while, at the same time, enhancing the efficiency of government spending.

“The mission was also encouraged by the authorities’ commitment to the structural reform agenda, which aims at providing the basis for stronger and more inclusive economic growth.  In particular, improving the business climate to support private sector development, economic diversification and job creation would enhance competitiveness and increase the resilience of the economy to external shocks.

“During its visit, the mission met with the Prime Minister, Mr. Yahya Ould Hademine, the Governor of the Central Bank, Mr. Abdel Aziz Ould Dahi, the Minister of Finance, Mr. El Moctar Ould Djay; the Minister of Economic Affairs and Development, Mr. Sid’Ahmed Ould Raiss; the Minister of Petroleum, Energy and Mining, Mr. Mohamed Salem Ould Bechir; the Minister of Fisheries and Maritime Economy, Mr. Nani Ould Chrougha; and other senior officials.  Meetings were also held with representatives of the private sector and development partners.  (IMF 04.06)

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11.11  TURKEY:  Fitch Says Election Heightens Political, Policy Uncertainty

On 08 June, Fitch commented that the inconclusive result of Turkey’s parliamentary election increases near-term political uncertainty and may aggravate tensions regarding economic policy.  This could increase risk to the sovereign credit profile, depending on how policymaking is affected.

The Justice and Development Party (AKP) won 41% of the vote and remains the largest party by some margin, but lost its parliamentary majority after 13 years, around 18 seats short in the 550-seat parliament.  The Kurdish Peoples’ Democratic Party (HDP) won 13% and 80 seats, securing parliamentary representation for the first time.  The Republican People’s Party (CHP) won 25% and 132 seats, while the Nationalist Movement Party (MHP) won 16% and 80 seats.

The HDP and MHP have said they will not join an AKP-led government, although this could change after negotiations.  The AKP could try to govern as a minority with the support of either the HDP or the MHP.  A CHP-MHP-HDP coalition appears unlikely due to antipathies between the MHP and HDP.  Fresh elections can be called if a government is not formed within 45 days, meaning that political uncertainty could drag on.

The election heightens uncertainty about economic policy and personnel that had emerged before Sunday’s vote.  Slowing GDP growth had increased tensions regarding efforts to rebalance the economy, cut reliance on net capital inflows, and lower inflation.  In Fitch’s view, economic policy coherence and credibility in Turkey has been weaker than in rating peers, demonstrated by shortcomings in the monetary policy framework and pressure from President Erdogan on the central bank to cut interest rates.

A coalition might bring moderating influences into play, but this is far from certain.  Conversely, increased political uncertainty, the possibility of another election and heightened market pressure on the exchange rate may put the central bank to the test, aggravate existing tensions and increase the risk of erratic policymaking or the pressure for looser fiscal policy, ultimately leading to widening budget deficits.

Prolonged political uncertainty may increase Turkey’s vulnerability to shifts in investor sentiment as US monetary policy tightening draws closer.  The size of its current account deficit and associated external financing needs are long-standing weaknesses in Turkey’s sovereign credit profile, although our ratings assessment acknowledges positive developments and resilience to recent episodes of external stress.  Signs of rebalancing include our forecast for a fall in the current account deficit to 4.6% this year, from 7.9% in 2013 (partly due to lower oil prices), and slower credit growth. We affirmed Turkey’s ‘BBB-‘/Stable rating on 20 March.

The election result could have some other, favorable political effects relating to the sovereign credit profile.  HDP’s strong showing could help avoid the risk of further marginalization of Turkey’s ethnic Kurds, which could have damaged the peace process.  The AKP’s failure to secure a majority, let alone a constitutional one, would appear to set back its contentious plans to change the constitution to centralize power in the hands of the president.  Potentially, a coalition government could ease the erosion of governance indicators, which had been weakening after the long period of single-party rule.

Further erosion of policy coherence and credibility that heightens Turkey’s exposure to fluctuations in global risk appetite for emerging-market assets would be negative for the sovereign credit profile, as would a sustained reversal in economic rebalancing leading to a widening current account deficit, higher external financing needs and greater-than-expected increases in net external debt/GDP.  (Fitch 08.06)

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11.12  TURKEY:  Turkey’s Exports Sharply Decline

Turkey’s exports in May 2015 were 19% lower than the same month last year.  Exporters Assembly of Turkey has announced that exports that were $12.87 billion in May 2014 this year has fallen to $10.82 billion.  Total exports for the year is about $6 billion less than 2014. It’s now likely that the $173 billion exports goal for 2015 will not be achieved.

Suleyman Yasar posted on 3 June in Al Monitor that one must remember that the decline in exports will have a negative effect on 2015 national income.  As long as the AKP cannot come up with a new economic policy, national income will go down.  National income, $823 billion in 2013, had already fallen to $800 billion in 2014 and per capita income had gone down from $10,822 to $10,404.  If conditions don’t change this year, per capita income could well go below $10,000.

The question all ask is why Turkey’s exports are declining:  It is because Turkey has lost its competitiveness.  So much so that although there has been a 55% devaluation in dollar parity over the past 24 months, we can’t still sell our products.  Other countries applied the declining world crude oil prices to their domestic prices and lowered their energy costs by 50%.  But Turkey, as it finances its budget from indirect taxes on oil and energy, did not apply lower energy prices to its domestic prices.  This meant that the devaluation caused further increases in domestic prices.  That is, while other developing countries were increasing their exports, Turkey lost significantly.

Here we have to note that exports in May to Germany fell by 26%, to Britain by 16%, to Italy by 22% and to the United States by 15%.

Meanwhile, Turkey was already suffering export losses to Arab countries because of the negative ramifications of its Middle East policies.  For example, in May 2015, exports to Iraq declined by 38%, which means a 27% loss for the year, so far.  Of course, as Turkey spends its resources on fancy malls, restaurants, high-end residences, luxury vehicles and showy state buildings, there was no investment in industry and agriculture that would produce goods for export.  The supply of commodities available for export shrank further, pushing up their domestic prices.

In short, the AKP government that opts for luxury consumption has turned Turkey into a country that can’t export.  (Al-Monitor 03.06)

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The Fortnightly newsletter is a free service of Atid, EDI. We are a team of economic and trade development consultants, headquartered in Jerusalem, but active throughout the region and beyond. EDI works with an international clientele interested in identifying and researching business opportunities in the region. We also serve as the regional representative offices for a number of U.S. states and bilateral Chambers of Commerce, as well as European clients.