Fortnightly – April 25, 2012

On 22 April, the cabinet approved the recommendations of the Committee on Concentration in the Economy in a unanimous vote. The cabinet instructed Prime Minister Netanyahu, Minister of Finance Steinitz and Minister of Justice Neeman to submit a bill to the ministerial legislative committee. Prime Minister Netanyahu said the decision was another step toward lowering the cost of living. The 100 Days Team emphasized the need to increase competition in the economy. Some 18 months ago the committee was established and the results will be the correction of distortions created in recent years. (Globes 22.04)

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1.2 Netanyahu Says Food Prices Haven’t Gone Up In Past Year

Prime Minister Benjamin Netanyahu on 22 April accepted the recommendations of a committee tasked with increasing market competitiveness. “We want to increase competitiveness by reducing centralization, cartels and monopolies. When competition is high, prices drop,” he said. He noted that food prices had not gone up in the past year, despite the fact that the index did and contrary to common belief. “But this is not enough. We want to see prices drop, and this is achieved by enhancing competition,” he added. Netanyahu praised his government and said: “While previous governments would talk of limiting cartels and monopolies, the current government actually does the work. We must continue to increase market competitiveness and reduce the cost of living.” Finance Minister Steinitz further said that “after 18 months of hard work, the government will most likely approve the centralization report which will work towards Israel’s economic, public and democratic interests.” Deputy Attorney General Licht said that he believes the major tycoons will turn to legal means, following the committee’s recommendations but called on the government to approve the recommendations. (Calcalist 24.04)

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1.3 Transport Ministry Considers Allowing Commercial Imports Of Used Cars

The Ministry of Transport is considering opening the car import market to commercial imports of used cars soon. This would be the most significant measure yet by Minister Katz as part of the Zelekha committee reform to increase competition in the sector. Under the new reform, commercial car importers, both authorized importers and parallel importers, which import from dealers rather by direct contracts with manufacturers, will be allowed to import and sell cars, probably up to two years old, subject to the cars complying with Israeli car import standards. Until now, transport ministers have prevented the commercial import of used cars, on the grounds that it would raise the average age of Israel’s car fleet and increase air pollution. It is currently possible to import a used car that is either up to two years old or more than 30 years old for personal, but not commercial, use. (Globes 23.04)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Arison Group’s Shikun & Binui Enters U.S. in Large Infrastructure and BOT Tenders

Shikun & Binui Group, a leading global infrastructure and real estate company and a member of the Arison Group, is participating in a number of large infrastructure tenders in the U.S., officially marking its entrance into the North American market. The Company is currently participating in tenders for the construction of highways and large scale BOT (Build, Operate, Transfer) projects. As part of the company’s commitment to sustainable building practices, as well as its drive to build successful projects that are socially and ecologically responsible, the group’s management attended the Fortune Brainstorm Green conference in California. Shikun & Binui’s U.S. activities will be guided by the Company’s decades of experience in constructing large scale infrastructure projects around the world, ensuring that its projects continue to meet the best interests of shareholders, employees, customers and the environment. The vision of Shikun & Binui is in line with the approach that many leading construction companies around the world have adopted over the last several years.

Founded in 1924 and traded on the Tel Aviv Stock Exchange and headquartered in Israel, Shikun & Binui is a leading global infrastructure group. From its establishment in Israel, the group’s operations have expanded to 20 countries around the world, including operations in Africa, Central America and East European countries. In 2011, the Company reported revenue of $1.5 billion. Shikun & Binui’s subsidiary, Shikun & Binui Real Estate, is the leading and largest residential real estate company in Israel, implementing environmentally sound building values, integrating environmentally responsible and energy efficient designs into every project. (Shikun & Binui Group 17.04)

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2.2 MoMinis Secures $4.5 Million Based on the Success of the PlayScape Mobile Mega-Game

Following the success of the PlayScape Mega-Game as a distribution vehicle for mobile games, existing MoMinis investors BRM Group and Mitsui Ventures are investing $4.5 million in MoMinis’ second round of funding. PlayScape pioneered the concept of Mega-Game in the mobile market: A unified gaming environment with multiple games (50+ titles to date) providing cross-game incentives, one common rewards system and one virtual currency, all completely transferable between games. A key differentiator of PlayScape is its ability to improve gaming metrics like retention and engagement. This claim is supported by its rating of 4.7 (out of 5) based on 8000+ reviewers — higher than the rating of any individual game within PlayScape.

Founded in 2008, Tel Aviv’s MoMinis http://www.mominis.com has become a leading publisher in the mobile market by providing an end-to-end solution for the development and distribution of mobile games. This is the company’s second round of funding, bringing the total funding raised to $9.2 million, led by the main investor BRM Group and Mitsui Ventures. The company’s PlayScape offering is the first mobile Mega-Game which provides developers with a cross-platform distribution solution that enhances discoverability while enabling end-users to benefit from a cross-game experience with Experience Points and Virtual Currency accumulated in one game completely transferable to any game. (MoMinis 18.04)

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2.3 Rafael Buys 40% Stake in Brazilian Aerospace Company

Rafael Advanced Defense Systems http://www.rafael.co.il/ announced the acquisition of a 40% stake in the Brazilian aerospace company GESPI Aeronautics. The acquisition will deepen the Israeli government owned defense company’s presence in the growing Brazilian homeland security and defense market. The two companies formally announced the acquisition on 10 April. Based in Sao Jose dos Campos near Sao Paulo, GESPI has been operating in Brazil’s civil and security sector for over 20 years, serving the local military forces. The acquisition of GESPI will allow Rafael to implement the strategic policy of the Brazilian government for the transfer of advanced technology and expertise to projects of the Ministry of Defense of Brazil and various security agencies of production site, providing employment opportunities and export to other countries. The companies did not disclose the amount of the deal. (Globes11.04)

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2.4 Egypt Unilaterally Cancels Gas Deal With Israel

Egypt unilaterally terminated its natural gas export contract with Israel, according to an announcement by the East Mediterranean Gas Company (EMG), the export operating company. Ampal-American Israel Corporation, which owns a 12.5% stake in EMG, announced that it had been notified by EMG that Egypt was ending the Gas Supply and Purchase Agreement between the two parties. Egyptian General Petroleum Corporation (EGPC) and the state-run Egyptian Natural Gas Holding Company (EGAS) notified EMG that they were terminating the Gas Supply and Purchase Agreement between the parties.

EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal. EMG, Ampal and EMG’s other shareholders are considering their legal options, as well as approaching the various governments.

In October 2011, EMG initiated arbitration proceedings against Egyptian government holding companies EGPC and EGAS due to their long-standing failure to supply the gas quantities owed under the agreement. EMG is seeking compensation from EGPC and EGAS for damages resulting from their contractual breaches. EMG already has further requested that an arbitral tribunal issue an order that EGPC/EGAS perform their obligations under the source gas agreement and rule that EGPC and EGAS are not entitled to terminate the agreement. The arbitration is ongoing. In addition, as previously, Ampal and other international shareholders of EMG have initiated the process of submitting claims against the Egyptian government under various bilateral treaties for the protection of investments.

Gas began to flow to Israel from Egypt in 2008 in the new pipeline after an investment of $460 million in building it by EMG. The contract for gas supply by the Egyptian government was for 20 years. Since the overthrow of the Mubarak regime in February 2011, the pipeline has been attacked by terrorists and blown up 14 times, disrupting the gas flow. No gas has reached Israel in the past few months. (Various 22.04)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Telairity Expands into Middle East and Opens Offices in Dubai and Jordan

Following a successful launch of Middle East operations at the February CABSAT show held in Dubai, Santa Clara, California’s Telairity is opening two new offices in Jordan and Dubai to serve the entire Middle Eastern region with local technical and engineering support, sales, installation and training. Telairity is the global leader in encoding technology in broadcasting, backhaul, IPTV and related markets. The new offices reflect a surge of interest in Telairity encoder products throughout the region, as evidenced at the CABSAT show. The company is currently engaged in the early planning stages of over a dozen projects to supply IPTV, DVB-S, DVB-S2 and Over The Top (OTT) video services to customers throughout the Middle East. Telairity is a supplier of innovative real-time H.264/AVC (MPEG-4) video compression solutions for broadcasting, backhaul, IPTV and related markets. The company’s unique video processing technology, based on the Telairity T1P2000 multi-core video processor, delivers the industry’s best price/performance for real-time H.264 video encoders today, with unique features like “instant-on” service. (Telairity 17.04)

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3.2 Sweden to Open Trade Offices in Kurdistan

AKnews reports that Sweden is planning to open trade offices in Erbil, as well as an institute to help Iraqis address unemployment, in an attempt to broaden trade relations with both the region and Iraq. The announcement came in a press conference for the Swedish Trade Minister Björling, who was in Erbil on a visit. (AKnews 17.04)

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3.3 DynCorp International Awarded up to $25.4 Million to Support the Kuwait Air Force (KAF)

Falls Church, Virginia’s DynCorp International (DI) been awarded a contract with the U.S. Army to provide a Maintenance Augmentation Team (MAT) for the Kuwait Air Force (KAF) AH-64D Apache helicopter maintenance program. DI will provide support to the KAF AH-64D Apache helicopter maintenance program for 16 AH-64D Apache Block II aircraft. The competitively-awarded, fixed price contract has one base year with four, one-year options and a total contract value of $25.4 million if all options are exercised. DynCorp International is a global government services provider working in support of U.S. national security and foreign policy objectives, delivering support solutions for defense, diplomacy and international development. (DI 13.04)

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3.4 IBM Expands Middle East Operations with Qatar Office

IBM announced the opening of a new branch office in Doha, Qatar. The increased presence in the Middle East region is in line with IBM’s global geo-expansion strategy, an initiative aimed at strengthening the company’s presence in growth markets around the world by providing services and solutions to an expanding base of customers and partners. IBM is placing a strong emphasis on investment in the Middle East as they recognize the opportunities presented by high growth rates and an increasingly competitive market. Their expansion strategy in the region is significant and ongoing, and Qatar is a key focus in the market as we undertake that expansion. Qatar is one of the world’s fastest growing economies with a national vision to create a sustainable and diversified economy by 2030. The company’s investment in Qatar is part of a broader plan to tap into new markets across the Middle East and Africa. With the opening of a branch office in Mauritius last month, and in Angola, Senegal and Tanzania in 2011, the new Qatar subsidiary underlines IBM’s plan to increase its presence in growth markets. IBM’s investment in Qatar is a significant development, given that the country’s ICT market is being fuelled by the rapid pace of economic development and diversification initiatives. (IBM 16.04)

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3.5 Aegion Corporation Forms Joint Venture in Oman with Special Technical Services

St. Louis’ Aegion Corporation announced the creation of a joint venture between United Pipeline Systems, an Aegion subsidiary, and Special Technical Services based in Oman. United Pipeline System is a 51% owner in the joint venture, with STS holding the remaining interest. The new joint venture, United Special Technical Services (USTS) is established in Oman and will provide pipeline, piping and flow line high-density polyethylene lining services throughout a territory that includes Algeria, Bahrain, Egypt, Saudi Arabia, Kuwait, Oman, Qatar, Tunisia and the UAE. Aegion Corporation is a global leader in infrastructure protection, providing proprietary technologies and services to protect against the corrosion of industrial pipelines and for the rehabilitation and strengthening of sewer, water, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures. (Aegion 12.04)

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3.6 Alwaleed Says World’s Tallest Building Finished in 2017

Jeddah’s Kingdom Tower, in Saudi Arabia, is set to become the world’s tallest building. It is planned to be completed midway through 2017, according to Kingdom Holding, who said that the 1,000m high skyscraper in the Red Sea port city would be finished in 63 months. Kingdom Holding also announced that developer Saudi Bin Laden Group has bought a 16.63% stake in the project for $400m. Kingdom Holding has a 33.35% stake in Jeddah Economic Company, the firm set up to build the Kingdom Tower project. The other shareholders are Abraar International Holding Company, also with 33.35%, and Jeddah businessman Abdulrahman Hassan Sharbatly with 16.67%. Kingdom Holding said that the final license from Jeddah municipality to build the Kingdom Tower was formally received on 19 February. The mixed use development will have a total construction area of more than 500,000 sqm and will house a Four Seasons hotel, serviced apartments, office space, luxury condominiums and the world’s highest observation deck. Kingdom Tower will form part of the wider Kingdom City project, a 56m sq ft, SAR75bn development which will include a number of other residential and commercial buildings. On completion, Kingdom Tower will trump Dubai’s 830m Burj Khalifa to become the tallest free-standing structure in the world. It may not hold the record for long however, with an Azerbaijani firm recently announcing plans to build a 1,030m structure in the Caspian Sea nation’s capital Baku. (AB 15.04)

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3.7 Saladax Expands Distribution of My5-FU in Egypt & Throughout MENA Region

Bethlehem, Pennsylvania’s Saladax Biomedical, a privately held company developing and commercializing novel diagnostic assays to achieve the promise of personalized medicine for new and existing therapeutics, announced that Eilaf Pharma S.A.E. will serve as exclusive distributor of Saladax’s My5-FU™ diagnostic test, which measures levels of a widely-used anti-cancer drug, 5-fluorouracil (5-FU), in the blood of cancer patients, in Egypt and throughout the Middle East North African (MENA) region. My5-FU enables oncologists to determine the optimal dose of 5-FU for each individual patient, thereby increasing the effectiveness of the drug and lessening the risk of severe toxicity and side effects. My5-FU is the first of Saladax’s innovative dose management tests commercially available. Eilaf was founded in 2008 to represent dynamic companies from the USA and EU in Egypt and MENA region. Eilaf seeks to commercialize proprietary prescriptions, promote innovative devices and provide contract research services in key therapeutic areas. The relationship was born and facilitated with the help of the Middle East Regional Office of the Commonwealth of Pennsylvania; the Commonwealth’s authorized trade representative in the region. (Saladax 23.04)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 SPI Solar Signs MOU With the Taneo Fund to Build 23 Megawatts Across Greece

Roseville, California’s SPI Solar, a leading vertically integrated photovoltaic (PV) solar developer, recently entered into a Memorandum of Understanding (MOU) with two fund management companies in Greece for the sole purpose of developing utility-scale solar energy facilities (SEF) across Greece. Thermi-Taneo Venture Capital Fund (Thermi) and AIMS-Taneo Fund (AIMS) are part of the New Economic Development Fund known as the Taneo Fund. The Taneo Fund is a Greek-state sponsored, privately funded and independently managed fund-of-funds which makes venture-capital investments in Greece and Europe. The agreement establishes a minimum commitment for Taneo to provide 23 megawatts of SEF projects for SPI to design and build, and sets as a goal for Taneo and SPI to potentially develop a total of 100 megawatts in SEF projects across Greece. The MOU provides a mechanism for SPI to more than triple its development opportunities across Greece. The projects associated with the MOU, all of which will be ground mount systems, are scheduled for completion between late Q4 and early Q1/13. (SPI 19.04)

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4.2 Turkey Wind Power Sector Outlook 2016

Turkish wind sector has been expanding gradually in recent years. The rising electricity demand and government focus on renewable energy has resulted in series of favorable transformation for wind power sector. Ankara recognizes the importance of wind as an excellent and environment friendly source of energy thereby focusing on growth of wind power sector in the region. The importance of wind power sector in Turkey overall energy matrix is reflected from the fact that wind capacity has grown almost 3000% from 2006 to 2011. The number of operational wind farms has also been increasing in the country, raising the total amount of electricity supplied by wind power in the nation. This also speaks volumes about the high return potential of investing in the sector, which has attracted various domestic and foreign companies into Turkish wind power sector. Wind power can be exploited immensely as a source of alternate fuel for power in Turkey. Wind potential is tremendous in the regions of Marmara and Aegean coasts of Turkey. These regions have collective potential to produce 25,000-30,000 MW of wind power. In terms of the total wind power potential, Turkey exceeds many of the European countries with its 48 GW of wind potential but somehow in terms of installed capacity it still remains far behind of these countries. (R&M 13.04)

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5: ARAB STATE & PAKISTANI DEVELOPMENTS

5.1 IMF Raises MENA Growth Forecast to 4.2% in 2012

The IMF raised its economic growth forecast for the Middle East and North Africa, but warned that the region remained vulnerable to worsening European debt crisis. The IMF projected that the MENA region would grow by 4.2% in 2012, up 0.6% on its January estimates, and by 3.7% in 2013, down 0.2% on earlier projections. Real GDP growth in MENA had slowed to 3.5% in 2011 amid the Arab Spring protests and resulting political upheaval. The report said social unrest that swept the Arab world negatively impacted tourism and capital flow. Aside from domestic challenges and geopolitical risks associated with Iran, the IMF sees large potential spillovers from the European debt crisis on oil prices and trade links with Arab Maghreb states. Growth in oil exporting economies, including Saudi Arabia, Iran, Libya and other Gulf countries, reached only 4.0% in 2011, despite exceptionally high oil prices. Qatar’s economy is projected to slow to 6% in 2012 and 4.6% in 2013, after growing by 18.8% in 2011. Growth in Saudi Arabia was 6.8% in 2011 and is forecast to slow slightly to 6.0% in 2012 and 4.1% in 2013. The UAE economy grew by 4.9% and Kuwait by a strong 8.2% in 2011. They are forecast to grow by 2.3% and 6.6%, respectively in 2012. The IMF warned that rising government expenditure in oil exporting economies has increased their fiscal vulnerability to oil price shocks. Meanwhile, growth in oil-importing nations, including Egypt and Tunisia, was up a modest 2.0% in 2011, even after excluding Syria. They grew by 4.5% in 2010. (IMF 17.04)

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5.2 Cancelled MENA Construction Projects Increase by 8%

The value of construction projects cancelled in MENA has risen by 8% since the start of the year, according to a report published by Citigroup. However, the value of cancelled and delayed construction projects in the region remained largely unchanged at approximately $719b since January 2012. According to the study, more than half (57%) of these cancelled or delayed projects were in the UAE, with the value of such projects rising 2% since Citigroup’s last report, published in January. The story was significantly different in Saudi Arabia, where the value of cancelled and delayed developments fell by 8% to $316b. In Qatar, which has seen a huge number of new developments in recent years, the value of delayed projects plummeted by 41%, but in terms of those being cancelled the value soared by almost a third, at 32%.

Looking at the construction industry as a whole, on a year-on-year basis, the value of GCC projects planned and underway crept up 2.5% to $1,906b. Saudi Arabia leads the way, with $750b of new projects in the pipeline, making up 31% of the entire MENA market. Iraq, which is now looking to rebuild its balance sheet, remains the third largest market in the region with just under $315b of new projects. It is also showing signs of spending across segments, which could mean more opportunities for contractors. In Kuwait, though the value of projects has grown 10% to almost $200b since the start of the year, the market generally is expected to be hampered in the coming months by domestic political tensions. (AB 22.04)

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5.3 Libya Pays JD50 Million to Jordanian Hotels & Hospitals

The Libyan government has made a JD50 million payment on its outstanding debt to the Kingdom’s hospitals and hotel. The head of the Libyan Medical Committee in Amman said that the money had been already transferred. He said the delay in paying back the outstanding debts was related to the government’s engagement with internal issues. The Jordanian Private Hospitals Association (PHA) officials confirmed that they had been notified of Libya’s decision to transfer JD50 million. It was not immediately clear how the payment would be divided between hotels and hospitals. The statement came one day after the Kingdom’s hotels decided to stop receiving Libyan guests due to the outstanding debt of over JD90 million the Libyan government owed the hotels. In a circular issued by the Jordan Hotels Association (JHA), hotels were asked to inform their Libyan guests to vacate their rooms by Sunday unless they can pay in cash for their accommodation. Meanwhile, PHA-affiliated hospital stopped receiving Libyan patients except cash payers at the beginning of this month. According to PHA figures, the medical bills for more than 50,000 Libyans treated in the Kingdom’s hospitals total JD120 million, of which Libya had only paid JD20 million prior to the payment just announced. (Various 19.04)

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►►Arabian Gulf

5.4 US Weapons Maker Eyes More Arabian Gulf Sales

US weapons maker Lockheed Martin expects more sales of anti-missile interception systems in the Arabian Gulf in a regional military buildup sparked by growing tensions with Iran, a company executive said. Lockheed, fresh from a $3.6b deal to sell its Theater High Altitude Area Defense (THAAD) system to the UAE in December, is in talks with other Arabian Gulf states to promote the advanced systems as all the GCC countries have expressed an interest in the THAAD. Gulf countries are spending billions of dollars on defense procurement amid increasing tensions with Iran over its nuclear program. Iran has repeatedly denied charges by the US and its allies that it is seeking to develop nuclear weapons and said it is for power generation. Tehran has threatened to target Israel and US bases in the Gulf if it is attacked and also to close the Strait of Hormuz, through which a third of the world’s sea-borne oil traffic passes daily. The UAE deal was the first foreign sale of THAAD, the only system designed to destroy short- and intermediate-range ballistic missiles both inside and outside the earth’s atmosphere. Lockheed looks to leverage its experience with the UAE to offer the systems to other US allies and partner countries in the region.

The UAE deal followed a $1.7b direct commercial contract to upgrade Saudi Arabia’s Patriot missiles and a sale of 209 advanced Patriot missiles to Kuwait, valued at roughly $900m. Last year, the Obama administration also announced it had sealed a deal to sell $29.4b in advanced Boeing Co F-15 fighter jets to Saudi Arabia, the priciest single US arms sale yet. The ongoing build-up of Saudi Arabia as a counterweight to Iran is projected to total as much as $60b over 10 to 15 years, including the F-15s, three types of helicopters and advanced missiles, bombs and other hardware and services. (AB 11.04)

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5.5 Kuwaiti Inflation Rises to 4.1% on Food & Beverages

Kuwait’s inflation rate rose to 4.1% in March from 3.8% the previous month as the costs of food, beverages and tobacco increased. Food prices climbed an annual 10% from 8.6% in February, according to the Central Statistics Office. Beverages and tobacco rose 7.3% in March, compared with 7.2% the previous month. Consumer prices rose 0.8% from February. Inflation in Kuwait, the only Arabian Gulf Arab state to have dropped its currency peg to the US dollar, accelerated to a record 11.6% in August 2008. The inflation rate is forecast to fall to an average 4% this year, from 4.8% in 2011, National Bank of Kuwait SAK, the country’s biggest lender, said in January. Prices of household goods and services increased 2.3% in the 12 months through March, compared with 1.4% the previous month. (AB 22.04)

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5.6 Moody’s Expects Qatar’s GDP To Grow By 6% In 2012

Moody’s http://www.moodys.com forecast on 15 April that Qatar’s real GDP is likely to expand by six% in 2012, driven by high oil prices, strong liquefied natural gas export volumes and accelerated public spending. The rating agency said the growth would support banks’ asset quality, drive credit growth – likely to be between 20-25% during 2012 – and increase bank revenues. Non-performing loan levels will likely remain relatively stable at around two% of gross loans, supported by Qatar’s strong macro environment and improvements in the credit quality of banks’ consumer portfolios. It said in the report that the outlook on Qatar’s banking system was stable, reflecting Qatar’s high public spending levels that will continue to sustain growth and bank lending activity over the 12-18 month outlook period.

Moody’s said that the stable outlook also captures the banks’ limited asset-quality pressures and healthy capitalization levels and strong earnings potential. Following three rounds of pre-emptive capital injections by the Qatari government into the seven listed domestic banks between 2009 and 2011, the sector’s solid capital buffers provide high loss-absorption capacity. The rating agency said that core liquid assets, estimated at 34% of total assets in December 2011, demonstrated that liquidity buffers were sound within the system. Return on average assets stood at 2.7% in 2011, one of the highest ratios amongst regional peers, Moody’s said. It added that Qatari banks’ interest-rate margins will likely decline in 2012 due to the increased funding costs and the introduction of interest-rate caps on their retail portfolios. However, Moody’s said it expects the system’s overall profitability to remain at comfortable levels, supported by higher lending volumes, low provisioning requirements and banks’ low cost bases. (Moody’s 15.04)

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5.7 Qatar Acquires 5.2% Stake in Tiffany

Qatar’s sovereign wealth fund has acquired a 5.2% stake in Tiffany, the US-based jewelry retailer. The stake expands the portfolio of the Qatar Investment Authority, which also owns Harrods, the luxury London department store, a 17% stake in Volkswagen and a 1% stake in LVMH, the French luxury group which owns Louis Vuitton, the UK’s Financial Times reported. QIA acquired its position last year and reported it this year in a Securities and Exchange Commission filing. According to the filing, QIA’s stake in Tiffany rose to 5% on 30 December and is estimated to be worth about $437m. The stake makes the QIA Tiffany’s largest shareholder, with investment fund Vanguard the next largest, with 5.17%. Qatar’s investment firms have been on a buying spree in France in recent months, including the purchase of football team Paris Saint-Germain. Qatari funds have also bought 10% of French media company Lagardere and 5.6% of construction giant Vinci. Last month it was also reported that Qatar had a two% stake in oil group Total. The wife of the Qatari emir bought a controlling stake in French handbag maker Le Tanneur & Cie in May last year while the Gulf state also has an interest in London department store Harrods. (AB 20.04)

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5.8 Saudi Inflation Remains Unchanged at 5.4% in March 2012

Annual inflation in Saudi Arabia remained relatively unchanged at 5.4% in March 2012, compared to the previous month, according to data released by the Central Department of Statistics (CDS). Over the month, inflation has risen by 0.3% in March 2012, after increasing by the same level in February 2012. Pundits expect annual inflation in Saudi Arabia to average 5.8% in 2012, compared to 5.0% in 2011. Food prices continued to increase on an annual basis to 5.1% in March 2012, from 4.3% in February 2012. Meanwhile, rental inflation on annual basis has eased to 8.9% in March 2012 from 9.2% in February 2012. Rental inflation will remain the major driver of inflation in Saudi Arabia at least until new housing supply comes on stream over the next five years. (Beltone 12.04)

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5.9 Saudi Health Ministry Awards Key Health Contracts In Riyadh

The Saudi health ministry has awarded contracts to implement three key medical projects in Riyadh at a total cost of more than SAR967.52 million. The contracts included building three medical towers — one each at King Saud Medical City, Prince Salman Hospital and Al-Iman General Hospital — and that will have a total of more than 800 beds. Other ongoing health projects in 2012 include, Prince Sultan Hospital, a hospital in west Riyadh, medical tower at Al-Yamama Hospital and Riyadh Mental Health Hospital, each having 500 beds, 300-bed Al-Kharj General Hospital, 200-bed Al-Saleel Hospital, 200-bed Afeef General Hospital, 50-bed Ramah and Halban hospitals, and 15 clinics in Riyadh. (AB 11.04)

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5.10 Saudi’s 2006 Shopping Spree Saw $2.9 Billion to Upgrade Their M1 Tank Fleet

It was revealed that in July 2006 the US DSCA informed Congress that Saudi Arabia wished to purchase 58 M1A1 Abrams tanks, then upgrade these M1A1s, along with its existing 315 M1A2s, to create 373 M1A2S (Saudi) Abrams configuration main battle tanks. The sale would include kits, spare and repair parts, communications and support equipment, publications and technical data, personnel training and training equipment, contractor engineering and technical support services and other related elements of logistics support. The estimated cost is $2.9 billion. This program also dovetails well with their recent $276 million Cooperative Logistics Supply Support Agreement, which ensures support and spare parts for their American-made land equipment. This sale and upgrade program will be executed in 3 phases, and has begun to attract contracts.

Saudi Arabia has an unusual land forces structure whereby it has an “American brigade” (8th Armored Brigade) currently armed with US equipment like M1 Abrams tanks, M2 Bradleys et. al., and a “French brigade” (4th Armored Brigade) armed with French equipment including AMX-30 tanks, AMX-10P APCs, et. al. Indeed, Saudi equipment throughout its land forces tends to be a mixture of American and French equipment as a rule. This hedges against supplier continuity and creates wider markers for geopolitical favors, at the cost of increased maintenance burdens and potential logistical and interoperability headaches. There were rumors that the 2006 memorandum of defense cooperation with France may also lead to an order of Leclerc main battle tanks etc., to upgrade the “French brigade” alongside its American counterpart. There has been no action on that front, but there have been countervailing rumors of a deal for Russian T-90s. Unless otherwise noted, General Dynamics Land Systems in Sterling Heights, Michigan executes these contracts, while the U.S. Army Tank and Automotive Command in Warren, Michigan manages the contract on behalf of its Foreign Military Sale client in Saudi Arabia. (DID 16.04)

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5.11 Pakistan Seeks New IMF Loan

Pakistan has decided to seek a new financial arrangement with the IMF amid concerns that it may not be able to repay its foreign debts in the next financial year without external support. Pakistan will require $4.3 billion next year just to pay off the IMF debt. In February, Pakistan started repaying a $7.6 billion loan it had received from the IMF under a standby arrangement signed in 2008. It paid a total of $399 million in February and by the end of the current fiscal year, it has to pay a total of $1.3 billion. The government has already held several rounds of talks with the IMF on a new loan arrangement but the lending agency seems unhappy with Islamabad’s response to suggested economic reforms, particularly for the lowering of fiscal deficit and improving tax-to-GDP ratio. A recent IMF report on Pakistan’s economy noted that the country’s gross external financing requirements in the next fiscal would be $10.5 billion while its ability to repay loans would weaken significantly in fiscal 2012-13. (Dawn 23.04)

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►►North Africa

5.12 Egyptian – American Trade Falls by 34% in January 2012

The volume of trade between Egypt and the US decreased by 34.2% to $545.3 million in January 2012, compared to $829.8 million in January 2011. Egypt’s exports decreased by 10.9% during January 2012, compared to January 2011, falling to $152.3 million from $171 million. The decrease is due to Egypt’s failure to export any petroleum products last January, compared to $26.9 million worth of oil exports in January 2011. Egypt previously exported metal fuel, liquefied natural gas and crude oil to the US. Non-oil exports rose in January 2012 to reach $152.3 million, a 5.6% increase from $144.1 million in January 2011. Products listed in the Qualified Industrial Zones agreement witnessed the greatest export increase, rising by 29.4% to reach $106.3 million in January 2012 from $82.1 million in January 2011. The most important Egyptian exports were textiles, carpets and cotton, in addition to urea fertilizer and decorative pieces, vegetables, medicinal herbs and aluminum. Egypt was ranked 43 on the list of countries importing from the United States in January 2012. It was ranked second in Africa after South Africa, third among Arab countries after the UAE and Saudi Arabia, and third in the Middle East after Israel and Turkey. (AA 20.04)

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5.13 Egyptian March Inflation Slows as Food-Price Increases Ease

Egypt’s urban inflation increased 1.2 % m-o-m in March 2012, showing a decline in the inflation rate as food prices rose at a slower pace, according to CAPMAS. The annual urban inflation rate fell to 9% from 9.2% in February, while food and beverage costs, the biggest component of the consumer-price index, increased 10.9% from a year earlier, compared with 12.6% in February. Core inflation accelerated to an annual 8.68% in March from 7.3% in February. (CAPMAS 12.04)

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5.14 Egyptian Tourism Declined 28.6% in January 2012

The number of tourists visiting Egypt has dropped by 28.6% in January 2012 in comparison to last year, according to a government report. The total number of tourists in January 2012 was 820,000, compared with 1.15 million in January 2011, CAPMAS said. Tourism from Western Europe declined the most, followed by Eastern Europe. The number of Arab tourists was 167,000 in January 2012, compared to 139,000 in January 2011, an increase of 20.5%. (CAPMAS 12.04)

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6: TURKISH, CYPRIOT, GREEK & BULGARIAN DEVELOPMENTS

6.1 Turkey’s Foreign Trade Deficit Sees Notable Improvement in February

Turkey’s foreign trade deficit dropped by more than one-fifth in annual terms during February, according to the Turkish Statistics Institute (TurkStat). The data shows the gap declined by 20.4% from $7.46 billion in February 2011 to $5.93 billion in the second month of this year. Exports grew by 17.1% to $11.77 billion, whereas imports saw a slight increase of 1.1% to $17.52 billion. The reduction came as a result of a much weaker Turkish lira against major currencies the euro and dollar – which gave Turkish goods a price advantage in international markets, while making foreign goods more expensive domestically — as well as the government’s efforts to diversify export markets in line with its centennial goal of having $500 billion in revenue from sales overseas by 2023. The US dollar was worth TL 1.59 on average in February of last year as compared to TL 1.74 this February. The euro, likewise, was also much stronger compared to the national currency, jumping from TL 2.18 in February 2011 to TL 2.33 three months ago.

The foreign trade deficit is a highly problematic issue for a country that relies on foreign supplies for nearly all of its energy needs and whose industries are also heavily dependent on foreign intermediate goods to keep their wheels turning. This gap has grown to a barely sustainable level for the country as it has outpaced almost all world nations in economic growth in the past two years. The foreign trade deficit spiked from $39 billion in 2009 — when the Turkish economy contracted by nearly 5% — to $72 billion in 2010, when the economic growth rate was at 8.9%. It soared to $105 billion, or some 13% of Turkey’s GDP last year, when the national economy grew by around 8% again. The foreign trade deficit is problematic because it causes the country’s foreign reserves to constantly bleed out and could eventually disrupt Turkey’s balance of payments as it also leads to a high current account deficit (CAD). To address this issue, the Central Bank of Turkey teamed up with government to add monetary measures on top of the administration’s fiscal measures last year. Whereas the bank aimed to slow down credit expansion and the weakening of the lira against the euro and dollar, the government imposed higher taxes — in the form of what is called the private consumption tax (ÖTV) in Turkey — on certain goods such as cars and mobile phones, as well as tobacco and alcoholic beverage, to cut imports. (TurkStat 31.03)

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6.2 Turkey’s Double-Digit Jobless Rate Returns After 9 Months

Turkey’s unemployment rate again reached double-digits in January, following nine months of single-digit unemployment. The jobless rate was at 10.2% for the period, which includes December 2011, January and February, according to data released by the Turkish Statistical Institute (TÜIK). The non-farm unemployment rate fell from 14.7% to 12.4% in the same period. The number of unemployed in the January period decreased 380,000 compared to the same period last year, at a total of 2.6 million. The unemployment rate was down 1.7 points to 10.2% compared with the same period. However, the rate stood at 9.8 in December, 9.1 in November and October, and 8.8% in September of last year. The last time the unemployment rate reached double digits was March 2011, when it was 10.8%. The unemployment rate was 12%, with a decrease of 1.8% in urban areas, and 6.5%, with a 1.6% decrease in rural areas, TÜIK said. Compared with 2011, the number of employed increased 1.01 million, reaching nearly 23.5 million in the January 2012 period. The number of people employed in the agricultural sector increased by 15,000, and in non-agricultural employment the number increased by 999,000. (TÜIK 17.04)

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6.3 Turkish Parliament Agrees To Reinstate 10% Limit on Foreign Ownership Of Land

Parliament’s Justice Commission agrees to reinstate a 10% limit on foreign ownership of land in a single district as members of the ruling party succumb to objections. The ruling Islamist Justice and Development Party (AKP) agreed to reinstate a 10% limit on foreign ownership of land in a single district, during discussions at Parliament’s Justice Commission, retreating after opposition objections. A controversial bill easing restrictions on foreign purchases of real estate was amended at a commission meeting April 11 after a stormy debate. Under the amended draft, a foreign individual can buy a maximum of 30 hectares of land in Turkey, but the amount could be doubled by a government decision. The current limit is 2.5 hectares of land. The main opposition Republican People’s Party (CHP), however, said the bill was still unconstitutional, as the bill envisaged no real limit for sales of real estate to foreign companies, and that the Constitutional Court had scrapped similar arrangements in the past. Under the draft, the government would be able to place restrictions or bans on the places where foreign individuals and trade companies could buy real estate. (HDN 14.04)

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6.4 IMF Sees Greek Economy Shrinking by 4.7% in 2012

The IMF has forecast that the Greek economy will shrink by 4.7% of GDP this year and that the country will not see any growth in 2013. The IMF’s World Economic Outlook predicted that the Greek economy, in recession since 2008, will contract more than the Washington-based fund, the European Commission and the European Central Bank – known collectively as the troika – predicted in the scenario used to agree Greece’s second bailout. In the debt sustainability analysis (DSA) produced by the troika, the baseline scenario forecast a 4.3% contraction in the Greek economy this year. The alternative scenario predicted that the economy would shrink by 4.8% of GDP. The IMF forecasts that unemployment in Greece will reach 19.4% this year. ( eKathimerini 17.04)

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7: GENERAL NEWS AND INTEREST

*ISRAEL:

7.1 Israel Commemorates 22,993 Soldiers Who Died in the Line of Duty

On Memorial Day for Fallen Soldiers and Victims of Terrorism, which began at sundown on 24 April, Israel honors the 22,993 soldiers who have fallen in the line of duty since 1860 (when modern-day Jews first settled outside Jerusalem’s Old City). Since last year’s remembrance day, 126 additional soldiers have fallen. In Israel there are currently 10,524 bereaved families of fallen soldiers, among them 2,396 orphans and 4,992 widows. The Memorial Day began with a minute-long siren sounded at 20:00h, followed immediately by official events. On the following day, a two-minute siren was sounded at 11:00 as part of Memorial Day ceremonies across the country.

For the duration of the sounding of both sirens, work is halted, people walking in the streets stop, cars pull off to the side of the road and everybody stands at silent attention in reverence to the fallen soldiers and victims of terrorism.

A small flag on a flame-shaped pole bearing a black ribbon will be laid on the grave of every soldier who died in the line of duty as an expression of respect and sympathy. More than a million people are expected to visit military cemeteries across the country this week. Though a regular work day, activity is usually curtailed and many leave their offices early pending the Independence Day celebrations that follow. (Israel HaYom 22.04)

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7.2 Israel’s Independence Day – 64 Years After Sovereignty was Regained

Celebrations for the 64rd anniversary of Israel’s regaining its independence will begin on Wednesday evening, 25 April throughout the country, continuing throughout Thursday, 26 April. The official observance starts when the state flag is raised to full mast at a national ceremony on Mount Herzl in Jerusalem. Israel Independence Day is celebrated annually on 5 Iyar, which corresponded to 14 May 1948, the date the British mandate ended over the Land of Israel. A religious and national holiday, Yom Atzmaut – Independence Day is a celebration of the renewal of the Jewish state in the Land of Israel, the birthplace of the Jewish people. In this land, the Jewish people began to develop its distinctive religion and culture some. Here the Jews preserved an unbroken physical presence, for centuries as a sovereign state, at other times under foreign domination. Throughout their long history, the yearning to return to the Land has been the focus of Jewish life. With the rebirth of the State of Israel, in 1948, Jewish independence, lost 1,879 years earlier, was restored.

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7.3 Israel’s Population at 64 Reaches 7,881,000

Israel’s population numbered 7,881,000 people on the eve of its 64th anniversary, according to the Central Bureau of Statistics indicate. In comparison, on the eve of its re-establishment in 1948, the State of Israel consisted of only 806,000 residents. New data published by the CBS indicates that nearly 5,931,000 of the population are Jewish (75.3%). The Arab Israeli population stands at 1,623,000 (20.6%) and the remaining 4.1% are immigrants and their children who are not listed as Jewish by the Interior Ministry. They comprise 327,000 residents. Since last year’s Independence Day, 161,000 babies have been born in Israel and 39,000 people have died. Approximately 19,000 immigrants arrived in the country, while nearly 8,000 chose to leave Israel. Another 4,500 people joined the general population as a result of family reunifications. In total, Israel’s population grew by 137, 500 – a 1.8% increase. The data also suggest that more than 70% of the Jewish population are native-born Israelis, and more than half of them are at least second generation Israelis. In contrast, only 35% of the population was native-born in 1948. (CBS 24.04)

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7.4 Finland Adopts Israeli Education Method

Finland has been leading the global education system rankings for years and is considered a role model and object of admiration with regards to educational achievements. Yet in spite of its successes in the field of education, the Nordic country has chosen to adopt an educational system conceived in Israel. The man behind the program is 90-year-old Professor Reuven Feuerstein, a world-renowned cognitive psychologist, a Professor of Psychology at the School of Education at the University of Bar Ilan and founder of the Feuerstein Institute (International Center for the Enhancement of Learning Potential) and an Israel Prize laureate in the field of Social Sciences. Feuerstein’s program focuses on imparting cognitive and learning abilities and has already been implemented in hundreds of schools and education and training institutions in Israel and in 40 countries including the US, Holland, France, Brazil and Indonesia. At its basis, the program focuses on adaptation to individual groups – like students and soldiers from Ethiopian backgrounds, therapy and rehabilitation for people with head injuries as well as gifted and outstanding students or students with Down syndrome and even the elderly. Feuerstein applied systems have already been in use in Finland’s special education system for over 20 years in treating autism and learning disabilities. In recent years the system has been put to use in preparing the unemployed for the workforce. (Various 17.04)

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*REGIONAL:

7.5 Bahrain Women Outscore Men in Top Jobs

Bahrain leads the Arab Middle East in a new report on women’s empowerment, which measures female education opportunities, business ownership and workforce participation. The country outscored its Arabian Middle East neighbors in the MasterCard Worldwide Index of Women’s Advancement 2012 with a total score of 69. The UAE came in second in the region with 67.5, followed by Qatar (67.1), Kuwait (63.5), Oman (63.4), Lebanon (51.8), Egypt (49.8) and Saudi Arabia (36.9). Bahrain was found to have three times more female business and government leaders than males – and was the only country in the region where more women than men occupy such posts. The study found that there are 313.6 women business/government leaders (in Bahrain) to every 100 males in the same position in this market. The second placed country in this category was the UAE (84.1), followed by Oman (80.7) and Qatar (63.9). Lebanon came last with 27.8. The annual index, which measures women’s socio-economic situation across the Middle East and Levant compared to men, found women have seen increasing advancements in recent years.

A score below 100 indicated men outnumbered women, while a score above 100 indicated women outnumbered men. In business ownership Bahrain came second with 32. Only Oman scored better with 38.9, while the UAE scored 31.5, Qatar scored 26.7, Kuwait scored 22.9 and Saudi Arabia scored nil. Meanwhile, Bahrain came third in the Arab Middle East in terms of the employment opportunities for women. In education, it scored 113.5, behind Oman (122.6) and Lebanon (150.2) – but ahead of the UAE (105.8). Across the region, overwhelmingly more women were enrolled in tertiary or post-secondary education than men. This is most evident in Qatar, which scored 558.7, followed by Bahrain in second with 273.1, Kuwait (243.1), the UAE (181.6), Oman (156.8), Lebanon (119.6) and Saudi Arabia (109.5). (TradeArabia 20.04)

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7.6 Sri Lankan Accused of Witchcraft in Saudi Arabia

A Sri Lankan woman has been arrested on suspicion of casting a spell on a 13-year-old girl during a Saudi family’s shopping trip, a Saudi police spokesman confirmed on 18 April, and may face death in a country where convicted sorcerers are beheaded. It was reported that a Saudi man had complained his daughter had “suddenly started acting in an abnormal way after she came close to the Sri Lankan woman in a Jeddah shopping mall. He reported her to the security forces, asking for her arrest. The specialized units dealt with the situation and arrested her. Saudi Arabia, a US ally, is an absolute monarchy that has no written criminal code and where court rulings are based on judges’ interpretation of Islamic Sharia law. In December, Amnesty International condemned the beheading of a woman in Saudi Arabia convicted on charges of “sorcery and witchcraft,” saying it underlined the urgent need to end executions in the kingdom. Amnesty said the execution was the second of its kind last year. A Sudanese national was beheaded in the Saudi city of Medina in September after being convicted on sorcery charges. (AB 18.04)

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7.7 Death Penalty Spurs Controversy in Tunisia

Tunisia is witnessing a major debate on the death penalty. Civil rights advocates are calling for its abolition and supporters of Sharia insist that it is necessary to deter crime. Twenty-one crimes in Tunisia are punishable by death, either by hanging or firing squad. The penalty has not been enforced since 1991, however, when it was imposed on a defendant convicted of child rape and murder. Most involved in the debate are well aware that Islamic Sharia calls for the death penalty in instances of murder. But the remaining twenty laws on the books include other crimes such as security violations, assault on public servants, rape associated with violence, treason, mutiny, and sabotage of the railway system. The Tunisian chapter of Amnesty International has called for the Constituent Assembly to abolish capital punishment, saying it does not befit the image of the “new Tunisia”.

To mark the first anniversary of the Tunisian revolution, Tunisian President Moncef Marzouki changed the sentences of 122 convicted criminals from death to life imprisonment. While debate on the topic remains quite spirited, many consider the president’s move to be a prelude to the abolition of the death penalty in Tunisia. After so many years without an execution in Tunisia, some may feel emboldened to end capital punishment once and for all. But they will face strong opposition, especially from those who insist on applying Sharia. (Magharebia.com 19.04)

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7.8 Greece Calls 6 May Poll That May Create Stalemate

Greece called a snap election for May, launching a campaign that may produce no clear winner and threaten implementation of the international bailout plan that saved the nation from bankruptcy. Prime Minister Lucas Papademos announced the 6 May date after meeting the president and his interim cabinet, which he said had done its job by securing the bailout and a landmark debt restructuring last month. Papademos, a former central banker called in last year when a socialist government collapsed, told his ministers he hoped a new parliament, which must pass a slew of tough reforms to secure payments under the bailout, would convene by 17 May. But the first elections since the debt crisis exploded at the end of 2009, dragging the country into its worst recession since World War II and shaking the euro, may be followed by protracted coalition negotiations. The conservative New Democracy and the Socialist PASOK parties – which backed the Papademos government – have lost public support for endorsing the bailout plan, and may not win enough votes to form a new coalition. Opinion polls show that small parties which oppose the steep wage and pension cuts imposed by the European Union and IMF in return for aid are gaining ground. A public angry with the cuts has taken to the streets over the past two years in protests that have often turned violent.

Recent opinion polls show the New Democracy party would win between 18 and 25% of the vote, ahead of PASOK’s 11-16% but far behind the socialists’ sweeping 43.9% in the pre-crisis election of October 2009. Both New Democracy and PASOK back EU/IMF reforms such as opening up of closed professions, slashing the public sector workforce by a fifth and cutting pensions, but Samaras said he would renegotiate some parts of the plan. (Various 12.04)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 OrbiMed Launches $222 Million Fund Focused on Israel Life Sciences

OrbiMed announced the closing of its first investment fund dedicated to life sciences venture capital opportunities based in Israel. The Fund, OrbiMed Israel Partners Limited Partnership, includes an anchor investment provided by the Government of Israel, which also provided special economic terms through the initial tender process for the Fund. OrbiMed Israel Partners is an integral part of the global OrbiMed family of funds. OrbiMed Israel builds on OrbiMed’s longstanding investment interest in Israel, which has led to multiple investments there over the past decade, including early-stage investments in Given Imaging and SuperDimension (acquired by Covidien). OrbiMed is a preeminent investment firm dedicated exclusively to the life sciences sector, with approximately $6 billion in assets under management. OrbiMed http://www.OrbiMed.com invests across the entire spectrum of pharmaceutical, biotechnology and medical device companies on a worldwide basis. Investments are made through private equity funds, hedge funds, royalty funds and other investment vehicles. (OrbiMed 23.04)

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8.2 Eltek Receives $800,000 Frame Order from a U.S. Medical Device Manufacturer

Eltek received a $838,000 frame order from a U.S. medical device manufacturer for high-end flex-rigid PCBs (printed circuit boards) for use in advanced medical devices. The order is expected to be delivered between May and October 2012. Total sales to this customer in 2011 were $1.4 million and reached $600,000 in the first quarter of 2012. The new frame order is in addition to the $2.1 million frame order Eltek received from another US medical customer that was announced earlier this month. These orders represent continuing market recognition of the high quality and reliability of their products. Petah Tikva’s Eltek http://www.eltekglobal.com is Israel’s leading manufacturer of printed circuit boards, the core circuitry of most electronic devices. It 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 17.04)

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8.3 Rosetta Green and Bayer to Develop Cotton with Improved Drought Tolerance

Rosetta Green and Bayer CropScience, a world leader in the development, production and commercialization of seeds signed a licensing agreement that relates to a joint project in the discovery and characterization of microRNA genes that have potential to provide drought tolerance and improved yield in cotton. Extreme climate damage such as drought or long periods between rain showers causing abiotic stress in plants, are among the toughest problems farmers encounter while growing crops. Every year less rain or rain delay cause losses in the range of billions of dollars to farmers across the world. Bayer and Rosetta Green will attempt to develop new cotton varieties that could produce better yields under difficult environmental conditions. Bayer will have an exclusive license for targets identified during this collaboration toward yield improvement in cotton. In return for the above, Bayer has committed to pay Rosetta Green milestone payments if certain steps are achieved in the development and commercialization of the products and royalties on future revenues from sales which could amount to tens of millions of dollars.

Rehovot’s Rosetta Green http://www.rosettagreen.com is an Israeli agro-biotechnology company specializing in developing improved plants to the agriculture industry using the unique technology of microRNA genes. The company has developed technological platforms for the identification and utilization of microRNAs. These microRNA genes possess the potential to improve key traits in important plants such as corn, wheat, rice, soybean and more. Rosetta Green’s product development pipeline already consists of plants with improved traits including drought tolerance, increased yield production, disease resistance and more. (Rosetta Green 03.04)

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8.4 NLT SPINE Receives CE Mark for its eSpin & Performs First Clinical Cases in Europe

NLT SPINE announced that its eSpin discectomy device has received CE Mark approval, enabling the company to market it in Europe. eSpin can be used as part of a lumbar interbody fusion procedure, equipping surgeons with a high performance instrument for spinal discectomy. The powered tool evacuates the disc nucleus and can be used to prepare the disc space before placing interbody fusion implants. The company has recently started using the approved eSpin for discectomy in Europe, and in the future eSpin will be integrated into NLT SPINE’s PROW LIFTM (lumbar interbody fusion) procedures. A 510(k) notice for the eSPIN is currently under review by the FDA and the device is not currently for sale in the US.

Kfar Saba’s NLT SPINE http://www.nlt-spine.com specializes in the development of innovative Minimally Invasive Spinal Surgery (MISS) and percutaneous procedures for treating degenerative spinal conditions. The company’s vision is to improve patient care and reduce total treatment costs by shifting from traditional open surgical routines to MISS, employing new methods and technologies to enhance usability and outcomes. Led by top international leaders in spinal surgery, NLT SPINE holds a wide portfolio of pending and issued patents that cover the non-linear core technology and related implant and instrument technologies. (NLT SPINE 19.04)

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8.5 RedHill Biopharma Successful Trial to Prevent Nausea & Vomiting in Cancer Patients

RedHill Biopharma announced positive results in an advanced bioequivalence clinical trial with RHB-102 for the prevention of nausea and vomiting in cancer patients. RedHill intends to approach the FDA soon to request a Pre-NDA meeting to discuss US marketing approval pathway. The draft final report summarizing the objectives and results of the trial demonstrates that the trial met its objectives and FDA’s criteria for bioequivalence between RedHill’s once daily RHB-102, and GlaxoSmithKline’s Zofran – a leading, approved antiemetic drug administered three times per day. RHB-102, which combines a patent–protected, once-daily, controlled release technology named CDT, with the active pharmaceutical ingredient Ondansetron, belonging to the family of inhibitors of the Serotonin receptor 5-HT3, is designed to prevent nausea and vomiting over 24 hours in order to avoid the need for additional drug administrations during the 24 hours post-treatment. The 24 hour time window is significantly longer than the effective time of the oral drugs currently available on the market. Thus, RHB-102 potentially holds a promise for cancer patients who are undergoing radiotherapy and suffer considerable difficulty in eating and swallowing.

Tel Aviv’s RedHill Biopharma http://www.redhillbio.com is an emerging Israeli biopharmaceutical company focused primarily on development of late clinical-stage new formulations of existing drugs. In addition to RHB-102 for the prevention of radiotherapy-induced nausea and vomiting, the Company’s current product pipeline includes a once-daily formulation of a leading congestive heart failure and high blood pressure drug, an oral thin film formulation of a leading triptan for the treatment of acute migraine, a combination therapy for the treatment of MAP infection in Crohn’s as well as a companion diagnostic test for detection of the MAP bacteria, a combination therapy for the treatment of resistant H. pylori bacteria causing ulcers, and a patent protected encapsulated formulation for bowel preparation ahead of certain gastro procedures. (RedHill Biopharma 18.04)

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8.6 Morflora Finalist for 2012 Red Herring Top 100 Europe Award

Morflora, focused on innovative non-transgenic trait delivery technology for plant protection and enhancement, has been selected as a Finalist for Red Herring’s Top 100 Europe award, a prestigious list honoring the year’s most promising private technology ventures from the European business region. The Red Herring editorial team selected the most innovative companies from a pool of hundreds from across Europe. The nominees are evaluated on both quantitative and qualitative criteria, such as financial performance, technology innovation, quality of management, execution of strategy, and integration into their respective industries.

Morflora, an innovator in the agricultural biotechnology industry, develops technology to help growers and seed companies worldwide promote sustainable agriculture and fight against common diseases and threats to crops via non-transgenic effective solutions. The company’s TraitUP platform is utilized to express or silence genes in seeds and plants, and acquired traits are expressed within days post treatment.

Moshav Sharsheret’s Morflora http://www.morflora.com develops generic and non-transgenic trait delivery solutions into plants, to protect them from a wide variety of diseases, as well as introduce new desired traits for plant enhancement. The company targets the seed and plant treatment markets, offering technology and solutions to increase global crop yield and reduce dependency on chemical treatments and lengthy breeding processes. Established in 2008, Morflora’s mission is to become a leading supplier of plant protection and enhancement solutions for a variety of agricultural markets. (Morflora 18.0)

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8.7 Lumenis Introduces SCAAR FX

Lumenis introduced SCAAR FX (Synergistic Coagulation and Ablation for Advanced Resurfacing), a noted advancement in CO(2) laser treatment capability. Lumenis unveiled UltraPulse’s unique SCAAR FX mode. SCAAR FX enables the treatment of surgical and acne scars, commonly characterized as conspicuous, complex and deep skin lesions, which require synergistic coagulation and ablation for advanced resurfacing. Initial treatments with SCAAR FX have shown remarkable results and minimal side effects. Using precision and high energy impact (up to 150 mJ per pulse per spot), SCAAR FX allows direct impact up to four millimeters deep into the skin tissue, four times deeper than other CO(2) lasers. Using a unique ablation/coagulation ratio, UltraPulse with SCAAR FX was designed to substantially improve structure of deep contracted skin lesions, such as surgical scars. This leads to increased range of motion in these areas and enhanced skin appearance. Other CO(2) lasers on the market only reach a depth of approximately one millimeter per pulse, and are limited by less than optimum ablation/coagulation ratios, which may lead to unsatisfactory results.

Yokneam’s Lumenis http://www.lumenis.com, the world’s largest medical laser company, is a global developer, manufacturer and distributor of laser and light-based devices for surgical, aesthetic and ophthalmic applications, with more than 900 employees worldwide. Lumenis has 265 registered patents, over 260 FDA clearances, an installed base of over 80,000 systems and a presence in over 80 countries. Lumenis endeavors to bring the finest state of the art technology products to the market, fulfilling the highest standards of excellence, quality and reliability, delivering premium value and service to its customers. (Lumenis 19.04)

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8.8 Medgenics Files IND Application for EPODURE Biopump Phase IIb Anemia Study

Medgenics has filed an Investigational New Drug (IND) application with the U.S. FDA to initiate a Phase IIb multi-center, 100-patient clinical trial. The trial is designed to evaluate the safety and efficacy of sustained erythropoietin (EPO) therapy delivered via the Company’s EPODURE Biopump for the treatment of anemia in dialysis patients with end-stage renal disease (ESRD). Filing for the anemia indication of this platform technology is a key step not only for EPODURE, but helps pave the way for multiple future indications that address multibillion-dollar markets. EPODURE is an autologous dermal Biopump, a small tissue implant made from the patient’s own dermal (skin) tissue. EPODURE Biopumps are processed to enable the continuous production of EPO, and are subsequently implanted subcutaneously. The filing of this IND application follows two key events that occurred in March 2012: the regulatory approval for a smaller Phase IIa study for the same indication in Israel; and positive meetings with the National Institutes of Health’s Recombinant DNA Advisory Committee in the U.S.

Misgav’s Medgenics is developing and commercializing Biopump, a proprietary tissue-based platform technology for the sustained production and delivery of therapeutic proteins using the patient’s own skin biopsy for the treatment of a range of chronic diseases including anemia, hepatitis C and hemophilia. Medgenics believes this approach has multiple benefits compared with current treatments, which include regular and costly injections of therapeutic proteins. Medgenics is focused on the development and manufacturing of its innovative Biopumps, aiming to bring them to market via strategic partnerships with major pharmaceutical and/or medical device companies. (Medgenics 17.04)

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 Intel Launches New Israeli Developed Chip

On 23 April, Intel Corporation launched its 3G Ivy Bridge processor, which it developed in Israel and the US. The Ivy Bridge is a quad-core processor, which is designed to offer substantially improved graphics and computer processing speed. The processors will be embedded in PCs and all-in-one models that are now being shipped to stores. Intel says that the Ivy Bridge is the first processor in the world produced by 22-nanometer technology based on 3D Tri-Gate transistors. Until now, transistors were 2D (planar) devices. Adding a third dimension enabled Intel to increase the number of transistors on a silicon chip, boosting performance per square millimeter of chip space. The Ivy Bridge processor can run applications using less power but with higher performance with SSD computer storage drive technology. This gives computers faster response times thanks to smart response technology. (Globes 23.04)

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9.2 iOnRoad Named Finalist in 2012 CTIA E-Tech Awards

iOnRoad was named a finalist in the Automotive, Safe Driving & Transportation category of CTIA’s annual Emerging Technology (E-Tech) Awards competition. The CTIA E-Tech Awards honor the most innovative new products in 15 categories spanning the areas of mobile apps, consumer electronics, enterprise and infrastructure. iOnRoad is a Driving Safety app that uses the smartphone’s native camera and sensors to warns of traffic accidents. iOnRoad uses the smartphone’s camera stream, GPS and sensors to detect the lane and vehicles in front of your car. It alerts the driver when in danger using audio-visual warnings allowing the driver to take corrective actions in time. iOnRoad improves one’s driving in real-time using augmented reality feedback of his driving and encouraging safe driving habits. The best part is that iOnRoad is free. iOnRoad is the winner of numerous distinctions and awards including the Gartner’s Top Automotive Vendors CES 2012 showcase award, Best AR Android app for 2011 and Best Israeli app for 2011.

Ramat Gan’s iOnRoad http://www.ionroad.com improves driving in real-time using the power of advanced smartphones. The app utilizes the smartphone’s native camera and sensors to detect vehicles in front of your car, alerting you when you’re in danger. iOnRoad’s maps your lane and objects in it. As your car approaches collision or runs off the road an audio-visual warning alerts you to take action in time and save your life. iOnRoad is the first driving assistance system that’s available as software only solution. Its deployment makes an elegant way of reducing the problem of distracted driving. (iOnRoad 19.04)

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9.3 IMI Completes Development of New Tank Shell

Israel Military Industries (IMI) has completed development of a new tank shell, the M339 which can penetrate reinforced structures and explode inside, destroying targets. The new shell will undergo final tests over the coming weeks, ahead of regular production at the company’s munitions factory in Ramat Hasharon. Deliveries to the IDF Armored Corps are scheduled for the summer. The new shell will be used by Merkava Mk. 3 and Mk. 4 tanks, replacing the current Halulan shells used for striking buildings in a combat zone. The 120-mm M339 ensures surgical strikes against terrorist squads in urban combat zones, while reducing the risk of collateral damage of civilians. IMI says that the idea for the new shell emerged from analysis of combat operations during the 2006 Second Lebanon War and the December 2008 Operation Cast Lead in Gaza. The Halulan explodes on contact with a structure’s wall, giving terrorist squads inside a high degree of survivability. The M339 has a delayed action mechanism allowing the shell to penetrate a structure, and explode inside. The shock wave of the explosion is contained by the room, greatly enhancing its lethalness. IMI delivered the first Kalanit shells to the IDF a year ago, and they are in use with armored forces serving along the Gaza border. Both the Kalanit and the M339 automatically receive targeting data from the tank’s fire control computer. The Kalanit’s versatility has made it a primary tank munitions for the urban battlefield, enabling a tank to carry fewer shells for designated targets and reduce the need for resupply during battle. (Globes 17.04)

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9.4 Discretix Enables HD Video Services Worldwide

HD video on Android smartphones and tablets poses a major challenge for Hollywood studios. While offering a compelling viewing experience, these devices have inherent security vulnerabilities, placing premium content at risk. In order to meet these challenges DRM and link protection must be secured at the hardware level and enhanced with secure content path and output control. Discretix’ hardware-assisted content protection solutions protect sensitive DRM assets by fully integrating with the ARM TrustZone ecosystem, across all leading platforms, utilizing a variety of Trusted Execution Environments (TEE) and Secure OSs. Discretix’ content protection solutions are in mass production across multiple platforms at Tier 1 Android devices vendors, enabling them to bring premium video services to market under their own name brands. The Discretix hardware-assisted content protection solution is available for platforms from all the leading mobile application processor vendors.

Discretix’ http://www.discretix.com security solutions are deployed in a wide range of consumer electronics devices enabling services and applications, while protecting the device and its contents. Discretix’ products include embedded security co-processors and a bro ad range of security applications. The solutions are tightly integrated into the device, enhancing security without compromising the user experience. (Discretix 16.04)

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10: ISRAEL ECONOMIC STATISTICS

10.1 Israel’s Economy Grew by 3.4% During 2011’s Fourth Quarter

The Central Bureau of Statistics announced on 16 April that Israel’s GDP rose at a seasonally adjusted annual rate of 3.4% in constant prices in Q4/11, the same growth rate as in Q3/11. Despite fears that the slowing of Israel’s GDP growth would intensify, the figures show that the growth rate was stable. GDP rose at an annual rate of 3.5% in H2/11, down from over 5% in H1/11. The business product, the economy’s main growth driver, rose by an annualized 4% in H2/11, after rising at an annual rate of 5.8% in H1/11 and 6.4% in H2/10. Business product growth in H2/11 includes annualized 9.5% growth in the financial and business services sector, annualized 10.5% growth in the construction sector, annualized 4.4% growth in the commercial, hosting and catering sector, and annualized 2.3% drop in the manufacturing sector.

A breakdown of growth components shows 4.4% growth in public consumption in the second half of 2011 and 12.6% growth in investment in fixed assets. However, private consumption, a key growth driver, was barely changed, rising just 0.4%, and exports of goods and services fell by 2%, due to the economic crisis in Europe, a key export market and the slowdown in the US.

Consumption trends are especially worrying. Spending on durable goods per capita, which reflects the standard of living, fell by an annualized 15.2% in H2/11, after rising by 17.5% in the first half. Spending on motor vehicles per capita fell by an annualized 23.3% in the second half, after rising by 11.8% in the first half, and spending on household appliances per capita (refrigerators, clothes dryers, air conditioners, etc.) fell by 15.6%, after rising over 40%. (CBS 16.04)

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10.2 IMF Says Israeli Economy Expected To Grow, But More Slowly, in 2012

The IMF has reduced its forecast for Israeli economic growth in 2012 by 0.9% to 2.7%. The reduction was detailed in the IMF’s annual report on the Israeli economy, published on 16 April. The IMF previously said Israel’s economy would grow by 3.6% in 2012. Additionally, Israel’s unemployment rate was expected to stand at 6% this year, which translates to some 210,000 people. Despite the predicted cut in Israel’s economic growth rate, IMF economists are optimistic and predict the final quarter of 2012 will see an increase in the growth to a 6% yearly rate, as opposed to a 5.6% rate in Q4/11. The report states that Israel’s economy will experience a higher growth rate than most OECD countries. The IMF report says the global economy would experience an increase in 2012 from its previous rate of 3.3% to 3.5%. In 2013, the IMF predicts a global growth rate of 4.1%, based on improved economic conditions — especially in the U.S. — and an easing of the global economic crisis. (IMF 16.04)

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11: IN DEPTH

11.1 ISRAEL: Summary of Israeli Venture Capital Investments – Q1/2012

On 23 April, the following findings of the IVC-KPMG Quarterly Survey, conducted by the IVC Research Center in cooperation with KPMG Somekh Chaikin Israel, were released. This survey reviews venture capital investments by Israeli venture capital funds, foreign and other investors., based on reports from 125 investors, of which 42 are Israeli management companies and 83 are other – including foreign – investment entities.

In the first quarter of 2012, venture capital investments amounted to $483 million, up slightly from the amount invested in Q1/2011. Hundred and forty four Israeli high-tech companies raised $483 million from Israeli and foreign venture investors, 15% below $569 million raised by 124 companies in the previous quarter, but almost equal to $479 million raised by 140 companies in Q1/2011.

Eighty-eight companies attracted more than $1 million each. Of these, three raised more than $20 million, 14 raised between $10 million and $20 million and 13 raised from $5 million to $10 million each.

The average company financing round was $3.40 million, compared to $4.59 million in Q4/2011 and up slightly from $3.42 million in Q1/2011.

Israeli VC Fund Investment Activity

In the first quarter of 2012, Israeli venture capital funds invested $119 million in Israeli companies, 10% below the amount invested in the previous quarter, and 13 less than in the first quarter of 2011.

The Israeli VC fund share of the total amount invested in Israeli high-tech companies was 25%, compared to 23% ($132 million) in Q4/2011 and 28% ($137 million) in Q1/2011. The remainder of capital came from foreign as well as other Israeli investors.

Ofer Sela, partner in KPMG Somekh Chaikin’s Technology group, said, “We’ve seen another strong quarter of technology investments. The drought that everyone feared hasn’t materialized, and local industry is receiving significant reinforcement from foreign investors who are steadily increasing their investments in Israeli technology companies.”

First investments by Israeli VC funds accounted for 48% of their total dollar investments in the first quarter, the highest percentage in the last four years. This compares to 44% and 23% in Q4/2011 and Q1/2011, respectively. The average first investment by Israeli VC funds was $1.9 million, while the average follow-on investment was $1.05 million.

Koby Simana, CEO of IVC Research Center explains that “total investments by Israeli VC funds are still relatively low compared to the past, however both in Q4 2011 and Q1 2012 we noted that nearly half of the funds’ investments went toward first investments – i.e. new portfolio companies. The data is not enough to point to a new trend yet, but these are certainly encouraging news for the Israeli high-tech industry”

Investment Rounds Excluding Israeli VC Fund Participation

In the first quarter of 2012, investment transactions excluding Israeli VC fund participation reached $236 million or 49% of all transactions, the highest share in a decade. This compares with $218 million (38%) and $157 million (33%) in Q4/2011 and Q1/2011, respectively.

Capital Raised by Sector

In Q1/2012, the life sciences sector led capital raising, as it did in the year-earlier period, with $130 million or 27% of total capital raised. It was the highest quarterly amount raised by life science companies in the past two years. Software companies raised $107 million or 22%, followed by internet with $78 million or 16% and communications with $64 million or 13% of total capital raised in the quarter. Semiconductors attracted just 2% of total capital raised, as in previous quarter.

KPMG’s Sela added, “The low level of investment in the semiconductor industry is worrying. This is an area in which many Israeli companies excel. The decreasing trend of semiconductor investments could cause Israeli industry to lose its position as a center of global innovation in this area.”

Capital Raised by Stage

In the first quarter of 2012, seed companies attracted 6% of total capital raised, compared with 4% in the previous quarter and 3% in the fourth quarter of 2011. Early Stage companies accounted for $174 million or 36% of the total capital raised, reaching the highest quarterly amount for early stage companies in the past two years.

IVC Research Center is Israel’s leading research center providing business leaders with an unmatched wealth of data on Israeli high-tech, startup, venture capital and private equity industries. IVC products and services are used regularly by high-tech companies, venture capital funds, private investors, financial investors and institutions, as well as public entities such as the Central Bureau of Statistics, the Bank of Israel and the Office of the Chief Scientist.

IVC owns and operates the IVC Online Database http://www.ivc-online.com containing over 8,500 Israeli high-tech companies, venture capital funds, investment companies, angels and technology incubators, as well as news updates and lots more. Among IVC products and publications are the IVC Quarterly Survey, which for over 15 years has been analyzing capital raising trends by Israeli high-tech companies, as well as the most comprehensive guide to Israeli high technology and venture capital – the IVC 2012 Yearbook. KPMG Somekh Chaikin’s technology professionals offer insights and experience accumulated from a long history of work with technology and life science companies. (IVC 23.04)

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11.2 KUWAIT: Defense and Security Report for Q2 2012

BMI reported that the influence of the Arab Spring spread to Kuwait in late 2011, as protests that began in September culminated in the storming of parliament in Kuwait City by dozens of demonstrators on 16 November. The protests centered on allegations of corruption against the prime minister, Sheikh Nasser al-Mohammad al-Sabah, and those who burst into the parliament building were backed up by thousands more protesters gathered outside demanding that the prime minister resign.

While Kuwait is relatively tolerant of protest by Middle Eastern standards and allows criticism of the ruling family, the storming of parliament proved a step too far for the country’s ruling emir, Sheikh Sabah al-Ahmed al-Sabah, who ordered an immediate security crackdown.

However, the emir subsequently proved responsive to the demands of the protesters, first accepting the resignation of the cabinet, including the prime minister, and then dissolving parliament in December. He also announced the appointment of Sheikh Jaber al-Hamad al-Sabah, formerly the defense minister, as the new prime minister. These moves appeared to quell the popular unrest, suggesting the Kuwaiti protests were aimed more at ousting a prime minister perceived to be corrupt rather than at toppling the status quo, as has been the case elsewhere during the Arab Spring. There was at any rate no repeat of the late 2011 unrest in the early part of 2012.

Parliamentary elections were due to be held in early February 2012 and, if deemed fair, should bolster Kuwait’s standing as one of the Arab world’s more democratic countries. Kuwait is also secure economically, unlike many of the Arab states where regimes have been toppled or severely challenged. Energy prices remain high and, with sanctions reducing Iran’s ability to export oil, supplies from Kuwait will, if anything, be in ever greater demand. The one significant threat to the Kuwaiti economy is Iran’s threat to close the Strait of Hormuz in the event of air strikes by Israel and/or the US. However, this scenario remains highly unlikely – not least because the closure of the strait would damage the Iranian economy as much as any other country’s – and barring any such extreme events BMI currently forecasts a Kuwaiti budget surplus of 21.7% of GDP for the fiscal year starting April 1 2011.

With internal security now looking more stable, unrest in the wider Middle East is once again the greatest threat to Kuwaiti security. Kuwait is heavily dependent on the US for its defense and security in a turbulent region. However, with US troops exiting Iraq in late 2011, the Kuwaiti government said in November that it was reluctant to see additional US troops stationed in its territory (some 23,000 US troops are already stationed there). Yet with many of the countries in Kuwait’s neighborhood appearing extremely volatile – among them Iran, Iraq and Yemen – this decision may be revisited depending on how the region’s various security crises unfold.

Kuwait is also largely dependent on US equipment for its own military. In the latest defense deal reached with a US company, Raytheon announced in January that it had upgraded the first of Kuwait’s six Patriot missile radars to the Configuration-3 standard. The program to select a new fighter aircraft for the Kuwaiti Air Force should also move forwards in 2012, with the anticipated US offerings, Boeing’s F/A- 18 Super Hornet and F-15SE Silent Eagle, well placed to see off France’s Dassault Rafale thanks to Kuwait’s ever closer defense ties with Washington. (R&M 12.04)

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11.3 UAE: Healthcare Sector Forecast to 2014

In the past few years, the UAE healthcare industry has shown an unprecedented growth which is expected to continue in the future due to increasing population, rising prevalence of lifestyle diseases and epidemic outbreaks like H1N1. The country has been witnessing a tremendous increase in the demand for healthcare services and professionals, which indicates high healthcare spending. As per BMI’s latest estimates, the healthcare market of the UAE is expected to expand at a CAGR of over 16% during 2011-2014 on back of these factors and developments.

According to BMI’s new research report, “UAE Healthcare Sector Forecast to 2014”, the UAE government is pouring the required investments and incentives to develop the country as the medical tourism destination for plastic surgery treatments, which are gaining popularity in the Middle East region. BMI also studied how increasing cases of chronic lifestyle-induced diseases and injuries are pushing healthcare providers for providing specialized services. Over the next few years, the demand for hospitals and hospital beds is likely to increase in the country as the existing infrastructure is inadequate to deal with the rising number of health complications.

On studying healthcare markets in various cities of the UAE, BMI found that Abu Dhabi, which has the largest health infrastructure, is actively working on expanding its medical facilities to entice increased numbers of affluent foreigners to the city. Similarly, Dubai, with myriad of first-class medical treatments and English speaking medical staff, is becoming a popular destination among travelers. BMI also discussed the factors, such as enhanced participation and high investments by private players, industry consolidation for medical infrastructure and supply of pharmaceuticals, which are shaping a bright outlook of the UAE healthcare industry.

BMI has done extensive research and analysis of various segments of the UAE healthcare market, including hospitals services, pharmaceuticals and medical devices. It was observed that the country’s medical device market has been buoyed by some of the lowest import duties in the region which make the UAE an attractive destination for imports of medical devices.

The domestic manufacturing of these devices remains low in the country. The study of the pharmaceuticals industry revealed that there will be a strong demand for OTC drugs in the UAE in near future due to the opening of standard retail pharmacy chains and rising trend of self-medication. (R&M 11.04)

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11.4 OMAN: Pharmaceuticals and Healthcare Report Q2 2012

BMI reported that Oman’s 2012 budget allocated a greater sum of money to the healthcare sector, in line with BMI’s view that the Arab spring would lead to greater spending in this segment. The Omani government has also increased the allocation for social security and welfare by 74% y-o-y to $1.01b. Expenditure on the health sector is an estimated $1.32b, which is 5% of total public expenditure. Furthermore, five hospitals are expected to be built at a cost of $626.3m. BMI’s headline expenditure projections for Oman are as follows:

Pharmaceuticals: OMR125m ($326m) in 2011 to OMR136m ($358m) in 2012; +8.6% in local currency terms and +10.0% US dollar terms. Forecast up from Q112, due to large public healthcare budget.

Healthcare: OMR671m ($1.74b) in 2011 to OMR730m ($1.92b) in 2012; +8.8% in local currency terms and +10.2% in US dollar terms. Expenditure in 2011 up from Q112, due to macroeconomic factors.

Medical devices: OMR38m ($98m) in 2011 to OMR41m ($108m) in 2012; +9.3% in local currency terms and +10% in US dollar terms. Forecast revised upwards slightly from Q112 due to large public healthcare budget.

Oman’s composite Risk/Reward Rating score remained unchanged in Q2/12 at 50.2 out of the maximum 100 points. As a result the country has retained its place in the Pharmaceuticals & Healthcare Risk / Reward Ratings (RRRs) matrix for the Middle East and Africa (MEA). Oman is one of the smallest regional markets, which drags down its rewards score, but has relatively low operating risks compared to other countries in the region.

Key Trends & Developments

In January 2012, Oman’s doctors went on strike briefly calling for better pay and working conditions. The doctors have since returned to work opting to postpone strike action until June 2012.

UK construction company Atkins has completed the master plan for the $1b Medical City project in Salalah, Oman. The design combines traditional Omani and contemporary design. Abdulla Aljoaib, president of Apex Medical Group, the master developer behind the project, said the 800,000 sq m2 Medical City will be the largest private healthcare infrastructure development in Oman. Aljoaib added that the Medical City is set to become a healthcare tourism destination benefiting local, regional and international healthcare patients.

Oman and the other countries of the Gulf Cooperation Council (GCC) have announced they will introduce a tax on tobacco products in an attempt to recoup the costs put on to the state by individual lifestyle choices. The tax will be introduced at the end of 2012 and will be levied at 100% of a product’s current value, in effect doubling the cost of smoking.

BMI’s economic view is that the Omani government’s expansionary spending plans, outlined in its budget for 2012, are likely to be comfortably funded by income from oil and gas exports. While BMI has noted a slight moderation in oil prices, they nevertheless expect revenues to be elevated in the near term, and as a result the budget is likely to remain in the black throughout the year. Muscat has outlined expenditure of OMR10.0b for 2012, an estimate which – if anything – could prove too low. BMI forecasts the 2012 budget surplus to come in at $2.5b, or 4.2% of GDP, compared with an estimated 7.3% of GDP in 2011.

Politically, Oman is a relative oasis of calm in an often tense region. It has managed a delicate balancing act in recent decades. Sultan Qaboos bin Said al-Said enjoys almost absolute power, serving as prime minister, defense minister, finance minister, foreign minister and governor of the central bank. Yet he engages tribal and business interests to bolster his position. He has also introduced limited democracy in the form of an elected Consultative Council, although this body exercises little real power. Royal succession is the major question hanging over Oman’s political future, although demographic change and regional instability also pose challenges. (BMI 12.04)

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11.5 EGYPT: Risk Alert – Watching and Waiting

On 10 April, the Economist Intelligence Unit commented that as the political instability of Egypt’s transition continues, the uncertainty of the situation is having a serious impact on both the economy and the appetite for foreign investment.

According to Egyptian Central Bank figures released on April 2nd, by the end of March the country’s foreign exchange reserves had fallen to just $15.12b, down from $15.72b the previous month (and $33.6b at the start of 2011). This leaves the country with less than three months’ worth of import cover. Over the past year, the Central Bank has chosen to continuously draw down its reserves rather than print more money, an alternative it fears could have a serious knock-on impact on the streets of Egypt. In its latest move, the bank lowered the reserve requirement for Egypt’s banks’ local-currency deposits from 14% to 12% to boost lending to the government and private companies.

The problem is that the longer political instability continues, the further away are the prospects of an upturn in investment and the greater the strain on Egypt’s reserves. In 2011 there was a net outflow of foreign direct investment (FDI) of $482.7m, a dramatic reversal from the $380.9m net inflow in the second half of 2010. “There’s no doubt that since the revolution there’s been a sharp drop in FDI, with many investors sitting out until the political environment calms and settles,” says Rick Phillips, partner at Acts, a private equity firm, in Cairo.

Too many cooks

To the frustration of investors, the ongoing tussle between the army and Freedom and Justice Party, an offshoot of the Muslim Brotherhood and the largest party in parliament, has prevented a clear economic policy from emerging. “It’s not organized at all,” says one Cairo-based lawyer. “There’s no central core of decision-making power. There are a lot of different forces but they only co-operate when it’s good for them. A lot of long-term expatriates are leaving. It’s really a message.”

The problems are exacerbated by government investigations into allegations of corruption in the award of contracts under the previous regime of Hosni Mubarak. Real estate investment has largely ground to a halt pending the resolution of disputes over land allegedly sold at favorable prices by the previous government. Even companies that are not directly implicated have put their investments on hold. “People have trouble making investment decisions because they worry they may be prosecuted in two-three years’ time, says Abu Basha, an economist at EFG Hermes in Cairo.

Arbitration frustration

A lack of clarity on the proceedings is making things worse. At least three companies have now begun international arbitration proceedings over projects that have been summarily cancelled after they were unable to establish an effective line of communication with the government. “There are so many different parties involved – the government, the parliament, the ministries, the army – that the companies are not convinced the government is functioning in an organized way,” says a source close to one of the companies.

In the meantime, the lack of policy direction is providing other routes for corruption. “There is even less long-term supervision and a lot more dark corners than there were under Mubarak,” says the lawyer. “There’s no transparency. The box is all jumbled up. The opportunity is there because no one is looking.”

The divisions between the army-backed government and the FJP are also hampering the signing of a $3.2b IMF loan that economists say is essential to avoiding a balance-of-payments crisis. The FJP says that the government has not provided sufficient detail on what it intends to do with the money. The likelihood is that agreement will be reached on the IMF deal in the coming weeks. There is also some hope that the introduction of a new constitution and the election of a new president, both of which are due to take place in the next three months, will help to stabilize the situation.

Cometh the hour

“Right now everything hinges on the development of the transition the country is going through,” says Mr. Abu Basha. “People are looking to the second half of the year for activity to improve once the new president has been elected. The boost in confidence could result in more activity.”

But divisions over the preponderance of Islamists in the constitutional assembly and the Muslim Brotherhood’s decision to nominate a presidential candidate threaten to perpetuate this period of instability. “This amount of political noise may detract from moving forward on the economy and especially the IMF loan,” says Raza Agha, an economist at RBS. “The hope is that the FJP will compromise with the secularists and the nationalists. Otherwise this is a downward spiral.”

In the meantime, investors are trying to remain optimistic. “We remain convinced that Egypt is, and will continue to be, an important investment destination for significant capital,” says Mr. Phillips. However, there is little optimism that Egypt’s return to its prior status as a major magnet for international investment will happen any time soon. (Risk Briefing 10.04)

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11.6 TUNISIA: A Balancing Act – Ennahda’s Struggle with Salafis

On 19 April, Erik Churchill & Aaron Zelin wrote in Sada http://carnegieendowment.org that on a day when organizers had called for a peaceful protest to honor the Qur’an, most Tunisians will remember the images of young protesters who climbed a clock tower at Tunis’s main intersection to raise a black and white flag inscribed with the shahada, the Muslim testament of faith: “There is no god but God and Muhammad is His Messenger.” On that day, March 25, a small group of protesters also attacked and harassed a troupe performing in front of the city’s municipal theater. These controversial and heavily covered events raise questions over how the Tunisian government, led by the Islamist party Ennahda, will handle growing conservative movements.

While much of the Tunisian and Western press has focused on the debate between Ennahda and the secular opposition, Tunisia’s ruling party has also faced criticism both from within its own party and from more conservative Salafi groups. Ennahda’s approach to instilling Islamic values in society contrasts sharply with that of Salafi trends: while the party believes that society should gradually, and through democratic institutions, adopt the principles it once lost under colonialism and secular dictatorships, many Salafis assert that democracy infringes on God’s sovereignty by establishing humans as legislators. This intra-Islamist debate may prove to be the true battleground in the ongoing transition.

Though it is difficult to gauge their popular support, Salafi organizations have certainly become more vocal. Many, such as Hizb ut-Tahrir (Ettahrir), began mobilizing in early January while the demonstrations against the Ben Ali regime were still going on. Others did not rally until their leaders were released from prison in the March 2011 prisoner amnesty. While Salafi groups did not contest the Constituent Assembly elections this past October, they did attempt a show of strength outside of the ballot box a few weeks prior in demonstrations against the Nessma TV broadcast of the 2007 French-American film Persepolis which included depictions of God in human form – considered blasphemy by many religious Sunni Muslims. Tunisia’s government is also concerned with the rise in militant discourse and activity, expressed most prominently in clashes in Sfax in February with an armed group seeking to establish an “Islamic emirate.”

Ennahda’s leadership has remained sanguine thus far and chosen to condemn the actions of “rogue elements” within Salafi groups rather than the groups’ ideology on whole—while also publicly expressing its willingness to dialogue with Salafi groups that use legal, non-violent methods. This policy appears based on both its history in the opposition and the practical considerations of governing an ideologically polarized country. Many of Ennahda’s top leaders, including Prime Minister Hamadi Jebali and Interior Minister Ali Laarayedh, spent much of their lives in Tunisian jails; the movement does not want to repeat the mistakes of the former regime by cracking down harshly.

Ennahda has supported Salafi groups’ legalization. While Ettahrir has not yet been formally authorized as a political party, it was allowed to hold an international conference last March outside of Tunis. Ennahda has even endeavored to dialogue with Salafi strains sympathetic to an al-Qaeda worldview – though most in the Tunisian context like Abu Ayyad al-Tunisi, leader of Ansar al-Sharia in Tunisia (AST), seem satisfied with da‘wa (missionary work).

In addition to such outreach, however, Ennahda has also taken action to curb the influence of Salafis in public discourse. In an attempt to present himself as the true steward of Tunisian conservatism and connect with Salafi-sympathetic voters, Ghannouchi announced that he himself was a Salafi, insofar as the term referred to a Muslim that believed one should return to Islam as founded on the Quran and the Sunna. More importantly, key institutions are taking a lead role in molding public religious discourse. For example, in response to reports that as many as 400 mosques across the country have been “taken over” by radical preachers, Minister of Religious Affairs Nourredine Khadmi has spoken out on the need for imams to be approved by the ministry before their installation at the local level. The decision to reopen Tunisia’s oldest and most revered religious school, Zeituna University (closed by Bourguiba), can also be interpreted in this context.

Taken together, these recent actions demonstrate that Ennahda recognizes the dangers implicit in allowing Salafi groups to operate with full freedom, but avoids the risky crackdowns that might result in deeper or more widespread radicalization. Already heavily criticized for a perceived inaction on the economy, Ennahda is keen to avoid ideological confrontations.

However, this position opens the door for secular groups to criticize the government – groups that receive considerable support from a society still very much fearful of extremists and that fears increasing conservatism, especially regarding women’s rights. From their perspective, the ruling party’s actions are evidence of a double discourse – conservative in private and moderate in public – rather than a practical one. While secular parties appear poised to capitalize on what they call Ennahda’s mismanagement of a serious threat to modern Tunisia, they remain fractured. Liberal parties have split apart and reformed into coalitions, only to disintegrate once more – allowing for the rise of so-called “Destourian” parties composed of segments of the Ben Ali and Bourguiba eras. Led by transitional Prime Minister Beji Caid Essebsi, these groups have garnered support by calling for a new era of national unity based on security and modernism. A lack of organization (for the liberals) and doubts about their intentions to clean up government (among the Destourians) have limited the popularity of both groups, neither of which seem capable of challenging Ennahda at this time. However, the media, still largely a secular bastion, will continue to pressure the government to act against extremism.

But if the recent public protests by Salafis are any indication, Ennahda isn’t quite comfortable taking sides just yet. Rather, its approach has been to demonstrate its moderation by criticizing both sides. Following the attack on the theater troupe in Tunis, the government closed Bourguiba Avenue to all protests – later causing even more bad publicity after it violently cracked down on secular protests the following week. The recent sentencing of two atheists to seven years in prison for posting anti-Islamic material on their Facebook pages – a decision widely supported by the conservative wing within Ennahda and among Salafi groups – was met with the “hands-off” statement that the government could not interfere in the judicial process. Ennahda’s critics are quick to see in this officially neutral position a hidden complicity with the judgment itself.

There are some issues on which Ennahda must take a stand, however. On March 26, the party’s decision to exclude a provision for sharia as “the sole source of legislation” in its draft constitution provoked outrage among hardline conservatives – Salafis denounced Rached Ghannouchi as a traitor when he stated that the original first clause in the constitution was sufficient for a Muslim country: “Tunisia is a free, independent, and sovereign state. Its religion is Islam, its language is Arabic, and its type of government is the Republic.” Ghannouchi also observed that over 90% of Tunisian law derives from sharia already without constitutional provisions. Though debate officially ended with the announcement, the party was deeply divided during the course of discussion.

The controversy over sharia is but one area where large numbers of Ennahda’s members have dissented from the party’s official line. As the party gears up toward next year’s elections, these internal debates may intensify, particularly as Ennahda meets over the summer to decide its official platform. The next few months will be critical for Ghannouchi to gauge whether the moderate stance of the group’s leaders will continue to hold sway over its rank and file – particularly as those in the Constituent Assembly look more and more at their re-election prospects.

Aaron Y. Zelin is a research associate in the Department of Politics at Brandeis University. He maintains the website Jihadology.net and co-edits the blog al-Wasat. Erik Churchill is an analyst and development consultant based in Tunisia. He blogs about Tunisian politics at Kefteji. (Sada 19.04)

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11.7 MOROCCO: Boosting Agriculture

Already boasting an incredibly close bilateral relationship, export volumes between the EU and Morocco look to grow even further as continuing liberalization – in the guise of a pair of new trade agreements – loosens restrictions on agricultural and seafood products.

In February, after much heated debate, the European parliament narrowly approved measures to liberalize trade with Morocco in agricultural and fisheries products. The new legislation allows for an increase in specific quotas, currently worth an estimated €100m per year, for zero- or low-duty imports. It also will immediately cut 55% of tariffs on Moroccan agricultural and fisheries products and 70% of tariffs on similar EU products for a period of 10 years. In total, 45% of all EU imports to Morocco will become duty-free.

Some of the main EU products to have their import duties eliminated include poultry, butter, certain cheeses, fruit, UHT milk, olive oil, tomatoes, durum wheat products, fruit and vegetable juices, nuts, potatoes and tobacco. Moroccan products to be included in the duty-free category are tomatoes, garlic, zucchini, cucumber, artichokes, apricots, grapes, peaches, oranges and chemically pure fructose. Proponents of the deal, which builds on an existing agricultural agreement from 2008, say that it will likely create better investment opportunities for EU companies and more jobs for the Moroccan agricultural sector.

Today, the sector represents 15% of Morocco’s GDP and is a major source of employment, with 3m-4m people working in the agricultural and agro-industrial fields. The total value of agricultural exports totaled €1.4b in 2010, the majority of which went to the EU. The measures had to overcome heated criticism in the EU parliament, fuelled by concerns over the subsequent impacts on domestic European production.

Aziz Akhannouch, Morocco’s agriculture and fisheries minister, dismissed these concerns, telling local media in February that both EU companies and Moroccan small farmers affiliated with giant exporting cooperatives would benefit from the deal. He said that 80% of Moroccan farms are less than 5 ha in size and thus unable to export their produce without joining larger cooperatives.

To alleviate such concerns, the bill includes numerous “safeguards”, such as only allowing slight increases for quotas of certain products, specifically tomatoes, strawberries, cucumbers and garlic. The agreement also provides for seasonal quotas to counter oversupply and distortion in the EU market, limiting the impact of granting improved access to unprocessed fruit and vegetables from Morocco, which currently make up 80% of total EU imports. The accord also calls for Moroccan imports to meet European sanitary standards, which in the past have been a barrier to exports.

The EU parliament has also called on the European Commission to monitor strict application of quotas and strengthen controls to avoid possible fraud in the entry price system, while simultaneously requesting an assessment of the impact on European producers and farmers’ incomes. They have also insisted on the inclusion of a “rendezvous clause”, which states that both parties must meet no later than three years from the start of the agreement to consider further alterations and concessions.

The deal comes as part of a long-term effort by the Moroccan government to strengthen the performance and output of the domestic agricultural sector. The country has long held a competitive edge in fruit and vegetable production due to a fortuitous geography, but has suffered from volatile swings in production due to water issues and outdated cultivation and harvesting methods.

The government’s cornerstone initiative for this comprehensive overhaul of the sector is the Plan Vert, a multi-billion euro agricultural development program. Launched in 2008, Plan Vert aims to increase the sector’s profitability and spur rural development by seeking out private investment in regions with a high agricultural potential through subsidies and improved infrastructure. Plan Vert also provides for the modernization of farming methods in arid regions and increases environmental protection standards. The results have indeed been encouraging. Since 2007, fertilizer use has increased by 7%, the mechanization of farming techniques has risen by 27%, and the use of irrigation systems has gone up by 127%. Should these initiatives lead to increased production as expected, the new yields will soon have a new home in the EU market. (OBG 16.04)

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11.8 TURKEY: From Strength to Strength

Increased foreign mergers and acquisitions (M&A) activity and regulatory changes that encourage consolidation are expected to dramatically alter the commercial playing field in Turkey over the next several years. A new commercial code coming into effect in July should increase and improve disclosure requirements, which should attract investor interest while pushing small and medium-sized enterprises (SMEs) toward mergers. At the same time, both incoming and outgoing M&As are at record highs.

“Turkey is not a fly-in, fly-out market, and it is important for investors to realize this,” Selcuk Yorgancioglu, the senior partner and head of Turkey, Iraq and Central Asia for Abraaj Capital, told OBG. “Turks want to see the time and commitment from investors. These expectations have resulted in a large number of M&A transactions and minimal greenfield investments, because the market is only understood by those who commit to being here.”

According to a report from Deloitte, a global professional services firm, Turkish companies were the targets of 241 deals in 2011, which surpassed a record set in 2010. Publicly disclosed deal values reached $11.9b, and the audit firm estimated that including undisclosed values would put the total at around $15b.

While this marks a significant decrease in volume from the estimated $29b in 2010 deals, much of that volume came from energy privatizations that were never finalized, thus the actual amounts held steady in 2011. The average deal size actually fell in 2011, from $140m to $62m, as the focus shifted to the acquisition of SMEs. Approximately 83% of the deals were for less than $50m, accounting for just 22% of total deal volume, while the top four deals represented 42% of the total.

These mega-deals came from across the economic spectrum: Vallares’ $2.1b purchase of Genel Enerji, Diageo’s $2.09b acquisition of beverage producer Mey Içki and the sale of Turkish insurance giant Acibadem Saglik Hizmetleri to Integrated Health Holdings for $1.26b. The fourth was a privatization of Istanbul’s IDO ferryboat company, which was sold to a consortium that included Turkish companies Tepe, Akfen and Sera, and the Scottish investment company Souter.

The lower level of privatization activity decreased the overall volume of acquisitions, although the government’s transport plans indicate that 2010 may be a blip in this regard. On the docket for 2012 is the privatization of 1139 km of roads and bridges across Turkey, including the two bridges spanning the Bosphorus Strait in Istanbul. Galataport, Istanbul’s cruise ship port, is also scheduled for sale later this year.

Electricity and gas distribution privatizations that were postponed in 2011 over a lack of funding will also be re-tendered in 2012. A report from PricewaterhouseCoopers has deemed the successful sale of any of the electricity grids “unlikely”, but views the tenders for gas distributers Baskent Gaz and IGDAS as having a greater chance of success. However, the combination of a worldwide credit crunch and regulatory uncertainty makes the availability of financing for these privatization deals far from certain.

At the small- and mid-market level, however, where purchases require less capital, M&A activity is brisk. Deloitte reports that food and beverage, energy, manufacturing, and health care companies accounted for the most deals in 2011. Moreover, firms are looking to July 2012, when the new Turkish commercial code is expected to shake up the M&A field.

The regulations would require companies to have independent and qualified auditors, and force joint- and limited-stock companies to adhere to international financial reporting standards (IFRS). SMEs would be required to adhere to a simplified version of the IFRS, and mergers and other corporate transactions will follow EU regulations under the new regime.

The code is expected to boost M&A activity in a number of ways, primarily through the diminution of risk associated with increased transparency. The cost of compliance with the new regime has been estimated at $30,000-$60,000; while this may be small change for large businesses, it could be too costly for some SMEs, pushing them into unprofitability. As a result, M&As would be the natural outcome.

Finally, the growing strength of Turkish corporations is reflected in strong numbers for outbound M&A activity. Turkish acquisitions of foreign companies were at record levels for both number of deals and volume in 2011, with 25 deals worth $2.9b. Two-thirds of the total value came from the largest Turkish acquisition in many years; beverage company Anadolu Efes purchased SABMiller’s Russian and Ukrainian holdings for $1.9b.

Meanwhile, recent years in Turkey have seen the country’s largest brands become even bigger, such as Coca Cola Içecek’s purchase of its parent company’s Iraq and Turkmenistan holdings, or white goods manufacturer Arcelik’s acquisition of a South African brand.

Increased corporate expansion will likely position Turkish firms to benefit from the wave of mergers expected from the new commercial code. Foreign investors, who represented 74% of the total deal value of incoming acquisitions in 2011, will thus be competing with the rising strength of home-grown companies. “Turkey has one of the best-regulated financial markets in this time zone, and a healthy and well-capitalized banking system,” Yorgancioglu said. “We expect M&A volumes to reach the level of continental Europe soon.” (OBG 12.04)

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Fortnightly - April 25, 2012

Fortnightly – April 25, 2012

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