THE FORTNIGHTLY
A Review of Middle East Regional Economic & Cultural News & Developments
2 October 2019
3 Tishrei 5780
3 Safar 1441
Written & Edited by Seth J. Vogelman*
TABLE OF CONTENTS:
1: ISRAEL GOVERNMENT ACTIONS & STATEMENTS
1.1 Canada and Israel Revise their Free Trade Agreement
1.2 Tourism Ministry Provided Airlines with NIS 50 Million in Grants for New Routes to Israel
1.3 The Bank of Israel Approves the Establishment of a New Bank
1.4 Armenia to Open Embassy in Israel by 2020
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Anacapa Partners Announces Investment in Dooblo
2.2 Datumate and Dorsch Group Announce Strategic Partnership
2.3 Cox Automotive Begins Israel Auto-Tech Operations
2.4 DustPhotonics Secures $25 Million in Series B Funding Led by Intel Capital
2.5 Foretellix Targets Increasingly Visible Gaps in ADAS and Autonomous Vehicle Safety
2.6 Fundbox Raises $326 Million to Expand First B2B Payments and Credit Network
2.7 Tipalti Raises $76 Million to Further Accelerate Its Leadership in Global Payables Automation
2.8 Cycode Raises $4.6 Million in Funding to Deliver Industry’s First Source Code Control
2.9 FruitSpec Closes $4 Million Investment for Its Yield Estimation Solution
2.10 PICO Venture Partners Closes $80 Million Second Fund
2.11 EC Awards odix €2 Million to Deliver Ransomware Protection Technology to SMEs
2.12 Zion Oil & Gas Begins 3-D Seismic Acquisition in Israel
2.13 Tastewise Raises $5 Million Series A Funding Round from PeakBridge
2.14 Namogoo Named Dun & Bradstreet’s Most Desirable Startup to Work for in Israel
2.15 Duda Raises $25 Million to Provide Website-as-a-Service to Digital Agencies & SaaS Platforms
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Andersen Global Expands to Jordan
3.2 Accela Partners with Dubai’s SIRA to Launch Security Licensing & Regulation Technology
3.3 Dubai’s Retail Sector Undergoing a Major Transformation Due to e-Commerce
3.4 Dubai Camel Hospital Set to Expand Amid Rising Demand
3.5 MaxAB Closes Landmark $6.2 Million Seed Round
3.6 Dabchy Raises $300,000 in Seed Funding
3.7 temtem has Raised Algeria’s Largest Series A Funding with $4 Million
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Endangered Turtles Bred in Captivity in Israel Help Save Species
4.2 How Date Palms and Satellites Are Helping the UAE Fight Carbon Emissions
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon’s Average Inflation Rate at 2.77% by August 2019
5.2 Lebanon’s Trade Deficit Ended at $10.24 Billion by July 2019
5.3 Tell Group Aims to Facilitate Lebanon’s Infrastructure via New $100 Million Fund
►►Arabian Gulf
5.4 Qatar’s Banking System Stable as Infrastructure Spending Drives Economic Growth
5.5 UAE Remittances Decline Due to Slow Down in Employment
5.6 Saudi Arabia’s $27 Billion Plan to Transform Tourism
►►North Africa
5.7 Egypt’s Planning Ministry Aims to Raise Workforce to 31.7 Million in FY 2019/20
5.8 Egypt’s Non-Petroleum Exports Increase as Imports Decrease
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 OECD Says Turkish Economy Contracting Less Than Previously Forecast
6.2 Turkey Lacks Skills to Compete in Today’s Global Economy
6.3 Turkey Turns to Crisis-Hit Car Industry in Attempt to Revive Economy
6.4 Cyprus 2020 Budget Projects 2.9% GDP Growth and Fiscal Surplus
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 On Eve of Jewish New Year, Israel’s Population Exceeds 9 Million People
7.2 Yom Kippur – Holiest Day in the Jewish Calendar – Falls on 8/9 October
7.3 Sukkot Holiday Celebrated
*REGIONAL:
7.4 Turkish Life Expectancy Rises to 78.3 Years
8: ISRAEL LIFE SCIENCE NEWS
8.1 Prilenia’s Pridopidine Chosen to Participate in the First ALS Platform Trial
8.2 Aidoc Releases Complete AI Package to Speed Identification and Treatment of Stroke
8.3 Strauss Group Reduces Sugar in Its Milk Chocolate by 30% with No Artificial Substitutes
8.4 Biogal-Galed Labs Launches CombCam Automated Reading Device for Kits
8.5 DarioHealth Wins U.S. Patent for Optical Transmission of Data Between Sensor & Smart Device
8.6 Biovo to Launch Innovative Anesthesia and Ventilation Platform
8.7 BGN Technologies Licenses Polymer for Targeted Cancer Therapy to Vaxil Bio
8.8 Solio Alfa Plus FDA-Cleared Radio Frequency Pain Relief Device Debuts in US Market
8.9 Tarsius Pharma Announces FDA Acceptance of IND Application for TRS01
8.10 Body Vision Closing $20 Million in Series C Funding
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Odo Security Emerges from Stealth with Agentless Access Management Platform
9.2 Viz.ai Named Among Forbes Most Promising AI Companies in America
9.3 Waterfall Security Solutions Announces Release of V7 Software Platform
9.4 Advice Electronics’ New, Innovative High Density Laser Capacitor Charging Power Supply
9.5 Aniview’s Ad Server and SSP Are First to Support Sellers.JSON & SupplyChain Object
9.6 AudioCodes Introduces Meeting Insights
9.7 BigID Introduces Third-Party Data Sharing Privacy Compliance Capabilities Ahead of CCPA
9.8 US Defense Innovation Unit Selects D-Fend Solutions’ Counter Drone System
9.9 ECI’s Converged Interconnect Network Solution for Cable Operators
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Ranked 38th in the World for Economic Freedom
10.2 Israel’s Composite State of the Economy Index for August 2019 Rises by 0.2%
10.3 Unemployment in Israel Rose in August to 3.8%
10.4 New Mortgages in Israel Increase by 30% Since Start of 2019
11: IN DEPTH
11.1 LEBANON: Lebanon’s Budget Finally Ratified and Goes into Effect
11.2 LEBANON: A Closer Look into Lebanon’s Fixed Currency
11.3 SAUDI ARABIA: S&P Affirms ‘A-/A-2’ Ratings; Outlook Stable
11.4 EGYPT: Israel to Start Exporting Natural Gas to Egypt as Last Obstacle Is Removed
11.5 EGYPT: Ethiopia Again Rejects Egypt’s Vision for Renaissance Dam
11.6 EGYPT: Five Things to Know About Egypt’s Startup Ecosystem
11.7 ALGERIA: A Presidential Election Will Be Held on 12 December
11.8 TURKEY: IMF Staff Concluding Statement of the 2019 Article IV Mission
11.9 GREECE: Staff Concluding IMF Statement of the 2019 Article IV Mission
11.10 CYPRUS: IMF Staff Concluding Statement of the 2019 Article IV Mission
11.11 CYPRUS: Moody’s Changes Outlook on Cyprus’s Rating to Positive, Affirms Ba2 Rating
There are some challenges for the two countries to increase these numbers. On the Canadian side, Canada’s exports to the US in 2018 were $337 billion or 177 times that exported to Israel. Canadian firms, unlike their Israeli counterparts, focus first on the domestic market, then the US market and then overseas.
Israeli firms, if they are to grow to any substantial size must first think globally rather than domestically and that usually entails opening up a US office. Rarely does Canada come into the picture, but this has just started to change with the growth of Canada’s high tech sector. In 2017, the World Economic Forum voted Montreal, Vancouver and Toronto as three of the top 25 high tech cities of the world. Recently a number of Israeli high tech companies have listed their shares on the Toronto Venture Exchange, reflecting the change in how Israeli entrepreneurs and high tech companies view the Canadian capital markets and the growing importance of Canada’s innovation ecosystem. (Globes 19.09)
1.2 Tourism Ministry Provided Airlines with NIS 50 Million in Grants for New Routes to Israel
Foreign airlines have received Ministry of Tourism grants totaling over NIS 50 million for operating routes from various destinations, starting in 2016. The grants are awarded to airlines for opening new routes to and from Israel when the ministry believes have potential for bringing tourists to Israel. The airlines receiving the grants at the end of the first year of their activity undertake to use the money for marketing measures and campaigns to encourage tourism to Israel.
Airlines receive €250,000 for a route per weekly flight for a year, meaning that an airline operating three new weekly flights gets €750,000 a year. Since one of the conditions for the grant is opening a new route that did not previously exist in Israeli aviation, the main beneficiaries from the grants are low-cost airlines beginning flights from less popular destinations, which are cheaper to operate, including lower airport fees charged by the Civil Aviation Authority of Israel.
Heading the list of the airlines receiving Ministry of Tourism grants since 2016 is Hungarian airline Wizz Air, which has received €3.3 million, over half of all the grants obtained by airlines. It received the grants for operating flights between Tel Aviv and Lublin (Poland); Kosice (Slovakia); Craiova, Timisoara, and Sibiu (Romania); and Debrecen (Hungary). Irish low-cost airline Ryanair has received €2.5 for operating flights between Ben Gurion Airport and Poznan, Wroclaw, and Gdansk (Poland) and Baden-Baden and Memmingen (Germany). Polish national airline LOT also receive grants for operating routes from Poland, including from Poznan, Lublin, Wroclaw, and Gdansk.
El Al also received a €1 million grant for starting new routes from Tel Aviv to Las Vegas and Miami. United Airlines won a grant for operating a new route between Tel Aviv and Washington. For three weekly flights on this route, the US airline received a €750,000 annual grant, as did South American airline LATAM for operating a three weekly flights from Tel Aviv to Sao Paolo (Brazil) and Santiago (Chile). Air India, which launched direct flights between Tel Aviv and Delhi in 2018, received a €750,000 grant. Chinese airlines have also received grants. Hainan Airlines received €750,000 for its three weekly flights to Shanghai in 2017-2018. Another Chinese airline to receive a grant is Sichuan Airlines, which inaugurated a Tel Aviv-Chengdu route a year ago and received €500,000 for two weekly flights. (Globes 18.09)
Back to Table of Contents1.3 The Bank of Israel Approves the Establishment of a New Bank
The Bank of Israel notified entrepreneurs Mr. Marius Nacht and Prof. Amnon Shashua, that the Banking Supervision Department has completed the examination process, and that the Governor is prepared to grant a license to the bank and a permit to control it. The process was carried out in consultation with the Licensing Committee.
According to the business plan presented to the Banking Supervision Department, the intent is to establish a digital bank, without branches, and to focus on providing banking services to households, including providing credit, receipt of deposits, management of bank account, and providing securities purchasing and sales services.
The establishment of a new bank is possible due to a broad process in which the Banking Supervision Department removed barriers and the Bank of Israel and Ministry of Finance led joint initiatives, in accordance with the recommendations of the joint committee established to increase competition in banking and financial services, which were supported by the government and the Knesset. The process included a change in the process of granting a bank license that will create a mechanism to ensure regulatory certainty for the entrepreneurs prior to the completion of full operational preparations; close guidance of the entrepreneurs by the Supervisor of Banks to support the establishment of new banks; lowering the initial capital requirements for establishing a bank and the capital ratios (according to a risk-based approach); revising the Banking Supervision Department’s Proper Conduct of Banking Business directive to enable the digital provision of all banking services; a government decision to provide a government grant to an entity that establishes a computer services center as automated infrastructure for new and existing banks and deposit and credit unions; and the establishment of a credit data system to respond to information restrictions and allow for the provision of credit under competitive conditions by banks and new players.
The receipt of the control permit and bank license will enable the entrepreneurs to move forward and complete the IT system, operational, and regulatory preparations required to launch the bank’s operations, including signing an agreement with the technological system supplier that won the State tender, TCS from the TATA Group, complete the hiring of the managerial staff and the appointment of a Board of Directors, and more.
The new bank will be supervised by the Banking Supervision Department at the Bank of Israel in order to ensure its stability and to protect the money deposited with it, similar to the supervision over the other banks in Israel. Customers of the new bank will be able to make various payment transactions, including via debit card, transfers, real-time transfers (Zahav), cash withdrawals at ATMs, and so forth. (BoI 24.09)
1.4 Armenia to Open Embassy in Israel by 2020
Armenia has announced that it will be opening an embassy in Israel. The two countries established formal diplomatic ties in 1992. According to an announcement from the Armenian Foreign Ministry, the embassy – which would be the 90th foreign embassy in Israel – will be located in Tel Aviv and opened “as quickly as possible,” sometime between the end of 2019 and the beginning of 2020. The decision reflects well on the closer bilateral diplomatic ties over the past year. (IH 20.09)
2: ISRAEL MARKET & BUSINESS NEWS
2.1 Anacapa Partners Announces Investment in Dooblo
San Mateo, California’s Anacapa Partners, a leading private equity firm focused on acquisitions in the lower middle market, completed a growth investment in Dooblo, a leader in mobile survey software, data collection and analysis solutions. Trail Mark Partners participated in the investment alongside Anacapa. Financial terms of the transaction were not disclosed. Anacapa Partners feels Dooblo’s SurveyToGo platform is the premier data collection tool in the research space.
Based in Kfar Sava, Dooblo provides innovative professional mobile survey software for the market research industry. Dooblo’s flagship product, SurveyToGo, eliminates 60% of the costs of traditional paper-based survey projects with 10x the quality of the collected data, and is utilized by market research firms in more than 100 countries worldwide. (Anacapa 18.09)
2.2 Datumate and Dorsch Group Announce Strategic Partnership
Datumate and Frankfurt, Germany’s Dorsch Group have entered a strategic partnership, combining Datumate’s innovative construction data analytics platform DatuBIM with Dorsch Group’s industry-leading construction planning and consultancy services. The partnership will enable Dorsch to expand its digitalization services from planning to the entire construction lifecycle. DatuBIM provides digital monitoring and documentation of managerial and engineering construction processes and establishes a single, permanently updated source of digitized project assets from planning through execution and maintenance. As part of this strategic partnership Dorsch Group will sell, deliver and support DatuBIM services to customers in Germany, Austria and Switzerland, whether they undertake new infrastructure builds or rebuilds of existing infrastructure.
DatuBIM 2.0, is a non-intrusive, end-to-end service and collaboration platform that delivers automated construction data analytics within hours of data capture, as well as comparison against design plans and execution progress. As-built digital twins and automated multi-dimensional, customized analytics deliver valuable insights for optimizing, controlling and documenting processes, quality and budget. DatuBIM cloud-based software offers value to project owners, managers and contractors, and the full range of construction industry professionals.
Yokneam’s Datumate develops software and services that utilize big data analytics, machine learning, state-of-the-art computer vision, and drone and camera technologies. Our flagship services and products, DatuBIM™ and DatuSurvey™, revolutionize traditional core processes like infrastructure construction project execution management and facilitate digitalization of the entire asset lifecycle from planning, through execution and maintenance. (Datumate 18.09)
2.3 Cox Automotive Begins Israel Auto-Tech Operations
US vehicle trading and services giant Cox Automotive is launching Israeli auto-tech operations. The Atlanta-based company announced that it will expand its collaboration with Israeli startups and entrepreneurs, and in the first stage it has formed a partnership with DRIVE TLV, a Tel Aviv-based smart mobility innovation center.
The DRIVE TLV hub was founded in 2017 by Mayer Cars and Trucks and Dr. Tal Cohen, a serial entrepreneur investor and a long-time faculty member at Georgia Tech. DRIVE’s other partners include Hertz Rent a Car International, Israeli telematics company Ituran, NEC, Aptiv, Honda and Volvo Group. The partnership’s main goal is to facilitate collaboration between Cox Automotive and Israeli transportation innovators. DRIVE TLV is focused on supporting mobility startups and entrepreneurs of all stages, with its accelerator, prototyping lab and shared workspace that encourages networking and collaboration. Israel is home to more than 8,000 startups, and over 600 are focused on mobility and transportation-related solutions.
As a DRIVE partner, Cox Automotive will actively engage with startups by providing expertise, and rapid prototyping opportunities that may evolve into additional business relationships. These activities will enable startups to receive accelerated validation of their technology and business model and, in turn, allow Cox Automotive to gain cutting edge competitive advantage. (Globes 19.09)
2.4 DustPhotonics Secures $25 Million in Series B Funding Led by Intel Capital
DustPhotonics announced a Series B investment of $25 million led by Intel Capital and joined by WRVI Capital. This series also includes a continued investment from veteran entrepreneur, Avigdor Willenz. This latest round will help fund DustPhotonics’ roadmap and expand its operations and global market presence. As data rates double with every successive generation, so does the complexity for meeting the demand of lower cost, lower power and higher reliability. Technology innovations, like AuraDP, provide a significant value differentiation enabling superior performance and sustainable 100, 400 and 800 Gb/s products.
Modiin’s DustPhotonics, founded in 2017, develops and manufactures pluggable optical modules and solutions for data center, enterprise and HPC applications. Its innovative products and technology, such as AuraDP, are targeted at enabling the next generation of optical modules and connectivity. (DustPhotonics 23.09)
2.5 Foretellix Targets Increasingly Visible Gaps in ADAS and Autonomous Vehicle Safety
Foretellix has opened Measurable Scenario Description Language (M-SDL) to the ADAS and AV ecosystem and contributed the language concepts to the Association for Standardization of Automation and Measuring Systems (ASAM) standards committee. M -SDL is the first open language that addresses multiple shortcomings of today’s formats, languages, methods and metrics used to verify and validate vehicle safety. Foretellix also announced its M-SDL Partners Program, providing a mechanism for industry feedback and refinement of M-SDL. A partial list of members includes AVL List GmbH, Volvo Group, Unity Technologies, Horiba Mira Ltd, TÜV SÜD, Automotive Artificial Intelligence (AAI) GmbH, Metamoto Inc, Vector Zero Inc, Trustworthy Systems Lab of Bristol University and Advanced Mobility Institute of Florida Polytechnic University.
By opening and contributing M-SDL, tool vendors, suppliers and developers will be able to 1) use a common, human readable, high level language to simplify the capture, reuse and sharing of scenarios, 2) easily specify any mix of scenarios and operating conditions to identify previously unknown hazardous edge cases, and 3) monitor and measure the coverage of the autonomous functionality critical to prove AV safety, independent of tests and testing platforms.
Tel Aviv’s Foretellix’s mission is to enable ‘measurable safety’ of autonomous vehicles, enabled by a transition from ‘quantity of miles’ to ‘quality of coverage’. Foretellix was founded by a team of pioneers in measurable verification and validation, with a highly automated and proven coverage driven methodology broadly adopted in the semiconductor industry. They have adapted and tailored their approach for the safety verification and validation of autonomous vehicles. (Foretellix 23.09)
2.6 Fundbox Raises $326 Million to Expand First B2B Payments and Credit Network
Fundbox has raised $176 million in growth equity funding for its Series C round. In addition, the company also announced that it has secured a $150 million credit facility. Fundbox will use these new investments to transform the B2B payments and credit experience by making transactions simple, fast and transparent so businesses will have greater cash flow predictability.
The Series C round was oversubscribed and includes a diverse range of leading institutional investors, including Allianz X, Healthcare of Ontario Pension Plan (HOOPP), HarbourVest, 9Yards Capital, Hamilton Lane, SEB Private Equity (on behalf of clients), Cathay Innovation, Synchrony, MUFG Innovation Partners Co., Recruit Strategic Partners, GMO Internet Group, and Arbor Ventures, as well as participation from the major existing Fundbox investors including Khosla Ventures, General Catalyst and Spark Capital Growth.
According to a recent Fundbox research study developed in partnership with PYMNTs, there is an unprecedented $3.1 trillion owed to U.S. firms today, locked up in accounts receivables “limbo.” Fundbox calls this massive out-of-reach pool of capital the “Net Terms Economy.” By unlocking this capital with faster payment technologies, there is an opportunity to transform millions of businesses that provide or rely on open credit terms to complete a business transaction. This is why Fundbox has built the first two-sided payments and credit network designed specifically to accelerate B2B commerce. With automated machine-learning risk decisions, faster payments to sellers, and more flexible payment terms to the buyer, sellers can focus on increasing average order volumes (AOV) while buyers have greater purchasing confidence and repayment flexibility.
Tel Aviv’s Fundbox is a leading financial technology company focused on disrupting the $21 trillion B2B commerce market by launching the world’s first B2B payments and credit network. With Fundbox, sellers (of all sizes) can quickly increase average order volumes (AOV) and improve close rates by offering more competitive net terms and payment plans to their SMB buyers. With heavy investments in machine learning and the ability to quickly analyze transactional data, Fundbox is reimagining B2B payments and credit products in new category-defining ways. (Fundbox 24.09)
2.7 Tipalti Raises $76 Million to Further Accelerate Its Leadership in Global Payables Automation
Tipalti has successfully raised an additional $76 million. Led by Zeev Ventures, the D round also includes a follow-on investment from Group 11 (f.k.a. SGVC) and participation from two new investors: 01 Advisors (a fund founded by Twitter’s former CEO & COO) and Greenspring Associates. Tipalti will use this additional funding to continue to set the pace for innovation in the payables automation space and solidify itself as the leading solution for fast-growing and mid-sized companies across the globe. The company will fuel its growth through increased developer, customer success, sales, and business development headcount, marketing investments, while adding new offices in North America and Europe.
Herzliya’s Tipalti’s payables automation technology is aimed at fast-growing mid-market companies, who have traditionally been underserved by banks. Leveling the playing field, the solution provides them with the ability to scale efficiently and rapidly, accessing the services that are otherwise only available to large enterprises. Tipalti streamlines and optimizes businesses’ end-to-end global payables workflow, while giving these companies access to cross border payments, currency conversion, and payments across a wide range of methods. (Tipalti 24.09)
2.8 Cycode Raises $4.6 Milliohttp://www.tipalti.comn in Funding to Deliver Industry’s First Source Code Control
Cycode announced $4.6 million in seed funding. The round was led by YL Ventures with participation from security industry leaders. Cycode’s mission is to protect source code, the building blocks of an organization’s software, and the highly valuable intellectual property (IP) contained in it, from the growing risk of theft, leakage and manipulation.
Cycode, the first solution to address certain security gaps, intends to set the industry standard in source code protection. Cycode’s source code control, detection and response solution utilizes the startup’s patent-pending Source Path Intelligence Engine to deliver rapid, comprehensive and seamless visibility into an organization’s source code inventory. It quickly connects all of the organization’s source code management systems (SCM) and code repositories, cataloging source code inventory and the paths source code takes between users, devices and repositories during development and distribution across the extended enterprise.
Tel Aviv’s Cycode, the industry’s first source code control, detection and response platform, utilizes its unique Source Path Intelligence engine to seamlessly deliver comprehensive visibility into all of an organization’s source code and automatically detect and respond to anomalies in access, movement and usage. With Cycode, organizations are “Secured to The Source”; their security teams can rapidly and dramatically reduce the risk of source code loss without impacting developer access or productivity. (Cycode 24.09)
2.9 FruitSpec Closes $4 Million Investment for Its Yield Estimation Solution
Misgav’s FruitSpec, a portfolio company of The Trendlines Group, has completed an investment round of $4 million. Investors included AgVentures, a South African agtech investment company and Hubei Forbon Technology Co. China.
Inaccurate fruit yield estimation from an early stage (especially in green fruit) remains a key problem in the food chain. The ability to accurately estimate a fruit yield has a major impact on key business decisions relating to crop maintenance/handling and sales projections. Currently, yield estimations are mostly performed by farmers/workers using a visual “count” from the sampling of a few trees. Until now, the main technological challenge in providing early season fruit yield estimates is the inability to distinguish the green fruit from the green leaves in an image. FruitSpec solves this problem with its patented hyperspectral and computer vision algorithms, enabling the company to count the number of fruit and to estimate fruit sizes for accurate early season fruit yield estimation. In all recent commercial operations and field trials, FruitSpec demonstrated accuracy rates above 95% with its technology (at an impressive average of 97.3%).
FruitSpec is positioned to have a major impact on the fruit yield estimation market, with a calculated 47 million hectares (116 million acres) of fruit orchards globally1 standing to gain from these developments. This translates to a $3 billion market potential for FruitSpec, according to company estimates, FruitSpec seamlessly addresses a critical pain point within the fruit market value chain, and its value proposition is easily grasped by industry players. FruitSpec’s solution is not merely an improvement to existing industry norms, but a total disruption of the inaccurate and labor-intensive methods currently used. (FruitSpec 24.09)
2.10 PICO Venture Partners Closes $80 Million Second Fund
Jerusalem’s PICO Venture Partners has closed its second fund with $80 million in capital commitments. PICO now manages $130 million across two funds. Founded in 2015, the firm invests in early-stage startups seeking to upend broken business models in sizable industries. Rather than focusing on specific sectors, it looks for values-based, execution-driven Israeli entrepreneurs who leverage technology to modernize processes and unlock greater efficiency in the marketplace. The firm believes that this sector-agnostic, business-centric approach is the key to successfully identifying and investing in startups with the greatest potential for growth.
PICO has invested in 15 portfolio companies to date including Vroom, the online platform for buying and selling refurbished, pre-owned cars. Recognizing the massive opportunity to transform the highly fragmented used car market, PICO led Vroom’s initial investment round and has continued to support the company in follow-on rounds. PICO also led the initial investment round in Spotinst, the cloud automation and optimization startup that has reached more than 1,500 enterprise customers across 52 countries in just three years. The young firm has other notable, fast-growing investments including Gloat, an AI-powered internal talent marketplace, and ChargeAfter, a multi-lender point-of-sale financing platform – both working with Fortune 500 customers.
More recently, PICO invested in Tastewise, an AI-powered food trends prediction and intelligence startup, and Ravin.AI, which combines computer vision and deep learning to detect and analyze vehicle damage via standard cameras. (PICO 26.09)
2.11 EC Awards odix €2 Million to Deliver Ransomware Protection Technology to SMEs
odix recently secured a €2 million grant from the European Commission (EC) to bring their enterprise-grade cybersecurity technology to small to medium-sized enterprises (SMEs). The company was among the select ventures that were awarded funding as part of the EU’s Horizon 2020 SMEI research and innovation program.
odix focuses on file-based attack protection and offers next-generation solutions for disarming any malware including ransomware. Hackers and cybercriminals often disguise malware by embedding them in legitimate documents. Once an infected document is opened, the malware can then spread throughout an organization’s network and infrastructure. odix aims to bring their technology to a wider audience by partnering with managed security service providers (MSSPs) that serve SMEs. The company looks to leverage the cloud in order to offer its various tools as Software-as-a-Service, allowing SMEs to avail of these functionalities through affordable subscriptions.
odix’s core technology has already been successfully used by top enterprises and governments to protect their infrastructures. Despite the explosion of malware and ransomware outbreaks over the past years like Wannacry, Petya and GandCrab, none of odix’s users were compromised by these attacks. By awarding odix the Horizon 2020 grant, the EC shows that it trusts the company to enable SMEs in the region to be protected from rampant file-based cyberattacks.
Rosh HaAyin’s odix provides comprehensive infrastructure and network protection against file-based malware attacks. It is a privately-owned company with offices in Israel, the US, and Luxembourg. The company was founded by former officers in the Israel Defense Forces specializing in cybersecurity. Among its clients are top brands like GE, Varonis, EIC (European Investment Bank), Dominion Energy, BAE Systems and Dun and Bradstreet. (odix 25.09)
2.12 Zion Oil & Gas Begins 3-D Seismic Acquisition in Israe
Zion Oil & Gas, announced the commencement of data acquisition for its Megiddo-Jezreel 3-D seismic program. Within the first week over 30 square kilometers of equipment has been deployed for the start of the largest onshore 3-D survey in Israel’s history. Zion’s seismic acquisition will cover 72-square kilometers within its Megiddo-Jezreel license. Zion Oil & Gas, a public company traded on NASDAQ (ZN), explores for oil and gas onshore in Israel on their 99,000-acre Megiddo-Jezreel license area. (Zion Oil & Gas 25.09)
2.13 Tastewise Raises $5 Million Series A Funding Round from PeakBridge
Tastewise has raised $5 million in a Series A funding round led by PeakBridge, an investment firm specializing in FoodTech. Last year Pico Venture Partners provided Tastewise $1.5 million in seed funding, bringing the company’s total funding to $6.5 million to date. The Series A round will be used to further develop Tastewise’s AI technology, focused on understanding human interactions with food, such as the motivations behind why people select and prefer certain foods over others. By breaking down data to the specific functions that interest consumers, Tastewise not only knows what foods are trending, but why. With the platform expansion, Tastewise will further train its AI to comprehend the deep human motivation around food trends, with insights that will shape the future of the industry.
Tastewise gains actionable insights into real-life interactions with food by analyzing over 1 billion food photos shared every month together with the largest restaurant menu database available today (over 180,000 restaurants in the U.S.). The company already works with Fortune 500 food and beverage brands to pinpoint market opportunities and is primed to identify potential market gaps to fill for rising trends like virtual restaurants. Plans to expand the AI technology platform’s visual analysis of images will empower the platform to provide more proactive insights on emerging trends in the culinary industry.
Tel Aviv’s Tastewise brings the power of data to the art of food and beverage intelligence. The platform analyzes billions of food data points – including menus, home recipes and social media – to provide real-time insights for restaurants, hospitality groups, and food brands. Capturing food innovation in real time, Tastewise equips industry professionals to identify target segments and competitors, understand emerging trends, and determine which dishes or products should be served next. Tastewise 25.09)
2.14 Namogoo Named Dun & Bradstreet’s Most Desirable Startup to Work for in Israel
Namogoo was ranked as the Best Startup to Work For in Israel by Dun & Bradstreet (D&B), topping the list of 10 other startup honorees. This is the first time that Dun and Bradstreet’s prestigious list has included a section for startups in addition to its annual list of Top 50 Companies to Work For in Israel. Namogoo’s client-side platform uses machine learning technology to prevent unauthorized ads injected into consumer browsers and devices from disrupting the online customer journey and redirecting them to other promotions. Leading global brands such as Tumi, Asics, Argos, and Dollar Shave Club, are using Namogoo’s solution to protect their customers’ online shopping experience from these disruptions and are increasing their conversion rate by 2-5%.
Over the past year, Namogoo grew its customer base by 150% and its platform is used by brands in over 38 countries, including a number of new verticals such as travel, insurance, and online marketplaces. To support its growing and diverse clientele, Namogoo’s offices are located in Herzliya, Israel, Boston, MA, and London, UK. While Namogoo’s unique technology has proven crucial for brands’ bottom lines, the company takes the most pride in the workplace environment it has created to nurture and grow employees.
Herzliya’s Namogoo is pioneering the field of Customer Journey Hijacking Prevention. Namogoo’s client-side technology enables online businesses to deliver a distraction-free customer journey by identifying and blocking unauthorized product ads injected into consumer web sessions that divert site visitors to competitors and hurt conversion rates. The world’s largest retailers rely on Namogoo to deliver a disruption-free customer experience and consistently increase eCommerce revenue. (Namogoo 25.09)
2.15 Duda Raises $25 Million to Provide Website-as-a-Service to Digital Agencies & SaaS Platforms
Duda has raised a $25 million growth equity round from Susquehanna Growth Equity (SGE). This round brings the total amount raised to date to $50 million. The financing will be used to accelerate sales and marketing efforts and continue growing the R&D team based in Israel. Duda has developed highly-tailored tools that are integrated into its website building platform to enable professional website designers and digital agencies to increase efficiency and more effectively collaborate both internally and with their customers. Web professionals who have moved from WordPress to Duda report a 50% reduction in site build times. Additionally, Duda provides a white-label Website-as-a-Service solution for SaaS companies enabling them to offer website design capabilities deeply integrated with their technology for SMB customers. Duda is working with a number of leading SaaS companies across multiple industries, including hotel and property management, fashion and beauty, CRM and digital marketing.
Tel Aviv’s Duda is the leading web design platform for all companies that offer web design services to small businesses. The Company serves all types of customers, from freelance web professionals and digital agencies, to the largest hosting companies, SaaS platforms and online publishers in the world. Loaded with powerful team collaboration and client management tools, the Duda platform enables the building of feature-rich, responsive websites at scale. Every Duda website is automatically optimized for Google PageSpeed and great out-of-the-box SEO. (Duda 25.09)
3: REGIONAL PRIVATE SECTOR NEWS
3.1 Andersen Global Expands to Jordan
San Francisco’s Andersen Global continues to strengthen its presence in the Middle East with the announcement that Jordan-based Zalloum & Laswi has become a full member firm of the international association and is adopting the name Andersen Tax & Legal. The firm had previously signed a collaboration agreement with Andersen Global last fall.
Established in 1993, Zalloum & Laswi’s nearly 20 professionals provide legal services for mid-to-large Jordanian corporations and foreign corporations in banking and finance, civil law, contracts, foreign investment, intellectual property rights, international trade and cross-border issues, corporate and commercial law, criminal law, litigation and dispute resolution, mergers & acquisitions and real estate. Andersen Global is an international association of legally separate, independent member firms comprised of tax and legal professionals around the world. (Andersen Global 01.10)
3.2 Accela Partners with Dubai’s SIRA to Launch Security Licensing & Regulation Technology
San Ramon, California’s Accela, a leading provider of cloud-based solutions for government, announced that Dubai’s Security Industry Regulatory Agency (SIRA) has gone live with a new security regulation and licensing system powered by Accela technology. The system will manage all licensing, inspection, and auditing for security service providers to help create a safer city. In doing so, Dubai becomes among the first cities in the world to regulate private security activities using modern technology.
SIRA’s new security solution helps address these emerging threats by streamlining licensing, inspection, and auditing processes for all Security Service Providers in Dubai, including security companies, equipment vendors, private security guards and businesses that require security services. The new system will automate and fast-track previously manual processes, improve accuracy, and reduce counter visits. SIRA’s system is fully integrated with all internal and external approval entities across the UAE, including Smart Dubai, the Department of Tourism and Commerce Marketing, Department of Economic Development, and Dubai Municipality. By leveraging Accela’s technology, SIRA will help the Dubai government meet the safety components of its 2021 vision and Smart Cities and Governments paperless initiative. (Accela 24.09)
3.3 Dubai’s Retail Sector Undergoing a Major Transformation Due to e-Commerce
Dubai’s retail sector is undergoing a major transformation with the rise of e-commerce and evolving customer preferences shaping a new ‘retail logistics’ industry, according to JLL. The consultancy said in a new report that a wave of innovative new real estate solutions in the logistics sector are creating alternative investment opportunities. It said Dubai is well placed to leverage the retail industry’s rapidly changing dynamics including rising e-commerce, new disruptive technologies and evolving consumer tastes. Retailers are addressing the challenge of fulfilling increasing demand for online delivery while balancing an oversupply of traditional retail space, JLL said, adding that ‘omni channel retailing’ allows retailers to optimize their real estate portfolios and boost their performance.
Portfolio optimization is driving demand for more and better quality warehousing as retailers seek to satisfy changing business models to meet the needs of their growing consumer base. Many retailers are finding themselves with excess stock within stores but a shortage of quality warehousing. It is estimated that at least 50% of recent demand for warehouse space across the UAE comes from the retail sector.
JLL noted that the boom of online retail is increasing demand for warehousing space and logistics solutions that meet today’s fast paced customer demands, adding that retailers are now investing across the full supply chain, not just traditional physical spaces.
Dubai has traditionally adopted a ‘build it and they will come’ philosophy – a strategy that has grown the city into the modern metropolis it is today. In the current era of uncertainty a new strategy of ‘come and you can build it’ is emerging, creating an opportunity for these players. According to JLL, increased private sector participation will also be a key driver for success of the retail logistics industry. (AB 25.09)
3.4 Dubai Camel Hospital Set to Expand Amid Rising Demand
Dubai Camel Hospital, the world’s first camel hospital, is set to expand its capacity by an additional 50% in response to massive demand for its services. The veterinary hospital said it has firmed up plans to enlarge its facilities to be able to treat over 30 camels simultaneously. It currently has capacity for 22.
The camel hospital opened its doors in 2017 to meet the demand in the UAE for an advanced medical facility dedicated to treating camels. Since its inception, the hospital has attracted the interest of not only local owners but also camel breeders from across the world. The hospital’s customized equipment was adapted from equestrian medical equipment to accommodate camel treatment and the facility is also equipped with a mini-race track to rehabilitate camels after their medical procedures. The hospital also aims to contribute significantly to the research and development of camel medicine as part of enhancing the global body of therapeutic knowledge related to the desert animal.
In recent years, camel dairy farming has also evolved as an alternative to traditional dairy farming in the region and is projected to become a $661 million market by 2024. Camels are also reared to participate in camel beauty pageants, which have evolved into a multi-million dollar sport thanks largely to government-sponsored festivals focused on the nation’s heritage and culture. (AB 23.09)
3.5 MaxAB Closes Landmark $6.2 Million Seed Round
Cairo’s MaxAB, an Egyptian B2B e-commerce marketplace that connects informal food and grocery retailers with suppliers via an easy-to-use app, has secured seed funding of $6.2 million, one of the largest ever seed rounds raised by a MENA start-up. The round was co-led by Beco Capital, 4DX Ventures and Endure Capital, with participation from 500 Startups, Outlierz Ventures and other local investors. With this injection of capital, the company expects to reach 50% of Egypt’s population within the next two years before expanding across different markets.
The 270 strong MaxAB team has built a stock list of over 600 products (including groceries, beverages, dairy, confectionery and non-food products). Using technology to close the gap between traditional retailers [over 400,000 in Egypt] and FMCGs, the start-up leverages technology to connect brands to retailers via its Android app. It is working to automate and simplify Egypt’s $45 billion FMCG food retail market and has recorded 50% month-on-month growth, with 9,000 activated retailers on the platform already. Brands using MaxAB have access to real-time demand monitoring and business intelligence tools, which improve end-to-end supply chain control, and better forecasting. Retailers in remote and under-served areas will have access to a wide variety of products, the convenience of ordering stock online in addition to second day deliveries not to mention the added benefit of access to credit facilities. (MaxAB 25.09)
3.6 Dabchy Raises $300,000 in Seed Funding
Dabchy, a Tunis-based peer-to-peer (P2P) fashion marketplace, has raised $300,000 in a seed round led by 500 Startups and joined by Flat6Labs, Vision Ventures, Daal Venture Capital and a group of angel investors. Dabchy is an online platform that facilitates its users to sell both pre-used and new clothes online at low cost.
Founded in 2016, Dabchy now has a community of over 400,000 users in Tunisia, Morocco and Algeria, who use its web and mobile-based platform to buy and sell new (unused lying in one’s wardrobe), self-made, pre-owned (used) clothes and accessories for women and kids. Dabchy’s Android app has been downloaded over 100,000 times. Dabchy has already begun celebrating its achievements as a leading product. In 2019, Dabchy was the first Tunisian and African startup to join the European Fashion Tech Incubator,Look forward by Showroomprivé in Paris. The company also participated in the second cohort of Womentum, a women in tech accelerator by Womena in partnership with Standard Chartered.
In 2018, Dabchy.com was listed among the first 100 top African and Arab promising startups by IFC- International Finance Corporation and the World Economic Forum. In 2017, Dabchy joined the first acceleration cycle of Flat6labs, Tunis. Following the program, the company also launched Dabchy Kids that year. For the three venture capitalist firms, 500 Startups, Vision VC and Daal VC, Dabchy is their first investment in a Tunisian startup. (Dabchy 23.09)
3.7 temtem has Raised Algeria’s Largest Series A Funding with $4 Million
temtem, the Algiers-based ride-hailing and transportation company, has raised Algeria’s largest Series A funding with $4 million from Tell Venture Automotive and private investors. temtem will use the capital to accelerate growth and launch new products and services starting in 2019. A year after its seed round, temtem proves once again that it is able to convince investors and chose Tell Venture Automotive and private investors. This new fundraising round confirms temtem’s competitive position, the relevance of its strategy, and investor confidence in its strong growth potential.
With this new capital, temtem, whose services cater to both consumers and corporates, will lunch two new innovative services centered around improving the daily lives of Algerians. Since its inception in 2018, more than 200,000 clients have used temtem with a loyalty that demonstrates the quality of the client experience. A few hundred corporate clients have also trusted temtem with improving the transportation experience of their employees to which temtem provides a full range of product such as private chauffeurs, delivery services, motorcycle ride-hailing, etc.
Temtem’s data science team specifically focuses on modeling the use of its users with the goal of ever-improving the customer experience and to more precisely pinpoint market needs in order to better match them by the end of the year. At the same time, temtem will strengthen its collaboration with strategic partners in the telecommunications and audiovisual industry. The goal is to democratize a unique service, already acclaimed by customers looking for a daily service with the best quality and at the best price. A new round of fundraising has already begun by Tell Venture Automotive to support growth in Algeria as well as in the African continent during 2020. (temtem 25.09)
4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS
4.1 Endangered Turtles Bred in Captivity in Israel Help Save Species
On a Mediterranean beach in central Israel, a newly-hatched baby turtles fumble along the sand, making their way to the sea for the very first time. These hatchlings, some 60 released into the wild recently, is part of a unique conservation program run by the Israeli Sea Turtle Rescue Center. The center is based at Moshav Mikhmoret, some 35 kilometers north of Tel Aviv.
Green turtles are endangered worldwide, the World Wildlife Fund says. Among other hazards, they are threatened by hunting, human encroachment on the beaches where they nest, and pollution of their feeding grounds offshore. According to the rescue center, only about 20 female green turtles nest along Israel’s Mediterranean coast during a breeding season that usually lasts from May until August. To help the turtle population, nature authorities have declared some beaches nature reserves and with the rescue center have been relocating threatened turtle nests to safe hatcheries since the 1980s.
In 2002, the rescue center went a step further and began recruiting turtles for a special breeding stock that would one day help populate the sea with their offspring, in one of the world’s only such conservation programs. The mating squad began to reach sexual maturity a few years ago and this year managed to breed, with about 200 baby turtles are expected to hatch by the end of the breeding season. (Reuters 29.09)
4.2 How Date Palms and Satellites Are Helping the UAE Fight Carbon Emissions
Satellite imagery is proving crucial in helping the environment by estimating the amount of carbon sequestration in data palms, according to researchers at the United Arab Emirates University. The major project, due to complete at the end of next year, has so far revealed that date palm trees in the UAE can capture up to 15.8 tons of carbon emissions per hectare per year. This space technology contributes to helping decision-makers find out how to balance carbon emissions through planting more date palm trees. The UAE is among the top countries in the Arab region and the world in terms of number of date palm trees, reaching about 15-16 million trees planted in Abu Dhabi alone. (AB 28.09)
5: ARAB STATE DEVELOPMENTS
5.1 Lebanon’s Average Inflation Rate at 2.77% by August 2019
Lebanon’s average consumer prices rose by an annual 2.77% by august 2019 compared to an annual uptick of 6.29% recorded by August 2018 according to the Central Administration of Statistics (CAS). The rise in prices over the period came on the back of yearly rises registered across all components of the consumer price index (CPI), except Transportation and Health. The breakdown of the CPI revealed that the average costs of Housing and utilities (including: water, electricity, gas and other fuels) which grasped a combined 28.4% of the CPI, climbed by an annual 2.25% by August 2019. In fact, average Owner-occupied rental costs (constituting 13.6% of the category) grew by an annual 2.48%. In turn, the average prices of water, electricity, gas and other fuels (11.8% of housing & utilities) recorded a yearly uptick of 1.78% over the same period. Moreover, the average prices for Food and non-alcoholic beverages (20% of the CPI) and Education costs (6.6% of CPI) registered yearly upticks of 4.31% and 5.13%, respectively, by August 2019. As for the average prices of Clothing and Footwear (5.2% of the CPI), they also rose by 14.26% year-on-year (y-o-y) by August 2019. Meanwhile, average consumer prices of Health (7.7% of the CPI) and Transportation (13.1% of the CPI) recorded the respective downticks of 0.73 % y-o-y and 1% y-o-y. The latter slipped mainly due to the decline in average oil prices which slipped by an annual 8.16% to $65.87/barrel by July 2019. (CAS 23.09)
5.2 Lebanon’s Trade Deficit Ended at $10.24 Billion by July 2019
Lebanon’s trade deficit widened in the first 7 months of the year to reach $10.24B, up by 0.98% compared to the same period in 2018. Regardless of the promising progress in exports, which grew by a yearly 19.20% to $2.09B, the wider deficit came as a result of a 3.67% yearly increase in the value of imports to $12.33B noting that Mineral products and Vegetable products are the only 2 categories to witness an increase in its imported value. In terms of value, Mineral products were the leading imports to Lebanon by June 2019, grasping a 34.59% stake of total imported goods. Products of the chemical or allied industries followed, constituting 10.11% of the total, while machinery and electrical instruments grasped 8.87% of the total. Specifically, Lebanon imported $4.27B worth of Mineral Products, compared to a value of 2.59B in the same period last year. The net weight of imported mineral fuels, oils and their products is still increasing since the start of the year and witnessed a yearly rise from 4,034,926 tons by July 2018 to reach 7,634,537 tons by July 2019. Meanwhile, the value of chemical or allied industries recorded a decrease of 6.28% y-o-y to settle at $1.25B and that of machinery and electrical instruments also declined by 12.20% over the same period to $1.09B.
In terms of top trade partners, Lebanon primarily imported from US, China, and Russia with shares of 9.33%, 8.46% and 7.70%, respectively, by July 2019. As for exports, the top category of products exported from Lebanon were pearls, precious stones and metals, which grasped a share of 34.91% of total exports, followed by a share of 10.81% for prepared foodstuffs, beverage and tobacco and 10.40% for Products of the chemical or allied industries over the same period. In details, the value of pearls, precious stones & metals surged from 428.30M by July 2018 to reach $731.41M by July 2019. As for the value of Prepared foodstuffs; beverages, tobacco, it declined by 5.60% y-o-y to $226.50M. Meanwhile, the value of Products of the chemical or allied industries recorded an increase of 8.39% year-on-year to $217.87M. In the first 7 months of 2019, Switzerland followed by the UAE and Saudi Arabia were Lebanon’s top three export destinations, respectively constituting 22.55%, 12.21% and 6.64% of total exports.
5.3 Tell Group Aims to Facilitate Lebanon’s Infrastructure via New $100 Million Fund
Private equity firm Tell Group has closed its first Lebanon infrastructure fund. The company hopes to raise $100 million worth of funds. The fund, known as the Tell Lebanon Infrastructure Fund, is the first Lebanese fund specifically targeting infrastructure opportunities in Lebanon. Currently, the group is focusing on raising funds worth $1 billion for the infrastructure development of Lebanon. However, the group has not yet revealed the amount that has been invested.
Apart from the fund, foreign governments and donors have also shown concern about the crippling infrastructure of Lebanon. To improve the conditions, they pledged an amount of $11 billion last year in Paris on the condition that the reforms will be carried out by the Lebanese government itself. The amount will be used for Lebanon’s 12-year infrastructure investment program.
The work by the Tell Fund has already started and initially it has identified 5 to 6 sectors that need to be revamped, which include energy, telecommunications and waste management. In the later stages, it plans to focus on sectors such as tourism, water, solid waste, transport and electricity. According to the group, institutions and governments from around the globe have committed to the fund. These include more than 25 family offices, individuals and institutions from Lebanon, Europe and the Gulf Cooperation Council. Beirut has decided to follow suit after struggling to improve its slow growth and a weak infrastructure of the city. It has announced a capital investment program worth $20 billion that will focus on more than 280 projects around the city. (MAGNiTT 19.09)
►►Arabian Gulf
5.4 Qatar’s Banking System Stable As Infrastructure Spending Drives Economic Growth
The outlook for Qatar’s banking system remains stable as continued spending on the country’s infrastructure projects will drive modest economic growth and support lending, Moody’s Investors Service said in a report. Higher oil prices have improved government finances and supported spending on infrastructure, including preparations for the 2022 FIFA World Cup. Qatari banks’ sound profitability, capital and liquidity should stay broadly stable, even as problem loans increase slightly because of continued challenges in the construction, contracting and real estate sectors.
Moody’s expects problem loans to increase to 2.4% of total loans by June 2020 from 2.1% at the end of 2018, while Qatar’s real GDP rises 2.1% in 2019 and 2.2% in 2020, driven mainly by growth in the non-hydrocarbon sector of the economy. The banks’ return on assets will remain broadly stable at around 1.5% going into 2020. Moody’s expects pressure on interest margins to moderate because liquidity pressures have eased and the global trend of rising interest rates has reversed. Additionally, the banks have re-priced their loan books at higher interest rates. Loan-loss provisioning needs will also stabilize and banks will continue to contain costs. (Moody’s 24.09)
5.5 UAE Remittances Decline Due to Slow Down in Employment
Remittances from the UAE fell nearly 8% in the first-half of 2019 as both quarters saw a decline due to a slowdown in employment. Central Bank data revealed that remittances fell from Dh87.92 billion in H1/18 to Dh80.96 billion in the corresponding period this year. First-quarter remittances fell from Dh43.5 billion to Dh38.4 billion while second-quarter saw remittance declining from Dh44.42 billion to Dh42.55 billion. A total of Dh33.046 billion thereof were transferred through money exchange companies and the rest from the banks operating in the country.
The highest destination country for outward personal remittances during April-June 2019 was India at 37.2%. This high share is in accordance with the significant share of expats from India working in the UAE. According to the latest UAE population statistics published by the Global Media Insight, 59.5% of the expat population in the UAE originate from South Asian countries, and expats from India account for 27.5% of the total expat population in the UAE. Among the major markets, remittances to India accounted for Dh15.8 billion of the total, followed by Dh4.4 billion or 10.5% to Pakistan, Dh3 billion to Philippines, Dh2.7 billion to Egypt, Dh1.6 billion to the UK and Dh1.57 billion to Bangladesh. (KT 24.09)
5.6 Saudi Arabia’s $27 Billion Plan to Transform Tourism
Saudi Arabia’s General Investment Authority (SAGIA) and the Saudi Commission for Tourism and National Heritage (SCTH) announced on 27 September a number of agreements with regional and international investors totaling about SR100 billion ($27 billion). Agreements signed by SAGIA include one worth SR37.5 billion with Triple 5 which plans to develop a series of mixed-use tourism, hospitality and entertainment destinations across the kingdom and another with Majid Al Futtaim worth SR20 billion for a mixed-use shopping and entertainment destination which will create 12,000 jobs and feature the region’s largest indoor ski slope and snow park. Saudi Arabia expects to increase international and domestic visits to 100 million a year by 2030, attracting significant foreign and domestic investment and creating a million jobs. By 2030, the aim is for tourism to contribute up to 10% towards Saudi Arabia’s GDP, compared to just 3% today.
Other agreements were signed with Oyo Rooms (SR4 billion) to purchase 10 or more upper-budget level and luxury hotel properties across the Saudi Arabia, a SR1.5 billion joint venture with Nenking Group/Ajlan Brothers to build a landmark lifestyle destination in Riyadh, and a deal with FTG Development to build a hotel, waterpark and retail development in Qiddiya; a 1,500 room hotel in NEOM City and a hotel situated between Jeddah and Makkah. Other SAGIA agreements were signed with Kerten Hospitality to develop a portfolio of mixed-use projects and Tetrapylon to coordinate with leading tour operators across North America, Europe and Asia to profile Saudi Arabia as a must visit global tourist destination.
Agreements facilitated by SCTH include two with Al Khozama concerning the Mayasem Project and the Harbour Project in Jeddah, along with other investment plans plus another with Diriyah Gate Development Authority to establish a 27-hole golf course at Wadi Safar and a 40 room hotel in Al Bujairi, overlooking the Wadi Hanifah Valley and At-Turaif UNESCO World Heritage Site. National carrier Saudia agreed four MoUs while organizations have made investment commitments collectively valued at SR36.25 billion, including Alshaya Group, Shomoul, Radisson, Alrajhi Investment and Seera Group. (AB 27.09)
►►North Africa
5.7 Egypt’s Planning Ministry Aims to Raise Workforce to 31.7 Million in FY 2019/20
Egypt’s Ministry of Planning, Monitoring and Administrative Reform announced the sustainable development plan’s second year objectives for Egypt’s labor force and unemployment rates in fiscal year 2019/20. Minister of Planning El-Saeed said on that the country’s workforce is expected to reach 31.7 million people during FY 2019/20, compared to 30.9 million in FY 2018/19, a 2.6% increase. The minister added that the plan, which targets a growth rate of 3.2%, involves measures to encourage heavy-labor projects to decrease unemployment rates. These include increasing funding from the Micro, Small & Medium Enterprise Development Agency to EGP 5.6 billion by the end of FY 2019/2020, compared to EGP 5 billion in FY 2018/2019, an increase of 12%.
El-Saeed said that SMEs are expected to provide around 376,000 job opportunities during FY 2019/2020, compared to 342,000 job opportunities in FY 2018/2019, rising by 9.9%. The plan also involves adopting incentive programs to encourage the informal sector to merge into the formal one. El-Saeed added that the plan aims to activate the role of the non-banking financial sector in providing micro-financing, in addition to providing leasing and finance services for SMEs and boosting mechanisms that help spread the entrepreneurial culture and support exports. (Ahram 22.09)
5.8 Egypt’s Non-Petroleum Exports Increase as Imports Decrease
Egypt’s non-petroleum exports increased by 3% during the past eight months in comparison to the same period the year before, stated the report on non-petroleum foreign trade indices published by the Egyptian General Organisation for Export and Import Control on 25 September.
Non-petroleum exports recorded $17.65 billion during the first eight months of 2019, up from $16.612 billion during the same period in 2018. The rise resulted in a decrease of $80 million in the trade balance deficit during the mentioned period. Three export sectors achieved notable growth, including food products, with exports in this sector increasing by 8%, recording $2.3 billion, up from $1.888 billion during the same period of 2018.
Exports of the agricultural crops sector also increased by eight%, recording $1.763 billion in the same period, up from $1.626 billion, while exports of the garments sector were raised by six%, recording $1.105 billion, up from $1.43 billion. The Ministry of Trade and Industry aims to reduce imports that have a domestic parallel, and substitute imported products for domestically produced one. The plan has worked thus far: six sectors have witnessed a notable decrease in their exports during the past eight months.
Imports in the furniture sector have decreased by 61% in the past eight months, recording $345 million, down from $883 million during the same period of 2018. Imports of books and artistic works also decreased by 24%, reaching $19 million, down from $25 million in 2018. Construction material imports decreased by 11%, recording $6.17 billion, down from $6.799 billion. Likewise, chemical products imports fell by 4%, reaching $5.48 billion, down from $5.706 billion. Leather products imports declined by 3%, reaching $114 million, down from $118 million. Food products imports decreased by 1%, reaching $3.727 billion, down from $3.747 billion.
Five countries received 34% of Egypt’s exports. These are the US with exports worth $1.462 billion, the UAE $1.26 billion, Saudi Arabia $1.156 billion, Turkey $1.93 billion and Italy $896 million. Five countries exported to the Egyptian market 41.5% of its imports. These are China with imports worth $7.196 billion, the US $3.39 billion, Germany $2.451 billion, Italy $2.267 billion and Russia $1.889 billion. (Al-Ahram 25.09)
6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS
6.1 OECD Says Turkish Economy Contracting Less Than Previously Forecast
Turkey’s economy is expected to contract by 0.3% this year, the Organization for Economic Cooperation and Development (OECD) said in its latest global economic outlook. The OECD had previously forecast a 2.6% contraction for Turkey in a similar report in May. It left its prediction for next year unchanged at growth of 1.6%.
Turkey’s economy is recovering from a currency crisis last year that caused a recession in the second half of 2018. The country posted positive quarter-on-quarter economic growth in the first half of this year, but annual growth remains negative. The OECD said that monetary policy easing would likely help economic activity in Turkey pick up modestly next year, provided local and global economic confidence is maintained. But it warned the Turkish authorities that stimulus had its limits. (Ahval 19.09)
6.2 Turkey Lacks Skills to Compete in Today’s Global Economy
Turkey appears woefully unprepared for the technological age, as its citizens grossly under-perform in crucial tech-related skills and more than half fail to complete high school. The Organization for Economic Co-operation and Development’s (OECD) most recent Survey of Adult Skills measured proficiency in key information-processing abilities, including literacy, numeracy and problem solving in technology-rich environments in 32 countries. Surveyed from April 2014 to March 2015, Turkish nationals scored significantly lower in these skills than people with the same level of education in other countries.
The mean literacy and numeracy scores in Turkey are more than 40 points lower than the international average, according to the OECD, while nearly 80% of 55 to 65-year-olds and more than 50% of 25 to 34-year-olds have not completed secondary education. Some 40% of Turkish adults lack basic information and communications technology skills, while 38% have no prior experience with computers, or lack basic computer skills. Turkey has the third lowest average score in literacy and numeracy among the 32 countries surveyed.
The Turkish government in recent years has repeatedly said that increasing the competitiveness of the country in new technologies and information economy was a priority. But many complain about the poor quality of the education system, particularly in state schools. The Turkish Statistical Institute’s June 2019 figures show that 26% of the population is neither in education or employment.
Since it came to power in 2002, Turkey’s ruling Justice and Development Party (AKP) has concentrated efforts in increasing the percentage of the population with tertiary education and has achieved its target to have at least one university in every province in the country. In 2010, Turkey had 95 state and 54 private universities. As of 2019, the number of state universities has increased to 129, while the number of private universities has risen to 73. The number of students in four-year university programs is 4.4 million, according to the latest official figures. (Ahval 19.09)
6.3 Turkey Turns to Crisis-Hit Car Industry in Attempt to Revive Economy
Turkey’s government turned from the construction sector to the car industry as it sought to revive economic growth and help out crisis-hit businesses with cheap loans. State-run banks announced on 26 September that they were slashing interest rates on loans used to purchase domestically-produced cars to less than half the annual inflation rate. Turkey is seeking to lift the economy out of a deep downturn brought on by a currency crisis that peaked in August last year. The IMF said recently that it expected the economy to grow by 0.25% in 2019.
Ziraat Bank, Halkbank and Vakifbank will offer borrowers interest rates of between 0.49% and 0.69% monthly on loans of between 50,000 liras ($8,800) and 120,000 liras over as many as five years, according to a joint statement by the banks. The offer is being made in conjunction with manufacturers.
Sales of cars and light commercial vehicles have slumped by an annual 46% to 239,317 units in the first eight months of this year, according to data published by the Automotive Distributors’ Association (ODD). Earlier, Kibar Holding, which is the producer and seller of Hyundai cars in Turkey, called on the government to introduce swift measures, including tax cuts, to help revive the industry.
The decision by Turkey’s largest state-run banks follows similar measures announced last month for mortgage lending. The three lenders started to provide borrowers with mortgages at interest rates of 0.99% monthly, cutting the rates by about one third. Turkeys’ economic downturn has left the construction industry with a huge stock of unsold homes. The IMF and ratings agencies have warned the government that short-term unorthodox measures to boost lending growth in Turkey risks more financial instability. Instead, they have called on the government to implement structural reforms. (Ahval 26.09)
6.4 Cyprus 2020 Budget Projects 2.9% GDP Growth and Fiscal Surplus
Cyprus’ 2020 state budget forecasts slower GDP economic growth of 2.9% next year and a fiscal surplus of 2.7%. Due to the state of government finances, Finance Minister Harris Georgiades said there was no need for tax hikes or any other financial burdens. But he did concede there was a significant increase in health expenditures as result of the implementation of the national health system (GHS) and the operation of the State Health Services Organisation OKYPY. Georgiades said the budget forecasts a growth rate of 2.9% which would lead to conditions of full employment. Government revenues are estimated to reach €10 billion while expenditure is estimated at €9.4 billion.
Inflation is projected to stand at 1.2%, while the unemployment rate is expected to drop to around 6%. Public debt to GDP ratio is predicted to fall to 91.1% as a result of an early repayment of debt to the International Monetary Fund scheduled for 2020. He said the budget enables the implementation of the government’s program, with €1 billion worth of projects underway, while it foresees investments in e-governance and digital transformation worth €250 million. The budget also provides expenditures for new policies such as the establishment of an investment fund to finance new innovative enterprises as well as the establishment of a Deputy Ministry for Innovation and Digital Policy. (FM 19.09)
7: GENERAL NEWS AND INTEREST
*ISRAEL:
7.1 On Eve of Jewish New Year, Israel’s Population Exceeds 9 Million People
Israel’s population stands at 9,092,000 people on the eve of the Jewish New Year of 5780, according to the Central Bureau of Statistics annual report. The population count has grown by 184,000, or 2.1%, since last year and is expected to reach 10 million by 2024 and 20 million by 2065. Over the year, 196,000 babies were born, 50,000 people died and 38,000 people immigrated to Israel.
Today’s Israeli society is made up of 74.2% Jews, 21% Arabs and 4% who are classed as others. Some 43% of Jews living in Israel describe themselves as non-religious or secular while 22.1% claim to be traditional or slightly religious. Of those calling themselves religious, 12.8% say they are traditional, 11.3% call themselves religious and only 10.1% say they are ultra-Orthodox.
Israelis are generally satisfied with life, with 88.9% reporting they are pleased with their situation. However, 36.1% claim they are unhappy with their economic circumstances: 29.9% said they were unable to pay their bills last year, while almost 25% said they had given up medicine or medical treatment and even hot meals due to a lack of funds.
Life expectancy for men in Israel is 80.9 years, while Israeli woman on average live to the age of 84.9 – among the highest life expectancies in the world. Cancer is the leading cause of death for around one quarter of Israelis (25.2%), followed by cardiac disease (14.8%). Statistics also show that one in seven Israelis (14.1%) suffer from severe disability.
When it comes to assets and property, 66.5% of Israelis own their own homes and of that number, more than half are paying a mortgage. Israeli households spend 24.2% of their total income on housing expenses, 20.2% on public and private transportation, including car insurance and gas, and 16.9% on food. Almost every Israeli (97.3%) owns at least one mobile phone and 78% of households own a computer and 83.7% of Israelis use the internet. (CBS 27.09)
7.2 Yom Kippur – Holiest Day in the Jewish Calendar – Falls on 8/9 October
On the evening of 8 October and until after sunset on 9 October, Israel and world Jewry will observe Yom Kippur, or the Day of Atonement. The holiest day on the Jewish calendar, falling on the tenth of Tishri, it is a day marked by fasting, prayer and penitence for one’s sins against their fellow man and G-d. Yom Kippur atones only for sins between man and G-d, not for sins against another person. To atone for sins against another person, you must first seek reconciliation with that person, righting the wrongs you committed against them if possible. That must all be done before Yom Kippur.
Yom Kippur is a complete Sabbath; no work can be performed on that day. It is a complete, 25-hour fast beginning before sunset on the evening before Yom Kippur and ending after nightfall on the day of Yom Kippur. The Talmud also specifies additional restrictions that are less well-known: washing and bathing, anointing one’s body (with cosmetics, deodorants, etc.), wearing leather shoes and engaging in sexual relations are all prohibited on Yom Kippur. As always, any of these restrictions can be lifted where a threat to life or health is involved. In fact, children under the age of nine and women in childbirth (from the time labor begins until three days after birth) are not permitted to fast, even if they want to. It is customary to wear white on the holiday, which symbolizes purity and calls to mind the promise that our sins shall be made as white as snow. The day long fast is widely observed even among Israel’s secular public and most of the country’s Jewish population attend all or part of the day’s synagogue services. The fast is concluded with a shofar blast and rejoicing.
7.3 Sukkot Holiday Celebrated
The Jewish festival of Sukkot begins at sunset on Sunday, 13 October until nightfall on 20 October (in Israel). The festival ends on day later outside of Israel. The holiday begins on the Hebrew date of 15 Tishrei, the fifth day after Yom Kippur. The word “Sukkot” means “booths” and refers to the temporary dwellings that Jews are commanded to live in during this holiday. The commandment to “dwell” in a sukkah can be fulfilled by simply eating all of one’s meals there or by actually living in the sukkah as much as possible, including sleeping in it. The holiday commemorates the forty-year period during which the children of Israel were wandering in the desert, living in temporary shelters. There are intermediate days during the week, which begins and ends with a holiday, referred to as Chol Ha-Mo’ed.
Another observance related to Sukkot involves what are known as the Four Species (arba minim in Hebrew) or the lulav and etrog. Jews are commanded to take these four plants and use them to “rejoice before the L-rd.” The four species in question are an etrog (a citrus fruit native to Israel), a palm branch (in Hebrew, lulav), two willow branches (arava) and three myrtle branches (hadas).The six branches are bound together and referred to collectively as the lulav. The etrog is held separately. With these four species in hand, one recites a blessing and waves the species in all six directions (east, south, west, north, up and down, symbolizing the fact that G-d is everywhere).
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7.4 Turkish Life Expectancy Rises to 78.3 Years
Average life expectancy at birth for a Turkish citizen increased to 78.3 years in the 2016-2018 period, the Turkish Statistics Institute (TÜİK) announced on 24 September. The statistics authority had calculated the average life expectancy for 2015-2017 as 78 years. TÜİK added that Turkish women live longer than men by 5.4 years on average. The institute said life expectancy at birth was 75.6 years for men and 81 years for women versus 75.3 years and 80.8 years in the 2015-2017 period.
The average remaining life expectancy at age 30 was 49.8 years (47.3 years for men and 52.3 years for women) and at age 50 was 30.7 years (28.4 years for men and 32.9 years for women). In Turkey for 65-year-olds, the average remaining life span was 17.9 years in the 2016-2018 years – 16 years for males and 19.2 years for females.”
According to the address-based population system, Turkey’s population was 82 million as of end-2018. The annual population growth rate increased to 14.7 per thousand in 2018 up from 12.4 per thousand in 2017. The proportion of the population residing in province and district centers decreased to 92.3% in 2018 from 92.5% in 2017, according to the latest statistics TÜİK announced in February. (TÜİK 24.09)
8: ISRAEL LIFE SCIENCE NEWS
8.1 Prilenia’s Pridopidine Chosen to Participate in the First ALS Platform Trial
Prilenia announced that Pridopidine, its lead compound, has been selected as the first of three potential new treatments to be included in the launch of the first ever platform trial in amyotrophic lateral sclerosis (ALS). Two additional compounds were chosen to join the trial at a later stage. Pridopidine was chosen by an independent review committee out of 30 competing investigational treatments based on human genetic data, efficacy in preclinical models, favorable safety profile and readiness of drug supply. Pridopidine is a highly selective S1R agonist, and this mechanism has already been shown to provide some benefit in ALS patients.
The HEALEY ALS Platform Trial will be the second clinical trial initiated by Prilenia. Earlier this year, Prilenia launched a phase 2 clinical trial in the US to evaluate the safety and efficacy of Pridopidine in treating Levodopa Induced Dyskinesia in patients with Parkinson’s Disease. Partial financial support to initiate these first treatments is made possible thanks to the generosity of the Healey family and friends and the AMG Charitable foundation along with partners at TackleALS.
Herzliya’s Prilenia is a clinical stage biotech startup founded in 2018 with the purpose of improving the lives of patients and their families by developing treatments for neurodegenerative and neurodevelopmental disorders. Pridopidine a first-in-class drug candidate with an established safety profile and therapeutic potential in several neurodegenerative diseases affecting adults and children. Pridopidine is a highly selective S1R agonist, shown to exert neuroprotective effects in numerous models of neurodegenerative disorders mediated via the S1R. S1R validation as a therapeutic target for ALS is demonstrated in animal models and in humans.
Pridopidine is also the first drug to show a statistically significant effect on maintenance of functional capacity in early HD, as measured by Total Functional Capacity (TFC). Pridopidine was acquired by Prilenia from Teva in 2018 and is currently in Phase 2 clinical development for the treatment of patients with Parkinson’s Disease suffering from Levodopa Induced Dyskinesia (PD-LID). In addition to the Healey platform trial in ALS, Prilenia is planning to initiate a phase 3 trial in Huntington Disease in the near future. (Prilenia 18.09)
8.2 Aidoc Releases Complete AI Package to Speed Identification and Treatment of Stroke
Aidoc released its complete AI package for the identification and triage of stroke in CT scans. The CE-marked solution flags and prioritizes vascular occlusions which result in both ischemic and hemorrhagic strokes, cementing the company’s lead in regulatory clearances for deep learning solutions in radiology and continuing its mission to make AI standard of care. The stroke package, comprising the new CE-marked Large-Vessel Occlusion AI module and Aidoc’s already FDA-cleared and CE-marked intracranial hemorrhage AI module reduces ‘door-to-needle’ time for patients suffering from stroke, improving outcomes and saving lives.
Aidoc’s complete stroke package ensures that both ischemic and hemorrhagic stroke sufferers are prioritized in worklists immediately. The ‘always-on’ technology analyzes patient scans continuously in the background providing a substantial impact on time to treatment so that a specialist stroke team can act promptly. This prioritization is already showing value in academic facilities as well as smaller institutions, where fast detection means patients can be taken to a stroke center in time to save their lives.
An early leader in AI healthcare, Tel Aviv’s Aidoc was one of Time Magazine’s 50 Genius Companies of 2018 and its founders were recognized in Forbes’ “30 under 30” list. The company’s solutions reduce turnaround time and increase quality and efficiency by flagging acute anomalies in real-time. Aidoc’s healthcare-grade deep learning algorithms benefit from large quantities of data, making their solutions the most comprehensive in the field, and enabling them to provide diagnostic aid to the broadest set of pathologies. (Aidoc 19.09)
8.3 Strauss Group Reduces Sugar in Its Milk Chocolate by 30% with No Artificial Substitutes
After two years of research and development at Strauss Group labs in Nazareth Elite, Israel, led by the company chocolate technology team, Strauss was the first to bring the good news to the consumer: a refined sweet milk chocolate bar with 30% less sugar. The sugar is replaced by two main components: dietary fiber (17%) and ground tiger nut flour (5%). Finding the unique raw materials and developing an exact recipe enabled us to retain the sweet taste while preserving the chocolate’s creamy texture.
The tiger nut tuber is a natural source of sweetness. It has its roots in Spain and is integrated into the local food culture of the country, as well as in South America and the eastern states. Rich in vitamins and minerals and non-water-soluble dietary fiber, the tuber contains fats similar to olive oil. It also has a high content of resistant probiotic starch serving as food and a substrate to gut-friendly bacteria. The tuber has a slightly sweet taste, hence in a complex development process it was found to be a source of sweetness that could significantly reduce sugar while preserving the familiar taste of chocolate.
Petah Tikva’s Strauss Group is a branded, multi-category and innovative food and beverage group. The group is an international corporation with a strong home base in Israel, where it is the second-largest food and beverage group. Overall, Strauss operates 30 production sites in over 20 countries around the world, including Brazil – where it is the largest coffee player; and the U.S. – where it leads the category of refrigerated fresh dips and spreads, including hummus. Strauss has strategic and financial collaborations with leading global players such as Danone, PepsiCo, Haier and Virgin. (Strauss Group 19.09)
8.4 Biogal-Galed Labs Launches CombCam Automated Reading Device for Kits
Biogal Galed Labs announced the commercialization of the new CombCam, an automated reading device for Biogal’s VacciCheck and ImmunoComb kits. This will make the interpretation of VacciCheck and ImmunoComb easier, less cumbersome, faster, digitalized and more accurate. Biogal’s CombCam is a user friendly, add-on technology that interprets VacciCheck and ImmunoComb test results. CombCam makes this interpretation easier, less cumbersome, faster, digitalized and more accurate. This, will greatly assist veterinarians in the vet clinic/ vet lab setting. Biogal’s CombCam is a user friendly, add-on technology that interprets VacciCheck and ImmunoComb test results. CombCam makes this interpretation easier, less cumbersome, faster, digitalized and more accurate. This, will greatly assist veterinarians in the vet clinic/ vet lab setting.
Kibbutz Galed’s Biogal was established in 1986. Biogal’s various veterinary diagnostic products are available in over 35 countries. Biogal developed the patented ImmunoComb, VacciCheck and PCRun technologies for the detection of pet infectious diseases. (Biogal Galed Labs 18.09)
8.5 DarioHealth Wins U.S. Patent for Optical Transmission of Data Between Sensor & Smart Device
DarioHealth Corp. has received a notice of allowance from the U.S. Patent and Trademark Office titled “Systems and Methods for Enabling Optical Transmission of Data Between a Sensor and a Smart Device.” The patent will allow Dario to develop paired smartphone devices that can collect and analyze real-time medical data and provide immediate and highly detailed, personalized data reports to the user. Once collected, this data can be shared with healthcare providers through the DarioEngage platform to facilitate digital health interventions based on the data analysis.
DarioHealth’s digital therapeutics solutions are unique in that they capture and analyze members’ real-time, clinical data using a member’s smartphone and allow for full access and connectivity to that data at any time throughout the day, along with personalized daily and weekly health data reports. This provides Dario members a fully personalized, integrated and exceptionally convenient platform to manage their health throughout the day, and facilitates a heightened user experience, increased user engagement and improved clinical health outcomes. As the future of healthcare becomes increasingly digitized and focused on empowering individuals to take control of their personal health, DarioHealth believes smartphones will serve as the primary conduit for health interventions and chronic condition management.
Caesarea’s DarioHealth Corp. is a leading, global digital therapeutics company revolutionizing the way people with chronic conditions manage their health. By delivering evidence-based interventions that are driven by data, high-quality software and coaching, we empower individuals to make healthy adjustments to their daily lifestyle choices to improve their overall health. Our cross-functional team operates at the intersection of life sciences, behavioral science and software technology to deliver highly engaging therapeutic interventions. Dario is one of the highest-rated diabetes solutions in the market, and its user-centric MyDario mobile app is loved by thousands of consumers around the globe. (DarioHealth 18.09)
8.6 Biovo to Launch Innovative Anesthesia and Ventilation Platform
Biovo Technologies will launch its novel HyperForm product line in November. HyperForm – a breakthrough platform of disposable anesthesia and ventilation devices, brings a significant improvement in patient safety over existing solutions, based on a new approach to sealing cuff design and material properties for all laryngeal masks, tracheostomy tubes and tracheal tubes. HyperForm game-changing technology overcomes the main problems related to the sealing cuff element that plague current products, while maintaining a very competitive price. It follows Biovo’s successful Closed Suction System product (now named CleanSweep®), which was acquired by Teleflex and the newly launched Cuffix – first of its kind disposable cuff pressure regulator for tracheal and tracheostomy tube cuff device and B-Care – an innovative and economical oral care kit for effective and comfortable oral care of ventilated ICU patients.
Rosh HaAyin’s Biovo is a medical device company specializing in the development and commercialization of medical devices for the treatment of unmet clinical needs in Intensive Care, Operating Rooms and Anesthesia markets. It is part of the Airway Medix S.A. group, which its shares are traded on the Warsaw Stock Exchange. (Biovo Technologies 23.09)
8.7 BGN Technologies Licenses Polymer for Targeted Cancer Therapy to Vaxil Bio
BGN Technologies, the technology transfer company of Ben-Gurion University (BGU) of the Negev in Beer Sheva, has entered into an exclusive worldwide license agreement with Vaxil Bio for the development and commercialization of targeted cancer therapy. The technology features a new E-selectin targeted polymer for the inhibition of tumor growth and metastatic spread of cancer.
The BGU researchers developed a new synthetic polymer that can target E-selectin with high affinity for delivering drugs to tumors and metastatic sites. Using primary and metastatic models of cancer, this approach showed promising therapeutic results, enhancing drug accumulation in tumors, decreasing significantly the rate of tumor growth in preclinical trials, and dramatically prolonging the survival of mice with melanoma lung metastases.
Another promising application involves the use of this E-selectin-binding polymer, without drug cargos, to interfere with E-selectin-mediated interactions, thus blocking leukocyte and cancer cells recruitment to inflamed and cancerous tissues. This approach was shown to reduce colonization of circulating cancer cells in the lungs and was also shown to inhibit leukocytes recruitment and inflammation in animal models of liver injury and atherosclerosis.
BGN Technologies is the technology company of Ben-Gurion University, Israel. The company brings technological innovations from the lab to the market and fosters research collaborations and entrepreneurship among researchers and students. To date, BGN Technologies has established over 100 startup companies in the fields of biotech, hi-tech, and cleantech as well as initiating leading technology hubs, incubators, and accelerators.
Ness Ziona’s Vaxil Bio is an immunotherapy biotech company focused on a novel approach to targeting prominent cancer markers. Its lead product Immucin is a MUC1 signal peptide-derived product, wholly owned by Vaxil and protected by a series of patents in all major territories around the globe. As recently presented by the company, the mode of action by which Immucin exerts its unique immunological and clinical activity, is believed to be via its distinctive characteristics as a neoantigen. (BGN Technologies 23.09)
8.8 Solio Alfa Plus FDA-Cleared Radio Frequency Pain Relief Device Debuts in US Market
Solio announced the launch of its signature pain-relief device, Alfa Plus, into the American marketplace after recently securing FDA clearance. Solio Alfa Plus is the first pain management device ever cleared by the FDA that specifically treats pain using a tripart combination of Radio Frequency (RF), Infrared (IR), and Low Level Laser Therapy (LLLT) technologies. The Solio Alfa Plus is designed for home use.
Manufactured in Israel, Alfa Plus completed three years of research and development at The Hillel Yaffe Medical Center. The study evaluated Alfa Plus technology together with a trigger-point treatment on over 100 patients who suffered from chronic lower back pain. The results were excellent, with more than 90% of patients reporting significant relief from pain after treatment.
Although RF technology is already used in advanced medical clinics, Alfa Plus focuses on safe and effective pain relief technologies that can be used directly in the home. Older devices used only temporary relief measures like TENS and soft laser LLLTs. Solio’s expert team used clinical studies and consultation with pain management professionals to confirm the effectiveness of the Alfa Plus treatment. The simple-to-use, advanced design is placed directly on the site of pain, allowing four RF diodes to noninvasively penetrate the skin with deep heating. This increases blood circulation and accelerates tissue regeneration, while reducing inflammation, muscle aches, stiffness and pain. Alfa Plus stimulates the body’s natural healing mechanisms, coaxing the body into healing itself.
Experts in engineering and the bio-med fields, Herzliya’s DMT is the maker of Solio products. Solio designers have created some of the most widely used energy-based technologies and platforms in use by medical professionals. Solio specializes in a wide range of high-end professional technologies packed in small, user-friendly affordable devices intended for home use. The Solio Beauty line offers a range of technologies for permanent hair removal, facial skin rejuvenation, skin cleansing, microdermabrasion and anti-aging, skin tightening and cellulite reduction for the body. (DMT 24.09)
8.9 Tarsius Pharma Announces FDA Acceptance of IND Application for TRS01
Tarsius Pharma announced the acceptance of its Investigational New Drug (IND) application for TRS01 by the U.S. FDA. The company is developing TRS, a breakthrough, bio-inspired platform technology for the treatment of blinding ocular diseases. TRS was developed to ‘re-engineer’ the immune system, and approaches inflammatory diseases from within the system. This IND acceptance will enable Tarsius to initiate enrollment in its planned Phase I/II clinical trial of TRS01.
The planned study is a multi-center, randomized, placebo-controlled dose-ranging study in patients with ocular inflammation following cataract surgery. This study is designed to determine the safety profile of TRS01, the recommended dose, and preliminary evaluation of the potential effect of TRS01 in ocular inflammation. Ocular inflammatory diseases impose a significant medical and economic burden on society, affecting hundreds of million people worldwide and posing severe risks of vision loss and blindness. The TRS Platform Technology has the potential to effectively treat a broad array of autoimmune and inflammatory ocular diseases. Untreated, these diseases can have devastating effects, and may eventually lead to blindness.
Zichron Yaakov’s Tarsius Pharma was established in 2016 and is focused on developing innovative therapeutic solutions to prevent blindness. Tarsius is backed by Sun Pharmaceuticals, a global pharmaceutical company, as well as investments by private investors and family offices. This project has received funding from the European Union’s Horizon 2020 research and innovation program under grant agreement No. 879598. (Tarsius Pharma 24.09)
8.10 Body Vision Closing $20 Million in Series C Funding
Body Vision Medical has closed $20 million in Series C funding. The proceeds will be used to streamline commercialization and manufacturing activities for Body Vision’s LungVision 2.0 Platform, which features AI Tomography, fused imaging, cloud-based machine learning and multi-modality image registration. The LungVision 2.0 Platform received FDA clearance in May 2019. The LungVision Platform is designed to enable the pulmonologist with easy and instant access to advanced technological capabilities within their regular procedure room. Seamlessly integrated into the standard procedure flow, the LungVision Platform offers continuous support throughout all phases of a Navigation Bronchoscopy procedure. This platform includes precise tomographic tool-in-lesion confirmation and guided biopsy sampling. Body Vision Medical is uniquely equipped to provide both the physician and hospital with highly desired benefits through continuous delivery of cost-effective medical procedures.
Ramat HaSharon’s Body Vision Medical is a software and medical device company specializing in augmented real-time fusion imaging, artificial intelligence and intra-body navigation. The company was founded in 2014 to address the contemporary unfulfilled clinical need of early lung cancer diagnostics and treatment. (BVM 25.09)
9: ISRAEL PRODUCT & TECHNOLOGY NEWS
9.1 Odo Security Emerges from Stealth with Agentless Access Management Platform
Odo Security unveiled an agentless, cloud-native platform that allows IT and DevOps engineers to easily manage secure access to any application, server, database and environment located on-premises or in the cloud. Unlike competing products that only support web access, Odo is unique in its ability to also support SSH, RDP and database access which is a game-changer for DevOps teams. In addition, OdoAccess provides full visibility into all user activity, can be set-up in less than three minutes and eliminates the administration burdens associated with VPNs.
Odo’s zero trust architecture moves access decisions from the network perimeter to individual devices, users, and applications where business-driven security policies and access controls are best enforced. Every access attempt is treated as suspect until authenticated and authorized. Users only have access to those resources they have been authorized to see. In a single click, IT and DevOps engineers can ensure that the right people have access to the right resources at the right time, all while giving users frictionless access and maintaining total visibility on all user activity.
Tel Aviv’s Odo enables organizations to simplify, secure and scale remote access across multi-cloud and on-premises infrastructures. Odo’s agentless, zero trust access solution removes the need for VPNs and enables IT and DevOps engineers to easily manage secure access to any application, server, database, and environment, eliminating network layer access and providing full visibility on all user activity. Odo has raised $5 million in seed funding from TLV Partners and Magma Venture Partners. (OdoSecurity 18.09)
9.2 Viz.ai Named Among Forbes Most Promising AI Companies in America
Viz.ai was recognized in the inaugural Forbes AI list as one of America’s 50 Most Promising Artificial Intelligence Companies. Viz.ai uses Artificial Intelligence (AI) to synchronize stroke care, thereby reducing time to treatment and expanding patient access to life-saving care. The Forbes AI list highlights the most promising private companies that are applying artificial intelligence to solve problems in innovative ways. As the emerging leader in applied Artificial Intelligence for healthcare, Viz.ai focuses on ensuring the right patient sees the right doctor at the right time.
Tel Aviv’s Viz.ai is the leader in applied artificial intelligence in healthcare. Viz.ai’s mission is to fundamentally improve how healthcare is delivered in the world, through intelligent software that promises to reduce time to treatment and improve access to care. Viz.ai’s flagship product, Viz LVO, leverages advanced deep learning to communicate time-sensitive information about suspected stroke patients straight to a specialist who can intervene and treat.
In February 2018, the U.S. FDA granted a De Novo clearance for Viz LVO, the first-ever computer-aided triage and notification software. Viz.ai announced its second FDA clearance for Viz CTP through the 510(k) pathway, offering healthcare providers an important tool for automated cerebral perfusion image analysis. (Viz.ai 17.09)
9.3 Waterfall Security Solutions Announces Release of V7 Software Platform
Waterfall Security Solutions announced the release of Version 7 of the software platform for the Waterfall Unidirectional Security Gateway and related family of hardware and software products. The V7 software platform is the foundation of software components used in Waterfall suite of hardware-enforced security products, including the Waterfall Unidirectional Gateways, Unidirectional CloudConnect, BlackBox, FLIP and Secure Bypass products.
Waterfall’s products lead the world for securing the perimeters of industrial control system networks. Customers can be confident that deploying Waterfall products means that customer control systems will be protected to best-in-class standards – Waterfall’s patented family of unidirectional products secure OT perimeters in a wide range of industries, supporting a wide range of communications paradigms. Waterfall products ensure visibility into and disciplined control of operations networks for industrial enterprises.
Rosh HaAyin’s Waterfall Security Solutions is the global leader in industrial cybersecurity technology. Waterfall products, based on its innovative unidirectional security gateway technology, represent an evolutionary alternative to firewalls. The company’s growing list of customers includes national infrastructures, power plants, nuclear plants, off and on shore oil and gas facilities, refineries, manufacturing plants, utility companies, and many more. Deployed throughout North America, Europe, the Middle East and Asia, Waterfall products support the widest range of leading industrial remote monitoring platforms, applications, databases and protocols in the market. (Waterfall 19.09)
9.4 Advice Electronics’ New, Innovative High Density Laser Capacitor Charging Power Supply
Advice Electronics has announced the release of a new LCH3000-XXX series of capacitor charging power supplies. The LCH3000-XXX series is a new generation of high voltage pulsed power supplies based on Advice’s innovative QCP (Quasi Constant Power) technology providing up to 3,000J/Sec in the range of 400V- 1.2KV using the traditional standard size 12.7″ x 5.7″ x 4.1″ (32.2 x 14.5 x 10.4 cm). This size has previously been limited in the marketplace to 2,000J/Sec maximum.
Advice Electronics is developing a complete new line of compact, reliable and competitive capacitor chargers with power levels ranging from 1KW to 9KW and output voltages up to 1.6KV. Standard and custom versions will allow medical, aesthetic, research, industrial and precision laser applications enabling laser manufacturers using flash lamps a greater design flexibility by upgrading their existing laser products without the need for mechanical modifications.
Kfar Saba’s Advice Electronics is a global developer, manufacturer and distributor of Power and Energy products. With over 31 years in the market Advice products range include UPS, power supplies, lithium batteries, solar systems and telecom products. The company maintains R&D, engineering, production, distribution and service departments with offices in 3 continents. (Advice Electronics 19.09)
9.5 Aniview’s Ad Server and SSP Are First to Support Sellers.JSON & SupplyChain Object
Aniview has finalized development to fully support and comply with the IAB tech lab’s latest initiatives, making it the first of its kind to do so. In April 2019, the IAB Tech Lab released two new technical specifications aimed at increasing brand safety and transparency as well as enhancing trust between partners within the AdTech ecosystem. Sellers.JSON and the OpenRTB Supply Chain object come as a package and are designed to give more confidence to both buyers and sellers.
As a leading Video Ad Server within the AdTech Ecosystem, Aniview’s approach seeks to help its customers comply with these two initiatives by helping them create and completely managing the entire Supply.JSON file. In addition to that, it has already finalized development to add support in all the different types of integrations (VAST, OpenRTB and/or Prebid.js) for the SupplyChain object, initially intended just for RTB. As a Video SSP, www.aniview.com already supports the Sellers.JSON and SupplyChain object with all of their demand partners and with 100% coverage. This move makes Aniview the first of its kind to provide full support for these new mechanisms.
Established in 2013, Herzliya’s Aniview provides advanced video solutions to publishers, publisher networks, advertisers and advertising platforms on a global basis. Its patented technology can support desktop, mobile and VOD/OTT inventory types and currently serves over 10 billion monthly impressions. Aniview’s innovative technology deploys best in class capabilities to enable engaging, high performance media and advertising delivery. (AniView 19.09)
9.6 AudioCodes Introduces Meeting Insights
AudioCodes announced Meeting Insights, an enterprise solution that is designed to easily capture, organize and share corporate meeting content assets using AudioCodes state-of-the-art Voice.AI technology. Meeting Insights leverages years of VoIP leadership and enterprise market presence to power a new age of advanced voice analytics and meeting-generated insights. Capturing information from multiple sources spanning both in-room and remote participants connected from multiple locations, Meeting Insights seamlessly delivers multi-modal and real-time access to key meeting moments, decisions taken and resulting action items. The result is a robust solution that holds crucial information that would otherwise be lost.
Common organizational use-cases of Meeting Insights include team collaboration sessions, training classes, recruitment interviews and sales reviews. With the solution currently in beta stage, these use-cases together with user feedback will serve as a basis for the general availability of Meeting Insights as a Software-as-a-Service (SaaS) offering.
Lod’s AudioCodes is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. AudioCodes enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers, and hosted business services. AudioCodes offers a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world. (AudioCodes 23.09)
9.7 BigID Introduces Third-Party Data Sharing Privacy Compliance Capabilities Ahead of CCPA
BigID announced data-driven Third-Party Data Sharing privacy compliance capabilities to help enterprises further automate and operationalize requirements around third party data sharing under regulations like the California Consumer Privacy Act (CCPA). The new privacy compliance feature integrates with BigID’s native data at rest and data in motion scanning capabilities.
The documentation of third party data sharing is required under CCPA to maintain data transparency; in particular, CCPA requires that organizations report on the categories and attributes shared with third parties as well as distinguish between data transferred for business purposes and the transfer of data for a sale. The CCPA furthers extends the right for California consumers to “Opt-Out” of the sale of their data, and to facilitate these “Do Not Sell” requests. While many organizations have explicit contractual provisions in place to cover data sharing relationships, the validation of third party data flows is still largely done manually, creating challenges for monitoring and reporting on data sharing at scale.
Based in New York and Tel Aviv, BigID uses advanced machine learning and identity intelligence to help enterprises better protect their customer and employee data at petabyte scale. Using BigID, enterprises can better safeguard and assure the privacy of their most sensitive data, reducing breach risk and enabling compliance with emerging data protection regulations like the EU’s General Data Protection Regulation and California Consumer Privacy Act. BigID has raised $96 million in funding since its founding in 2016 from Bessemer Venture Partners, SAP.io Fund, Comcast Ventures, Boldstart Ventures, Scale Venture Partners, Salesforce Ventures and ClearSky. (BigID 24.09)
9.8 US Defense Innovation Unit Selects D-Fend Solutions’ Counter Drone System
D-Fend Solutions announced that in August 2019, during Black Dart 2019, the Defense Innovation Unit (DIU) selected the EnforceAir c-UAS platform of D-Fend Solutions. EnforceAir c-UAS is an advanced autonomous system that automatically and passively detects, locates and identifies rogue drones as well as mitigates risk by taking control over them and landing them safely at a pre-defined safe zone.
The Defense Innovation Unit (DIU) supported the Department of Defense (DOD) in evaluating component technology during Black Dart 2019, a joint interagency demonstration focused on rapid development and implementation of Counter-Unmanned Aircraft Systems (C-UAS) technology from readily-available commercial and governmental products.
Founded in 2017, Ra’anana’s D-Fend Solutions is the leading provider of counter-drone solutions for urban environments in the most challenging scenarios. The company has recently secured a $28M funding led by Claridge Israel with participation by current shareholder, Vertex Israel. (D-Fend Solutions 24.09)
9.9 ECI’s Converged Interconnect Network Solution for Cable Operators
ECI announced the availability of its Converged Interconnect Network (CIN) solution for cable operators. ECI’s solution is the first step in the transition to a distributed access architecture (DAA), enabling the consolidation of multiple service types (e.g. cable, broadband and business services) onto multi-service transport platforms. This consolidation streamlines operations, dramatically reduces costs, and improves customer experience. Equally important, the ECI solution provides a future-ready aggregation solution on which cable operators can launch new, high value services, including 5G backhaul.
The ECI solution makes use of the company’s Neptune multi-service product line to provide a unified packet aggregation network. The Neptune product line includes a range of multi-service platforms that can be deployed across the network, from a street cabinet to the head-end office. ECI’s unique Elastic MPLS combines support for IP/MPLS, MPLS-TP and Ethernet on the same platform and enables the stitching between these domains, as required. Elastic MPLS also allows for smooth migration of existing services while supporting new service types in the future. The platforms come with flexible, high capacity (nx100G), long-range interfaces which permit a reduction in the number of core nodes and sites.
Petah Tikva’s ECI is a global provider of ELASTIC network solutions to CSPs, critical industries, and data center operators. With the advent of 5G, IoT, and smart everything, traffic demands are increasing dramatically, and network operators must make smart choices as they evolve their infrastructure. ECI’s Elastic Services Platform leverages our programmable packet and optical networking solutions, along with our service-driven software suite and virtualization capabilities, to provide a robust yet flexible solution for any application. (ECI 25.09)
10: ISRAEL ECONOMIC STATISTICS
10.1 Israel Ranked 38th in the World for Economic Freedom
Israel is ranked 38 in terms of economic freedom among 162 countries and territories nationwide, a drop of one place since the last report was issued, according to the Economic Freedom of the World: 2019 Annual Report by the Jerusalem Institute for Market Studies, in conjunction with the Fraser Institute of Canada. The rankings gave Israel a score of 7.53 out of 10 for economic freedom, which was lower than the average score in OECD countries. The nations that earned the top rankings for economic freedom were Hong Kong and Singapore, followed by New Zealand, Switzerland, the US, Ireland, Britain, Canada, Australia, and Mauritius. The nations whose economic freedom was ranked lowest included Iraq, Egypt, Syria, the Democratic Republic of Congo, Sudan, Libya and Venezuela.
For sound money, Israel scored 9.38. The more problematic areas were in government size, a category in which Israel was ranked 82nd, with a score of 6.47. However, since 1980, Israel has steadily improved in that category, when the economy was almost entirely controlled by the government and Israel received a particularly low ranking of 2.33. In 2015, Israel was given a score of 6.31. In the legal system and property rights category, Israel was scored 6.2. For regulation, Israel was ranked 62nd. Israel performed worst when it came to the labor market, where it was ranked 121 on the list. (IH 20.09)
10.2 Israel’s Composite State of the Economy Index for August 2019 Rises by 0.2%
The Bank of Israel’s Composite State of the Economy Index for August increased by 0.23%. The Index’s rate of increase has returned to reflecting growth at the long-term pace, after fluctuations in the first quarter of the year due to vehicle purchases being brought forward to the first quarter at the expense of the second quarter.
The Index for August was positively affected by increases in goods exports and in the import of manufacturing inputs in August, and by an increase in the industrial production index in July. In contrast, a decline in imports of consumer goods in August, a decline in the services revenue index in July, and a decline in building starts in the second quarter moderated the Composite Index’s rate of growth. The Index for previous months was revised slightly upward due to revisions in service export data for April and May, and improvement in most recent data that have a positive effect on the long-term growth rate of the index. (BoI 23.09)
10.3 Unemployment in Israel Rose in August to 3.8%
The unemployment rate in Israel among those age 15 or higher rose from 3.7% in July to 3.8% in August, according to the Central Bureau of Statistics. The unemployment rate among men fell from 3.5% in July to 3.4% in August, but the unemployment rate among women rose from 3.9% in July to 4.2% in August. Employment in August was 0.2% higher than in the preceding month. The number of full-time employees (working 35 or more hours a week) fell by 34,000, a 1.1% decrease, while the number of part-time employees (working less than 35 hours a week), increased by 25,000, a 2.9% increase.
The proportion of participation in the labor force rose from 63.1% in July to 63.2% in August. The proportion of participation among men fell from 67.4% in July to 67.3% in August, while the proportion of participation among women rose from 59.0% in July to 59.2% in August. The employment rate (the proportion of those age 15 or higher who work) in August 2019 was 60.8%, the employment rate among men was 65.0%, and the employment rate among women was 56.7%. All three of these figures are unchanged from July. (CBS 19.09)
10.4 New Mortgages in Israel Increase by 30% Since Start of 2019
Although the number of new mortgages in Israel dropped by 10% in August 2019, the total amount of new mortgages issued since January 2019 increased to a record NIS 45 billion ($13 billion), a jump of 30%, according to a report by the Bank of Israel. The report attributed the rise in the amount of new mortgages to an increased number of new mortgages taken out under the government-subsidized Mehir Lemishtaken (“Move-In Price”) program for first-time homebuyers. Under the terms of Mehir Lemishtaken, buyers are allowed to take out a mortgage for up to 90% of the price of an apartment valued up to NIS 1.3 million ($370,000), in contrast to a minimum down payment of 25% required to take out a mortgage under general terms. The Finance Ministry launched the 90% mortgage terms in 2018, hoping to help new homebuyers, especially young families, find a solution to surging property values. Near-zero interest rates have made housing a top investment in Israel. Israel’s home prices have more than doubled in the past decade to an average of about NIS 1.5 million ($430,000). (IH 26.09)
11: IN DEPTH
11.1 LEBANON: Lebanon’s Budget Finally Ratified and Goes into Effect
BLOM Bank noted that seven months after the constitutional deadline, the Lebanese Parliament ratified the 2019 Budget Law on 19 July 2019. The law, in its first draft, was approved by the Council of Ministers (CoM) after 20 ministerial sessions, and forwarded to the Finance and Budget Committee (FBC) on 1 July. Of the initial 99 articles, the FBC amended 45, deleted seven, and added four. In addition, the Ministry of Finance amended 13 articles and added one. The Parliament then voted on the revised draft, amending another 18 articles, deleting two, and adding two. The final version of the law was published in the official gazette on 31 July.
In terms of spending, the budget expenditure stood at $15.4 billion, compared to $16 billion in 2018. In addition, $1.7 billion were allocated as treasury advances to Electricité du Liban (EdL), compared to $1.4 billion in 2018.
The Parliament cut the Council of Ministers’ draft budget by $156 million, the bulk of which, $148 million, targeted the presidency of the CoM. The Council for Development and Reconstruction’s (CDR) budget was reduced by $141 million (the FBC had proposed deeper cuts, reaching $191 million, of which $50 million were revoked by Parliament), whereas the Higher Council for Privatization and PPP and Higher Relief Commission had a combined budget reduction of $7 million.
The budgets of the Ministries of Economy, Energy and Water, and Finance were reduced by $8 million, $3 million and $0.3 million, respectively. However, the Parliament increased the budgets of the Ministries of Public Health and that of Interior and Municipalities by $2 million and $0.7 million, respectively. The parliament also rejected the CoM’s proposed reduction of former MPs’ retirement salaries.
The approved budget revenues are projected to be $155 million lower than those estimated by the CoM’s draft. This reduction is primarily due to a 2% decrease in the estimated tax revenue, with a 3% decrease in the revenue from the tax on income, profits and capital gains, and an 8% decrease in the revenue from fees on international trade. Projected total revenues hence are expected to stand at $12.5 billion. The Parliament also imposed a $33.3/KVA tax on private generator operators. The law decreased the rate of the CoM’s proposed reductions on the pensions of army veterans from 3% to 1.5%. Also, the proposed fee on imported goods was increased from 2% to 3%, however it was set to only target VAT liable goods, excluding fuel and raw materials.
Conclusions
This budget failed to further lower the deficit reflected in the CoM draft, decreasing it by a negligible $0.85 million. The fiscal deficit to GDP ratio stands at 7.6% according to the government’s estimates, although this number is seen as overly ambitious by multiple sources.
In light of a dire fiscal situation caused by excessive spending on public salaries, transfers to EdL, and rising debt servicing costs, the Lebanese government is attempting to curb its burdening deficit, and hence adopted austerity measures in its 2019 budget law. However, the law failed to introduce any structural reform measures. The budget cuts to CDR also cast doubts on the government’s ability to implement the ambitious CEDRE projects. Moreover, contrary to the reforms promised at CEDRE, the government has so far failed to implement the electricity plan, causing an increase in treasury advances to EdL.
The Lebanese Parliament approved a budget law for the running year that includes austerity measures aimed to solidify the financial position of the treasury. The budget law is a key element of the reform program that the government promised to implement in order to unlock the funds pledged by donors at CEDRE. (BLOM 19.09)
11.2 LEBANON: A Closer Look into Lebanon’s Fixed Currency
Sam Brennan posted on 24 September in Al-Monitor that Lebanon’s fixed exchange rate has been a pillar of stability for two decades. However, poor economic conditions threaten its sustainability.
Lebanon declared an economic emergency on 2 September following a downgrade from two of the three major credit rating agencies and slowed GDP growth — 0% according to the credit rating agency Fitch. These precarious economic conditions have raised concern over the country’s ability to maintain one of its most successful monetary policies: the fixed exchange rate between the Lebanese pound and US dollar.
In 1980, the exchange rate was around 3 Lebanese pounds to 1 dollar. In just over a decade, this increased to over 2,500 pounds to 1 dollar. This rapid change in the exchange rate deterred investors.
This economic instability was in large part due to the Lebanese Civil War, which began in 1975. But by the mid-1990s, the conflict was de-escalating and reconstruction was a priority. However, the government struggled to attract investors due to currency inflation. One answer to this was a currency peg, fixing 1,507.5 pounds to 1 dollar by 1997.
Simon Neaime, professor of economics and finance at the American University of Beirut, explained to Al-Monitor, “It was done to signal that your investments that come in will have the same purchasing power or the same value when you get it out.” He added that it also gave local banks the confidence to loan the government the capital it needed for reconstruction.
The burden of keeping the Lebanese pound and the dollar equal fell on Lebanon’s central bank, Banque du Liban, which used its foreign currency reserves to defend the peg. This largely manifested through Banque du Liban buying government debt and instituting high interest rates designed to incentivize people to deposit their money in the country. A side effect of this was that local banks could make money through favorable interest rates and buying up government debt as opposed to investing in productive industries.
Toby Iles, director of Middle East Africa Sovereigns for Fitch, told Al-Monitor, “The negative [here] is partly that banks can make [a] profit by buying government debt, while the healthier thing would be for banks to lend to the economy which goes into productive sectors, which would mean the economy is less out of balance.” However, as long as money flowed into Lebanon, Banque du Liban’s reserves were high, government debt was bought and the peg was stable, but, as Neaime noted, “The story lately has changed.”
Currently, the reserves — excluding gold and other assets — are declining, with some predicting that without reforms, the reserves can only cover another year. According to Fitch, the reserves have dropped nearly $3 billion since the end of 2018, leaving $29.1 billion in June 2019, and will decline $3 billion each year in 2020 and 2021. Iles explained, “How high do reserves need to be to maintain confidence? There are a number of indicators to analyze, but it is kind of an unanswerable question.” He added, “The thing that concerns us most recently is that you have had this pressure on bank deposits and reserves and yet there hasn’t been a singular big crisis or event.”
Previously, when Lebanon went through an economic crisis, there was a singular event that shook confidence — be it the assassination of Prime Minister Rafik Hariri in 2005 or the 2006 Hezbollah war. Currently, the situation is a death from a thousand cuts: the resignation of Prime Minister Saad Hariri in 2017; the stalled government formation last year, which lasted nine months; delay in the 2019 budget; sanctions on Hezbollah; escalation with Israel; and the conflict in neighboring Syria. The accumulation of these issues has led to a lack of confidence in Lebanon’s stability and seen foreign investments and remittances drop off. In a country that imports more than it exports, these capital inflows were a major avenue for Lebanon to equalize its balance of payments and keep its reserves high.
Lebanese inside the country have also been shaken by poor economic conditions, reducing their deposits in local banks and converting them into dollars, which is seen as more stable, resulting in a rise in dollarization.
To solve this, interest rates — particularly on government debts — rise to keep money in the country by providing better returns. However, this has contributed to government debt — the majority of which is held by the central and local banks — as an expense taking up 47% of state revenues, according to Fitch.
But this is a catch-22, with the government spending and Banque du Liban dipping into their reserves to ensure money stays in the country, while a major reason why money is leaving the country is because Lebanon is spending too much and reserves are declining. Neaime said, “The high interest the government is paying is affecting the deficit because it is government expenditure and it is increasing the debt.” Banque du Liban has engaged in financial engineering previously to keep the exchange rate fixed and could do something similar again. However, Neaime said, “I think they have used most of their tricks, I don’t think they have much left.”
However, Marwan Mikhael, head of research at BLOMINVEST, the investment arm of one of Lebanon’s largest banks, told Al-Monitor that this “vicious cycle” could, with the right measures, be turned into a “virtuous cycle.” Part of this requires the government to reduce the gap between their spending and revenues through reforms — which Mikhael said was occurring behind the scenes for the state-owned electricity provider, Electricite du Liban, which costs the state up to $2 billion a year.
However, Lebanon will also need to secure capital inflows, which could be delivered in the short to medium term through the $11 billion worth of soft loans offered at the CEDRE Conference, and even the prospects of oil and gas. Then confidence would recover and the situation could improve. However, Neaime said it is a “race against time,” even though very few in Lebanon want the peg to go.
Iles said, “I don’t think Lebanon would want to pursue a policy of changing [the peg], the central bank would really want to hang on to it. There are good reasons for that; in the near term, coming off the peg won’t have any immediate positives, but it would have a lot of negatives.” He added that they would include “an effect on GDP per capita, living standards, government debt would be higher, the banking sector would face issues across their balance sheet and there would probably be a big recession.”
Sam Brennan is a Beirut-based freelance journalist who writes on culture, technology and politics. (Al-Monitor 24.09)
11.3 SAUDI ARABIA: S&P Affirms ‘A-/A-2’ Ratings; Outlook Stable
On 27 September, S&P Global Ratings affirmed its ‘A-/A-2’ unsolicited long-and short-term foreign and local currency sovereign credit ratings on Saudi Arabia. The outlook is stable.
Outlook
The stable outlook reflects our expectation that Saudi Arabian oil production facilities that were hit in the 14 September attacks will be swiftly repaired. The stable outlook also reflects our view that Saudi Arabia will maintain a pace of moderate economic growth and retain strong government and external balance sheets (net asset-stock positions) over the next two years, despite sizable fiscal deficits and heightened regional tensions.
We could raise the ratings if Saudi Arabia’s economic growth prospects improve beyond our current expectations, for example, as a result of a sustained and significant pick-up in oil prices and volume demand, possibly tied to the end of U.S.-China trade tensions and a rebound of the global economy. We could also raise the rating should authorities improve the transparency of accounting for general government assets.
We could lower our ratings if we observed a sustained rise in geopolitical or domestic political instability that posed a significant and continued threat to the oil sector, or if we observed fiscal weakening beyond our expectations, or a sharp deterioration in the sovereign’s external position. An unexpected materialization of contingent liabilities could also place additional pressure on the ratings.
Rationale
The ratings on Saudi Arabia are supported by its strong external and fiscal net asset stock positions. The ratings are constrained by high geopolitical risks, sizable fiscal deficits and the limited transparency of its institutional framework and the reporting of government assets.
Decision-making structures are highly centralized and, in our view, relatively opaque. However, we do not expect any major deviation from the recent domestic policy course of planned economic diversification, “Saudization” (replacing expatriates with Saudis) of the workforce, and gradual socioeconomic liberalization, especially with regard to attempting to increase female participation in the workforce.
We expect that the government will continue to try to maintain a balance between spending to support the economy (given relatively low oil prices) and still attempting to contain overall fiscal deficits. Our fiscal expectations have weakened following the attacks on oil facilities, and because of lower expected oil production volumes tied to the extension of the December 2018 OPEC-plus-Russia agreement to March 2020.
Mounting tensions with Iran and Yemenite Houthi militia will constrain the ratings, although we expect Iran and Saudi Arabia to shy away from a full-fledged direct military confrontation. Despite some rhetoric to the contrary, we expect that the U.S. will remain reluctant to engage in military action that might involve U.S. ground troops, preferring to stick to its “maximum pressure” policy of severe sanctions and diplomacy with Iran. Nevertheless, the U.S. will remain the ultimate guarantor of Saudi Arabian security vis-à-vis Iran. In our view, any retaliatory military action following the attacks will likely be surgical and limited in scope, and will not lead to a full-fledged direct military confrontation.
In the aftermath of the attacks on key oil facilities we expect Saudi Arabia to redouble its efforts to secure key oil production and processing facilities, increase storage capacity, and enhance attempts to develop Red Sea export routes that would help avoid the volatile Arabian Gulf. We expect that it will expedite plans to expand the East-West pipeline to the Red Sea port of Yanbu to an estimated 7.3 million barrels per day from its current output of about 5 million, thereby permitting oil exports to circumvent the volatile Strait of Hormuz.
Institutional and Economic Profile: An era of reform brings both risks and opportunities
- The economic impact of the 14 September attacks on Abqaiq and Khurais is likely to be contained.
- The Saudi government has articulated an ambitious strategy to reduce the economy’s dependency on oil and imported labor, and to transform the domestic education and job market.
- Policy decision-making is centralized, with limited institutional checks and balances.
The attack on national oil company Saudi Aramco’s oil facilities in Abqaiq and Khurais led to an immediate drop in Saudi crude oil production of 5.7 million barrels per day. This amounted to more than one-half of Saudi’s average 2019 daily production and about 5% of global production. Nevertheless, given the aggressive repair schedule, we expect Saudi Arabian oil production will rebound quickly.
The attacks also interrupted the production of about two billion cubic feet of daily associated gas, which has affected the petrochemical business in particular. Natural gas liquids are a vital feedstock to a significant part of Saudi Arabia’s petrochemical and manufacturing industry. In our view, growth of the industry will be constrained in the short term, but will also rebound quickly.
We expect that the key parameters of Saudi Arabia’s institutional framework will remain broadly steady through 2022. Decision-making on future policy reform is likely to remain centralized. Recent moves to appoint the Crown Prince’s half-brother as energy minister is a change to the longstanding policy of appointing a non-royal as energy minister, and points to increased policy centralization of key parts of the economy under the monarchy.
We anticipate that the government will continue to strive to rebalance the economy and its public finances away from a reliance on crude production, while attempting to reduce its reliance on expatriate labor. The government is implementing a series of reforms that include social measures aimed at increasing labor participation (particularly of women), improving levels of educational attainment, and raising the private sector’s role in the economy.
Given that oil production makes up a significant portion of Saudi Arabia’s GDP, our growth forecast for the country continues to be highly sensitive to assumptions of OPEC production targets and prices. The OPEC-plus-Russia deal currently runs to end-March 2020, after which it is likely that Saudi Arabia will try to get the deal extended and continue with its current policy of limiting supply to support the global oil price market.
We expect real GDP will contract by about 0.4% this year, driven mainly by a fall in oil production tied to the OPEC deal and the attacks. We expect it to rebound to 2.3% on average over 2020-2022. There are some positive signs in high-frequency private-sector data and we expect moderate credit growth.
We anticipate that public investment will remain high under ongoing expenditure plans, the goals of which are to support the non-oil economy and private-sector demand. Our GDP per capita estimate is about $23,100 in 2019, but we expect that, on a trend basis, growth will remain lower than that of several peers, at 0.6%. The country will partly fund its ambitious economic reform program using the large fiscal and external buffers that it amassed during the pre-2015 era of twin balance of payments and budgetary surpluses, as well as through privatizations, including a planned IPO of Saudi Aramco shares.
Official labor force statistics show the number of non-Saudi employees has declined by about 1.9 million since 2017. This implies that the government’s stated policy of Saudization of the workforce may be working, but possibly also that job prospects in the economy have deteriorated.
Flexibility and Performance Profile: Strong external and fiscal positions from a stock perspective, despite ongoing fiscal pressures
We expect wide fiscal deficits over the next three years, due to relatively low oil price assumptions and high fiscal expenditure, despite improved non-oil revenue collection.
Our estimate of the kingdom’s strong net asset (stock) position on both its fiscal and external balances is a key support for the rating.
While we forecast a high level of foreign currency reserves, a continued increase in external debt could somewhat moderate Saudi Arabia’s strong external stock position.
Lower oil price assumptions, as well as the government’s somewhat expansionary fiscal stance, have weighed on previous plans to consolidate the fiscal deficit and reach a balanced budget by 2023. Outlays on development projects associated with vision realization programs will also drive capital spending. We expect Brent oil prices will average about $64 per barrel in 2019, $60 in 2020, and $55 per barrel in 2021 and beyond. Due to the temporary outage following the recent attacks on oil infrastructure, and the OPEC cuts, production will reduce to around 9.5 million barrels per day (mbpd) on average over 2019, before gradually increasing to 10.5 mbpd by 2022. In comparison, Saudi Arabia produced about 10.3 mbpd last year at a price of about $69 per barrel. As a consequence of the attacks, oil prices may benefit from a new “risk” premium of about $1 – $3 per barrel.
We estimate the central government deficit will stand at 8.1% of GDP in 2019 and average close to 7.6% of GDP over 2020 to 2022. Fiscal reforms to widen the tax net away from oil are yielding some results, with 2018 non-oil revenues increasing by approximately 35% over 2017.
We take the view that the central government deficit is financed 30% by asset drawdowns and 70% by debt issuance. This split implies that Saudi Arabia would report gross debt of about 37% of GDP by 2022, from 16% in 2018. Our general government balance consolidates the central government and the social security system and it also includes the share of drawdowns of investment income from government assets. We forecast general government deficits to stand at 4.8% in 2019 and average 3.9% in 2020-2022.
Although Saudi Arabia has been running deficits on a flow basis in recent years, we believe it has remained strong on a stock basis, owing to strong accumulation in past years when oil prices were high. We expect net general government assets (the excess of liquid fiscal financial assets over government debt) will average about 65% of GDP between 2019 and 2022. These fiscal assets include the central government’s deposits at the Saudi Arabian Monetary Authority (SAMA), key government institutions’ deposits, and an estimate of investment income. We also include in our calculation an estimate of government pension funds’ liquid assets, including those of the Public Investment Fund (PIF).
In addition to the budget, the government has plans for domestic capital expenditure led by the PIF, the National Development Fund (NDF), and other investment funds. If productively deployed, this could help maintain growth potential through our ratings horizon. Investment plans could also be supported by funds raised from the planned IPO of a stake in Saudi Aramco. Plans are moving ahead and estimated valuations for Saudi Aramco vary between $1 trillion and $2 trillion. Recent moves to appoint the PIF governor as chairman of Saudi Aramco implies that the IPO is likely to go ahead fairly soon, with funds likely to be transferred to PIF. PIF has grown rapidly in size and importance over recent years, with the full support of the monarchy.
The purchase of SABIC by Saudi Aramco, as well as a sizable investment in India’s Reliance Group, represent a continued push by Saudi Aramco and the country to try and move further into midstream oil businesses, such as refining and petrochemicals, as part of the country’s moves to diversify the economy away from upstream crude production.
We continue to view Saudi Arabia’s external position as a strength and estimate that current account surpluses will average 4.3% of GDP through 2022. We expect that Saudi Arabia’s liquid external assets, net of external debt, will average about 168% of current account payments over 2019-2022. Gross external financing needs will likely remain at about 42% of the sum of usable reserves and current account receipts over the same period, suggesting ample external liquidity. We expect usable reserves will remain high over the forecast period, covering about 19 months of imports. In our calculation of usable reserves, we subtract the monetary base from gross foreign currency reserves for sovereigns that have a long-standing fixed peg with another currency (because the reserve coverage of the base is critical to maintaining confidence in the exchange-rate link).
Monetary policy is both stabilized by, and constrained by the fixed exchange rate: it helps to anchor the population’s inflation expectations, but largely requires Saudi Arabia to follow movements in the U.S. federal funds rate (even when they may not be entirely appropriate for Saudi Arabian economic conditions). We expect that the peg will be maintained throughout the forecast period and beyond. (S&P 27.09)
11.4 EGYPT: Israel to Start Exporting Natural Gas to Egypt as Last Obstacle Is Removed
Menna A. Farouk reported on 25 September in Al-Monitor that an agreement was recently signed allowing the Egyptian Eastern Mediterranean Gas company to use the Eurasia-Israel pipeline, which would allow the resumption of natural gas exports to Egypt.
Israel will start exporting natural gas to Egypt after Eastern Mediterranean Gas (EMG) and Israel’s Europe Asia Pipeline Co. said on 8 September that they had signed an agreement allowing the former to use a second terminal to export natural gas to Egypt.
According to oil experts and economists, the deal has removed the last obstacle to the start of gas exports from Israel to Egypt. On 19 February 2018, Israel’s Delek Drilling company and Texas-based Noble Energy announced the signing of a 10-year contract worth $15 billion with the Egyptian Dolphinus Holdings company to export natural gas to Egypt. The two companies decided in September 2018 to buy stakes in EMG’s pipeline to facilitate the deal.
“Israel was finding a major obstacle in providing an offshore pipeline to supply gas produced from Israeli offshore fields of Tamar and Leviathan to the Egyptian grid. After signing the agreement, EMG’s pipeline would be used to link the Israeli city of Ashkelon to el-Arish in Egypt’s Sinai Peninsula,” Ahmed el-Shami, professor of feasibility studies at Ain Shams University, told Al-Monitor. Shami said that in spite of the fact the deal is between private companies, the Egyptian government will indirectly benefit from it and the deal will increase state revenues.
The economist explained that Israeli gas is cheap compared to imported liquefied gas, and that alleviates the burden on the Egyptian government in providing gas to the industrial sector as well as helps the government supply national projects already underway with energy and meet local demand. “The Egyptian government already makes gains indirectly from the private companies that purchase gas — whether it is from Israel or any other country. That is because the government collects fees in return for using the national network of gases and incomes of using Egyptian liquefaction stations,” he added.
Shami also said that what is most important is the fact that the agreement supports Egypt’s strategy to become a regional center for the gas industry and gas exports to the world. “Egypt will use Israeli gas and treat it in its liquefaction stations for re-export to Europe. That would be a game-changer for Egypt,” he said.
Tharwat Ragheb, professor of petroleum and energy engineering at the British University in Cairo, also said that the agreement was very beneficial for Egypt, as it has helped to settle an international arbitration case against Egypt as a result of halting gas exports to Israel in 2012.
In light of the decision of the International Criminal Court on 4 December 2015 against the Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company (EGAS), the Israel Electricity Authority was entitled to receive damages estimated at $1.7 billion in addition to the amount of interest, as Egypt has stopped gas exports to Israel due to unrest following the January 25 Revolution in 2011, according to the Ministry of Petroleum. Egypt signed a deal with Israel in 2005 in which it agreed to sell $2.5 billion worth of gas to Israel.
Ragheb said that the General Petroleum Corporation and EGAS reached a “friendly agreement” to resolve the dispute with Israel, and the two Egyptian entities managed to settle and reduce the amount of the ruling issued in favor of the Israel Electricity Authority to an amount of $500 million. “That was a remarkable achievement. Egypt used that agreement as a pressuring card in order to get a settlement of its gas dispute with Israel,” he told Al-Monitor.
Ragheb added that Egypt’s gas agreement with Israel also goes in line with the country’s plan to be a gas exporter to Europe, which seeks to wean off of Russian oil. “Although the agreement stirs public confusion and worry on the backdrop of historical conflict with Israel, boosting gas cooperation with Israel will be of great benefit to Egypt at the local and regional levels,” he added.
Since 2014, Egypt has been ramping up its efforts in order to put an end to energy shortages and become an oil and gas exporter again after it turned into an importer following the January 25 Revolution.
In a statement on 30 June, the Egyptian Ministry of Petroleum said that the country’s natural gas production reached unprecedented levels, standing at about 6.8 billion cubic feet per day. Egypt consumes 6.6 billion cubic feet of natural gas per day, according to the same ministry data. The statement also highlighted that Egypt achieved self-sufficiency in locally produced natural gas by the end of September last year due to a gradual increase in domestic gas production as a result of the completion and development of new phases of four major fields in the Mediterranean Sea. “This has rationalized the use of foreign exchange directed at imports and reducing the import bill which is a burden on the state budget,” the statement added.
The ministry also said that a total of 31 projects in this field have been implemented over the past five years with investments worth $21.4 billion and a total production rate of 6.9 billion cubic feet of gas.
Menna A. Farouk, a journalist and an editor at The Egyptian Gazette, writes about social, political and cultural issues, including press freedom, immigration and religious reforms among other topics. (Al-Monitor 25.09)
11.5 EGYPT: Ethiopia Again Rejects Egypt’s Vision for Renaissance Dam
Ayah Aman reported in Al-Monitor on 24 September that after more than a year of stalled negotiations between Egypt and Ethiopia on the Grand Ethiopian Renaissance Dam, Egypt’s diplomatic moves at the regional and international levels seem to have led nowhere.
Egypt has initiated several international diplomatic moves expressing its deep concern about what it says is Ethiopia’s stalling and failure to reach a comprehensive agreement on filling and operating the Grand Ethiopian Renaissance Dam (GERD), which it sees as a threat to its water supply. This comes after a year and four months’ lull in negotiations, since Ethiopian Prime Minister Abiy Ahmed visited Cairo in June 2018 and repeated after President Abdel Fattah al-Sisi the famous oath, “I swear to God, we will not cause any harm to Egypt’s Nile water.”
Technical, political and security negotiation rounds have been taking place for more than four years now, since the presidents of Egypt, Sudan and Ethiopia signed the Declaration of Principles in March 2015. At the time, the declaration was seen as a breakthrough in the crisis, which continues to go unresolved. Since then, Sisi has made many statements seeking to allay the Egyptian public’s fears about the dam. In January 2018, he announced the crisis with Ethiopia was over and said there were several paths to a solution.
Yet just this month, on 14 September, his statements at the annual National Youth Conference were alarming. Speaking of the dam construction that started in 2011, Sisi said Egypt has been “paying since 2011 for one mistake … a price we’ve paid and will continue to pay.” He asserted, “Dams would not have been built on the River Nile … was it not for 2011,” in reference to the January 2011 Revolution.
Responding to a question concerning the dam at the “Ask the President” session held on the sidelines of the Youth Conference, Sisi recalled the Iraqi water shortage after the fall of the Iraqi state. He said, “Iraq in 1990 received 100 billion cubic meters (bcm) of water, but now it only receives 30 bcm.”
In early September, Egypt had launched official diplomatic efforts with other countries. Foreign Minister Sameh Shoukry briefed foreign ministers attending a 10 September Arab League meeting in Cairo on the difficulties marring the dam negotiations. He said Ethiopia has been inflexible recently and has even attempted to manipulate the situation. Arab League Secretary-General Ahmed Aboul Gheit said at a press conference that day that the Arab ministers had expressed solidarity in protecting Egypt’s water supply, which they agree is an integral part of overall Arab security.
As well, during a 12 September meeting with ambassadors of European countries to Cairo, Egyptian Deputy Foreign Minister for African Affairs Ambassador Hamdi Loza briefed them on the latest developments regarding the dam and stressed Egypt’s uneasiness over the extended length of negotiations. A statement by the ministry after the meeting said Ethiopia has demonstrated “an insistence to impose a unilateral vision while disregarding the interests of others’ interests and without giving due diligence to avoiding damages to two estuary countries, especially Egypt, which depends on the Nile as the lifeblood of the Egyptian people.” After a round of technical negotiations on 15-16 September with Sudan in Cairo, Ethiopia and Egypt remain at odds.
Despite Egypt’s diplomatic mobilization ahead of the meeting, Ethiopia did not respond to any diplomatic pressure to approve or even discuss the Egyptian vision. Egypt had proposed filling the dam’s reservoir within seven years and releasing 40 bcm of Nile water annually to downstream countries.
Ethiopian Minister of Water and Energy Seleshi Bekele voiced his country’s rejection of Egypt’s requests. Ethiopian news website Addis Standard cited a classified document outlining Ethiopia’s rebuke of Egypt’s proposals. The Egyptian vision would “prolong the filling of GERD indefinitely” and “compensate for the Egyptian water deficit by serving as a second backup reservoir to High Aswan Dam,” according to the document. Egypt’s plan would mean the dam wouldn’t “deliver its economic return to Ethiopia … [and would] infringe on Ethiopia’s sovereignty.” The document added, “Ethiopia [would] forfeit its rights to equitable and reasonable utilization of the Blue Nile water resources.”
Shoukry summarized Egypt’s position in dealing with the dam crisis by not yielding to the de facto policy that Ethiopia has been imposing since 2011. In remarks at a press conference Sept. 15, he said, “The will of one party will not be imposed by creating a concrete situation that is not being dealt with within the framework of consultation and understanding.” Days later, Shoukry spoke about the dam in an exclusive, wide-ranging interview on 21 September with Al-Monitor at the United Nations in New York, where he emphasized the “life and death” nature of the negotiations. “I don’t think anybody would agree that the Ethiopian development should come at the expense of the lives of Egyptians,” he said.
A diplomatic official familiar with the Renaissance Dam negotiations told Al-Monitor in a telephone interview, “The continued stumbling of the negotiations and the failure of commitment or implementation of any of the items of the agreements reached in the previous meetings at the political, technical and security levels have become a source of grave concern. It’s not easy, but the Egyptian negotiators have offered many solutions and middle ground visions to achieve the best interest of all parties by filling the dam reservoir in a way that doesn’t harm Egypt and benefits Ethiopia.”
The official, who spoke on condition of anonymity given the sensitivity of this topic, added, “Egypt [gave up] many of its demands so as not to disrupt the course of negotiations, such as the World Bank intervention, which Ethiopia had rejected. Cairo has been dealing in good faith with all proposed visions and solutions, but the continued Ethiopian refusal, without offering any realistic alternative that reduces the risk of damages caused by the dam filling and operation, makes it difficult for negotiators to work [and] is a mere waste of time.” The source went on, “Egypt will knock on all doors and use all international and regional diplomatic methods to guide the Ethiopian side to find a serious and comprehensive agreement on the filling, operation and management of the dam to safeguard the interests of the three parties (Egypt, Sudan and Ethiopia) and make the dam damage tolerable.”
Regarding the preliminary results of Egypt’s international efforts, the source sees a strong understanding and support at the Arab and European levels for Egypt’s concerns. “Egypt will take other measures in other international forums, including the United Nations General Assembly meetings,” said the source. The water ministers of the three countries will meet again on 4-5 October to again discuss terms of the agreement on filling and operating the dam.
Ayah Aman is an Egyptian journalist for Al-Shorouk specializing in Africa and the Nile Basin, Turkey and Iran and Egyptian social issues. (Al-Monitor 24.09)
11.6 EGYPT: Five Things to Know About Egypt’s Startup Ecosystem
Egypt is the fastest growing startup ecosystem in the Arab Middle East and North Africa region, according to a report published in 2018 by MAGNiTT, bagging 22% of all deals last year, second only to the United Arab Emirates. The country has also seen a significant spike in the number of venture capital companies, international funds, incubators, and accelerators over the last couple of years, which, along with government initiatives, have made Egypt an attractive hub for startups in the region.
“Egypt is seeing a second wave of entrepreneurs and investors that are more mature and experienced. The population is also starting to embrace technology for everyday activities and we see that large but young tech firms are a great source of talent and inspiration,” Ziad Mokhtar, managing partner at Algebra Ventures was quoted by the Magnitt report as saying.
Following are 5 things to know about this up-and-coming young entrant in the global startup space:
Almost Unicorns: Egypt is still a relatively new startup hub, and while it does not have any unicorns to its name yet, several promising companies are on their way to the $1 billion club.
Swvl, an app that allows customers to book rides on buses and vans in their network, tops the list with a total of $80.5 million raised over four funding rounds so far, according to data aggregator Crunchbase.
Vezeeta, a healthtech platform which allows patients to book doctors on the app, with $23.5 million raised over five funding rounds so far, according to Crunchbase, is next in line. The company closed it latest funding from a series C round in December 2018. Instabug, Yaoota, Basharsoft, and Halan are some others on the list.
Incubators on the Rise: Flat6Labs is the most prominent accelerator in Egypt, and was the only one in the country up until a few years ago. EdVentures, the corporate VC arm of Nahdet Misr, one of the leading publishing groups of Egypt, is one of the main players in the education startup sector. Sawari, Algebra and Endure Capital are other private VCs.
Falak is a government run accelerator that invests in early-stage startups, and was established to give the startup industry in the country a much-needed shot in the arm.
Government Efforts to Scale the Industry: The Egyptian Ministry of Investment and International Cooperation has a number of different startup programs and networks that helps founders develop their entrepreneurial skills and companies navigate regulations. The initiative by the ministry, called ‘Fekratek Sherkate’ administers these programs, including Falak.
Bedaya, founded by Egypt’s General Authority for Investment and Free Zones, is an incubator that offers funding as well as office space, networking opportunities and manufacturing zones to startups. The incubator’s ‘Bedaya Fund’ provides financing opportunities for startups in the food, agricultural, manufacturing, services, and information technology sectors.
TIEC, or Technology Innovation and Entrepreneurship Center is another government incubator that funds startups in the information and communication technology sector, as part of the government plan to develop the country’s communication infrastructure.
Tech Leads the Way: Technology is the hottest startup sector in Egypt, with the country poised to lead the way for tech innovation in the Arab Middle East and Africa, a Business Insider report earlier this year said. However, issues with the country’s economy, which has been struggling in the wake of the Arab Spring crises, the ouster of leader Hosni Mubarak, a generally weaker currency versus the U.S. dollar and complex bureaucracy make it hard for startups to operate efficiently. Several companies have been forced to relocate to Germany, Dubai, China or the Cayman Islands in order to take some of the pressure off.
Bootcamps and Events Make Connecting Easier: Events give startups an important opportunity to network, connect and learn from experts and investors around the world. Egypt has several annual events that help put regional startups on the global map – RiseUp Summit – biggest in the country, Vested, and the Techne Summit, held in Alexandria, are some of the must-attend gatherings.
Techne Summit, in fact, returns for its fifth edition in Alexandria, Egypt, at the end of the week, with topics of discussion ranging from health tech, e-commerce, and fintech, to retail, marketing and media technology, among others.
The event, held on 28 – 30 September, featured the launch of a network comprising angel investors from across the Mediterranean region, called ‘Mediterranean Business Angel Investment Network’, or Med Angels. Investors from France, Greece, Tunisia, Morocco, Egypt, Lebanon, Slovenia, Croatia, among others, are already a part of the network, which aims to “facilitate cross border investing among participating member networks.” The Med Angels platform claims it will help connect more than 100 networks with nearly 10,000 angel investors, across 24 countries.
The 2019 event features several satellite events, or side events, such as air yoga, educational sessions on social media management, Cloud services management etc., at various locations in Alexandria. Techne Summit kickstarted in Egypt in 2015, and, as of 2018, had hosted over 6,000 participants, 130 speakers, 230 startups, and 80 investors from more than 25 countries. (Entrepreneur 24.09)
11.7 ALGERIA: A Presidential Election Will Be Held on 12 December
Dalia Ghanem posted in Carnegie-Mellon’s Diwan that a presidential election was announced, to be held on 12 December.
What Happened?
On 15 September, Algeria’s interim president, Abdelkader Bensalah, announced that a presidential election would be held on 12 December. The presidential election has already been canceled twice this year, on 18 April and 4 July. The announcement came less than two weeks after Army Chief of Staff General Ahmad Gaid Salah had promised that the election date would be known by mid-September, proving again that it is the military leadership that calls the shots in Algeria. The military is trying to impose a quick fix to the political crisis that has been shaking the country since the departure of former president Abdelaziz Bouteflika.
Why Does It Matter?
For months Algerians have been demonstrating against Algeria’s political elite and the system in place. The imposition of a new election date is viewed by many people as an effort by the military leadership to impose a president who will effectively be its pawn.
There are serious hurdles to holding elections on 12 December. For instance, it is difficult to foresee how security conditions will be in three months if Algerians continue to demonstrate and the military chooses to continue implementing coercive measures to end the popular contestation movement. The security forces are already cracking down on activists and opposition figures, and are escalating their efforts. At the same time many mayors and judges are refusing to organize the election in their districts. As a result, the presidential election is likely to be neither free nor fair.
Moreover, the current constitution has been massively rejected by the popular movement and protestors want the document to be rewritten before any election takes place. The military leadership, in turn, has crafted electoral reforms to accelerate the election – reforms passed by the government and parliament against the will of protesters. Steps have even been taken to lower the number of signatures required for individuals to stand as candidates, from 60,000 to 50,000.
What Are the Implications for the Future?
There is no sign that Algeria’s opposition and civil society will accept the results should an election be held. The country’s political and military leadership is facing a severe legitimacy crisis, so that trying to push through an election without taking popular demands into consideration is almost certainly not going to resolve the crisis.
Algerian elections tend to hinder democracy, rather than the opposite. That is because they are characterized by the absence of any real transition. Instead, they give the political system a facelift and create an opportunity for this system – now widely rejected by many Algerians – to regenerate itself. For Algerians today, the ballot box is not synonymous with democracy but with the perpetuation of a political order that is undemocratic. By orchestrating a presidential election, the military is stifling the desire for genuine change in the country, and the consequences of doing so may have far-reaching implications for Algeria’s stability. (Diwan 16.09)
11.8 TURKEY: IMF Staff Concluding Statement of the 2019 Article IV Mission
On 23 September 2019, the IMF issued a Concluding Statement which describes the preliminary findings of IMF staff at the end of an official staff visit to Turkey.
Growth has rebounded, aided by policy stimulus and favorable market conditions, following the sharp lira depreciation and associated recession in late-2018. The lira has recovered and the current account has seen a remarkable adjustment. Turkey remains susceptible to external and domestic risks, however, and prospects for strong, sustainable, medium-term growth look challenging without further reforms. Current positive market sentiment provides a good opportunity to enact a set of reforms that would address vulnerabilities, strengthen policy credibility, and set the economy on a higher and more sustainable growth path. Against this backdrop, we look forward to the forthcoming New Economic Program (NEP), which should clearly diagnose the challenges facing the economy and outline a comprehensive set of policies to address them.
Background—Growth and Imbalances
- Turkey achieved strong growth in recent decades, but at the same time imbalances increased. Initially, broad-based macroeconomic and structural reforms supported growth, poverty reduction, and income convergence with advanced economies. As reforms waned, however, growth became increasingly dependent on externally-funded credit and demand stimulus. As a result, Turkey entered 2018 with an economy running above potential and a large current account deficit, largely financed by debt-creating flows.
- These imbalances contributed to last year’s sharp lira depreciation and associated recession. Negative sentiment towards EMs and adverse geopolitical developments ultimately triggered sizeable lira depreciation in August 2018. The exchange rate shock and a necessary, but belated, monetary policy reaction were accompanied by a recession in the second half of the year and a sharp increase in unemployment.
Recent Developments – Stimulus and Recovery
- Growth has since resumed, aided by policy stimulus. Buoyed by expansionary fiscal policy, rapid state bank credit provision, a strong contribution of net exports and more favorable market sentiment, the economy registered positive growth in the first half of 2019. Staff now expects growth to be positive this year – about ¼% – despite the large negative carryover effects from last year’s recession.
- The lira has recovered as market pressures have abated. Import compression and a strong tourism season have led to a remarkable current account adjustment, and only a small deficit is expected this year. This, combined with improved market sentiment and geopolitical developments, have taken pressure off the lira.
- This set the stage for a steep decline in inflation. High real policy rates, lira stability, favorable base effects, and resulting lower inflation have allowed the CBRT to cut policy rates. While inflation could fall to single digits over the coming months, staff expects end-year inflation of below 14%.
Outlook—Challenges Remain
- The current calm appears fragile. Reserves remain low, and private sector FX debt and external financing needs high. Non-financial corporate balance sheets have been stressed by lira depreciation, higher interest rates, and lower growth. Banks report adequate capitalization and moderate NPLs, but loan restructuring has increased and staff expects the lagged effect of the recession and the weaker lira to continue to put strains on asset quality. High dollarization reflects, among other things, weaker domestic sentiment and state bank funding needs. While public debt is low – a key strength for Turkey – the fiscal deficit has increased and uncertainty over the possible scale of contingent liabilities and potential debt rollover pressures limit available fiscal space.
- Prospects for strong sustainable growth have weakened and risks remain on the downside. Despite the recent turnaround, without consistent implementation of a comprehensive package of reforms, medium-term growth is likely to remain subdued given balance sheet strains. Risks include a deterioration in sentiment towards emerging markets, possible policy implementation risks, and adverse domestic or geopolitical developments.
Policies – Securing Stronger and More Resilient Growth
- The main policy challenge is to move from a short-run growth focus to securing stronger and more resilient growth over the medium term. This could be achieved through a five-pronged policy response:
- tight monetary policy to boost central bank credibility, underpin the lira, durably lower inflation, and strengthen reserves;
- steps to bolster medium-term fiscal strength;
- a comprehensive third party assessment of bank assets and new stress tests, with follow-up measures, as needed, to further strengthen confidence in banks;
- additional steps, building on existing reforms, to strengthen the insolvency and corporate restructuring framework; and
- focused structural reforms to support productivity growth and increase economic resilience.
- Although these reforms may come with short-term output tradeoffs, the growth payoffs over the medium- and longer-term are likely to be large, and downside risks would also be significantly contained.
Monetary Policy: Strengthening Credibility
- Durably lowering inflation remains the most important challenge for monetary policy, and is the best way to permanently lower interest rates. The central bank continues to work to enhance its credibility, including by seeking to strengthen its communications. Nevertheless, in staff’s view, the CBRT easing cycle has been too aggressive given still-high inflation expectations and the need to mitigate macro-financial risks. Monetary policy should keep rates on hold until there is a durable downturn in inflation and inflation expectations. This would also underpin the lira, allow reserves to be rebuilt, and support de-dollarization.
- Clearer monetary and intervention policy would further boost credibility. Notwithstanding progress in simplifying the monetary policy framework, reducing the many instruments and rates through which liquidity is provided would further clarify the policy stance. A transparent framework for pre-announced FX purchases – with these being the sole preserve of the CBRT – should be implemented at the appropriate time. As volatility subsides, remaining measures that aimed at containing excessive volatility in capital flows should be phased out.
Fiscal Policy: Preserving the Anchor
- Fiscal policy—a longstanding strength for Turkey—should remain a key anchor. The recent fiscal stimulus has helped the economy recover and we welcome the unwinding of some of the measures taken given recent economic strength. In staff’s view, a neutral fiscal stance next year would still support growth, allowing automatic stabilizers to work, but further discretionary stimulus should be avoided to contain financing needs and preserve fiscal space.
- Measures of about 1½% of GDP over the medium term would help stabilize the debt burden around current, commendably low, levels. Persistent gaps have opened up between primary spending and tax revenues, which could undermine Turkey’s traditionally strong debt dynamics. Revenue mobilization measures could include broadening the tax base and enhancing revenue efficiency by raising and unifying reduced VAT rates. Personal income tax could also benefit from reforms. On spending, removing backward-looking public wage indexation, rationalizing subsidies and transfers, and better targeting social assistance would also help.
- Fiscal structural reforms would support consolidation. Staff welcomes the authorities’ efforts to strengthen oversight and management of PPPs, including through plans to publish a monitoring report and introduce a new PPP law. It would be important for the legislation to ensure that such partnerships are fully integrated with the overall budgetary process, including their authorization and appraisal. Consistent budget execution and a thorough monitoring of fiscal risks, including publication of a fiscal risk statement, would further strengthen fiscal credibility.
- Further monitoring of extra budgetary institutions would also be welcome. The scope and role of extra-budgetary and other non-central government entities and institutions need to be carefully defined and monitored, with the maximum degree of transparency and a strong governance framework. In this regard, the investment mandate of the recently-established Turkey Wealth Fund (TWF) risks fragmenting management of public spending outside of the budgetary process. The TWF’s governance structure could also be refined to limit potential conflicts of interest.
Financial and Corporate Sector Policies: Stability and Rebalancing
- Further steps to clean up bank and corporate balance sheets would support financial stability and stronger and more resilient growth over the medium term. Banks’ impairment and restructuring practices should be reviewed to support loan repayments in a durable and sustainable manner. We encourage the authorities to further pursue their efforts to strengthen the current resolution regime. To complement this, an early comprehensive third-party asset quality review (AQR) and ensuing stress tests, accompanied, to the extent needed, by further measures, would help shore up market confidence.
- Actions to support credit growth should be limited. Efforts to expand lending, including through state banks and the CGF, should be limited and should also ensure that resulting credit is provided only to viable borrowers. In line with past application of macro-prudential measures, the authorities should stand ready to use such tools to rein in excessive and/or imprudent credit growth. The recent changes to incentivize private bank lending with reserve requirements should be revisited.
- Additional efforts, building on existing reforms, to strengthen the insolvency regime and out-of-court restructuring would help release resources and restart productive lending. Staff welcomes ongoing efforts, including a comprehensive review of existing insolvency legislation, to better balance debtor and creditor rights. This, combined with tighter NPL classification and enforcement, would inform better pricing of NPLs and increase the attractiveness of out-of-court solutions and encourage more durable restructurings.
Structural Reforms: Boosting Productivity
- Focused structural reforms would improve prospects for stronger sustainable growth and increase the economy’s resilience to shocks. Product market efficiency could be enhanced by simplifying business entry and exit, addressing barriers to competition and allowing automatic energy pricing adjustments. The quality of human capital could be raised by upgrading education and on-the-job training. Early childhood education and childcare could further increase female labor force participation. Labor market flexibility could be improved by eliminating backward-looking public wage indexation and aligning minimum wages with expected inflation and productivity. Severance pay could be reformed to encourage labor mobility.
- Governance reforms could also help growth prospects. Improving regulatory predictability and simplifying administrative procedures would help the business environment and investment climate. Minimizing regulatory forbearance would enhance transparency. Improvements in governance could also magnify structural reform payoffs. (IMF 23.09)
11.9 GREECE: Staff Concluding IMF Statement of the 2019 Article IV Mission
On 27 September, the IMF issued a concluding statement describing the preliminary findings of an official staff visit to Greece.
Greece’s new government inherited a tepid economic recovery, one weighed down by crisis legacies and across-the-board policy reversals since program exit that further raised fiscal, financial, and external vulnerabilities. While the government has made a promising start in unblocking structural reforms and privatizations and is advancing the clean-up of bank balance sheets, a stronger effort in all policy areas is urgently needed if Greece is to become competitive within the currency union, eliminate the debt overhang, and achieve more inclusive growth.
- The new government is rightly prioritizing growth but faces an uphill battle. Per capita income remains below pre-Euro Area accession levels, reflecting significant crisis legacies (high public debt, high non-performing loans, over-indebted borrowers), low productivity, a dearth of investment, a weak payment culture and adverse demographics. Prospects were further dampened by what became a broad-based policy retreat following program exit in August 2018, with program-era reforms put on hold (e.g., fiscal structural reforms), canceled (e.g., the pre-legislated pension and personal income tax (PIT) reform packages), or reversed (e.g., key elements of the 2011-13 labor reforms and efforts to broaden the tax base and strengthen the payment culture).
- Growth is expected to be around 2% in 2019 and 2020. Near-term growth is benefiting from a cyclical recovery and improved market and consumer sentiment, which should translate into higher investment. Still, with long-term growth projected at 0.9%, it will take another decade and a half for real per-capita incomes to reach pre-crisis levels. Public debt-to-GDP is projected to trend down over the next decade with relatively low liquidity risks in the medium-term, though long-term sustainability is not assured under realistic macro assumptions. Still-weak banks dampen growth prospects and pose significant fiscal and financial stability risks. These and other factors leave Greece vulnerable to a range of external and domestic shocks. Considering Greece’s cyclical position and desirable policies in the medium term, staff assesses there is a substantial overvaluation of the real effective exchange rate. In this context, the new government should use its political mandate and improving investor sentiment to deploy a full range of policy tools and overcome long-standing vested interests, aiming to push long-term growth meaningfully above current projections.
- Fixing the banking sector, currently a misfiring engine of growth, is a top priority. The government’s goal of achieving single-digit non-performing exposures ratios by mid-2022 goes in the right direction and the proposed ‘Hercules’ asset protection scheme could provide significant support (though important details have yet to emerge). However, to fully restore asset quality, along with the quality and levels of bank capital, liquidity, and profitability, the new government should develop a more comprehensive, ambitious and well-coordinated strategy. These efforts should be primarily market-based, with any public support subject to a dynamic cost-benefit analysis, and supported by further improvements in the legal framework (e.g., more efficient judicial processes and modernization of the insolvency regime). Residential mortgage protection and ad hoc tax and social security installment schemes have prevented meaningful debt restructuring and undermined the payment culture and should be permanently phased out.
- Reducing fiscal targets would support the economic and social recovery. The 2019 fiscal primary surplus is expected to be in line with Greece’s 3.5% of GDP commitment to European partners—though once again depending on growth-dampening under-execution of public investment. For 2020, staff recommends that the government and European partners build consensus around a lower primary balance path, given ample economic slack and critical unmet social spending and investment needs, and to accommodate spending that would create synergies with stepped-up structural reforms.
- The fiscal policy mix should be rebalanced to strengthen growth and social inclusion. Plans to cut direct tax rates and strengthen compliance are welcome but more could be achieved by broadening the tax base. Greece remains near the EU bottom in terms of the share of workers paying personal income taxes and has one of the largest VAT compliance gaps. Relative to the rest of the EU, too much goes to pensions and the government wage bill, and too little to other social spending. To address critical needs, Greece should significantly scale up social spending (e.g., the means-tested guaranteed minimum income and public health) and investment. To free up fiscal space, pension benefits of existing retirees should be calculated in line with the new benefit formula (and the recent restoration of pre-crisis ‘pension bonuses’ should be reversed). Accelerating public financial management reforms will help better execute the public investment budget, enhance budget control, and strengthen risk management (including from ongoing court cases), while continued efforts are needed to strengthen the Independent Authority of Public Revenue and mobilize the Anti-Money Laundering framework to combat tax evasion.
- The new government deserves credit for unblocking privatization and pushing through business deregulation and digitalization, but much of the needed structural transformation of the Greek economy still lies ahead. The economy remains over-regulated and dominated by small and medium-sized enterprises operating in an unwelcoming business climate, and Greece is at or near the bottom of the EA in many cross-country surveys. More is needed to de facto liberalize product markets and closed professions and strengthen competition.
- The recent labor market proposals from the government deserve support, though more is needed to support higher employment, growth and competitiveness. Staff supports recent legislation to lift new restrictions on dismissals and the intention to limit unilateral appeals to arbitration. Plans to introduce an opt-out mechanism from collective bargaining go in the right direction but should aim at full restoration of the 2011-13 landmark labor reforms. Reducing non-wage costs, linking the adjustment of minimum wages to productivity growth, strengthening active labor market policies and removing bottlenecks to female labor force participation will be essential to address hysteresis, poverty (including in-work) and social exclusion. (IMF 27.09)
11.10 CYPRUS: IMF Staff Concluding Statement of the 2019 Article IV Mission
On 26 September, the IMF issued a concluding statement concerning the preliminary findings of IMF staff at the end of an official staff to Cyprus.
Cyprus has made significant progress in recovering from the financial crisis. Real GDP has now surpassed its pre-crisis peak and the unemployment rate has declined rapidly coming close to the pre-crisis level. Large disposals of non-performing loans (NPL) have strengthened bank stability, and sizable fiscal surpluses have lowered risk premia and reduced financing risks.
Challenges remain however in sustaining the relatively robust growth momentum. Given still-high NPLs, recent efforts to undo key reform initiatives are undermining the hard-won gains in restoring macro-financial stability. Increasing external headwinds are slowing near-term growth, while a sizable debt overhang and weak productivity growth also hold back medium-term growth potential.
Policies should focus on reforms to secure financial stability and raise the growth potential of the economy. Priorities are to steadfastly implement the strengthened legal tools to lower NPLs and private debt and to build bank capital buffers; to reduce public debt by ensuring strict spending discipline and improving the efficiency of public spending; and to increase productivity through institutional reforms and the promotion of technology adoption.
Outlook and Risks
Cyprus has made significant strides in recovering from the financial crisis and in addressing its legacy challenges. With economic growth averaging about 4½ percent over the past three years, the pace of recovery in Cyprus has been more rapid than many other euro area post-crisis economies. The unemployment rate has declined although it is still above the pre-crisis level. Efforts to address high NPLs and banking system vulnerabilities also gained momentum. The disposal of large NPL portfolios, supported by a strengthened foreclosure and insolvency framework last year, and the resolution of Cyprus Cooperative Bank paved the way for a more consolidated and deleveraged banking system. GDP levels have now surpassed pre-crisis levels, while in the banking system, NPLs as a share of GDP have declined by nearly two-thirds from its post-crisis peak. Although public debt has spiked in the process, strict spending discipline and large fiscal surpluses have helped Cyprus to capitalize on favorable market conditions and reduce debt vulnerabilities.
While economic growth is gradually moderating, the near-term economic outlook remains favorable. Growth is expected to decelerate to around 3 percent in 2019–20 on weaker external demand, from nearly 4% last year. Investment is expected to remain strong, driven by housing and infrastructure construction projects that are primarily foreign financed, while robust labor market recovery and rising income continue to support private consumption. The current account deficit is expected to widen, reflecting slowing growth among trading partners and continued high construction-related imports. Over the medium term, growth is expected to slow to its long-run potential growth rate of around 2½%, as the transitory effect of the investment boom gradually dissipates.
Risks to the outlook are mainly on the downside. Delays in NPL resolution could negatively affect the capital position of banks and weigh on availability of credit. Realization of fiscal contingent liabilities could slow the pace of debt reduction, eroding confidence and raising risk premiums. The high level of external debt makes the economy vulnerable to interest rate and growth shocks. External risks from rising protectionist trade policies, a sharper-than-expected slowdown in euro area growth or a hard Brexit could affect tourism and shipping revenues and foreign direct investment (FDI) flows. A negative assessment on Anti-Money Laundering/Combating Financial Terrorism (AML/CFT) compliance risks could affect confidence and deter investments. On the upside, exploitation of offshore gas deposits and energy sector investments could boost growth over the longer term.
Important challenges remain in sustaining the growth momentum over the longer term. Private sector deleveraging has been lagging given ongoing challenges in debt workouts. The NPL ratio has declined from more than half of loans at end-2017 to less than one-third today but remains among the highest in Europe, and banks suffer from low profitability, constraining credit and investment growth. In this context, the amendments to the foreclosure framework, which were recently approved by the Parliament but have not entered into effect and are currently being reviewed by the Supreme Court, are a setback creating uncertainties for NPL reduction and deleveraging of the economy. Longer-term economic growth potential is hindered by weak productivity growth, reflecting financial sector weakness as well as broader institutional bottlenecks and a slow pace of technology diffusion. Policies should thus focus on reforms to secure financial stability and strengthen growth potential by enhancing efficiency and productivity.
Policy Priorities
Financial Sector Policy: Supporting Deleveraging and Strengthening Financial Sector
1.NPL resolution and sustainable debt workouts remain key priorities. Efforts should focus on ensuring a well-functioning NPL resolution toolkit through restructuring, foreclosure, and insolvency. To this end, the recent amendments to the legislation risk reducing the effectiveness of foreclosure as a credible threat against strategic default, thereby weakening prospects for collateral recovery and increasing the need for additional provisioning. Adequate supervisory oversight of durable restructuring is crucial. The finalization of the framework for electronic auctions and continued progress with complementary judiciary reforms aimed at reducing backlogs will also be key to improve collateral execution and incentives for debt workouts.
2.Strengthening of the supervisory and regulatory framework of credit acquiring companies (CACs) should continue. While progress has been made on multiple fronts, including staffing, on-site inspections and off-site monitoring, strengthening of data reporting and analysis will be crucial given that a sizable stock of NPLs is now held by CACs. It is also important to swiftly finalize the state-owned Cyprus Asset Management Company’s (CAMC) governance and operational structure, business strategic plan, and performance measurement framework, with an appropriate sunset clause and a clear mandate to maximize recovery, while balancing operational independence with public accountability and transparency.
3.Efforts should be made to address the moral hazard risks inherent in the Estia subsidy scheme. Close monitoring to prevent potential abuse of the scheme and timely reassessment of borrower eligibility will be needed, to ensure that taxpayers are not called on to subsidize individuals who are capable of servicing their mortgages. Any complementary schemes for vulnerable primary owners deemed unviable under Estia should ensure further burden sharing and be well-targeted with a full cost-benefit analysis undertaken to control fiscal and implementation costs.
4.More broadly, efforts to further improve bank profitability and capitalization are crucial. Narrowing interest margins and excess liquidity in a declining interest rate environment are creating pressures on profitability, which is being further weighed down by an inefficient cost structure with excess staffing levels and branch networks in the banking system. Banks should continue to maintain adequate provisions and capital buffers to insulate against potential further losses from NPL sales and workouts and reduce property holdings to targeted levels. Policies should encourage lowering of cost-to-income ratios through rationalization of operational costs, diversifying income sources, and undertaking of digitization solutions.
5.Macro-financial risks from the property market appear limited for now but warrant close monitoring. The segmented nature of the property market calls for close monitoring of sectoral developments, for example, to ensure that any overheating in the luxury segment is not fueled by domestic credit, or that concentration of future sales of repossessed collateral properties does not lead to fire-sales. Macro-prudential measures tailored to the market segment should be undertaken if warranted.
Fiscal Policy: Mitigating Risks to Debt Sustainability and Enhancing Efficiency
1.Fiscal performance is strong, but risks remain. Cyprus is projected to maintain large primary surpluses that will allow public debt to decline rapidly over the medium term. However, this outlook is subject to risks, including from court-mandated increases in the public wage bill reversing crisis-era measures, higher-than-expected spending under the newly introduced National Health System (NHS)—particularly from lagging competitiveness of the public health sector vis-à-vis the private sector—and contingent liabilities from public entities, as well as the Asset Protection Scheme and weak asset quality in the financial sector.
2.Spending should be firmly controlled to reduce risks to debt sustainability, while the composition of expenditure should seek to enhance efficiency. Expenditure growth should be capped by nominal medium-term output growth to keep debt firmly on a downward path. Prioritizing public spending to support structural reform efforts would help achieve faster and more inclusive medium-term growth. To this end, growth of the wage bill should be contained below that of nominal GDP, to create space for more productive expenditure. There is scope to improve the efficiency of education spending, including by reallocation towards investment in innovation and human capital. To contain risks from the NHS, strict monitoring and fine tuning of the regulatory framework for controlling incentives and costs of services, together with improving the competitiveness of the public health sector, will be important.
Structural Reforms: Improving Productivity and Strengthening Growth Potential
1.Productivity enhancing structural reforms are key for bolstering medium-term growth potential. While Cyprus has maintained its cost competitiveness, it suffers from low labor productivity growth and faces challenges to investment and economic efficiency. These include difficulties with access to finance, costly and lengthy judicial processes, inefficiency of government administration, low investment in new innovations and skills mismatches.
2.Policies to support greater market diversification, competition, and technology adoption are needed to enhance competitiveness. Greater investment in Information and Communications Technology infrastructure, intangibles such as science, technology, engineering and mathematics training, research and development innovation and easier access to finance are needed to facilitate technological diffusion. Given strong reliance on services exports, reducing remaining restrictions in implementing the EU Market Services Directive could facilitate competition and attract FDI. These reforms would enable greater market diversification, which would support faster economic growth and reduce volatility. Other competitiveness-enhancing policies could focus on strengthening business linkages and external connectivity to international markets.
3.Ongoing efforts to improve efficiency of the judiciary should continue, in order to better enforce commercial claims, support deleveraging and reduce the cost of doing business. The recent specialization of selected judges in financial litigation, the ongoing recruitment of additional judges, and work on establishing a court of appeals should be complemented by reforms of the rules for civil procedures, clearance of the backlog of cases and introduction of the e-justice system. Strengthening the institutional framework for the insolvency service and insolvency professionals is also important. Efforts are needed to create a more efficient system of issuing and transferring title deeds and accelerate the clearance of the backlog.
4.Efforts to reform public sector governance and efficiency should be renewed. Approval of pending legislation to reform the assessment of candidates for appointment and promotions and the structure of the civil service would facilitate greater mobility and enhance effectiveness. Legislative efforts to strengthen the governance and autonomy of the Central Bank of Cyprus should also be expedited. Successful implementation of local government reforms would streamline procedures and improve service delivery. Fiscal institutional measures for strengthening governance of state-owned enterprises, public financial management controls at the local government level and reforms in tax administration would help contain risks while improving public efficiency.
5.Ensuring that growth is inclusive is key to sustaining growth. While unemployment is rapidly declining, the share of youth not in employment, education or training and long-term unemployment remain high, partly reflecting skill mismatches. Programs focused on job retraining and improving linkages between educational and job opportunities would help reduce this gap. (IMF 26.09)
11.11 CYPRUS: Moody’s Changes Outlook on Cyprus’s Rating to Positive, Affirms Ba2 Rating
On 20 September, Moody’s Investors Service (Moody’s) changed the outlook on the Government of Cyprus’s Ba2 ratings to positive from stable. Concurrently, Moody’s has affirmed the Ba2 long-term issuer and senior unsecured ratings, and the (P)Ba2 program ratings. Cyprus’s short-term ratings have also been affirmed at Not Prime (NP) and (P)NP.
The change in outlook to positive from stable is driven by two factors:
1. Cyprus’s exposure to event risk continues to decline given ongoing improvements in bank asset quality; and
2. Cyprus’s fiscal strength is improving beyond previous expectations.
The affirmation of Cyprus’s Ba2 sovereign ratings balances the credit-supportive factors such as wealth, improved economic resilience, and a recent track record of fiscal outperformance against constraints such as institutions that are weaker than European peers, a lack of economic diversification, high debt across all sectors of the economy and still-high non-performing exposures (NPEs) in the banking system.
Cyprus’s long-term local- and foreign-currency bond and bank deposit country ceilings remain unchanged at A2. Moody’s maintains a six-notch cap between the government bond rating and the bond and deposit ceilings. Its short-term foreign-currency bond and bank deposit country ceilings remain at P-1.
RATINGS RATIONALE
Rationale for Positive Outlook
First Driver: Continued Reduction in Exposure to Event Risk Given Ongoing Improvements in Bank Asset Quality
The primary driver of the positive outlook is that Cyprus’s bank-related exposure to event risk continues to decline. Policy action by the government and actions by the banks will likely lead to a further large reduction in NPEs over the coming 18 months. NPEs reached 30.6% of gross loans in March 2019 (local operations only) having peaked at 49.8% in May 2016, and Moody’s expects that number to continue to fall, and quite possibly to halve, over the next 12-18 months. These declines are being driven by two factors:
First, the Estia government support scheme was launched on 2 September; the closing date for applications is 15 November. Estia aims to deal with the most difficult area of NPEs, namely mortgages that are backed by primary residences. Under the scheme, the government will pay a subsidy to eligible borrowers, which lowers their debt servicing costs by one-third. Moreover, borrowers with negative equity will only have to repay an amount up to the market value of their residence; losses relating to falls in value relative to mortgages will be borne by the lender. Estia is expected to help restart payments on the more than €1.1 billion of nonperforming retail mortgage loans held primarily by two of the banks rated by Moody’s, Bank of Cyprus Public Company Limited (long-term deposit rating: B3 positive, baseline credit assessment: caa1) and Hellenic Bank Public Company (long-term deposit rating: B3 positive, baseline credit assessment: caa1). These NPLs amounted to 11% of total NPEs in the banking sector as of March 2019.
Second, we expect that the banks will complete further major asset sales over the period. The securitization and sale of problem loans have been facilitated by a new securitization law and by amendments to legislation governing the sale of loans. Reform of the foreclosure framework has also supported disposal of assets by banks, though recent amendments passed by parliament would hinder that process somewhat; those amendments have been referred to the Supreme Court, which should make a decision later this year or early next year.
Second Driver: Ongoing Improvements Fiscal Strength Beyond Previous Expectations
Cyprus’s debt metrics are improving at a faster pace than we had previously anticipated and from a lower level. The impact of the resolution of Cyprus Cooperative Bank (CCB, ratings withdrawn) had a less pronounced impact on the country’s debt burden last year, increasing the debt burden to only 102.5% vs Moody’s previous expectations of 107% of GDP. Since then, the government has returned to running large primary and fiscal surpluses, and we expect this trend to continue.
We now forecast that debt will fall to 97% of GDP this year and, due to sizeable primary surpluses and ongoing low funding costs, it will continue to fall by around 5% per annum, to around 75% by the end of 2023. We also think that the resilience of the government’s balance sheet has improved: while Cyprus faces rising spending pressures coming from health care, public sector wages, and Estia, we believe that the debt burden will continue to decline, albeit at a slower pace, even were these pressures to increase expenditure levels.
Rationale for Affirmation of Ba2 Ratings
The factors supporting the affirmation of Cyprus’s Ba2 sovereign rating include the country’s small but wealthy economy, and improvements in its economic resilience in recent years. It also incorporates the government’s track record of fiscal outperformance in the wake of the country’s banking crisis. Before the resolution of CCB, strong growth trends and primary surpluses generated positive debt trends that we expect will continue in the coming years.
However, Cyprus faces credit challenges arising from its small and relatively undiversified economy, as well as from high levels of government, non-financial corporate, and household debt. Moreover, increasing spending pressures have the potential to weigh on fiscal prospects. Cyprus’s institutions are weaker than are those of its European peers. The still-large financial sector remains burdened by the second-highest NPE ratio in the European Union.
What Could Change the Rating—Up/Down
We would consider upgrading Cyprus’s sovereign rating if NPEs were indeed to continue to fall to levels substantially below 20%, reflecting a material improvement in the strength of the banking system and reducing contingent liability risk. Greater clarity that the debt burden will continue to fall steadily to below 90% over the coming 1-2 years would also support upward pressure on the rating if accompanied by improvements in banking sector risk.
Conversely, while a downgrade is currently unlikely, as reflected by the positive outlook, the issuer’s credit profile could weaken if growth or fiscal policy decisions were to cause a reversal of the supportive fundamental debt trend. Failure to bring down the stock of NPEs in the banking sector would also put downward pressure on the rating. (Moody’s 20.09)
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