Fortnightly, December 3rd 2014

The issue of taxing the natural gas partners was settled several years ago, as long the partners were supplying the gas to the domestic market. In recent months, however, the partners have signed a series of letters of intent (and one contract with the Palestinian Authority) for exporting gas to neighboring countries. The question then arose in the government of how to tax the gas partners in the export deals.

A draft bill was passed on 2 November establishing a formula for determining the price of gas for tax purposes, and series of additional parameters. Following professional discussions, and after hearing the views of the public, the government ministries and the companies operating in the sector, and the opinions of international experts in the field, the team recommended establishing a netback model in the law as the method of determining the transfer price for the purpose of taxing gas export deals between related companies. Under this method, the state will determine the taxable expected profit for the developers by calculating the transaction price, subtracting the accepted return on deals of this type, and adding the accepted rate of return on deals of this type.

In addition, in order to ensure that the partners in the gas fields do not sell the gas at prices that are too low, the committee established a mechanism that will ensure that the gas price in export deals is not lower than the accepted price in Israel. (Globes 24.11)

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1.2 Energy Minister Revives Israel-Italy Gas Pipeline Plan

At a recent conference of energy ministers from European and Middle Eastern countries in Rome, Israel’s Minister of National Infrastructure, Energy & Water Silvan Shalom suggested to Vice-President for Energy Union Maros Sefcovic European support for building a natural gas pipeline from Israel to Europe. Shalom asserted that such a pipeline would be useful to both sides. Shalom will fly to Brussels shortly to meet with representatives of the relevant countries and to discuss further details.

The conference, also attended by energy ministers from Lebanon, Jordan, Egypt, and Turkey, discussed, among other things, Europe’s need to diversify its sources of natural gas. As of now, Russia supplies 30% of the gas consumed by Europe, which fears further disruptions in the continuous flow of gas, given the dispute between Russia and Ukraine. The pipeline used to supply gas to Europe also passes through Ukraine. When Russia decides to halt the supply of gas to Ukraine, Europe also suffers.

Shalom therefore revived a proposal, made long ago, to construct a gas pipeline beginning in Israel, passing through Cyprus, and ending in Italy. From there, the gas can also reach the other European countries. Shalom claimed that this gas could be an additional source for Europe and at a lower price. Such a pipeline would help Israel, and other gas developers to export some of their gas reserves, currently estimated at 1,000 BCM. The main difficulty in such a pipeline is technical – it would be 1,250 kilometers long and pass through waters with a depth of up to 3,000 meters. This pipeline, which could transport 10 BCM annually, would be the world’s longest, and is expected to cost over $15 billion. (Globes 25.11)

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2: ISRAEL MARKET & BUSINESS NEWS

2.1 Tel Aviv Awarded Title of ‘World’s Smartest City’

The City of Tel Aviv won the award for the ‘World’s Smartest City’ at the Smart City Expo World Congress in November in Barcelona, Spain. The White City was selected for the prize among 250 competing international cities, including London, Washington D.C., New York, Dubai, Amsterdam and more. Tel Aviv was nominated for the prize due to its provision of an impressive array of technologies to city residents that include: city-wide WiFi access (Tel-Net), location-based smartphone technology to help visitors get around the city, and active measures to engage residents through public round-table policy discussions and a collaborative budget.

In addition, Tel Aviv provides its residents with a unique service dubbed ‘Digi-Tel,’ allowing them to access services and information via email, text message or a personalized website that can be customized according to location, preferences, marital status and more. As part of the services, Tel Aviv residents can engage in a city-wide application development competition based on open databases, as well as register online for municipal services.

In November of last year, the ‘Digi-Tel’ program won the special merit prize at the 2013 Webi Awards, held by the “People and Computers” publication. This and the latest award join the list of achievements for Tel Aviv as a ‘Startup City,’ which includes its recognition as an international center for innovation and entrepreneurship. (No Camels 21.11)

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2.2 Tamar Gas Group Plans Upgrade & Pipeline to Egypt

Israel’s offshore Tamar gas field may get a $1.5 – $2 billion upgrade, including the construction of an underwater pipeline to an export plant in Egypt run by Spain’s Union Fenosa Gas (UFG). The Tamar group plans to expand production capabilities with new wells, platform upgrades and a pipeline to Egypt if a final supply deal with UFG is signed, Israel’s Delek Drilling said. Tamar has been supplying Israel with natural gas since coming online last year, and in May the partners signed a non-binding agreement to deliver about 4.5 billion cubic meters of gas a year for 15 years to UFG’s liquefied natural gas terminal in Egypt. UFG’s plant in Damietta has been idle since 2012 when gas shortages in Egypt led the government to divert supplies to its growing domestic needs. Total cost would be between $1.5 – $2 billion, the company said, and supplies to Egypt would start flowing in 2017. (Ynet 21.11)

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2.3 3D Systems Enters Into Definitive Agreement to Acquire Cimatron

Rock Hill, South Carolina’s 3D Systems Corporation and Cimatron announced a definitive agreement under which 3DS will acquire all of the outstanding shares of Cimatron for $8.97 per share in cash, subject to certain adjustments for Cimatron transaction expenses, for a total of approximately $97 million, inclusive of its net cash. The combination of Cimatron’s products with 3DS’ portfolio strengthens 3DS’ position in the fast-growing 3D design and manufacturing space. The transaction adds complementary products and technology and extends 3DS’ direct and reseller sales coverage globally. 3DS management expects the acquisition of Cimatron to be immediately accretive to its cash generation and to its Non-GAAP earnings per share upon closing.

Givat Shmuel’s Cimatron (http://www.cimatron.com) is a leading provider of integrated 3D CAD/CAM software products and solutions for manufacturing. Cimatron’s products are used by a growing number of companies worldwide for their 3D production molds, tools and dies in a wide variety of functional end-use manufacturing applications. With two major product lines, CimatronE and GibbsCAM, Cimatron caters to all manufacturing sectors. CimatronE is an integrated CAD/CAM solution for toolmakers and manufacturers of discrete parts, which provides full associativity across the manufacturing process from quoting, through design and up to delivery. GibbsCAM, the CAM industry’s recognized ease-of-use leader, offers simple to use, yet extremely powerful, solutions for programming multi-axis CNC machine tools. (3D Systems 24.11)

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2.4 Citi Foundation to Support Tech Accelerators in Arab Sector

The Citibank financial services group announced that its philanthropic arm would fund two social-business technology entrepreneurship accelerators, one in Baqa al-Gharbiyye and one in Nazareth, at a cost of $150,000. The accelerator, called Q-start, will get underway next month in Baqa al-Gharbiyye. The accelerator, managed by the PresenTense organization and Al-Qasemi College, is one of 15 prestigious programs by PresenTense taking place simultaneously in 15 cities in five different countries around the world, including New York, Los Angeles, Riga, and Jerusalem. Out of dozens of requests to join the accelerator, 15 enterprises will be chosen at the end of the process. The Q-start programs lasts six months, in which the entrepreneurs will undergo intensive training, including assimilation of practical work tools for entrepreneurs, tools for professional presentation of an enterprise, advisory mentors, and links to the social business community. Inclusion of people from the business and urban community in the program is also expected. The accelerator will involve many fields of endeavor in the Arab-Israeli sector in general, with a focus on the Triangle District (bordered on the west by the Haifa District and the Central District). At the end of the program, the graduates will present the ventures to senior economic and cultural figures in the city. According to the plan, another accelerator will begin operating next month in Nazareth. This cooperation follows the success of NazTech, the first entrepreneurship accelerator in the Arab sector, which ended this past summer in Nazareth. (Globes 30.11)

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2.5 Crowdfunders Converge on Jerusalem for World’s Largest Crowdfunding Summit

OurCrowd will bring together on 9 – 10 December 36 of its innovative portfolio companies to meet with over 600 investors and executives from 17 countries in the largest global gathering of its kind. At the two-day OurCrowd Global Investor Summit, participants will meet with and hear from CEOs of OurCrowd’s portfolio companies, including leading startups such as: Consumer Physics (SCiO scanner), BioCatch (behavioral authentication), BillGuard (crowd sourced anti-credit card fraud), BT9 (food chain security), and Highcon (digital packaging). Participants will also hear from top Israeli innovators and decision-makers, including Brig. Gen. (Res.) Dr. Daniel Gold (“Father of Israel’s Iron Dome”), Jerusalem Mayor Nir Barkat (early investor in Check Point – Israel’s premier cybersecurity success), Larry Jasinsky (CEO of ReWalk Robotics, OurCrowd’s first IPO) and Leonard Rosen (CEO at Barclays Capital Israel), among others. The event will culminate with a cocktail party and performance by celebrated Israeli singer/songwriter Meir Banai. Presenting companies will cover major investment sectors, including cybersecurity, medtech, agritech, Big Data, the Internet of Things, robotics and more.

On the second day of the summit, participants will have the opportunity to get exclusive up-close briefings and field tours, as OurCrowd investors break into 5 individual buses and hit the road to visit a variety of companies, educational and army facilities, as well as other sites to figure out what really makes the Startup Nation tick.

OurCrowd (http://www.ourcrowd.com) is the leading hybrid venture capital equity crowdfunding platform for accredited investors who wish to invest in Israeli and global early stage companies. OurCrowd selects opportunities, invests its own capital and brings these startups to its accredited membership. Members choose those deals they invest in via OurCrowd-managed partnerships. OurCrowd investors must meet stringent accreditation criteria and invest a minimum of $10,000 per deal. (OurCrowd 02.12)

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2.6 Valens is 4th Fastest-Growing Technology Company in EMEA

Valens, the developer of HDBaseT technology and founding member of the HDBaseT Alliance, announced that it ranked 4th in the 2014 Technology Fast 500 rankings for Europe, the Middle East, and Africa (EMEA), as compiled by Deloitte. Now in its 14th year, the Deloitte Technology Fast 500 program ranks the fastest growing public and private technology, media, telecommunications, life sciences, semiconductors and clean technology companies from over 20 countries in the EMEA region, based on percentage revenue growth over a five-year period. Valens grew a staggering 33,244% between 2009 and 2013. Hod HaSharon’s Valens (http://www.valens.com) provides semiconductor products for the distribution of uncompressed ultra-high-definition (HD) multimedia content. The company’s HDBaseT technology enables long-reach connectivity of devices over a single cable and is a global standard for advanced digital media distribution. (Valens 02.12)

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3: REGIONAL PRIVATE SECTOR NEWS

3.1 Americana Group to Open 35 Additional TGI Fridays Restaurants by 2019

Americana Group (Kuwait Food Company) and TGI Fridays will significantly grow their partnership with a new agreement for Americana to open 35 new Fridays restaurants over the next five years. This agreement will give Americana a total of 90 Fridays locations by 2019. Earlier this year, Americana, the leading operator of casual and quick service restaurants across the Middle East and North Africa, celebrated the opening of its 50th Fridays restaurant in Al Jabriya, Kuwait. Next year, they will operate Fridays restaurants in nine countries when a new location opens in Erbil, Kurdistan. The 35 new Fridays restaurants will be opened in Americana’s existing markets, demonstrating the strength of the Fridays brand performance in this region.

Americana (http://www.Americana-Group.net) is the Middle East’s most successful group of companies operating consumer foods, restaurants, and food-related products. This story started out in Kuwait in 1964 with the establishment of a small trading company, which then opened its first restaurant (Wimpy) in 1970. This was the region’s first experience with international chain restaurants and was the beginning of Americana’s rapid expansion in this field. This was followed with the establishment of the first meat processing plant in 1972 to cater for the restaurants’ growing demand. With time, more Americana restaurants, food companies, factories, and brands were established and a high growth rate was always maintained. (Americana Group 21.11)

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3.2 Nutanix Announces Expansion in the Middle East

San Jose, California’s Nutanix, the web-scale converged infrastructure company, is expanding its presence in the Middle East with investment in its local pre-sales and support teams to help grow its steadily growing customer base and channel network across the region. Focused initially on Gulf Cooperation Council (GCC) countries, the investment will allow customers who deploy Nutanix in the region to take full advantage of a simple and highly available virtualized IT infrastructure platform and reduce TCO by as much as 60% within months as opposed to years. Due to the unprecedented demand for web-scale technologies, Nutanix serves 1000+ customers in over 50 countries and recently closed a $140 million Series E funding round, valuing the company at over $2 billion.

Currently Nutanix works through a host of partners that have made considerable investment into resourcing teams to deploy Nutanix in the region. In addition, as part of its global multiple distribution strategy, it will be appointing additional channel partners in the key GCC countries soon. Nutanix has already assisted several of its existing partners to secure qualified sales and technical skills, and is in the process of setting up partners as accredited training centers. (Nutanix 19.11)

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3.3 UAE’s First Roller Coaster Restaurant Opens at Yas Mall

The Roller Coaster Restaurant LLC, a part of Group JWA, has opened its first UAE outlet with the launch of ROGO’S, a roller coaster inspired casual dining venue located in Abu Dhabi’s latest retail hotspot, Yas Mall. The focal point of the 14,000 square foot restaurant is the network of 30 individual roller coaster tracks that loop, spiral and spin in and around diners to deliver an exciting menu of international comfort food directly to each table. Each table has its own individually designed roller coaster track and a unique silent delivery system that thrills diners as they get to watch their food make a gravity-defying 360-degree journey to their table. The state-of-the-art technology makes dining fun as it transports both cold and hot food and drinks along the multi-spiral, double loop and tornado tracks. As well as its hi-tech high-flying food delivery system, the 378-seat restaurant provides guests with a fully integrated ordering system in the form of individual handheld tablets that allow them to order from the carefully crafted menu of delicious specialties. (bc 27.11)

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3.4 Real Madrid Drops Christian Cross From Crest After UAE Deal

Spanish football giant Real Madrid has reportedly dropped the Christian cross affixed at the top of its official crest after signing a sponsorship deal with the National Bank of Abu Dhabi. The club’s president, Florentino Perez, revealed a new credit card sponsored by the bank, which doubles as a Real Madrid club membership card. On the card, the club’s iconic “Los Blancos” badge is missing the cross atop its royal crown. Outside the UAE, the club crest has not been altered. Perez said the partnership with the Abu Dhabi bank symbolized for Real Madrid a “strategic alliance with one of the most prestigious institutions in the world.” In September, the National Bank of Abu Dhabi (NBAD) signed a three-year agreement to become the exclusive banking partner of Real Madrid in the UAE. The deal, which is extendable and could spread to incorporate the entire Middle East and North Africa (Mena) region, saw NBAD become the only bank outside of Spain to issue co-branded Real Madrid credit and debit cards. Last month, Real Madrid also agreed a “long-term strategic partnership” with Abu Dhabi fund International Petroleum Investment Co (IPIC) that will strengthen the club’s status as the world’s richest, and help fund a planned stadium overhaul. The agreement includes setting up Real museums and expanding their soccer schools around the world, as well as creating content for digital media platforms. (AB 29.11)

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3.5 Saudi Students Studying in the US Increases 22%

The number of Saudi students studying in the US rose by 21% to nearly 54,000 last year, making it the fourth largest student exporter to the US. There were 886,052 foreigners enrolled in US higher education in the 2013-2014 school year, according to the Institute of International Education and the State Department, an increase of 7.4% year-on-year. The largest bloc of students came from China, who make up 31% and rose 17% to about 274,000.

Saudi saw the second highest growth, up 21% since last year. The Saudi kingdom ranked fourth overall, with India and South Korea taking second and third places. The most popular institutes for overseas students are New York University, the University of Southern California, the University of Illinois at Urbana-Champaign, Columbia University, Purdue University, the University of California at Los Angeles, Northeastern University, Arizona State University, Michigan State University and the University of Washington. (AB 21.11)

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3.6 Al Futtaim to Invest $700m in Egypt After Dispute Settled

Dubai-based conglomerate Al Futtaim Group said it would invest $700 million in Egypt over three years and pay the government $30.5 million as part of a settlement reached recently over a long-standing land sale dispute. Al Futtaim said the investments would be directed towards new projects in a second phase of the company’s Cairo Festival City development, including a hotel and nearly 500 housing units. Also, Al Futtaim has agreed to pay $30.5 million within 90 days as part of a settlement. Egypt is seeking to clear a backlog of such disputes to help win back foreign investors spooked by political and economic turmoil since the 2011 uprising. Al Futtaim began work on Cairo Festival City in 2008, building a shopping center, two hotels, schools, clinics and residences on a 3 million square meter area. The company aims to increase the number of shops in the development to 300 in the first half of 2015 from 200 currently. (AB 25.11)

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3.7 Disney in Talks to Build First Middle East Theme Park in Egypt

The Walt Disney Company is in talks about building a theme park in Egypt, its first venture in the Middle East. Minister of Investment Salman said the park would be similar to the venue in Paris. Tourism in the country plummeted following the unrest in the country after the downfall of former president Hosni Mubarak in early 2011. Walt Disney has been previously linked to the Dubailand development for its first theme park in the Middle East, but it did not materialize. (AB 20.11)

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3.8 Westinghouse Signs Agreement to Develop Nuclear Power in Turkey

Westinghouse Electric Company, China’s State Nuclear Power Technology Corporation (SNPTC) and Electricity Generation Company (the largest electric power company in Turkey), announced an agreement to enter into exclusive negotiation to develop and construct a four-unit nuclear power plant site in Turkey based on AP1000 reactor technology. The project also covers all life cycle activities including operations, nuclear fuel, maintenance, engineering, plant services and decommissioning. Eight AP1000 units are currently under construction worldwide: two each at the Vogtle and V.C. Summer sites in the U.S. and the Sanmen and Haiyang sites in China. In addition, shareholder agreements have been signed in the past few months for the development of AP1000 plants at the Moorside site in the UK and the Kozloduy site in Bulgaria.

Westinghouse Electric Company, a group company of Toshiba Corporation, is the world’s pioneering nuclear energy company and is a leading supplier of nuclear plant products and technologies to utilities throughout the world. Westinghouse supplied the world’s first pressurized water reactor in 1957 in Shippingport, Pennsylvania. (Westinghouse 24.11)

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3.9 Grace Buys Out Turkey Construction Products JV Partner

W. R. Grace & Co. has entered into definitive agreements to acquire the remaining 50% equity interest in the joint venture it formed in 1996 with STFA Yatirim Holding A.S., one of Turkey’s most established and reputable conglomerates providing services in construction, natural gas distribution, construction equipment, and construction chemicals. With the agreement, STFA will sell its 50% stake in Grace Yapi Kimyasallari to Construction Products Dubai, a Grace subsidiary. The business, located in Istanbul, Turkey, provides cement additives, concrete admixtures, and building envelope products in Turkey and the surrounding region. The transaction is pending Turkish regulatory approval and is expected to close by the end of the year. Terms were not disclosed. Following the transaction, the business will become a wholly-owned subsidiary of Grace and operate within its Grace Construction Products business segment. Grace offers a wide range of innovative specialty construction chemicals and, as a worldwide leader in the construction products industry, its building materials have been used in major projects around the globe. The business will continue to provide Specialty Construction Chemicals products to customers in Turkey, Azerbaijan, Georgia, Kazakhstan and Iraq. It will also remain an important growth center for the company’s Specialty Building Materials business in the region. (Grace 20.11)

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4: CLEAN TECH & ENVIRONMENTAL DEVELOPMENTS

4.1 Rare Israeli Beachfront Saved from Private Developer’s Claws

On 1 December, Israel’s Central District Planning Committee decided that the famous Palmachim Beach shall continue to remain the secluded, natural area it has always been – and not be bulldozed and concretized into a 350-room holiday resort. Located midway between Tel Aviv and Ashdod, the site has been the subject of bureaucratic battles for several years. Four years ago, the holiday village received approval – but due to widespread popular protests, the government returned the issue to the public planning committee. The committee has now reversed the original decision, and the beach will be declared a national park. The green organizations leading the struggle against the resort claimed that Israel is short on beachfront and that the remaining sea shore actually belongs to the public and should not be sold for the private use of just a few. Palmachim, in fact, is one of the few beachfronts that have remained in their natural form, and the environmentalists insisted that it be preserved for future generations. Likud Interior Minister Gilad Erdan is credited with having done much towards this decision; he fought valiantly against the hotel project when he served as Environment Minister in the previous government. (Arutz7 01.12)

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4.2 Egypt’s Environment Ministry To Boost River Transport

Egypt’s Environment Ministry is looking to boost river transport up to 25% by establishing infrastructure and limiting negative and environmental impacts of transferring merchandise via the Nile river, according to Minister Khaled Fahmy. In remarks on the sidelines of a meeting with the ministers of irrigation and transportation, Fahmy said that all countries use their waterways for efficient transportation. He said, however, that citizens in Egypt fear new usages, although the ministry does not have any fears. The minister concluded by saying that river transportation in Egypt does not exceed 0.5% of the total transportation rate. He added that his ministry is studying the possibility of transporting passengers or products via the Nile. (Al-Masry Al-Youm 26.11)

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5: ARAB STATE DEVELOPMENTS

5.1 Syria Ban on Produce ‘Disastrous’ for Lebanon

Farmers are expecting further deterioration to the agriculture sector following a decision by Syrian authorities over a week ago to halt the import of Lebanese produce. Syrian authorities refused to issue new permits for Lebanese farmers to export their produce to Syria following the expiry of old import permits. Lebanon has 12,000 tons of potatoes remaining from the old season and 50,000 tons newly harvested, while the country only consumes 20,000 tons, so the country still need to export around 40,000 tons. Syria usually imports around 90% of Lebanese bananas, so the new measure would take a heavy toll on local banana producers. The new measure was also unfair because Lebanon usually imports almost all kinds of products from Syria without any restrictions. Under the Greater Arab Free Trade Area agreement signed by Lebanon, the country is obliged to grant Syrian and other Arab produce and goods free access to its market.

On top of its failure to lobby the Arab League to extend the “Agricultural Calendar” beyond 2011, Lebanon is not even exercising import safety and quality standards, which can help protect farmers from unfair competition in an indirect way. Lebanon’s produce, meanwhile, is subject to stringent standards, which often lead to the denial of shipments by Arab states. (TDS 02.12)

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5.2 Jordan Promoted As Hub of Religious Tourism at Expo

Jordan’s Ambassador to Malaysia Maher Lokasha, accompanied by embassy members, on 1 December checked on the Jordanian pavilion participating in the religious tourism, Hajj and umrah exhibition in Kuala Lumpur. The Jordan Tourism Board, the Kingdom’s representative to the event, sought to promote the religious tourism product in Jordan and Jerusalem with the participation of Jordanian travel and tourist agencies. Jordan’s participation had an effective role in acquainting Malaysian tourists with the possibility of visiting holy sites in Saudi Arabia and Jerusalem through Jordan, in addition to visiting Jordanian religious and historic sites. (Petra 01.12)

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♦♦Arabian Gulf

5.3 Oman Ranks 5th in Economic Freedom of the Arab World 2014 Report

Oman ranked 5th out of 22 members of the Arab League in the Economic Freedom of the Arab World 2014 Report, launched at the Economic Freedom of the Arab World Conference in Amman, Jordan. The report showed that Oman has improved its ‘access to sound money’ while also recording an increase in the ‘regulation of business, credit and labor’. The report shows that Oman is making considerable progress towards a free and open market that will provide new opportunities for enterprises to thrive. The results indicate that the Sultanate’s economic freedom will grow due to the ongoing regulatory improvements that will support local development, attract inward investments and ultimately advance economic diversification. Jordan and the UAE are tied as the most economic free nations in the region with Bahrain in third, Kuwait in fourth and Qatar joining Oman in fifth place. Lebanon dropped to seventh place while Saudi Arabia ranked eighth, Yemen ninth and Tunisia completing the top ten. (BIME 25.11)

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♦♦North Africa

5.4 Egypt’s Urgent Railway Development to Cost LE41 Billion

Egypt’s aging railway urgently needs LE41 billion to develop 700 outdated carriages and 21 tractor units, Minister of Transportation Dahy said. Negotiations to purchase 700 new ordinary carriages are ongoing with Hungarian, Chinese and Spanish companies. The ministry is expecting to soon receive 212 air conditioned carriages.

Egypt’s railway, which transports around 1.4 million passengers every day, has been struggling with an outdated system for years. The number of fatalities from train accidents reached 781 in 2013, almost 74% more than in 2012, which saw 447 train-related deaths. More than half of those accidents were caused by deficiencies in railway crossings. The government has not announced any long term plans to develop the whole railway system. The transport ministry also plans to raise ticket prices for air conditioned passenger trains in January. In 2013, Egypt’s Railway Authority saw its revenues drop 34% compared to the prior year on the back of repeated suspensions in its operations due to security reasons. Revenues from passenger rail fell 39%, registering LE611 million ($88 million), while those from commercial rail dropped five% to hit LE145 million ($21 million) in 2013. (Ahram 22.11)

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5.5 Cairo Considers New Iron & Cement Licenses to Fill Local Gap

Investment Minister Salman said the cabinet is currently studying whether to introduce new licenses for iron and cement to meet local market needs by 2020. The minister said the potential licenses will come into effect in accordance with studies undertaken on market needs. The new licenses may relieve pressure on the balance of payments and foreign reserves, depleted by importing from abroad, and the measure will be linked to the current investment plan. Salman stated that Egypt will suffer from a deficit of 30,000 metric tons of cement by 2020. This is comprised of the difference between current cement production estimated at 50,000 metric tons per year and an expected 80,000 metric tons in consumption by 2020. He said studies confirm Egypt will be on the verge of an iron deficit crisis by 2020, as consumption will reach 12.5m metric tons, despite current production estimated at only 8m metric tons. Salman added that the energy shortage crisis will push Egypt toward considering issuing licenses for investors in exchange for the investor providing their own energy. He said, however, that the iron licenses will be issued in an integrated manner to include all types of iron, ranging from the initial stages to the final ones. (DNE 01.12)

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6: TURKISH, CYPRIOT & GREEK DEVELOPMENTS

6.1 Turkey Massively Expands Food Exports to Russia

Turkey’s food exports to Russia surged over the first nine months of the year, with white meat exports, poultry and seafood increasing by 447%, Agriculture Minister Eker stated. Turkey is a major supplier of food and agricultural produce to Russia, having posted $1.68 billion in trade last year. After the US and the EU began imposing sanctions on Russia for its role in the conflict in Ukraine, Russia retaliated with restrictions on the importation of food from the EU and other Western countries in August. The restrictions created big opportunities for Turkey and Latin American countries such as Brazil, which increased food exports to Russia. In the first nine months of the year, Turkey’s exports to Russia were valued at $4.5 billion, with the main export products being textiles, yarn, fabric, manufactured goods, vegetables and fruit, according to official data from the Economy Ministry. (AA 24.11)

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6.2 OECD Expects Turkey to Grow 3% This Year

Turkey will grow 3% this year, the OECD stated on 25 November in its latest Economic Outlook, confirming its growth forecast for the country 3.2% in 2015 and 4% in 2016. The global economy will gradually improve over the next two years but Japan will grow less than previously expected while the Eurozone will continue to struggle with stagnation and an increased deflation risk, it said. Furthermore, diverging monetary policies could lead to greater financial volatility for emerging economies, many of which have accumulated high levels of debt. The euro area is projected to grow by 0.8% in 2014, before slight acceleration to 1.1% in 2015 and 1.7% in 2016. (HDN 25.11)

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6.3 Poor Oral Health Figures Put Dent in Turks’ Smile

According to oral health statistics from the World Health Organization (WHO) and the Istanbul Chamber of Dentists, while Europeans on average use three toothbrushes a year, the average Turk uses less than one, noting that sufficient oral health measures are not being taken in the country. The data indicate that one in three people in Turkey does not brush their teeth even once a day. One out of two households does not possess a toothbrush. The statistics also indicated that older people’s oral health is worse than their younger counterparts. The percentage of over-65s who have no teeth is around 65%. Rotten teeth and gum disease are among some of the most common health problems in the country. According to the WHO figures, the four greatest non-infectious diseases are diabetes, cancer, respiratory diseases and tooth and mouth disease. Every year, 36 million people worldwide lose their lives from these non-infectious diseases, and this is why oral health is so important. The number of dentists in Turkey is high. At the moment there are 62 dentistry faculties and almost 25,000 dentists. In a country of 75 million, there are thought to be 3,000 patients to each dentist. (Zaman 24.11)

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6.4 Cyprus to Return to Growth in 2015, Capital Controls to be Lifted

Cyprus is expected to return to growth next year, with the economy expected to expand for the first time in four years by 0.5%, Cypriot Central Bank chief Georghadji told MPs. The central banker was optimistic that the recovery was at a faster pace than forecast and that with the banking system now seeming to have stabilized, the final capital controls imposed as part of last-years bailout fracas, will be lifted “soon”. She told the House Finance Committee hearing that the European Commission’s revised forecast of a 2.8% contraction this year was “more realistic”, up from earlier estimates of a 3.2% contraction.

Georghadji told MPs that her optimism is based on the fact that the recovery so far has been faster and results have been better than initially projected. Noting that the local banks were still not providing sufficient liquidity to the real economy, Georghadji said that the Central Bank has a strategy in line with ECB measures to encourage lenders to provide credit in a sustainable way and provided borrowers can repay their loans. She said that the Central Bank focus now is on the restructuring of loans in a reasonable, just and sustainable way so that the ratio of non-performing loans (NPLs) in banks’ book will be reduced. This, she added, will have a positive effect on interest rates and the economic climate as a whole to the benefit of both households and businesses. Georghadji said she will be monitoring closely the situation with big borrowers and will be checking what measures the banks have taken to recover, especially as the rate of restructurings so far has not been to a “satisfactory” degree. (FM 02.12)

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6.5 Greece Improves in World Bank’s “Doing Business” Report

A new World Bank Group report finds that Greece’s standing on the ease of doing business continues to improve. With the report’s expansion of several indicator sets and change in the ranking system factored in, Greece’s doing business rank is now 61. This reflects a regulatory framework for local entrepreneurs that is gradually aligning itself with other OECD high-income economies. The Doing Business 2015: Going Beyond Efficiency shows that Greece made registering property easier by reducing the property transfer tax and eliminating the requirement for a municipal tax clearance certificate. The reform enabled the country to record the most progress globally in the registering property indicator. Last year, Greece was the top improver globally in starting a business in 2012/13.

In addition to property registration, Greece made business incorporation easier over the past year by lowering registration costs so that starting a business now costs 2.2% of income per capita, down from 32.5% a decade ago. In addition, Greece strengthened legal institutions by introducing an electronic filing system for court users. Since 2005, the Doing Business project shows that Greece has implemented 20 reforms, making it easier for local entrepreneurs to do business. This gives Greece the fourth largest number of reforms in OECD high-income countries during that period, after Portugal, Czech Republic, and Poland. Data in Doing Business 2015 are current as of 1 June 2014. (EG 11/14)

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7: GENERAL NEWS AND INTEREST

♦♦ISRAEL:

7.1 Elections in Israel as PM Netanyahu Fires Lapid and Livni

Prime Minister Benjamin Netanyahu has fired Minister of Finance Yair Lapid and Minister of Justice Tzipi Livni. The PM instructed the Cabinet secretary Mandelblitt to issue letters of dismissal to the ministers. Netanyahu said, “In recent weeks, including over the past day, ministers Lapid and Livni have harshly attacked the government that I head. I will no longer tolerate opposition within the government and I won’t tolerate ministers attacking the policy of the government that I head from within the cabinet. I will call for the dissolution of the Knesset as soon as possible to go to the people and receive a clear mandate to lead Israel.”

The prime minister said he will call for the dissolution of the Knesset as soon as possible in order to go to elections and “receive a clear mandate from the people to lead Israel.” In a press conference Tuesday evening, Netanyahu argued that “at the current situation, from within the current government, we cannot lead the country and my responsibility as prime minister is to lead the country.” Netanyahu stressed that he refused to continue to govern with open dissent from within the coalition, urging the people of Israel to provide him with a safe majority from which he could lead.

Elections less than two years since the last vote seemed almost inevitable after Lapid rejected an ultimatum from Netanyahu in an explosive meeting Monday night ostensibly aimed at salvaging the warring coalition government.

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♦♦REGIONAL:

7.2 Qatar’s Population Climbs By 40% Since World Cup Win

Qatar’s population has rocketed by nearly 40% since the Gulf state was awarded the 2022 World Cup four years ago. According to official government figures, the number of people living in Qatar at the end of November was 2,269,672, an increase of 53,000 on the month-earlier figure. The new figure puts the population at an all-time high and has expanded by some 632,000 people since the World Cup award in December 2010. Qatar’s population has been rising as the country hires more foreign workers to build big infrastructure projects. Key infrastructure projects like the Doha Metro, road works like the Lusail Expressway and real estate developments like the Msheireb project are now well underway. It was reported that the total value of remittances from expats in Qatar increased six-fold between 2008 and 2013, 20 times the rate of population growth. Foreign workers transferred QR40.55b ($11.13b) in 2013, compared to QR9.54b ($5.4b) in 2008. During the same period, the expat population grew from 1.55 million to 2.04 million. (AB 01.12)

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7.3 Study Shows Qataris Work Less Than Half the Time of Expats

Qatari nationals work less than half the amount of time expats spend earning money in an average day, according to a government survey, which also found Qataris spend more than five hours a day engaged in leisure or cultural activities. Overall, Qataris work two hours and 52 minutes a day, compared to six hours and 42 minutes for non-nationals, the Time Use survey, by the Ministry of Development, Planning and Statistics shows. However, when broken down to include only employed respondents, the average Qatari works seven hours and 53 minutes a day, while expats work an average nine hours and 27 minutes. Only 49% of Qatari men and 28% of Qatari women are employed, the survey of more than 16,000 people said. Instead, Qataris are engaged in leisure and cultural activities, including reading, watching TV and visiting relatives, for more than five hours per day. Expats spend an average 3.5 hours on the same activities. Qataris spend 49 minutes praying each day, compared to 28 minutes among expats. The rest of the day is devoted to household chores and personal care such as eating and sleeping. (AB 26.11)

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7.4 UAE Motorists Face One-Year Ban for Exceeding 200 Kph

Drivers will face a 12-month ban if caught driving over 200 kph, under new plans being considered by the UAE’s Federal Traffic Council. The proposal has come from Dubai Police in the wake of the latest statistics that show 761 drivers were detected driving over 200 kph during the past year. The head of the UAE Traffic Council told a press conference that the new measure would help curb speeding on the UAE’s roads. The fastest one was a motorist driving at 254 kph. The car would also be impounded for two months under the proposed law. The current law for exceeding the speed limit by more than 60 kph is a AED1,000 fine, 12 points on a license, and the vehicle impounded for a month. (AB 25.11)

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7.5 Tunisia Heads to Presidential Runoff

None of the candidates in the Tunisian presidential elections on 23 November was able to pass the 50% ballot threshold to win the vote. Tunisia’s new head of state will now be elected in a runoff in the end of December. According to the first results, Nidaa Tounes candidate Beji Caid Essebsi came out first with 42.7% of the ballots, followed by incumbent president Moncef Marzouki with 32.6%. Next are Hamma Hammami of the Popular Front with 9.5%, Slim Riahi of the Free Patriotic Union with 6.7%, and Hechmi Haamdi of al-Aridha Chaabia with 3.9%.

Turnout was 64.6%. More than 5.25 million Tunisians registered with the Independent High Authority for Elections (ISIE) were eligible to vote, including about 400,000 living abroad. Out of the initial 27 candidates, 22 competed in the presidential race. Many observed young voters’ noticeable abstention from the vote, as compared to a higher turnout among older people. (Magharebia 24.11)

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7.6 Moroccan Parliament to Adopt Electronic Cards to Prove Presence of MPs

The Moroccan House of Representatives has decided to adopt new measures to prove the presence of its members at a time the rate of absenteeism within the legislative branch has gone through the ceiling. Following its meeting on 24 November, the executive office of the House of Representatives has decided that the members of the Lower House will have to prove their presence with the help of electronic cards. This comes after two parliamentarians had voiced their discontent that their names were included in the list of absents recited by the head of the Lower House recently although one of them was present, while the other provided a medical certificate. (MWN 25.11)

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7.7 Turkey to Build Mosques in 80 State Universities

Turkey’s top religious body has revealed government plans to build a mosque at every state university, adding to what critics have said are increasing efforts to force Islamic values on the society. Government-paid clerics would be installed at each of the mosques to deal with “young people’s problems” and provide guidance, the head of Turkey’s Religious Affairs Directorate, known as Diyanet in Turkish, said. Mosques are under construction in over 80 universities. Fifteen of them have been opened for prayers and we will open at least 50 more in 2015. The announcement follows a decision in September to allow female students in state schools to wear the Muslim headscarf, while all make-up, hair dye, tattoos and body piercings were banned. The Islamic-rooted AKP government of Erdogan, who was installed as president this year after the maximum two terms as prime minister, has long been accused of seeking to impose religion on Turkey’s mainly Muslim but officially secular society, as well as Islamizing the education system. (AB 23.11)

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8: ISRAEL LIFE SCIENCE NEWS

8.1 Israeli Wine Cracks World’s Top 100

After tasting 18,000 wines from vineyards around the globe, influential American lifestyle magazine Wine Spectator selected Recanati Winery’s Cabernet Sauvignon Galilee as one of the top 100 wines of 2014. Every year, the Wine Spectator editors taste 18,000 wines from vineyards around the globe in order to choose the best 100 of them. This is the first time that wine made in Israel makes it into the prestigious list. The magazine’s managing editor, Kim Marcus, described the Recanati Cabernet Sauvignon Galilee, which ranked 93rd on the list, as “a rich red, showing good power to the mineral-infused dried blackberry, dark plum and current flavors. Engaging dried herbal notes emerge on the focused finish.” The Recanati Winery (http://www.recanati-winery.com/eng) was founded in 2000 in the industrial zone of Israel’s Hefer Valley in the Sharon region. Following its inclusion on the prestigious list, orders have been pouring in from all around the world. The Recanati Cabernet Sauvignon Galilee costs NIS 60 (about $16) while the top 100 list includes wines which around $150. (Ynet 24.11)

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8.2 Teva Launches Liquid Formulation of TREANDA Injection in US

Teva Pharmaceutical Industries announced the commercial availability of a liquid formulation of TREANDA (bendamustine HCI) Injection. This new liquid formulation removes the step of reconstituting lyophilized powder with sterile water prior to adding the required dose of medicine to the infusion bag and administering to a patient. By eliminating the need for reconstitution, preparation time for healthcare professionals is reduced. TREANDA is indicated for the treatment of patients with chronic lymphocytic leukemia (CLL). Efficacy relative to first-line therapies other than chlorambucil has not been established. TREANDA is indicated for the treatment of patients with indolent B-cell non-Hodgkin lymphoma (NHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.

TREANDA was approved by the FDA for the treatment of chronic lymphocytic leukemia (CLL) in March 2008. Efficacy relative to first line therapies other than chlorambucil has not been established. TREANDA received its second approval in October 2008 for the treatment of patients with indolent B-cell non-Hodgkin lymphoma (NHL) that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen.

Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is the world’s leading generic drug maker, with a global product portfolio of more than 1,000 molecules and a direct presence in approximately 60 countries. (Teva 18.11)

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8.3 AposTherapy Raises $15 Million

AposTherapy has completed a $15 million financing round at an estimated $100 million company value, after money. Previous investors, including Pitango Venture Capital, Aviv Venture Capital, and Invus, accounted for half of amount invested in the current round, and private US investors, including David Levy, responsible for the health sector in international firm PricewaterhouseCoopers, and CD&R senior partner Richard Schnall, accounted for the other half. AposTherapy has raised $30 million to date. AposTherapy also recently appeared at the Oppenheimer conference for promising private companies, which may signal its future intention to turn to overseas capital markets or strategic investors.

Up until now, the company’s business model was the supply of medical service and a medical device on a hybrid model. The service includes diagnosis of the problem in the walking dynamics of the patient, whose attempt to avoid the pain is liable to make it worse. The treatment includes adapting the shoes with special curvatures that force the patient to alter his walking dynamics in order to walk. The adapting and training are carried out by physiotherapists on behalf of the company. The fact that the company itself performs the service constrained its ability to develop rapidly in international markets. The company is now trying to change its model by transferring its service activity to physiotherapy institutes, while concentrating on research and development of the device and the manufacturing process.

Herzliya Pituah’s AposTherapy’s (http://apostherapy.com) treatment competes with pain relievers and extremely complex back and knee surgery for ending the unbearable pain, which in some cases can be stopped by using the product. The treatment also constitutes an alternative or supplementary product for physiotherapy. The patient must walk at least one hour a day using the shoes in order to obtain results, but they can also be used as ordinary shoes (a person used to the shoes can walk in the them at normal speed, and they are not conspicuous). The company’s studies show that 86% of users reported less pain within five weeks. (Globes 25.11)

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8.4 RealView Imaging Raises $10 Million

Yokneam’s RealView Imaging (http://www.realviewimaging.com), which develops 3D holograms for use in medical treatment, announced that it had raised $10 million in a financing round led by Chinese fund LongTec, together with the company’s previous investors and a number of new private investors. RealView makes possible to view a 3D holographic image that “floats in the air” in front of the doctor’s eyes, with no special eyeglasses or screen, and enables him to see the anatomy of the organ involved (so far, mostly the heart has been involved) in a manner very closely resembling the actual organ, based on information from the existing imaging devices. A trial conducted on eight patients showed that such a hologram is precise enough to help doctors make clinical decisions during surgery. The doctors can examine the three-dimensional heart from all directions, turn it around by hand, and make various markings on it. When any action is performed on the actual heart, its effect can also be viewed immediately on the hologram image. LongTec has invested in a number of Israel technology companies in the health field to date, including Sensible Medical Innovations. (Globes 25.11)

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8.5 MRI Diagnostic Approach for Brain Injury Assessment

As concern grows in the US about the danger of head injuries to American football players after a spate of recent high-school deaths, an Israeli team has developed a new magnetic resonance imaging (MRI) diagnostic approach that can more easily visualize and assess the consequences of even mild injuries to the brain. Dr. Friedman and his team at the Brain Imaging Research Center at Israel’s Ben-Gurion University of the Negev hope to change that. Researchers at BGU and its affiliated Soroka University Medical Center in Beer Sheva showed, for the first time, how they were able to identify significant damage to the blood-brain barrier (BBB) of football players following “unreported” trauma or mild concussions. The method uses dynamic contrast-enhanced magnetic resonance imaging (DCE-MRI) to detect and localize vascular pathology and BBB breakdown. The BBB is composed of proteins, membranes and other materials that protect the brain by preventing many dangerous substances from penetrating. Medical researchers, including Friedman’s group at BGU, are working to find ways to develop drugs that could repair a damaged BBB and possibly prevent Alzheimer’s disease and other neurological diseases in some patients. Forty percent of the examined football players with unreported concussions had evidence of “leaky BBB” compared to 8.3% of the control athletes. Published in the current issue of JAMA Neurology, this study could help physicians in the decision-making process regarding treatment and when an athlete may return to the playing field. The publication of this study follows closely on the heels of Tel Aviv University study showing that an enhanced environment could speed the healing of traumatic brain injuries. (DT 01.12)

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8.6 Teva Announces Launch of Generic Exforge HCT Tablets in the United States

Teva Pharmaceutical Industries announced the launch of the generic equivalent to Exforge HCT® (Amlodipine, Valsartan, Hydrochlorothiazide) Tablets in the United States. Teva was first to file, opening the generic market for the product, as well as making the product eligible for 180 days of marketing exclusivity. Exforge HCT (Amlodipine, Valsartan, Hydrochlorothiazide) Tablets, marketed by Novartis Pharmaceuticals, had annual sales of approximately $158 million in the United States, according to IMS data as of September 2014. Teva Pharmaceutical Industries (http://www.tevapharm.com) is a leading global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic drugs as well as innovative and specialty pharmaceuticals and active pharmaceutical ingredients. Headquartered in Israel, Teva is the world’s leading generic drug maker, with a global product portfolio of more than 1,000 molecules and a direct presence in approximately 60 countries. (Teva 01.12)

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8.7 Israelis Invent New Wound-Closure Method

The TopClosure Tension Relief System (TRS), an innovative new technology created for skin stretching and secure wound closure, is a simple yet creative and effective manner of treating diverse and complex skin wounds such as post traumatic, surgical, acute and chronic skin wounds, which do not respond to conventional wound care. The management of most complex wounds requires surgery as a final solution. The TopClosure TRS offers a new approach for treating such wounds through both invasive and non-invasive applications. The TopClosure TRS can be applied non-invasively by adherence to the skin, using a bio-compatible hypoallergenic tape, prior to or following surgery.

Prior to any surgical procedure during which direct skin closure is anticipated to take place under excessive tension, the system is used to temporarily stretch skin tissues, thereby, avoiding the need for tissue expanders, providing a non-invasive means of external tissue expansion and avoiding excessive surgery with associated complications. The TopClosure TRS is applied to secure wound closure following surgery, where the skin was closed under tension, by distributing the stress more evenly around the closed wound and away from the wound’s edges. Tension on the scar can be reduced or totally eliminated, thus avoiding dehiscence ‎improving the quality and the aesthetics of the scar.

The TopClosure TRS is using the bio-mechanical properties of the natural skin. The TopClosure TRS is a Novel technology aimed at harnessing the visco-elastic properties of the skin for optimizing wound closure. By Stress-Relaxation – repeated load cycles of high tension and relaxation the wound edges become closer together, a few small increments every time. When tension is too high to allow immediate primary closure of wound edges, skin is dressed and complete closure is deferred to a later stage. Mechanical creep is utilized gradually in a few days process. In this way the TopClosure TRS prevents ischemia and tearing of tissues caused in the process of wound closure by tension sutures.

Ra’anana’s TopClosure (http://www.topclosure.com) TRS is changing the standard of wound care and has a global impact. The use of this unique new system is easy, safe and leads to excellent results. Surgeons will find this application to be extremely helpful when managing both, simple and complex wounds.

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9: ISRAEL PRODUCT & TECHNOLOGY NEWS

9.1 KaliPAK – Portable Solar Energy Backpack

The brainchild of two years of research and design by the Kalisaya (http://kalisaya.com/kalipak1) team based in Israel, the idea for the KaliPAK came about as a solution for those places where grid-based electric power doesn’t exist. This doesn’t just mean that campers and trekkers have a way to stay connected; this autonomous and environmentally-friendly power source could even be used to replace diesel generators or as a back-up in the case of natural disasters. Currently, the team of designers, disaster-recovery experts and businesspeople are hoping to raise $250,000 on crowdfunding site Kickstarter to bring the product to market and aid electrically-challenged communities in Africa in the process.

Calling itself “all the power you need when there is no power around,” KaliPAK can generate up to 600watts/hour, enough to charge a smartphone 100 times over, a laptop 10-15 times and provide 120 hours of light. The pack weighs less than 14 lbs. and can be charged by plugging it into anything from a regular outlet, to a car-lighter socket, or using the four (patent-pending) solar panels contained inside the pack. According to the company, the KaliPAK can be charged to up to about 80% of its full power capacity on a sunny day. In addition, the pack comes equipped with all the outlets you may need: two USB ports, two 12V power outlets and a Bluetooth transmitter that will let you know, through the KaliAPP, how much energy you still have, whether you’re correctly aimed at the sun, and provide an emergency switch. (NoCamels 23.11)

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9.2 European Bioinformatics Center Selects Mellanox InfiniBand for Supercomputer

Mellanox Technologies announced the Center for Biological and Sequence Analysis (CBS) at Denmark Technical University (DTU) has selected Mellanox’s end-to-end FDR 56Gb/s InfiniBand solution for the center’s new supercomputer, making Denmark a global leader in bioinformatics. Mellanox’s InfiniBand interconnect solution delivers the scalability, high performance and bandwidth needed for researchers around the world to share information and collaborate on the molecular analysis of people and their diseases to discover patterns and determine treatment methods. DTU’s supercomputer can store over 7.5 petabytes of data and has 92 terabytes of extremely fast memory over 560 servers, making it among the 125 largest computers in the world today. Mellanox’s FDR InfiniBand solution enables researchers on the DTU campus, as well as an estimated 500 users from around the world to take advantage of the enormous processing power offered by the supercomputer, aiding in the effort to make advances in life sciences. Among these users will be those participating in the European research infrastructure ELIXIR, which Denmark joined last spring. ELIXIR is an infrastructure that connects many of Europe’s independent bioinformatics resources to form a high-performance computing network, making it possible to utilize and analyze shared data in new and larger contexts. By choosing Mellanox, DTU’s supercomputer is now equipped with the most efficient interconnect technology and researchers will be able to easily expand their efforts when needed at an affordable rate while maintaining unparalleled bandwidth and low latency, which ensures better performance and improved storage capabilities.

Yokneam’s Mellanox Technologies (http://www.mellanox.com) is a leading supplier of end-to-end InfiniBand and Ethernet interconnect solutions and services for servers and storage. Mellanox interconnect solutions increase data center efficiency by providing the highest throughput and lowest latency, delivering data faster to applications and unlocking system performance capability. (Mellanox 24.11)

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9.3 Giraffic Accelerates MPEG-DASH, Bringing the Industry Closer to True HD

Giraffic announced partner and customer trials that prove the compatibility and performance benefits of its Adaptive Video Acceleration (AVA) for MPEG-DASH. The news adds to adaptive streaming standards supported and enhanced by AVA, such as HLS and Smooth Streaming, positioning Giraffic as a leader in video acceleration and MPEG-DASH performance. Giraffic AVA enables true HD and UHD 4K across a wider selection of content and devices, and enables device manufacturers to seamlessly support the various adaptive streaming protocols, including the varieties of MPEG-DASH. MPEG-DASH is the industry’s emerging adaptive bitrate streaming standard. It has yet to be fully standardized, making it difficult for device manufacturers to support each of the many content providers and apps. Additionally, just like with other adaptive streaming protocols, varying network conditions may prevent users from experiencing true HD and certainly UHD 4K TV quality.

Tel Aviv’s Giraffic (http://www.giraffic.com) is the inventor of Adaptive Video Acceleration (AVA) – a new client-side network throughput optimization technology that offers consumers High Definition video without re-buffering pauses or streaming resolution reduction. With millions of users worldwide enjoying accelerated high-quality video via Giraffic AVA, and thousands of Giraffic-enabled devices or Apps being deployed daily, Giraffic’s ground-breaking technology has been validated and benchmarked by some of the world leaders in Consumer Electronics and OTT TV to provide dramatic Internet throughput increase. (Giraffic 20.11)

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9.4 Camtek’s 3D Gryphon InkJet Technology Concludes a Beta-Test

Camtek announced that its 3D Functional InkJet Technology system for PCB solder mask applications, known as Gryphon, successfully completed a beta testing phase at Eltek’s site in Israel. The application system and solder mask material performed according to specification and met its quality and process requirements. This is an important milestone for Camtek. Eltek has been a close working partner of Camtek’s for many years and is one of the leaders at the high-end of PCB manufacture with stringent technical requirements, which Gryphon surpassed.

Petah Tikva’s Eltek (http://www.eltekglobal.com) is one of Israel’s leading manufacturer of printed circuit boards, the core circuitry of most electronic devices. It specializes in the complex high-end of PCB manufacturing, i.e., HDI, multilayered and flex-rigid boards. Eltek’s technologically advanced circuitry solutions are used in today’s increasingly sophisticated and compact electronic products. Migdal HaEmek’s Camtek (http://www.camtek.co.il) provides automated and technologically advanced solutions dedicated to enhancing production processes, increasing products yield and reliability, enabling and supporting customer’s latest technologies in the Semiconductors, Printed Circuit Boards (PCB) and IC Substrates industries. Camtek addresses the specific needs of these interconnected industries with dedicated solutions based on a wide and advanced platform of technologies including intelligent imaging, image processing and functional 3D inkjet printing. (Camtek 25.11)

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10: ISRAEL ECONOMIC STATISTICS

10.1 OECD Forecasts 3% Growth for Israel in 2015

The Israeli economy will recover from its current slowdown and return to 3% GDP growth next year, predicts the OECD in its latest economic forecast summary for Israel. The OECD calls on Israel to refrain as far as possible from further budget cuts for social affairs ministries: “The authorities’ commitment to resume fiscal consolidation in 2016 and to pursue the goal of reducing government debt is welcome. But civilian budget expenditures, notably already relatively low education and social spending, should be protected from cuts as much as possible.”

In its forecast the OECD said, “After a pronounced but temporary weakening in 2014, growth is projected to rebound to about 3% in 2015 and 3.5% in 2016, which should avert any rise in unemployment. The rebound in domestic demand that is expected to follow the end of the Gaza conflict, the projected strengthening of the external environment and the recent weakening of the exchange rate will sustain activity.” The OECD added that the economy should also be supported by ever-lower interest rates and a pause in fiscal consolidation in 2015. Falling prices call for continued expansionary monetary policy to facilitate the recovery. Even so, there needs to be continued vigilance as to the risks of overheating in the real estate market that this policy can induce. (Globes 25.11)

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10.2 Tel Aviv is Israel’s Most Expensive City

Tel Aviv has the priciest housing, and the highest monthly expenditure. Tel Aviv families spend the most – NIS 12,796, while the average family in Bat Yam spends the least, just NIS 8,373 a month, according to a new Central Bureau of Statistics report covering Israel’s 14 largest cities. Rishon LeZion boasts the highest average monthly income per family, at NIS 17 786, with Bat Yam recording the lowest, at just NIS 10,519. Tel Aviv leads in terms of housing expenditure, too, with housing costs in the city accounting for 30% of the average family’s overall monthly expenses; in Ashkelon and Beer Sheva, housing makes up just 20% of the average family’s monthly expenses. Beer Sheva families, on the other hand, spend the most on food (19.6% of their overall monthly outlay), while families in Rehovot spend the least (14.9%). In most of the big cities, the average family home serves less than one person per room; in Bnei Brak and Jerusalem, however, the average residence is home to more than one person per room (1.2-1.3).

Rishon LeZion leads the way in terms of the number of residents living in apartments they own themselves (76%); Tel Aviv, on the other hand, boasts the highest percentage of rented apartments (47%). Apartments in Tel Aviv have the highest average value, at NIS 2.22 million, with the cheapest apartments to be found in Beer Sheva – an average of NIS 894,000. The average rental in Beer Sheva goes for a third of that in Tel Aviv – NIS 1,400 as opposed to NIS 4,000. Tel Aviv also boasts the highest number of households that own a home computer and an Internet subscription, 87% and 82% respectively. Ashkelon families lead the way when it comes to ownership of a television and subscriptions to cable and satellite television, 97% and 87% respectively. Finally, more than half the families in Bnei Brak own a tumble dryer, compared to only about 20% in Bat Yam. (Ynet 21.11)

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11: IN DEPTH

11.1 ISRAEL: Summary of Israel’s Private Equity Market – Third Quarter 2014

In Q3/14, Israeli and foreign private equity investors entered into 11 transactions valued at $606 million, down 27% from $835 million in Q3/13 (22 deals), but well in excess of the $79 million – the lowest quarterly amount in four years – invested in Q2/2014 via 21 deals.

Foreign PE fund Oaktree Capital completed the largest deal in the third quarter, which accounted for 78% of the deal making. It acquired Veolia Israel, a provider of water, waste and energy management solutions for $475 million.

In the first three quarters of 2014, 51 private equity deals by Israeli and foreign PE investors accounted for $1.2 billion, down 27% from $1.7 billion invested in 58 deals in the year-earlier period and also well below the $2.1 billion and $1.6 billion invested in Q1-Q3/12 and Q1-Q3/11, respectively.

In Q3/14, Israeli private equity funds invested $114 million or 19% of all PE investments made in Israel, which compared with just $29 million invested in Q2/14 (the lowest quarter since 2011) and $325 million invested in Q3/13.

Rick Mann, Partner and Head of M&A at GKH, noted: “The Israeli private equity market data continues to show that Israeli private equity funds tend to be the most active in the Israeli market, but foreign private equity funds are generally behind the larger size transactions. The quarterly data tends to be influenced by one or two large transactions, and that is a pattern we expect to see continuing with significant investment opportunities in both the technology sector and the financial and industrial sectors.”

In the Q1-Q3/14 period, $519 million, or 42% of total transaction value, was invested by Israeli PE funds, compared with $518 million (30% of total) invested in the same period in 2013, and $488 million (23%) invested in Q1-Q3/12.

In Q3/14, five buyout transactions accounted for $576 million or 95% of all investments, with $30 million in straight equity deals making up the remaining 5%. In Q3/13 five buyouts captured $653 million (78% of total), while Q2/2014 was exceptional – 21 straight equity deals attracted $78 million or 100% of all the deal making in the quarter.

In the first three quarters of 2014, 12 buyout deals accounted for $929 million (75% of total deal value), a decrease of 32% from $1.4 billion (12 deals, 80%) in Q1-Q3/13, and 44% from $1.7 billion (15 deals, 79%) in Q1-Q3/12.

Marianna Shapira, Research Manager at IVC Research Center noted, “A review of the data shows PE investments in technology companies differ from those in non-technology companies in a number of ways. First, straight equity deals tend to be directed to technology companies, while buyouts and other mechanisms are used mostly in non-technology deals. Secondly, technology investments are, on average, far lower than those for non-technology – about half the amount. The first two factors combine into a third: the number of deals in the technology sector is 50% higher than those of non-tech deals by PE funds. Interestingly”, points our Shapira, “these investment patterns have been followed by both local and foreign funds in their Israeli investments, while substantially different strategies may be employed in foreign PE markets by the same funds.”

Israeli private equity investors

The IVC-Online Database maintains data on 30 active Israeli private equity management companies with a total of $8.5 billion under management. Since the beginning of 2014, 12 Israeli PE funds raised $1.2 billion to date, and twelve additional funds are in the process of capital raising.

IVC Research Center (http://www.ivc-online.com) is the leading online provider of data and analyses on Israel’s high-tech, venture capital and private equity industries. Its information is used by all key decision-makers, strategic and financial investors, government agencies and academic and research institutions in Israel. (IVC 25.11)

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11.2 ISRAEL: Fitch Revises Israel’s Outlook to Stable; Affirms IDR at ‘A’

On 21 November 2014, Fitch Ratings (http://www.fitchratings.com) has revised the Outlook on Israel’s Long-term foreign currency Issuer Default Rating (IDR) to Stable from Positive. The Outlook on the Long-term local currency IDR is Stable. The Long-term foreign and local currency IDRs have been affirmed at ‘A’ and ‘A+’ respectively.

The issue ratings on Israel’s senior unsecured foreign and local currency bonds are also affirmed at ‘A’ and ‘A+’ respectively. The Country Ceiling is affirmed at ‘AA-‘ and the Short-term foreign currency IDR at ‘F1’.

Key Rating Drivers

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

Medium:

Fiscal consolidation has been set back by military operations against Hamas in Gaza in the third quarter. Fitch forecasts a central government deficit of 3.3% of GDP this year, compared with a budgeted target of 2.8% of GDP. Additional military spending is contributing to a widening of the budgeted deficit to 3.4% of GDP in 2015. This will also mean the fiscal expenditure rule is likely to be breached. A tighter budget is planned for 2016, which in Fitch’s opinion will be tough without new revenue-raising measures.

Government debt is fairly high, at a Fitch-forecast 67.4% of GDP at end-2014. Progress in lowering debt toward the peer median of 48.9% has been disrupted by the Gaza conflict. Financing flexibility is high, with deep and liquid local markets, access to international capital markets, an active diaspora bond program, and US government guarantees in the event of market disruption. The structure of debt is favorable.

The conflict with Hamas and stagnation of the peace process highlight the geopolitical risks that weigh on Israel’s ratings. Some neighboring countries do not formally recognize Israel’s existence and there are intermittent conflicts with military groups in surrounding countries and territories. Tensions with Iran are high. The conflict in Syria possess a risk to Israel and to other neighboring countries that could impact Israel, although direct spillover has so far been negligible. A shift in Israel’s future gas export strategy looks set to deepen economic relations with some neighboring countries.

Israel’s IDRs also reflect the following key rating drivers:

The external balance sheet is a strength and Fitch forecasts it to improve. Gas production should ensure sustained current account surpluses, which we forecast to average 1.5% of GDP over 2015 – 2016. Likely large inflows of FDI will further bolster reserves and its net creditor position, which Fitch estimates at 32.4% of GDP at end-2014, compared with the ‘A’ range median of 8.6% of GDP. Enabling legislation for a sovereign wealth fund, set to receive revenues from 2019, has been approved.

We forecast real GDP growth of 2.3% in 2014 despite a period of stagnation in the third quarter. For 2015 and 2016 growth is forecast to average just over 3%, driven by a post-conflict rebound (particularly in tourism), rising investment, a stronger global economy and currency weakness. Damage to capital stock during the recent conflict was minimized by effective missile deterrence. Growth volatility is lower than peers. Inflation is currently negative, but looks set to return to within the authorities’ preferred range of 1 – 3% during 2015 due to currency depreciation and a pick-up in economic activity.

Israel’s well-developed institutions and education system have led to a diverse and advanced economy. Human development and GDP per capita are well above the peer medians and the business environment promotes innovation. A buoyant high-tech sector has driven growth in services exports, which averaged 10.6% over 2010-2013 despite exchange rate strength.

Steps are being taken to tackle structural weaknesses. The employment rate among ultra-orthodox men and Arab women has risen (to 30.5% and 44.5% in 2013, from 23.4% and 40.4% in 2008, respectively), partly in response to government initiatives, holding down wage inflation. Concentration of ownership in the private sector is being addressed, though introducing new players in some sectors is complicated by Israel’s fairly small and isolated market.

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently balanced. The main factors that could, individually or collectively, lead to a positive rating action are:

Sustained progress in reducing the public debt/GDP ratio towards the category peer median level
A sustained easing in geopolitical risk

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

A sustained deterioration of the public debt/GDP ratio
A serious worsening of geopolitical risk

Key Assumptions

Current regional conflicts and tensions are assumed to continue, but their impact on Israel is not expected to worsen materially. Fitch does not expect a military conflict between Israel and Iran. Fitch assumes the civil war in Syria will continue without seriously destabilizing neighboring states or directly spilling over into Israel.

Renewed conflict with Hamas in Gaza is not ruled out, despite the serious degradation of the latter’s military capacity. The tolerance of the rating and Outlook depends on the economic and fiscal implications of any conflict. Fitch does not assume any breakthrough in the peace process with the Palestinians.

Gas supply and associated revenues from the Tamar field are assumed to be in line with the authorities’ assumptions. Fiscal and export revenues from gas will be low over the forecast period of 2014-2016. (Fitch 21.11)

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11.3 ARAB WORLD: Jordan & UAE Offer Highest Levels of Economic Freedom

Jordan and the United Arab Emirates (UAE) are the most economically free nations in the Arab world, according to the annual Economic Freedom of the Arab World report published by the Fraser Institute (http://www.fraserinstitute.org), an independent, non-partisan Canadian public policy think-tank, and released in Amman, Jordan in partnership with the Friedrich Naumann Foundation for Liberty (FNF) and the International Research Foundation (IRF) of Oman.

Both countries posted freedom scores of 8.1, a slight increase from the 8.0 posted by both countries last year. Bahrain, the region’s financial hub, dropped from first place last year to third place and a score of 8.0 in this year’s report, which is based on 2012 data, the most recent available. “Economic freedom increases prosperity, creates jobs and reduces poverty, and subsequently liberates people from government dependence while opening the door to democracy and other freedoms,” said Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom (Fraser Institute) and co-author of the report.

Among the 22 nations in this year’s report, Algeria, last year’s last place country, again holds the dubious distinction of being the least economically free nation in the Arab world with a score of 5.6 followed by Iraq (5.7), Syria (5.8), Sudan (5.9) and Libya (6.0).

The Economic Freedom of the Arab World report compares and ranks Arab nations in five areas of economic freedom: size of government, including expenditures, taxes and enterprises; commercial and economic law and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labor and business.

Economic freedom is based on the cornerstones of personal choice, voluntary exchange, freedom to compete, and security of private property. Research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of prosperity, greater individual freedoms and longer life spans. A denial of economic freedom helped spark the “Arab Spring.” This report provides a timely reminder of the importance of real reform to increase economic freedom and prosperity throughout the region.

The report measures available data on economic freedom in 22 nations of the League of Arab States, but due to data limitations, calculations of the overall level of economic freedom are only available for 20 jurisdictions: Algeria, Bahrain, Comoros, Djibouti, Jordan, Kuwait, Lebanon, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Egypt, Tunisia, Yemen, Sudan, Iraq, Libya, Syria and the UAE. The rankings are entirely based on third-party data.

Economic Freedom Rankings 2014: Countries of the Arab World

1. Jordan and the United Arab Emirates (8.1)
3. Bahrain (8.0)
4. Kuwait (7.8)
5. Oman and Qatar (7.7)
7. Lebanon (7.6)
8. Saudi Arabia (7.4)
9. Yemen (7.3)
10. Tunisia (7.0)
11. Egypt (6.8)
12. Comoros, Djibouti, Morocco and Mauritania (6.5)
16. Libya (6.0)
17. Sudan (5.9)
18. Syria (5.8)
19. Iraq (5.7)
20. Algeria (5.6) (Fraser Institute 20.11)

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11.4 ARAB WORLD: Arab Countries Import Half of Their Food Requirements

The Arab region, which imports about half of its food needs, can boost its food production primarily by improving productivity and irrigation efficiency, in addition to regional cooperation, according to a report by the Arab Forum for Environment and Development (AFED) on food security. The report points out that Arab countries face serious challenges in their quest to enhance food self-sufficiency, including aridity, limited cultivable land, scarce water resources and population growth, in addition to the serious implications of climate change.

The report also blames weak policies, insufficient investment in science and technology in agricultural development, and a lack of regional cooperation as factors that contributed to “the impoverished state of agricultural resources and to their inefficient use and low productivity”.

The food deficit is underscored by a self-sufficiency ratio of about 46% in cereals, 37% in sugar, and 54% in fats and oil, according to the report. There is a link between food and water; the regional average masks the widely varying levels among countries, of which 13 are classified in the severely water scarce category, at less than 500 cubic meters per capita. The situation is so alarming in six of these countries, with availability of renewable water less than 100 cubic meters per capita.

The water scarcity issue is critical for Jordan which now ranks as the world’s second water-poorest country, where water per capita is 88% below the international poverty line of 1,000 cubic meters annually, according to government officials. This dilemma has been aggravated by the swelling of the population, with the Kingdom currently hosting around 1.4 million Syrian nationals escaping the conflict in their country.

Water scarcity in the Arab region is accentuated by the utilization of about 85% of total water withdrawals for the agriculture sector, which is characterized by low irrigation efficiency and crop productivity. The UN Food and Agriculture Organization says that countries are in a critical condition if they use more than 40% of their renewable water resources for agriculture and could be defined as water-stressed if they extract more than 20% of these resources. Based on this definition, 19 Arab countries could be defined as water-stressed because their current abstraction rates from their renewable water resources for agriculture greatly overshoot the defined limits, according to the report. (JT 26.11)

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11.5 LEBANON: Lebanon Looks to Reform Business Practices

Al-Monitor (www.al-monitor.com) wrote that Lebanon has always prided itself on being a land of personal initiatives. Since its independence in 1943 and throughout the three decades following World War II, it became a destination for free economy and a hub for investors and foreign companies. Lebanon was perceived as the most suitable access point to the markets of the Gulf and the Middle East because of its climate and geographic location, not to mention its social openness and business-friendly environment.

Several factors have undoubtedly fostered Lebanon’s pioneering role, such as the advanced service sector, which includes tourism, banking and health, as well as the active educational sector that follows the progress of the economy and offers the job market the right expertise. The Lebanese have always been known for their sense of innovation and creativity wherever they go in the world. Many of them have enjoyed bright success, especially those who were placed in the right setting that harbored their creativity and passion for taking the initiative and making achievements. This indicates that Lebanon is a business-friendly environment, which is compulsory to leverage entrepreneurship spirit.

However, the situation somehow deteriorated after the start of civil war in the mid-1970s (some historians said it started in 1973 with the clashes in the Palestinian camps, while others believed it started in 1975 with the Bus Massacre of Ain al-Rammaneh); then the country got back on track during the reconstruction phase, which lasted from the mid-1990s until 2005. Beirut almost regained its competitive role and ability to attract investors, especially after and despite the economic rise of the Gulf states, outside the oil rentier economy framework. During the last three years that witnessed the Syrian war spillover into the country, the worsening economic situation and the political deadlock, Lebanon’s economy entered a dark tunnel; reforms were suspended and the economy has been in a sort of recession since 2011.

The question remains: Is Lebanon capable of becoming an attractive spot for investments and a hub for initiatives and business once again?

In the International Bank’s latest 2015 forecast, titled “Doing Business,” Lebanon was ranked 104 out of 186 states in the category of attractive environment for business and initiatives, recording a decline relative to 2014, when it was ranked 102. This classification indicates the absence of necessary legal and political reforms to stimulate business and investment. The most important criteria highlighted in the report, as classification benchmarks, included the ease of establishing companies and shutting them down, the time needed to register properties, the ability of companies to receive funding from banks, the ease of paying taxes and tariffs, the ability of the judicial system in enforcing contracts, and the presence of laws and systems protecting the minority investors.

It almost goes without saying that initiators need effective legal and institutional frameworks that facilitate their job and protect their interests without drowning them in bureaucratic burdens, like the existing commercial laws that govern the establishment and dissolution of companies following insolvency.

In this context, George Haddad, a corporate lawyer, told Al-Monitor: “Investors, especially foreign ones, need a practical, quick and low-cost manner to establish companies. In case their business wasn’t lucky enough to succeed, they need to be able to shut it down without complications and high expenses, as this prevents them from investing.”

“The problem is not only in the corrosion and corruption of the management, but also in the obsolescence of some commercial laws that date back to the Ottoman era which haven’t been updated,” he said.

Asked about possible solutions to facilitate administrative transactions for initiators and save them time and money, he said: “Governments are currently leaning toward adopting the one-stop shopping model to facilitate getting the job done and restricting it to one place. Most transactions need several signatures and administrative or ministerial approvals in order to be passed.”

Haddad cited Dubai, where companies are created online in a couple of minutes, and said some business processes have been automated in Lebanon (VAT), but partly, which further complicated the process. One example is the VAT payment transactions where documents are prepared electronically, but the payment requires a personal presence at the banks.

Haddad also cited the obstacle of the 3 per thousand fee imposed on each contract, to be paid at the Ministry of Finance headquarters within five days before the signing of the contract. This not only leads to a bureaucratic burden and an additional cost, but also to an indirect tax added to the other taxes and fees paid by companies.

At first glance, the tax system in Lebanon seems encouraging for companies, with a 15% tax on profits, which is a relatively low rate. But when added to indirect fees, such as contract fees, the cost of the wasted time in the completion of the transaction and the burden of dealing with a corrupt management, the cost that companies have to pay becomes much larger than the cost mentioned in official texts, laws and public discourse.

As far as the liquidation of companies is concerned, Fadi Nader, a business lawyer and a founding member of Lebanese International Finance Executives (LIFE), which works to facilitate investment in Lebanon, told Al-Monitor that the liquidation of companies in Lebanon is a painstaking process that takes years. It requires the appointment of a liquidator by the Commercial Court, which alone takes 18 months.

Concerning the needed reforms, Nader stressed the need to implement the one-stop shopping method, especially considering that private companies liquidation requires several “acquittances” and involves several administrative parties; the Ministry of Economy, Social Security and the Ministry of Finance.

The process requires effort on the part of several ministries and departments, and this effort can only be approached through a comprehensive strategy. In this context, Jihad Azour, a former finance minister who co-championed several reform plans during his ministerial term, said that the first requirement was turning the business environment development issue into a national issue, given its importance in terms of attracting capital and enhancing productivity. Second, this issue should be put into the appropriate institutional framework, that is, under the custody of the prime minister, given that several administrative bodies are concerned. Third, Azour stressed the need to accompany the reform with a policy that executes such reforms.

Azour recalled the successful experience of three successive Lebanese governments from June 2002 to 2006 as they oversaw the reforms needed in the partnership with the European Union to facilitate trade between the two sides. “The approach was comprehensive within a clear strategy and a highly determined government leadership, which led to the development of basic laws, some of which were related to customs (rules of origin, assessment of values) and others to intellectual property protection,” he said.

Reform requires a clear and comprehensive plan, but it also needs to be prioritized and put under the category of a supreme national issue. The government still has a long road ahead. (Al-Monitor 21.11)

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11.6 SAUDI ARABIA: Saudi Arabia – Powering Up

OBG (http://www.oxfordbusinessgroup.com) reported that the first wave of state-backed solar power stations in Saudi were recently unveiled as part of a much larger commitment to diversify the Kingdom’s electricity generation capacity.

In late September, King Abdullah City for Atomic and Renewable Energy (KACARE) – the organization tasked with implementing a national sustainable energy program – issued a statement saying it had been charged by the Saudi Electricity Company (SEC) to establish solar power plants. The stations, to be built in the Qaisomah, Rafha, Wadi Al Dawaser, Mahd Al Dahab and Sharourah regions, are due for completion by the end of 2015.

The first project to be developed will be the power station at Mahd Al Dahab in Medina, according to a report carried by the Saudi Gazette, with bids for the construction work to be called for shortly.

To date, no exact specifications for the five plants have been released regarding the technology to be installed or production capacity, though it is estimated the five plants will add between 700 and 1000 MW to the grid. It is also unclear whether the projects will be operated directly by state agencies or in partnership with private firms.

Solar generation

While some of the details of the program need to be filled in, the announcement of the project appears to herald the arrival of solar energy in the Saudi power mix. There are already some small-scale stations in operation, representing steps in developing the renewables program announced in early 2013, which aims to deploy 5.1 GW of renewable energy capacity by 2018 and 54 GW by 2032.

Of this total, almost 80%, or 41 GW is to be solar generation capacity, with the remainder made up of a mix of wind, geothermal and waste-to-energy power plants. To achieve this target, officials have said up to $109b will be invested in renewable energy development over the next 18 years.

Though it has taken time for the KACARE program to get up to speed, Paddy Padmanathan, CEO of Saudi firm ACWA Power, which is bidding for a 100-MW solar plant in Makkah, believes momentum is building in the renewable energy sector. “There will be renewable energy deployed, no question. I am confident that we will start to see plants starting to be built … maybe towards the end of 2015,” he told Reuters.

Clean energy, clear opportunities

The drive to install renewable energy capacity should give impetus to the domestic economy, with opportunities all along the supply and services chain from the initial design and planning process, through to construction and the provision of specific technology.

Currently, Saudi Arabia does not have an extensive solar energy services segment, reflecting the lack of demand, with much of the material and technology having to be imported. The government’s commitment to renewable energy, and in particular solar power, should open doors for private investors to enter the industry, possibly forming partnerships with established international providers.

Already a US firm, SunEdison, has said it is in talks over the establishment of a $6.4b integrated-solar panel electricity, or photovoltaics, manufacturing complex, which would serve the domestic market as well as others in the Middle East.

Existing power firms, that have already established themselves in renewable energy, stand to benefit from the launch of the solar program. The call for tenders on the first five projects is likely to have a positive impact on ACWA’s planned initial public offering, which is expected before the end of the year or in early 2015.

Economic imperative

According to the Joint Organizations Data Initiative (JODI), electricity generation consumed 769,000 barrels per day of oil in August, equivalent to 11.5% of daily exports. While Saudi Arabia currently has excess production capacity, meaning domestic requirements do not affect export earnings, this could change in years to come.

According to some estimates, peak power demands are set to hit 120 GW by 2028, three times larger than consumption posted in 2010. Should this estimate be accurate, it would put Saudi Arabia in the position of being a net importer of oil, if measures were not enacted to diversify the Kingdom’s power generation capacity.

There is another strong incentive for Saudi Arabia to embrace renewable energy source: its role in climate change. According to a report prepared by the Climate Action Network Europe and Germanwatch, the Kingdom is ranked last out of 61 countries in terms of efforts to counter climate change. However, the study, entitled “Climate Change Performance Index 2014”, flagged the likelihood of the country moving up the ladder thanks to a change in its national strategy on climate change and energy. “The world’s largest crude oil exporter is planning to move aggressively into renewable energy, with plans to install enormous solar and wind power capacities in the next 20 years,” the report said. (OBG 18.11)

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11.7 EGYPT: IMF Staff Concludes 2014 Article IV Mission

An International Monetary Fund (IMF) mission visited Cairo from 11 – 23 November to hold discussions for the 2014 Article IV consultation. Discussions focused on economic and financial developments, the outlook, and the authorities’ economic policies and reform plans. At the conclusion of the mission, the following statement was issued:

“This is a moment of opportunity for Egypt. The economy has begun to recover after four years of slow activity. Equally important, there is growing national consensus on the need for economic reform.

“Egypt faces many challenges. During the prolonged political transition, growth fell and unemployment and poverty increased to high levels. Budget deficits grew and external pressures led to a fall in foreign exchange reserves.

“The authorities recognize these challenges and have set appropriate economic objectives, including raising growth and steadily reducing inflation. The government is seeking to reduce the budget deficit to 8–8½% of GDP and the budget sector debt to 80–85% of GDP by 2018/19, while at the same time increasing spending on health, education, and research & development as mandated by the constitution, as well as on infrastructure. Structural reforms planned by the authorities focus on improving the business climate, promoting investments and financial sector development, while addressing poverty and social gaps. The authorities are also seeking to improve Egypt’s external position, though additional external financing will still be needed through the medium term.

“The authorities have already begun to take the action needed to achieve their objectives. They have begun bold subsidy and tax reforms, are pursuing a disciplined monetary policy, expanding social policies, and have initiated wide-ranging regulatory and administrative reform efforts to improve the business environment and boost investment.

“Policies implemented so far, along with a return of confidence, are starting to produce a turnaround in economic activity and investment. We now project that growth will reach 3.8% in FY 2014/15.

“Against the background of regulated price adjustments, mainly the increase in energy prices in July 2014, headline inflation rose to 11.8% in October. Swift interest rate action by the Central Bank of Egypt (CBE) has helped contain the second-round impact of those increases, which were associated with subsidies reform, as reflected in core inflation which fell to 8.5%. This has helped anchor inflation expectations.

“While there has been a notable movement of the nominal exchange rate over the past two years, a more flexible exchange rate policy focused on achieving a market-clearing rate and avoiding real appreciation would improve the availability of foreign exchange, strengthen competitiveness, support exports and tourism, and attract foreign direct investment. This would foster growth and jobs and reduce financing needs.

“The banking system has been resilient in the face of economic stagnation in recent years. The CBE has appropriately reinforced the supervisory framework by strengthening regulations, further developing on-site and off-site supervision, and advancing implementation of Basel II and III. We welcome the CBE’s commitment to increase the timeliness and scope of disclosure of banking sector data.

“Key fiscal reform measures include containing expenditures and increasing revenues. For 2014/15, the mission estimates that the budget deficit will reach about 11% of GDP, as measures yielding about 2½% of GDP have already been approved. Policy measures on which work is already underway, including reducing untargeted energy subsidies, controlling the wage bill, the VAT and mining laws, and improving the efficiency of public financial management, will be important. In 2015/16, it will be important to keep expenditure in check, including through continued subsidies reform to reduce the budget deficit below 10% of GDP.

“The fiscal consolidation, as designed, is expected to minimize the drag on growth and protect the poor. More public spending on education, health, and research & development and stronger social protection policies should improve quality and availability of public services, support long-term growth, and help the poor and other vulnerable people achieve a better life. We welcome the launch of innovative cash transfer schemes and the recent reform of food ration cards, as well as the government’s commitment to take further steps to improve targeting and increase benefits.

“Energy sector reforms and sizable investments will be critical to reduce energy supply bottlenecks and raise potential growth. The megaprojects offer prospects for jobs and growth but should be carefully designed and monitored to limit potential fiscal risks, for example if they entail additional public investment or large contingent liabilities.

“Egypt is vulnerable to adverse global economic developments and regional security risks. For the reform effort to succeed it will need to be pursued steadfastly. The measures already taken by the authorities demonstrate their commitment to reform. However, building buffers, especially by raising international reserves and preparing contingency plans for the budget in case risks materialize, would be useful to address unforeseen shocks. (IMF 25.11)

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11.8 EGYPT: Egypt Debates Health Care Reform

Rami Galal posted on 24 November on Al-Monitor (http://www.al-monitor.com) that the health insurance system in Egypt could easily be called a failure, as Egypt’s Health Insurance Organization (HIO) is subject to outdated laws that have scarcely been modified in line with skyrocketing costs across all sectors.

Public hospitals have become a place to humiliate people who aren’t privately insured. They receive minimal care from doctors and nurses, who receive low wages as government employees, their services provided free of charge. Although the profession of medicine is an exact one, negligence has become a major characteristic of these hospitals.

When Egyptian patients became fed up with the situation, a new comprehensive social insurance law was drafted. It promised to resolve the predicament by separating medical services from funding considerations. In the past, patients received medical services based on the insurance policy provided by their professional union. For instance, journalists would get better benefits through the Journalists Syndicate, while teachers would through their organization.

However, it was not long before doubt arose regarding certain articles of the proposed legislation, as they seemed to pave the way for privatizing the health sector and thus violate the constitution.

Dr. Gamal el-Zeiny, a former member of Egypt’s parliamentary health committee, told Al-Monitor, “The comprehensive social insurance draft law is great as a general idea, as it puts an end to the differences between the rich and the poor and unites all Egyptians under one insurance umbrella. The draft law also aims to end dependency on the state’s decisions of whether or not to provide necessary treatment, as in many cases patients die before decisions are issued to this effect. This law would also encourage competitiveness, as patients would have the option to choose where to receive medical treatment, and incompetent hospitals would therefore not be frequented. This way, the performance level of hospitals would be put to the test as their general assemblies would dismiss inefficient boards of directors that are incapable of competing.”

He added, “Currently, the main beneficiary of health insurance is at an individual level, but with the new law the family would be the basis of insurance benefits. The law was drafted with the hope of including large segments of Egyptian society that are not insured, such as farmers and craftsmen, under an insurance umbrella.”

Dr. Ihab al-Tahir, the secretary-general of the Egyptian Medical Syndicate (EMS) and a member of the “Doctors Without Rights” movement, said, “The draft insurance law is flawed, as it does not cover ambulance or emergency services, which had been assigned to other institutions of the state without specifying which ones. The draft law also does not cover medical services for burns or injuries resulting from natural disasters.”

He asked, “Would it be possible to treat patients who suffer from burns the same way as those who are victims of earthquakes, volcanoes and floods?” Burns, he said, are usually the result of accidents, and the law in its current form is trying to avoid covering burns because of the high treatment costs. “Therefore, we demand equality for all, without exception,” Tahir said, adding that contracting hospitals for medical services on the basis of quality standards works to the detriment of the insurance system.

“Indeed, we all wish for patients to receive the highest quality care, but to place government hospitals that have not been funded for years in competition with well-equipped hospitals is unjust. This confirms the intention to privatize the health sector. Thus, the right thing to do would be to increase the budget for the health sector, rehabilitate government hospitals, equip them with quality standards and set them up to compete. However, in light of the draft law, three-quarters of government hospitals would be excluded from being contracted for their services.

“The EMS has demanded several times, in vain, that a special electoral system be held in hospitals. Under the current system, hospital managers are chosen at personal whims. However, high quality services are not the result of successful management only; they need to be well financed as well,” he added.

Furthermore, Tahir said that the current funding system is flawed in Egypt, a poor country. In this system, patients are responsible for 20% of the costs of medical tests, 20% of the costs of X-rays and one-third of the value of the treatment, not to mention consultation fees, which differ from one medical specialist to another. One option would be to increase monthly premiums to increase funding, thereby making treatment itself free of charge.

He said, “The new insurance draft law includes an article stipulating that HIO’s projects shall not be subject to the state’s tenders and bids. This raises the question of why would the HIO be above reproach?”

He went on, “As for excluding the armed forces from the comprehensive social insurance plan, it is because they have their own privileged insurance system that covers their entire personnel for any disease or accident, completely free of charge.”

For his part, EMS Chairman Khairy Abdel Dayem said that the syndicate wants a law that would cover all citizens without discrimination and take into consideration the difficult economic conditions of millions of Egyptians. He explained that the draft law, which is still under review, has advantages and drawbacks. Importantly, patients would have to pay for treatments on top of the monthly premium paid according to their income. He added that all of these issues are negotiable, but the project as a whole has the potential to improve the medical services provided to all Egyptian patients. (AL Monitor 24.11)

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11.9 TUNISIA: Tunisia’s Secularists Rising?

On 20 November Scott Mastic wrote in the Fikra Forum (http://fikraforum.org) reported that Nidaa Tounes’ victory in the recent Tunisian elections represents a shift away from the events that brought the Islamist Ennahda Party to power in 2011. Its success also appears congruous with other trends in North Africa, where a groundswell of protest in Egypt ultimately led to President Muhammad Morsi’s ouster and where the Muslim Brotherhood and other Islamist candidates fared poorly in Libya’s House of Representatives elections this past summer. But do these events signal that the tide is turning against political Islam?

Nidaa Tounes and those who voted for them should take comfort in knowing that the Tunisian electorate has not become irreversibly religious. But for those Tunisians who see Islamists as the adversary, the recent election outcome reveals little with respect to the ideological commitment of Tunisian voters.

In 2011, even as Ennahda experienced a wave of popular support, it was clear that voters were not necessarily committed to the party’s ideology. The extent to which Ennahda captured votes meant that many were simply willing to give the Islamists a chance in post-revolutionary Tunisia. Tunisians were voting for change following the departure of longtime president Zine al-Abidine Ben Ali. Similarly, Ennahda’s setback in October signaled that Tunisian voters are not driven primarily by ideology.

Having endured a difficult transition that has seen fits and starts, Tunisians were frustrated with the state of their country leading up the October 2014 elections, according to polling conducted by the International Republican Institute. Like three years ago, change was in the air. But this time voters were most concerned with economic reform, job opportunities and security, and many not doubt hoped that Nidaa Tounes would be able to address these issues and help realize the goals of the revolution.

Beyond that, Nidaa Tounes’ victory presents a golden opportunity: For the first time since the Arab Spring, a secular political force came to power through democratic national elections that accorded with international standards. But how Nidaa Tounes governs, with whom it allies, and what political program it implements are critical to how both Islamist and non-Islamist actors in Tunisia will interact for many years to come. It may also be instructive for the future trajectory of politics beyond Tunisia’s borders.

In the immediate aftermath of the 2011 revolutions, the Arab world’s secular political parties were reeling from years of dysfunction under nominally secular, one-party regimes. Decades of internal decay made them stale, while the Islamists seemed an appealing and new alternative. The post-Arab Spring environment presents a chance to change the paradigm of Islamist versus non-Islamist political competition, but there had not yet been a clear secular victory until last month. The key factor now is whether Nidaa Tounes can seize this opportunity to fundamentally change the perception of secular political parties in the Middle East.

Throughout the campaign, Nidaa Tounes’ political program was not clearly defined. In fact, the party often appeared disjointed in its priorities let alone policy positions. Moving forward, Nidaa Tounes will have to find a way to articulate a clear agenda that resonates with its constituency, and build trust with those Tunisians who did not vote for them.

With its newfound power, Nidaa Tounes and its leader, Beji Caid Essebsi, must resist the temptation to try and reconstruct the state apparatus that led to the tumultuous events of 2011. They must also demonstrate their commitment to advancing the individual freedoms that were part and parcel of Tunisia’s revolution. The manner in which Nidaa Tounes’ coalition governs will leave a lasting impression. But Tunisia’s secularists must understand why the people have given them chance at this moment and what they must accomplish to maintain public confidence. If they are unable to thread this needle, then the voters will simply opt for a different party next time.

Scott Mastic is the director for the Middle East and North Africa at the International Republican Institute (IRI). He was a member of IRI’s 2014 election observation mission to Tunisia. (Fikra Forum 20.11)

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11.10 MOROCCO: Power Projects Light Up With Funding Boost

The Oxford Business Group (http://www.oxfordbusinessgroup.com) announced that the government in Morocco secured $3.4b in international financing this autumn for an ambitious spate of power projects aimed not only at supplying the kingdom’s increasing demand for electricity, but also with a long-term plan to export surplus renewable energy to Europe.

The three latest agreements – which involve investors from South Korea, France, Japan and China – will fund the construction of one solar and two thermal power plants over the next five years. This will add a total of nearly 2000 MW of power capacity to Morocco’s current production of 22,250 GW, according to the US Energy Information Administration. Roughly 300 MW of the new output will come from renewable sources.

The sizable investments are set to help boost Morocco’s power capacity in the long term and ease its reliance on expensive imports, which accounted for around 17% of domestic consumption in 2013. Domestic electricity demand rises around 7% per year on average, according to official data, with the Kingdom reliant on imports from the Spanish and Algerian grids to close the production gap. With a number of large-scale industrial projects in the pipeline, demand is expected to accelerate even faster in the coming years, making new investments in generation crucial.

Thermal projects

The largest of the three projects is a 1386-MW coal-fired plant planned for the southern port town of Safi. Once constructed, it will be the second-largest power station in Morocco. Safi Energy Company, a consortium made up of France’s GDF Suez, Morocco’s Nareva and Japan’s Mitsui, will build and operate the site, which will consist of two 693-MW thermal plants. Morocco’s state-owned utility, the National Electricity and Water Office signed a 30-year power purchase agreement with the firm in 2013.

In mid-September Safi Energy said it had secured loans worth $2.6b to fund the construction of the plant. Financing will come from a number of domestic and international partners, including $900m from the Bank of Japan, $500m from Moroccan banks Attijariwafa Bank and BMCI Bank, and a further $485m from international banks in France and the UK. The operator awarded South Korea’s Daewoo Engineering the $1.77b construction tender last year and work is set to begin shortly, with the plant expected to be on-line in 2018.

The second thermal project involves the construction of a 318-MW plant in the eastern town of Jerada. Chinese construction firm Shandong Electric Power Construction Corporation (Sepco III) was awarded the Dh3b ($270m) contract in July 2013 to expand the existing 165-MW coal-fired plant and China’s Exim Bank agreed in September to extend a $300m loan. Construction of the plant extension is expected to create some 4000 short-term jobs in the Oriental province, giving the traditionally under-served region an economic boost. The plant is slated to become operational by the end of 2016.

Moroccan authorities estimate that the two new thermal plants will increase annual coal imports by more than 3.5m tonnes per year, adding to an energy import bill that already weighs down Morocco’s current account and contributed in 2013 to a deficit of 9.0% of GDP.

To reduce its dependency on imports and lighten the government’s fiscal burden, Morocco has begun to increase its share of renewables in its energy mix, with solar and wind both receiving significant attention. Morocco aims to have 2000 MW of installed capacity for each of solar and wind power by 2020, which will mean sourcing 42% of its power supply from renewables by the end of the decade.

Solar power

The third project to receive financing this month is a key part in the initiative to boost renewables, involving the expansion of a solar power plant in Ouarzazate, a flagship project in the Moroccan Solar Plan.

Morocco secured a $519m loan from the World Bank in early October to partly finance the second phase of construction, which will see two solar plants built with a combined capacity of up to 350 MW. One plant, Noor II, will have a capacity of at least 200 MW based on parabolic mirror technology, while the other, Noor III, will consist of a solar tower with a capacity of at least 100 MW.

The Moroccan Agency for Solar Energy (MASEN) has pre-qualified three international consortia led by Spain’s Abengoa, the Dubai-based branch of GDF International Power and Saudi Arabia’s ACWA Power to design, construct and operate the Noor II plant. The three companies, and a fourth consortium made up of France’s EDF and Mitsui have also been pre-approved to bid for Noor III. MASEN launched both tenders in late 2013, with results expected in the coming weeks.

The overall project, which is estimated to cost about €1.7b to build according to banking sources, has attracted considerable financial support from international partners, including the German state-owned bank KfW, the African Development Bank, the European Commission and the European Investment Bank. (OBG 21.11)

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11.11 TURKEY: IMF Executive Board Concludes 2014 Article IV Consultation

On November 21, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Turkey.

Turkey’s economy has grown on average by 6% annually since 2010, but this has come at the expense of a large external deficit making the economy sensitive to changes in external financing conditions. Macroeconomic policies have been too accommodative, inflation is high and well above the authorities’ target, real policy interest rates remain negative, and the exchange rate continues to be stronger than suggested by fundamentals. These imbalances are holding back growth potential and increasing risks. They need to be addressed with carefully sequenced macroeconomic policies and structural reforms aimed at increasing aggregate savings, competitiveness and potential output.

The financial system remains well capitalized with non-performing loans low and well provisioned. However, banks are increasingly reliant on external wholesale funding in foreign exchange and, in tandem, have increased their indirect foreign exchange risk. The main risk for Turkey remains a capital flows reversal, associated with monetary policy normalization in advance economies or changes in the country risk premium. Other risks center on slower European growth, geopolitical issues and the strength of the policy framework.

Executive Board Assessment

Executive Directors welcomed Turkey’s positive growth and employment performance in recent years, and commended the authorities for weathering well financial market turbulence in early 2014. However, Directors noted that high inflation, a large external deficit, and reliance on external financing pose vulnerabilities and could put pressures on the economy. Against this background, they emphasized that macroeconomic policies should be geared towards rebalancing the economy, lowering inflation, and strengthening buffers together with ambitious structural reforms aimed at boosting domestic savings and fully realizing Turkey’s economic potential.

Directors agreed that fiscal policy should play a bigger role in addressing external vulnerabilities and reducing the burden on monetary policy, while providing space for greater spending in priority areas. Accordingly, they supported the fiscal tightening envisaged in the 2015 budget and the substantial increase in the primary surplus within the 2015-17 medium-term program, although a few Directors saw merit in a more ambitious pace of adjustment. Directors agreed that consolidation efforts should primarily focus on improving spending efficiency and limiting current expenditure growth while preserving capital investment.

While welcoming the monetary tightening in early 2014, Directors generally called for a renewed focus on reducing the inflation rate, by setting and sustaining a positive real policy rate to reduce inflation and anchor expectations. Most Directors also encouraged further normalization of the monetary policy framework, which would improve communications and strengthen monetary transmission. A few Directors were of the view that the monetary policy framework could have multiple objectives, taking into account the various challenges the country faces. Directors highlighted that increasing foreign exchange reserves, as market conditions permit, will help strengthen resilience.

Directors noted that the financial system remains sound and well capitalized but called for continued vigilance. They welcomed the success of recent macro-prudential measures to limit consumer credit growth, and to encourage more core funding in the banking sector. Directors recommended additional steps to curb growth in wholesale foreign exchange funding and to reduce incentives for the non-financial corporate sector to take on exchange rate risk. They commended the significant progress made in enhancing Turkey’s AML/CFT framework.

Directors emphasized the importance of increasing national savings, particularly private savings, and reducing reliance on external financing. They encouraged the authorities to move forward with the ambitious reform agenda included in the 10th Development Plan, giving priority to increasing private sector savings, improving competitiveness and the business climate, and sustaining education and labor market reforms to boost productivity. (IMF 21.11)

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11.12 GREECE: Fitch Affirms Greece at ‘B’; Outlook Stable

On 21 November, Fitch Ratings (http://www.fitchratings.com) affirmed Greece’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘B’. The issue ratings on Greece’s senior unsecured foreign and local currency bonds are also affirmed at ‘B’. The Outlooks on the Long-term IDRs are Stable. The Country Ceiling is affirmed at ‘BB’ and the Short-term foreign currency IDR at ‘B’.

Key Rating Drivers

Greece’s IDRs and Outlook reflect the following key rating drivers:

The general government budget is on track to meet its 2014 objective, underscoring a remarkable budgetary adjustment in recent years in the face of severe cyclical headwinds. The adjusted primary surplus measure used under the Troika program is forecast by Fitch at 1.5% of GDP this year. The headline deficit forecast (EDP basis) is 1.6% of GDP. Year-to-date outturns suggest a slight over-performance is possible.

Fitch expects the current Troika review to be concluded by end-2014, but there is some risk it may slip into early 2015. Greece’s €3b bond issue in April has increased its financing buffers, but market access is not yet reliable. Fitch assumes that medium-term financing remains predicated on the government staying on track with its official creditors.

An early general election in Q1/15 is a likely scenario and there is a risk that the next administration would be less supportive of economic and fiscal reform. The most painful phase of Greece’s adjustment is over and the sovereign’s funding needs are covered through Q2/15 without market or Troika funds. However, achieving and maintaining the medium term primary surplus target of 4% relies on continued tight fiscal discipline and a sustained recovery in growth.

The economy is bottoming out, with real GDP having expanded modestly in 9M14. Fitch forecasts GDP growth of 0.5% in 2014, rising to 2.5% in 2015, unchanged since our last review in May, although potential domestic political developments and a weakening growth outlook in the Eurozone represent downside risks to these forecasts.

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

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

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

Rating Sensitivities

The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the ratings are currently balanced. Nonetheless, future developments that could, individually or collectively, result in negative rating action include:

A domestic political crisis, worsening relations with creditors, and/or backtracking on policy commitments; for example, an inconclusive early election, a failure to agree an accommodation with the Troika, or failure to meet primary surplus targets.

A decline in nominal GDP in 2015. This would increase the risk of social unrest, cause the public debt/GDP ratio to rise further, and widen the budget deficit.

Future developments that could, individually or collectively, result in positive rating action include:

A faster economic recovery and budgetary improvement supporting our baseline of a sustained primary surplus of 4% of GDP.

Sustained access to market funding at affordable rates, improving Greece’s financing flexibility.

Key Assumptions

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

Current and future administrations continue to maintain relations with official creditors (e.g. under a precautionary program). Social stability is maintained.

Greek banks make no further material demands on the sovereign balance sheet; €37b (20% of GDP) has been injected to date. If Greeks banks incur losses that are not covered by private shareholders, this would lead to a cash call on the government as guaranteed tax credits are converted into equity.

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

Greece remains a member of the Eurozone and does not seek to impose capital controls in the face of any renewed strains on sovereign creditworthiness. Greece and the Eurozone as a whole will avoid long-lasting deflation, such as that experienced by Japan from the 1990s. An extended period of deflation, resulting in low growth in nominal GDP would be highly damaging to public debt dynamics. (Fitch 21.11)

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Fortnightly, December 3rd 2014

Fortnightly, December 3rd 2014

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