Israel Government Actions & Statements

1.1 Cabinet Approves Budget on 13 May

After a marathon 20-hour session lasting most of the evening and into the morning, the Netanyahu government approved the budget for 2009-2010. The vote was 26 in favor, 4 Shas ministers voted against. According to the agreement in principle, there will be an across the board cut of 6% at all ministries both in 2009 and in 2010 a combined cut of about NIS 3 billion. VAT will rise by 1% and may also be charged on fruits and vegetables. The higher VAT will begin in July 2009 and is scheduled to only be for 18 months. The measure is expected to add NIS 5.5 billion to government receipts. The proposed VAT on fruits and vegetables is expected to add NIS 2.7 billion. At the same time, income taxes are expected to continue to be cut, with the maximum marginal tax rate on the highest earners falling from 46% to 44%. The company tax rate will fall from 26% to 25%. The measure is expected to reduce direct tax collections by NIS 3 billion. The wide ranging cuts include NIS 1.5 billion from the defense budget in 2010. However, it is not from the basic budget, so that it will gradually return to earlier levels in future years. (Globes 13.05)

Israel Market & Business News 

2.1 Camtek Announces Acquisition of Printar

Camtek announced the acquisition of assets of Printar, an Israeli company. Printar is engaged in manufacturing, sale and marketing of direct digital material deposition systems and inks for the Printed Circuit Board (PCB) industry, with two major fields of activity: Solder Mask, an epoxy layer selectively covering the PCB, while leaving the connecting pads uncovered (SM) and Legend, applying the identification nomenclature on the PCB, commonly used in the PCB industry (Legend). Printar introduced its first Legend system six years ago and maintains an install base of more than 45 Legend systems. Printar's technology provides a higher performances, one-step, environment-friendly and relatively low-cost process, in comparison with traditional printing methods. The technology can also be applicable in the future to various other applications in the field of electronic manufacturing. Camtek will purchase from Printar all of Printar's assets, knowledge, technology and IP rights related to the acquired business. In consideration for the purchase, Camtek will pay Printar a total sum of up to $2,500,000; an initial payment of $500,000 and an additional total amount of $2,000,000, subject to certain agreed conditions, and provided that such amount, if due, shall be paid no later than May 2011.

With headquarters in Migdal HaEmek, Camtek (http://www.camtek.co.il) designs, develops, manufactures and markets automatic optical inspection systems and related products. Camtek's automatic inspection systems are used to enhance both production processes and yield for manufacturers in the printed circuit board industry, the high density interconnect substrate industry and the semiconductor manufacturing and packaging industry. (Camtek18.05)

2.2 Herley's Israeli Operation Wins $2.2 Million Contract from International Customer

Lancaster, Pennsylvania's Herley Industries announced that Herley's General Microwave Israel (HGMI) has received contract awards totaling approximately $2.2m from an international customer. The awards are a production contract for synthesizers and integrated microwave assemblies resulting from a successful development contract awarded to HGMI in September of 2008. Herley Industries is a leader in the design, development and manufacture of microwave technology solutions for the defense, aerospace and medical industries worldwide. Herley has seven manufacturing locations and approximately 1000 employees. (Herley 20.05)

2.3 Ohio Consortium Funds Israeli Medical Devices Companies

Global Cardiovascular Innovation Center , partly funded by the State of Ohio's Third Frontier Project, will invest $1 million in the three Israeli cardiovascular devices start-ups. As reported by Globes, the investment amounts to 60% of the companies' financing round. GCIC will provide financing for Cardiostar, which is developing a non-invasive sensor for a range of cardiological activities; Sensible Medical Innovation, which is developing a device for continuous and dynamic imaging of the heart; and Vasostar, which is developing a method to fully clear blocked arteries using an improved catheter. GCIC is a product commercialization consortium led by the Cleveland Clinic, a leading US heart center. The consortium aims to foster the development of cardiology companies in Ohio. (Globes 25.05)

Regional Private Sector News

3.1 US Expects To Capture 25% of Mid East Wheat Market

The US expects to capture 25% of the wheat market in the Middle East and North Africa in the marketing year 2008/9. The US exported about 8.3 million tones to the region in 2007/8, which amounted to about a quarter of the market. The US share of the market has been declining in recent years due to significantly cheaper imports from the Black Sea. US wheat sales to Egypt, which is forecast to import about eight million tons of wheat this year, have been hit by the cheaper wheat and freight prices from Black Sea countries, especially Russia. (AB10.05)

3.2 Building Materials Prices in Persian Gulf See 15% Rise In April 2009

The prices of various building materials in the Persian Gulf have risen by as much as 15% in April 2009 as compared to the first quarter, with the price of steel witnessing the steepest hike from $430 to $500 per ton. The price hike, which is expected to encourage a more upbeat trade atmosphere in the market, is the result of the increase in building material imports following a slowdown in regional orders from October 2008 to February 2009 due to overstocking. According to the latest price indexes, products whose prices jumped since last month include medium density fiber boards (MDFs), which currently wholesale at $220 per cubic meter from $200 in March; and white wood, which rose by 10% to $210 per cubic meter from $190. In addition, freight costs have also increased from $300 to $650 for a 20-feet container in March, while a 40-feet container now costs $800 from previous rates of $550. (BI-ME 11.05)

3.3 Zain Enters into Agreement to Merge Jordan Operation with Palestinian Operator Paltel

In an official signing ceremony held in Amman, Jordan, Mobile Telecommunications Company KSC (Zain) and Palestinian Telecommunications Company (Paltel) have entered into an agreement for a share-for-share exchange, which will see Zain take a majority interest in Paltel with an equity shareholding of 56.53% in exchange for Paltel owning 100% of Zain Jordan. Paltel is a publicly-listed entity on the Palestinian Stock Exchange and Abu Dhabi Securities Exchange. The merger will set the current Paltel shareholders equity position in both Paltel and its newly acquired subsidiary, Zain Jordan at 41.43%. Through this transaction, Palestine will become the 24th territory in which Zain will have a commercial footprint. The mobile operation in the Palestinian Authority currently known as ‘Jawwal' will be rebranded to Zain by the end of 2009. This mobile operation will also join Zain's renowned ‘One Network' platform, taking to 19 the number of countries that benefit from One Network's many advantageous roaming offerings. (Zain18.05)

3.4 Intel Capital To Invest in Two Digital Content Companies In Jordan

As part of its ongoing commitment to Jordan, Intel announced on 17 May that Intel Capital, its investment organization, will be investing in two local digital content companies. The company also pledged to expand its World Ahead program through collaborations with the Jordanian government and other local and regional organizations. In support of Jordan's ICT vision, Intel Capital will invest in two Jordan-based digital content companies: Jeeran and ShooFeeTV. The announcement was made in the presence of Jordanian Minister of Information & Communications Technology (MoICT) Al-Rousan. The amount of each investment was not disclosed. Part of the $50m Intel Capital Middle East & Turkey Fund, this initiative represents Intel Capital's first investments in Jordan, and follows four previous Intel Capital investments across the Middle East in the past six months. The funding will be used to help both companies pursue their regional growth and development plans, as well as to extend their product offerings. (BI-ME 17.05)

3.5 Force Protection to Open Total Life Cycle Support Facility in Kuwait

Ladson, South Carolina's Force Protection, a leading developer of survivability solutions, signed a lease and will soon open a total life cycle support facility in Kuwait. This strategically located facility in Mina Abdullah, Kuwait includes warehousing, administrative offices and depot services. The facility is designed to support the ongoing need to modernize, repair, service, supply and conduct training for the Company's deployed fleet of vehicles in Iraq, Afghanistan and throughout the Middle East and Central Asia. The Company noted that this facility will immediately and specifically enable it to greatly shorten response times for spare parts, enable it to better serve the route clearance and other MRAP programs, and will serve as a forward logistics station for staging and installation of upgrade kits. With respect to training, the Company noted that it will provide maintenance and repair training as well as Operational New Equipment Training (OPNET) to ensure that the war-fighter achieves a high level of competence with and can fully exploit the enhanced operational capabilities of the upgraded vehicles. Force Protection, Inc. is a leading American designer, developer and manufacturer of survivability solutions, predominantly blast- and ballistic-protected wheeled vehicles currently deployed by the U.S. military and its allies to support armed forces and security personnel in conflict zones. (Force Protection18.05)

3.6 Zabeel Cancels $1 Billion Plans for US Hotel Investments, Shifts Focus to Dubai

Dubai-based Zabeel Investments has cancelled plans to invest $1b in US hotels as it focuses on its domestic business. Executive Chairman Al Hashimi said that they would be looking exclusively at Dubai. Last year, the firm was evaluating opportunities to buy hotels in New York, Los Angeles and Miami. Zabeel is now planning to launch a $30m fund this year to set up four to six restaurants in Dubai and London. The outlets will be managed by Light Group, a US hospitality management company owned 50% by Zabeel. Zabeel Investments currently has $6b in assets under management, covering property, hospitality, construction and education. Earlier this year Al Hashimi had confirmed that the group will remain focused on strategic growth and development of its portfolio during 2009. (AB18.05)

3.7 Saudi Arabia Selects Sensis A-SMGCS and WAM for King Fahad and King Abdulaziz International Airports

The General Authority of Civil Aviation (GACA) of Saudi Arabia has selected East Syracuse, NY's Sensis Corporation for deployment of Advanced - Surface Movement Guidance and Control Systems (A-SMGCS) and Wide Area Multilateration (WAM) systems for King Abdulaziz International Airport (Jeddah) and King Fahad International Airport (Dammam). Both airports will enhance safety by using A-SMGCS to view aircraft and vehicles on the ground. The multilateration subsystem of the A-SMGCS systems will be expanded to provide the airports with WAM for safe and efficient separation of aircraft in the terminal approach coverage area. Additionally, the airports will use Sensis VeeLo NextGen vehicle locator units for tracking and identification of vehicles on the airport surface. Sensis A-SMGCS fuses data from multiple surveillance sources, including Sensis Multistatic Dependent Surveillance (MDS) multilateration, Sensis solid state SMRi X-band radar and VeeLo NextGen vehicle locator units, to deliver accurate and highly reliable data. Further, the A-SMGCS includes advanced conflict detection and alerting through audible and visual alerts. The WAM surveillance component of the system will be integrated into the A-SMGCS to track and separate aircraft on approach up to 50 nautical miles from the airport. Sensis Corporation provides sensors, information technology, and simulation and modeling to the world's air navigation service providers, civil aviation authorities, airports, airlines and militaries. (Sensis Corporation 18.05)

3.8 Saudi Arabian Ministry Enables High-Performance e-Services with Juniper Networks Solutions

Sunnyvale, California's Juniper Networks, the leader in high-performance networking, announced that Saudi Arabia's Ministry of Foreign Affairs (MOFA) is building a high-performance network infrastructure based on a comprehensive, interoperable solution from Juniper Networks designed to connect its embassies throughout the world. The new infrastructure includes the headquarters data center backbone built using Juniper's routing, switching and security solutions. The MOFA network will connect its Riyadh headquarters with branch offices in Jeddah and Dammam and embassies globally to deliver, accelerate and secure the pace and quality of online services, such as issuing visas and consular assistance, and the Ministry's key internal applications used for financials and human resources. MOFA will integrate Juniper's application acceleration, enterprise routing, switching and security devices to create an optimized, secure high-performance network infrastructure. (Juniper Networks13.05)

3.9 Smoothie King Announces New Multi-Unit Agreements in Egypt & Turkey

New Orleans-area-based Smoothie King Franchises, the originator of the nutritional, fruit-based smoothie, has signed an agreement with the Amer Group to open at least 20 Smoothie King locations in Egypt and Turkey in the next few years. The multi-unit agreement with the Amer Group, an Egyptian real estate development and hospitality company, provides for new locations initially throughout Egypt and then Turkey, with the first Smoothie King scheduled to open later this Summer in El Alamein, Egypt and additional locations currently planned for cities along the Mediterranean and Red Sea coasts, as well as in Cairo. The developer will be Tropicana for Projects, S.A.E., a wholly owned subsidiary of the Amer Group Corporation. An owner of three premier resorts in Egypt, the Amer Group also is the largest local owner and operator of casual dining restaurant chains in Egypt, with nearly 40 restaurant outlets with brands including Chili's, Studio Misr, Johnny Carino's, Fish Market and Alain Le Notre. (Smoothie King 18.05)

3.10 GT Solar Commissions First Integrated Solar Wafer and Cell Turnkey Solution in Greece

Merrimack, NH's GT Solar, a global provider of specialized equipment and technology for the solar power industry, has received final acceptance for the design, installation and commissioning of the first integrated photovoltaic (PV) solar wafer and cell turnkey fabrication line in Greece. The state-of-the-art production line, created for Greece-based Solar Cells Hellas S.A., has an annual capacity of 30-megawatts (MW). It delivers a stable production process that produces high-quality multi-crystalline cells of optimum efficiency. With the commissioning of this turnkey solution, Solar Cells Hellas becomes the first PV manufacturer in Greece. GT Solar is one of only a small number of equipment providers that offers turnkey solutions for every process involved in manufacturing PV wafers, cells, and modules. A GT Solar turnkey solution is built on the solid foundation of GT Solar's industry-leading directional solidification systems (DSS) furnace technology. GT Solar's wafer fabrication line (GT-WAFFABTM) delivers high-quality multi-crystalline ingots to the wafer lines. (GT Solar26.05)

Israel Macro-Developments

4.1 Israel to head Europe's Eureka R&D Program

Globes reported that Israel will head the European Eureka Network for Market Oriented R&D in 2010-11, even though it is the only non-European country in the program. The Ministry of Industry, Trade & Labor's Chief Scientist Dr. Opper said that during its year as president of Eureka, Israel will be able to set its agenda, which will enable the country to promote important initiatives with European support, such as strengthening R&D in low technology industries or in other priority fields, such as the life sciences, water technologies, and the environment. Israel will also be able to promote joint R&D ventures with European and Israeli venture capital funds. The Eureka program is the largest program of its kind in the world. It was inaugurated in 1985, and its 40 members currently include almost every country in Europe as well as the European Commission. The program's objective is to foster joint R&D ventures with the support of national R&D programs and to set policy at the pan-European level. Eureka funds hundreds of new R&D projects every year at an investment of €1.5 billion. Israel joined Eureka in 2000, and has since become one of the five most active members in it. (Globes 25.05)

4.2 Israel Joins OECD Anti-Bribery Convention

The Manufacturers Association of Israel announced that Israel has joined the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, becoming the 38th country to adhere to the convention. The body is one of the OECD's key tools in its struggle against corruption. The convention stipulates that a businessperson or company that offers a bribe to a foreign public official, even through a mediator, risks criminal prosecution in his home country. This will now apply to Israeli companies and businesspeople. In preparation for joining the convention, Israel amended the Criminal Code to include a new crime - bribing a foreign public official - which carries a maximum penalty of three and a half years in prison and fine of up to NIS 202,000, or up to four times the value of the benefit received for the bribe, whichever is higher. In the case of a company, it will be possible to convict both the company and the company officers involved in the bribery. The Manufacturers Association added that Israel has worked hard in recent years to join the OECD anti-bribery convention, even though it is not a member of the organization. Joining the convention now is even more important given that it is an essential part of the process of Israel's accession to the OECD, which officially began in May 2007. On June 26, an OECD delegation will visit Israel to review implementation of the principles of the anti-bribery convention. The OECD is a unique international forum whose members develop common economic and social policies. (Globes 25.05)

Arab State & Pakastani Developments 

5.1 Jordan Ranks 22 On Ease Of Paying Tax

Jordan ranked 22 out of 181 economies on the ease of paying tax for the current year, according to a report by the International Finance Corporation, World Bank Group. The kingdom attributed the advanced level to efforts by the Income and Sales Tax Department. The report showed that the paying tax index in Jordan came first among all local institutions. Jordan, it said, ranked 101st on the ease of doing business at the international level, 115th on registering property, 52nd on employing workers and 128th on enforcing contracts. The report also indicated that closing a business took fifth rank among ten local indices and the kingdom came 93rd at the international level. It also ranked 113th on protecting investors, 123rd on getting credit, 128th on enforcing contracts and 131st on starting a business. (Petra23.05)

5.2 Consortium Considers ‘Shams Maan' As Mega Solar Plant

A consortium of Jordanian and international organizations plan to build a multimillion Photovoltaic power plant in Maan by 2012, with a capacity of 100 megawatt of electricity, according to a leading member in the consortium. Named “Shams Maan, Jordan will undertake a step towards long-term energy independence and a green environment by adopting this technology. In addition to Kawar Energy, Solar Ventures and 1st International for Investment joined the consortium, which will sign an agreement with MDC to implement the project. “Shams Maan” will not only be contributing to Jordan's renewable energy planned target, but equally important, it will prevent the equivalent of 160,000 tonnes of CO2 emissions. Jordan imports 96% of its energy and is considered one of the world's 10 poorest counties in water resources. As the southern part of the Kingdom is extremely sunny, has excellent radiation indices, making it one of the world's ideal places for solar energy production. (Petra20.05)

5.3 Iraq Trade Minister Quits Amid Corruption Scandal

The Iraqi government says trade minister Abdul Falah Al Sudani has resigned amid a corruption scandal that has plagued his department for months. Sudani is a member of the Shia Dawa faction of Nouri Al Maliki, the prime minister. On 7 May, the minister's brother was arrested on suspicion of corruption at a checkpoint in the south of the country. Sabah Mohammad Al Sudani, an aide to his brother, was captured later after he pulled up at a checkpoint in a government car driven by his bodyguards. Sudani, who faces embezzlement charges related to food imports, was taken to the central jail in Samawa. The minister himself had been questioned by parliament twice over the last few days over corruption claims. The head of Iraq's anti-corruption commission has accused several trade ministry officials of corruption, including the minister's two brothers. The Trade Ministry, which includes the Grain Board, denies any wrongdoing and blames the accusations on disgruntled employees. It is responsible for importing construction materials and food for Iraq's massive ration program. (Trade Arabia26.05)

5.4 Bahrain's $8 Billion Rail Plan Study Seen In 2010

Bahrain expects a study for its $8.12b rail plan to be completed by September 2010 as it seeks to ease congestion. Bahrain envisages building the 184 km. network in three phases by 2030, when the population is expected to double to 2 million. Gulf Arab states are spending more than $100bn on railway projects to ease congestion as they face poor public transport networks and growing populations. These projects have provided major contracts for international companies. German railway operator Deutsche Bahn signed a deal last year to help design a multi-billion dollar rail network in Qatar that includes links to the Bahrain-Qatar Causeway, one of the world's longest bridges. Bahrain's planned rail system will include a mix of light rail trains, monorails, trams and other systems. It will be linked to the Bahrain-Qatar Causeway, which will carry a railway as well as a road. Bahrain's ministry of works is studying the options for financing the rail plan, including private sector participation. (AB12.05)

5.5 UAE Will Not Join GCC Monetary Union Agreement

On 20 May, the UAE said that it will not join the GCC Monetary Union Agreement, following their announcement of the decision to the GCC General Secretariat. Central Bank Governor Sultan Bin Nasser Al Suwaidi said the UAE's monetary policy will not change and will maintain its method of openness, adding that the UAE dirham will remain pegged to the US dollar. The UAE was the first country to submit an application to host the GCC Central Bank in 2004, as part of the arrangements to join the GCC monetary union. The UAE is not host to any GCC establishments or authorities.

5.6 France to Open UAE Base & Targets Big Deals

France prepared to open its first military base in the Gulf on 25 May as it eyed multi-billion-dollar deals to supply the UAE with nuclear power plants and advanced military aircraft. French officials said the naval base in Abu Dhabi, capital of the UAE, the world's third-largest petroleum exporter, would deepen ties to the Gulf state and fortify efforts to battle piracy and defend trade. President Nicolas Sarkozy opened the base on 26 May. The UAE, the world's third-largest oil exporter, plans to build a number of nuclear reactors to meet an expected need for an extra 40,000 megawatts of electricity by 2017. French firms plan to compete for the business. France's Total, Suez and state nuclear reactor maker Areva said last year they planned to develop two third-generation nuclear reactors in the UAE. The UAE also wants French support for its bid to host the headquarters of the International Renewable Energy Agency (Irena), the global green energy body. (Reuters 26.05)

5.7 Obama Approves UAE Civil Nuclear Deal

On 21 May, President Obama approved a civilian nuclear deal with the UAE, which some observers see as striking a contrast with Iran's defiant nuclear drive. Obama sent the deal, negotiated by the previous Bush administration to Congress, which must now decide within 90 days whether to block the pact, which provides for US - UAE cooperation on peaceful uses of nuclear energy. His memorandum to the secretaries of state and energy, certifying that the deal was in US interests, did not mention US disquiet over a video filmed in the UAE that has raised human rights concerns in Congress. The deal - which comes even as the US is spearheading a campaign against Iran's nuclear drive - involves the exchange of nuclear materials and components for civilian use. (GN22.05)

5.8 UAE Plans To Deliver Nuclear Power By 2015 - 2017

The UAE has set a target date of 2015 to 2017 for the generation of nuclear power in the country, according to an official from the International Atomic Energy Agency (IAEA). It plans to complete its first nuclear plant by that time. The UAE is pushing ahead with the nuclear option to meet a surge in power consumption, which is rising 9% annually, following the Obama approval of a civilian nuclear deal with the Emirates. The country was planning to start building its first nuclear plant by 2011 to 2012. It is estimated it takes seven to ten years to build a nuclear power plant and up to 15 years where the nuclear infrastructure is not yet in place. UAE government officials were in the process of appointing consultants to prepare bidding documents, setting up organizations and signing agreements. It is estimated it costs between $3bn to $5bn to build a plant that could produce over 1,000 MW of power. The government in Abu Dhabi was also considering a selection of sites for the plant and is in the process of doing a feasibility study. Two further plants are planned. (Various22.05)

5.9 Japan Exports Body Reports 41.8% Climb in Trade with UAE

While the UAE and Japan have both been fighting the economic slowdown, bilateral trade between the two seems to have flourished, at least in 2008. Japan External Trade Organization (Jetro) reported a 41.8% increase in bilateral trade between Japan and the UAE amounting to $57.2 billion in 2008, fuelled by high oil prices that reached a historic high level of $147 last July. Total exports to Japan increased by 43.71% to $46.41 billion, primarily driven by crude exports amounting to $38.5 billion. Even though the volume of oil exported was lower than in 2007, the price was higher, from an average rate of $69.6 per barrel in 2007 to $104.3 per barrel in 2008. Apart from crude oil, gaseous hydrocarbons like liquefied natural gas and butane are also major export products, with a growth of 40.3% in 2008 to $5.6b. Semi finished aluminum ranks third in exports to Japan and has seen a growth of 12.8%. The only items to have a negative growth in export are raw materials and metallic ores and foodstuff, while uncooked pasta has shown a surprising growth from $25,000 to $4.4m.

The UAE's imports from Japan mainly comprise of general machinery, electrical machinery, and transport equipment. Construction machinery like self propelled cranes and track laying bulldozers form a major chunk of general machinery which grew by 55.3%, boosted by the growth in real estate and construction sectors. Transport equipment, accounting for 48% of UAE's imports from Japan, grew by over 40%. Passenger motorcars experienced a surge in imports by 36.2% to $3.5 billion. A notable addition to the usual products traded between the two countries is railway coaches for the metro service in Dubai. UAE imported railway coaches, and related materials worth around $236.8m. This holds immense potential for future trade especially since work will continue on the metro service despite the economic slowdown. (G12.05)

5.10 Oman & US Firm Sign Oil Exploration Deal

US firm PetroTel has signed a three-year exploration and production sharing agreement with the Sultanate of Oman. The Texas-based company will be developing Block 17 in the north of the Gulf state, Nasser Al Jashmi, state undersecretary for oil and gas. The 2,378 square kilometer block in Musandam will be operated by Petro to help Oman increase its hydrocarbon output. This is the fourth deal which the non-Opec producer has signed with foreign companies to develop and explore for oil and gas as it seeks to boost production. Other international companies that have signed production-agreements with Oman this year include, Canada's Epsilon Energy Limited, US listed Harvest Natural Resources and Malaysia's Petronas. Oman's oil output in Q1/09 rose 6.1% on the year to 786,700 barrels per day (bpd), official data showed. Oman's oil price forms part of the benchmarks used in pricing the 12 million barrels of crude exported from the Middle East to Asia daily. Oman is targeting output crude and condensate at around 805,000 bpd in 2009. (GN25.05)

5.11 Oman Reviews Pilot Projects For Solar & Wind Energy

The government of Oman is reviewing six pilot projects to harness energy from wind and solar, as well as recruiting international advisers to conduct a feasibility study for a large solar plant. The news comes as the government is establishing policies to encourage renewable energy as a way to spur economic development. The latest data from the US government's Energy Information Administration says Oman had 3.3 gigawatts of installed electric generating capacity in 2004, all of which came from conventional thermal sources. The country has sought international investors to finance new independent power projects to meet increasing needs from domestic demand and industrial growth. Oman's energy requirements are expected to cost more than $800m, according to according to the World Energy Council. A 2008 study by Oman's Authority for Electricity Regulation (AER) made the case for solar projects across the country, in addition to wind energy potential along the southern coast and in the northern mountains. The study said there was some potential for biogas, geothermal and wave energy but recommended the country focus on wind and solar. The government expects the solar feasibility study to pave the way to take bids in 2010 for a large concentrated solar project. Oman is already the site of desalination plants by Surrey, England-based Modern Water and San Leandro, California-based Energy Recovery. (BI-ME13.05)

5.12 Saudi April Inflation at 19-Month Low Of 5.2%

Saudi Arabia's Central Department of Statistics announced that the country's annual inflation rate fell for a sixth month running to a 19 month low of 5.21% in April, with official data showing food price rises continued to decline while pressures from rents remained steep. Saudi Arabia's cost of living index stood at 121.2 points on 30 April compared with 115.2 points a year earlier. That compared with inflation of 6% in March and was the lowest inflation rate since September 2007. Inflation rates have declined rapidly in the largest Gulf Arab economy as commodity prices slumped and a stronger US Dollar helped reduce import costs for the kingdom, which pegs its riyal to the dollar. Food and beverage costs recorded a rise of 1.6% in April compared with a 2.8% advance in March. Last year, when inflation peaked at more than 11% in July, food and beverage costs in Saudi Arabia had surged an annual 16%. (BI-ME 19.05)

5.13 Saudi's New Construction Contracts to Rise 15.4% To $60 Billion In 2010

As the largest construction market in the Gulf, the value of new construction contracts awarded to main contractors in Saudi Arabia is expected to increase by 15.4%, reaching $60bn in 2010 compared to $52bn in 2008, according to Naseba, an events management firm. Saudi real estate and construction development is mainly driven by the strong local population growth which is expected to double in the next 20 years, the demographic and structural shifts in the economy, the increasing transparency of laws and regulations attracting foreign investment and the new mortgage law as well as the affluent commercial sector, the media release notes. As a result, six mega economic cities are currently being developed and are expected to be home to 4 to 5 million residents by 2020. With the Saudi market currently valued at over $1 trillion worth of underway and planned projects, the real estate activity is estimated to increase at an average annual rate of 5.8%, with its contribution to GDP increasing from 6.8% in 2004 to 7.2% in 2009. The contribution of the building and construction sector to the GDP is estimated to increase at an average annual rate of 6.7%, reaching 7.3% by the end of 2009, as compared to 6.6% in 2004, concluded the Saudi Ministry of Economy in the Eighth National Development Plan (2005-2009).

5.14 Saudi Car Imports Seen Falling For First Time In 10 Years

Saudi Arabia, one of the Middle East's biggest car markets, could see the first drop in car imports in 10 years in 2009 as a crisis hits the oil-based economy. The industry, whose 2008 sales accounted for about 3% of the biggest Arab economy's gross domestic product (GDP), is cutting costs by freezing new recruitment, while banks are making access to financing harder. Global auto makers hope Gulf Arab countries will show relative resilience to the global downturn hitting the industry: the Saudi government has boosted spending to counter the effects of the crisis, but the private sector is widely expected to suffer, mainly from greater caution by banks towards lending. 2008 was the best year for the car industry in Saudi Arabia, which had not seen a drop since 1998. Saudi imports of new cars could fall 22% to 350,000 units in 2009. Demand from the private sector has cut sales but not the state sector or contractors on state projects. News about gluts in U.S. and European markets leading to hefty discounts there have turned many Saudis off buying, in the hope of seeing similar promotions hitting the showrooms at home. Japanese brands are believed to account for the biggest chunk of car sales in the kingdom. (AB25.05)

5.15 Egypt Tourism Revenues Drop 13%

Tourism revenues in Egypt fell by 13.2% in the first four months of 2009 to $3.6b due to the global slowdown, largely thanks to a sharp drop in eastern European visitors. The number of tourists visiting Egypt fell by 10.3% to 3.67m in the four months to the end of April. A slump in tourism, which employs about 10% of Egypt's workforce, is among factors that could drag economic growth this year to its lowest level in half a decade. The number of visitors from Ukraine had dropped over 57% while visitors from Poland and Russia had declined by around 23%. The drop is attributed to the relative weakness of those countries' currencies against the dollar, saying that had made packages more expensive. Tourism from Arab countries, meanwhile, was actually a sliver higher in the four months to end-April, boosted by higher tourism numbers from Saudi Arabia and Kuwait,. More than 12.8m tourists visited Egypt in 2008, providing revenues of $10.985b, government figures showed. The industry is Egypt's main hard currency earner, followed by worker remittances. Egyptian investment bank EFG-Hermes has said hotel occupancy could fall below 50% this year and the number of tourists could drop by 18% to 10.5m. (Various20.05)

5.16 Unemployment Rises in Egypt on Low Growth

Egyptian unemployment is set to rise from around 9% now because the most populous Arab country is not sustaining high enough economic growth to support its population. Prime Minister Nazif had said on 15 May that the economy was likely to keep growing by at least 4%. However, a fifth of Egypt's 80 million-strong population lives on less than $1 a day. Egypt had unemployment of 9.4% in Q1/09. Earlier this month the country said there were some 2.34 million people unemployed out of a workforce of 25 million. While some industries like tourism have been hard hit by the global recession, the labor intensive housing and construction sectors were among those performing better. Remittances from Egyptians working abroad, along with Suez Canal revenues, tourism, and oil and gas exports are key sources of foreign currency for Egypt. The country earned $8.56b from remittances in the 2007/8 fiscal year and $6.32b the year earlier. (DNE17.05)

5.17 Libya's Inflation Rate Slashed in First Quarter

On 18 May, the Libyan Central Bank announced that the pace of rises in consumer prices halved to 5.8% in Q1/09 from a record 11.8% rate in Q1/08. Average annual inflation surged to 10.4% in 2008 from 6.2% in 2007, while prices increased only 1.4% in 2006 and 3.0% in 2005. The jump in inflation was chiefly due to soaring costs of food, which Libya mostly imports. Prices fell at the end of the 1990s but since the lifting of the UN embargo, which ran from 1992 to 2003, consumer demand has risen sharply in the oil-rich country, where around 90% of food and equipment is imported. (BI-ME 19.05)

Turkish, Cyriot, Greek & Bulgarian Developments 

6.1 Turkish Talks with IMF Continue But No Date for New Visit

The IMF said that the Fund is in ongoing and continuing discussions with the Turkish authorities for a possible loan deal. In a press briefing in Washington on 21 May, the IMF also said that no date was set for the mission visit. Separately, local newspapers quote finance minister Mehmet Simsek as saying that he presented a measures package worth TRY 10 billion to the IMF when Simsek was conducting talks with the Fund as the economy minister. In a cabinet reshuffle earlier this month foreign minister Ali Babacan replaced Mehmet Simsek, who is now serving as the finance minister in the cabinet. Local media claimed that the recent cabinet reshuffle was the reason behind the delay of a visit by the IMF mission to warp up loan talks. Reportedly, the Fund proposed sending the mission to the country but economy minister Ali Babacan rejected this proposal on the ground that the new economy team needed some time to assess the situation. (Xing26.05)

6.2 IMF Sees Better Days In Late 2010 for Greece

The International Monetary Fund (IMF) expects the Greek economy to shrink by up to 2% this year and warned that fiscal and structural reforms are needed for the economy to get back on the recovery track. IMF officials, who were in Athens for two weeks putting together the Fund's report on Greece, said falling consumer and business confidence as well as lower industrial production and retail sales have contributed to the slowing economy. The mission projects growth between -1% and -2% in 2009 with a recovery beginning late in 2010. After showing an average annual growth rate of 4% for the last seven years, Greece's economic expansion in Q1/09 slowed to an annual pace of 0.30%, its slowest since 1993. The IMF's annual forecast is in line with the European Commission's projection, which predicts Greece's economy will shrink by an annual pace of 0.90% in 2009 before recovering moderately next year to show a growth rate of 0.1%. The IMF said a recovery in the medium term is likely to be “tepid” in the absence of reforms. The fund recommended sweeping changes to tax regulations, continuing wage moderation and social security reforms to help lower the budget deficit, which it sees widening to ”at least 6%” of gross domestic product. (Ekathimerini26.05)

6.3 Greece's Shipping & Tourism Revenues Shrink

Serving to confirm fears that the international financial crisis has seriously hurt the two leading industries in Greece and that the country's growth rate is indeed likely to turn negative, revenues from shipping dropped by 23.9% and from tourism by 18.2% on an annual basis, Bank of Greece data revealed on 22 May. The decline in Q1 revenues points toward an even more difficult period to come for tourism in particular, which will have a huge impact on gross domestic product, to which tourism contributes 7.8%. At the same time, however, the significant decline in oil prices on a yearly basis has led to a 22.2% reduction in the current account deficit relative to Q1/08, dropping to €7.3 billion this year from €9.4 billion in 2008. Fuel imports registered a sharp reduction of 35.3% year-on-year to reach just €2.5 billion, down from €3.9 billion in 2008. Receipts from ships fell by 43.9%, while fuel exports also declined by 29.4%. The inflow of funds from foreign investment in the January-March period reached €341 million, against a total outflow of €253 million.

The European Commission and other international organizations have long predicted a recession in Greek tourism and the economy in general. Brussels foresees a contraction of 0.9% for Greek GDP in 2009, while the IMF expects GDP to shrink by about 1%. The Bank of Greece estimates zero growth, which is likely to turn negative in some quarters of the current year. The only positive forecast has been from the Economy and Finance Ministry, which has predicted a growth rate of 1.1%, though this figure too is likely to be revised downward next month to about 0.5%. (Kathimerini23.05)

6.4 Comprehensive 2009 Up Date on the Bulgarian Pharmaceutical Market

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "The Pharmaceutical Market: Bulgaria" report to their offering. Funding for healthcare in Bulgaria is principally through compulsory health insurance, operated by the National Health Insurance Fund. The role of the NHIF is to provide a basic package of health services for the whole population. The government is divided on whether to allow private companies to operate in the insurance sector. Two of the three coalition parties support the idea of removing the NHIF's monopoly, unlike the senior partner, the Bulgarian Socialist Party. In 2008, the Bulgarian market for pharmaceuticals was estimated at $771 million, or $102 per capita. It is expected that the market will continue to expand at a rate of 5.1% per annum, reaching $989 million, equal to $136 per capita, by 2013. An estimated 78% of the pharmaceutical market is supplied by imports. Germany and Switzerland were the leading suppliers in 2006, accounting for over 30% of imports. The value of imports increased by 11.8% in 2006. (R&M26.05)

6.5 Bulgaria Ranks 38th in IMD World Competitiveness Report

The International Institute for Management Development (IMD) announced that Bulgaria ranks 38th among 57 leading economies in its World Competitiveness ranking, the 2009 ‘World Competitiveness Yearbook'. Bulgaria, which has gained one place as compared to last year, is followed by Spain, Brazil, Poland, Hungary, Turkey, Romania, Croatia and Ukraine. The World Competitiveness ranking is based on 329 criteria on the basis of hard numbers and investor perceptions. Moreover, the Stress Test on Competitiveness places Bulgaria at the 46th place, among the group of countries vulnerable to the global financial crisis. The country is followed by Italy, Poland, Greece, Spain, Russia, as well as Hungary, Croatia, Ukraine, Argentina and Venezuela. The Stress Test is an additional ranking, based on the results of the World Competitiveness Yearbook 2009. It analyses which countries are better equipped to fare through the financial crisis and improve their competitiveness in the near future and focuses on exposure, readiness and resilience in a period of world recession. (Reporter21.05)

6.6 Bulgarian Market for Medical Equipment & Supplies Estimated at $230 Million for 2009

Research and Markets (http://www.researchandmarkets.com) announced the addition of the "The Medical Device Market: Bulgaria" report to their offering. Around three quarters of the Bulgarian medical device market is supplied by imports. Bulgaria is located in south-eastern Europe, bordering Romania, Serbia, Macedonia, Greece and Turkey and is one of the newest members of the EU, joining in January 2007, alongside Romania. The population of Bulgaria is estimated at 7.5 million in 2009, over 17% of which is aged 65 or over. Funding for healthcare in Bulgaria is principally through compulsory health insurance, operated by the National Health Insurance Fund. The role of the NHIF is to provide a basic package of health services for the whole population. The government is divided on whether to allow private companies to operate in the insurance sector. Two of the three coalition parties support the idea of removing the NHIF's monopoly, unlike the senior partner, the Bulgarian Socialist Party. In 2009, the Bulgarian market for medical equipment and supplies is estimated at $230 million, or $31 per capita. It is expected that the device market will continue to expand at a rate of 12.4% per annum, reaching $411 million, equal to $57 per capita, by 2014. Around three quarters of the medical device market is supplied by imports. Germany, China and Italy were the leading suppliers in 2007, accounting for over 35% of imports. The value of imports increased by 33.7% between 2006 and 2007. (R&M26.05)

General News and Interests

*ISRAEL:

7.1 Shavuot Holiday to be Marked on Eve of 27 May

On 27/28 May, the Jewish world will observe the holiday of Shavuot. Shavuot is the second of the three major pilgrim festivals (Passover being the first and Sukkot the third) and occurs exactly fifty days after the second day of Passover. This holiday marks the anniversary of the day when the Jewish People received the Torah at Mount Sinai. This is a biblical holiday complete with special prayers, holiday candle lighting, and Kiddush, with many forms of work and labor are prohibited. The word "Shavuot" means "weeks": It marks the completion of the seven-week counting period between Passover and Shavuot. During these seven weeks the Jewish people cleansed themselves of the scars of Egyptian slavery and became a holy nation ready to enter into an eternal covenant with G d with the giving of the Torah. Before the giving of the Torah the Jews were a family and a community. The experience of Sinai bonded the Jews into a new entity: the Jewish people; the Chosen Nation. This holiday is likened to their wedding day - beneath the wedding canopy of Mount Sinai, G d betrothed the Jews.

7.2 Israel Remains Among Healthiest Countries in the World

Israel remains in the top tier of healthiest countries in the world to live in, according to the 2009 World Health Organization Statistics. Life expectancy in Israel reached 81 in 2007, the most recent year for which statistics are available. That was only 2 years short of Japan's 83 and put Israel among the top 14 countries in the world, longevity-wise. Israel was highly ranked in almost all other health categories in the WHO report. Israel's health rankings were consistently higher than the average in European countries and much higher than the average in the Middle East country group, to which Israel belongs geographically (the WHO lists Israel in the European group, however). The newborn mortality rate in Israel (3 per 1,000), the under five-years-old mortality rate (5 per 1,000) and the maternal mortality rate at childbirth (4 per 100,000) were much lower than the European averages of 10 per 1,000, 15 per 1,000 and 27 per 100,000 respectively. In addition, the report said that in Israel 100% of people have access to improved drinking water sources, higher than the European average of 97%. Israel also has an average of 37 doctors per 10,000 people, which is higher than the European average of 32. According to the report, Israel has low incidences of infectious diseases across the board, while also having a population which has consistently high rates of immunization. In Israel, 121 people per 100,000 die from cardiovascular disease – in Europe the average is 332. Israel lagged behind, however, on hospital beds per person. In the Jewish state there are 60 beds per 10,000 people, but in Europe the average is 63. In addition, Israel spent 8% of its Gross Domestic Product on health, but the European average is 8.4%. (IsraelN25.05)

*REGIONAL:

7.3 Pink Lebanese Taxis for Women Only

A taxi firm in Lebanon has unveiled a new concept geared toward women, complete with a fleet of pink cars and pink-attired female drivers ready to keep the sexes apart. "Initially, I thought I would have a rough time finding female taxi drivers given that in Lebanon this is a man's job," said Nawal Yaghi Fakhri, owner of Taxi Banat (Taxi for Women) which was launched on 19 May. The initiative, the first of its kind in Lebanon, has won the backing of the tourism ministry keen to cater to a growing clientele of wealthy female tourists from conservative Muslim countries in the Gulf region. The company's drivers will only serve women. A women-only cab company was also launched two years ago in the Islamic Republic of Iran, which frowns upon the mingling of the sexes, although men and women do sit together in shared taxis. The idea, however, has not gone down well with some in Lebanon. (BI-ME 19.05)

7.4 UAE Renews Call For Talks On Disputed Islands

On 23 May, the UAE renewed calls for Iran to start talks over three disputed islands held by Tehran and whose status has marred relations between the Gulf neighbors for decades. UAE Minister of State for Foreign Affairs Gargash said his country wishes to resolve the dispute through direct talks or international arbitration, a proposal the country has made several times. Iran, under the rule of the Western-backed shah, gained control of Greater Tunb, Lesser Tunb and Abu Musa islands in 1971, as Britain granted independence to its Gulf protectorates and withdrew its forces. Iran took possession of the Tunbs, while Abu Musa - the only inhabited island - was placed under joint administration under a deal with Sharjah, now part of the UAE. But since then, the UAE says the Iranians have taken control of all access to the strategic island and installed an airport and military base there. The UAE has the full backing of fellow GCC states Bahrain, Kuwait, Oman, Qatar and Saudi Arabia in its claim to the islands, near the Strait of Hormuz, through which an estimated 40% of the world's crude oil passes. (AB24.05)

7.5 Dubai Tennis Tourney Pays Fine Over Israeli Player Pe'er

The Dubai Tennis Championships will pay a record fine over its country's refusal to award a visa to an Israeli player. The heads of the tournament agreed on 17 May to pay the record $300,000 fine after the World Tennis Association turned down the Dubai appeal. The United Arab Emirates rejected Israeli tennis champion Shahar Pe'er's request for a visa to play in the Dubai tournament just days before the start of the competition and shortly before she planned to travel to the UAE in February. The WTA also will require the organizers of the Dubai tournament to ensure that Israeli players who qualify for the event receive their visas at least eight weeks ahead of the 2010 tournament. (JTA17.05)

7.6 Saudi Delays Municipal Election For 2 Years

Saudi Arabia has decided to delay municipal elections, which women were hoping to take part in for the first time, for two years. Saudi Arabia is an absolute monarchy without political parties. It was announced that more time was needed to study expanding the participation of citizens in running local affairs. Saudi Arabia held municipal elections in 2005, which were the country's first nationwide polls since its foundation in 1932. Women were barred from voting or standing for office but officials said then they would be allowed to stand in the next vote, which had been expected this year. The election for half the seats on the councils was part of a series of reforms undertaken after the Sept 11 Islamic terror attacks of 2001 that focused international attention on Saudi Arabia's political and religious culture. Most of the attackers were Saudi, acting in the name of the Islamist group Al Qaeda. King Abdullah ascended the throne in 2005 promising a program of cautious reforms in the world's biggest oil exporter, which follows a strict reading of Islamic law. Analysts and diplomats say he faces stiff opposition from senior members of the royal family as well as a powerful religious establishment fearing loss of influence. Recently, a group of Saudi human rights and opposition activists sent a petition to King Abdullah demanding political and judicial reforms, including holding elections. In March, Interior Minister Prince Nayef bin Abdul-Aziz, a half-brother of King Abdullah, was quoted by a local newspaper as saying that Saudi Arabia had no need for women members of parliament or elections. Later that month, Prince Nayef, who is seen as conservative force in the ruling family, was appointed as second deputy prime minister, a promotion that means that he will run the country when the monarch and crown prince are away. (Reuters18.05)

Israel Life Science News

8.1 Can-Fite Positive Results From Phase II Trial Treating Dry Eye Syndrome With CF101

Can-Fite BioPharma announced that its 80-patient Phase II clinical study using CF101 to treat patients with moderate to severe Dry Eye Syndrome had successfully met the primary efficacy endpoint. Patients in this masked study were randomly assigned to either 1 mg of CF101 or matching placebo; drug was taken orally as a monotherapy for 12 weeks. The 12 week duration is one that Can-Fite has used in other trials of CF101 as an anti-inflammatory agent, and is similarly a common one for Phase II trials of Keratoconjunctivitis Sicca. The patient group receiving CF101 demonstrated statistically significant improvement in superficial punctate keratitis, relative to the placebo group, as measured by fluorescein staining. This sensitive and prevalent measure of corneal disease was prospectively defined as a primary study endpoint, thus demonstrating the ability of orally administered CF101 to exert beneficial effects on ocular surface inflammation. An improvement in additional study parameters was also observed. CF101 was safe and well tolerated during the study period. These findings supply evidence for the efficacy of CF101 alone as a systemic anti-inflammatory drug. Recently Can-Fite announced that a Phase IIb study with CF101, in combination with methotrexate, failed to meet its primary end point in the treatment of Rheumatoid Arthritis, most probably due to lack of efficacy in the combined treatment. A Phase II study in patients with Psoriasis is ongoing also utilizing CF101 as monotherapy, and based on Can-Fite's estimations, data will be released during Q3 2009.

Petah Tikva's Can-Fite Biopharma (http://www.canfite.co.il) is a public company traded on the Tel Aviv Stock Exchange. The Company was founded on the basis of scientific findings made by Prof. Pnina Fishman and focuses on the development of small molecule-based drugs that bind to receptors of cancerous or inflammatory cells and inhibit their development. (Can-Fite18.05)

8.2 Sol-Gel Anti-Acne Clinical Study Shows Significantly Improved Efficacy and Safety

Sol-Gel Technologies announced results from a comparative clinical study. The results demonstrate that the company's two strength Anti-Acne kits achieved pronounced efficacy and markedly improved tolerability. The Sol-Gel Anti-Acne kits feature Sol-Gel's patented drug delivery technology. Participants in the double-blind, controlled and randomized, 4-week, 4-arm parallel groups were randomized to receive one of Sol-Gel's kits or of comparable leading commercial products. Safety and tolerability were assessed by the Principal Investigator dermatologist who also evaluated the rates and grades of erythema, edema, dryness, scaling/peeling, stinging/burning, itching and skin tightness. Efficacy was assessed by lesions count, including total lesions count, inflammatory and non-inflammatory lesions and Investigator Global Assessment by improvement of Severity Score.

Sol-Gel's Anti-Acne kits provide a fast-acting, highly-effective and well-tolerated benzoyl peroxide-based acne care program. In contrast to other treatments, the kits deliver visible reduction of acne as quickly as within three days and after two weeks significantly out-perform the leading brand in the resolution of acne and remain substantially more effective with continued use. The Kits, available in two strengths, both treat and prevent acne. Starting with the cleanser, toner and lotion, and optionally adding a spot treatment, the Sol-Gel regimens include timed-release benzoyl peroxide in combination with ingredients that clean, heal and balance the skin. They treat the entire face to reveal clear, blemish-free skin faster – without the dryness and skin irritation caused by other acne treatments. Ness Ziona's Sol-Gel Technologies (http://www.sol-gel.com) is a fast-growing specialty pharmaceutical company focusing on enhancing topical pharmaceutical products. Founded in 1997, the company has advanced skincare products to market and developed a pipeline of prescription and over-the-counter products, addressing dermal medical conditions affecting large patient populations. (Sol-Gel 18.05)

8.3 State-of-the-Art Gait Training Device to Help Millions Walk More Normally Again

Millions of people in the US have diseases or conditions that affect their ability to walk. For many of them, traditional walking aids such as canes and walkers are a disappointing substitute for being able to walk normally and live independently. Now there's a high-tech yet easy-to-use gait-training device, the GaitAid Virtual Walker from MediGait (http://www.medigait.com) that is bringing these people new hope for more normal walking - and living. GaitAid users commonly find themselves walking normally from their first step. But the immediate results are just the start of GaitAid's effects. Over time, the device "rewires" the wearer's brain to follow a healthier walking pattern - an effect that frequently continues even when it isn't being worn. This process (called neuroplasticity) essentially creates new, healthy nerve circuits that bypass the disease-damaged areas associated with walking. The GaitAid Virtual Walker is the only gait-trainer of its kind, combining virtual-reality programming and real-time motion detection in a simple-to-use, cell-phone-sized device. The GaitAid Virtual Walker is available for purchase by individuals or their caregivers as well as physicians, physical therapists, hospital rehabilitation clinics, nursing homes, and assisted-living communities who wish to offer the training as a value-added service. MediGait is located in Bar Giyora, Israel. (MediGait 18.05)

8.4 Kamada Raises an Additional Approximately $10 Million in a Private Allocation of Common Stock

Kamada announced that, pursuant to agreements dated February 23 2009 and May 10 2009, it has completed the private allocation of common stock and warrants to ten investors. The placement resulted in gross proceeds to Kamada of approximately $10 million. The shares described above and the shares that will be issued following the exercise of the warrants are registered for trade on the Tel-Aviv Stock Exchange. Kamada intends to use the net proceeds from the sale of the shares to advance their clinical pipeline, including the development of its inhaled alpha-1 anti-trypsin (AAT) and to accelerate the entrance of its products into the US and EU market. Ness Ziona's Kamada (http://www.kamada.com) is a public biopharmaceutical company developing, producing and marketing a line of specialty life-saving therapeutics using its proprietary chromatographic purification technologies. Licensed and marketed in more than 15 countries, several of these specialty therapeutics are currently undergoing advanced clinical trials. The company has recently completed a Phase III clinical trial in the US with its flagship IV Alpha-1 Antitrypsin (AAT) product indicated for treating AAT deficiency and is currently in advanced stages of development of its next generation, inhaled administration AAT for the treatment of various lung diseases including cystic fibrosis and bronchiectasis. (Kamada20.05)

8.5 Z-Cube & Yissum to Develop Innovative Nanotechnology Drug Delivery System for Pain Treatment

Milan, Italy's Z-Cube, the corporate venture arm of Zambon Company, and Yissum Research Development Company have entered into a license agreement for Z-Cube to develop and commercialize an innovative nanotechnology drug delivery system for the treatment of pain. Under the terms of the agreement, Z-Cube has received the worldwide exclusive right to develop and commercialize the technology for pain applications and will sponsor a research program to be conducted by an Israeli group. Z-Cube has also received the right to grant sublicenses. Yissum will receive license fees, milestones and royalty payments.

Yissum Research Development Company (http://www.yissum.co.il) of the Hebrew University of Jerusalem was founded in 1964 to protect and commercialize the Hebrew University's intellectual property. Products based on Hebrew University technologies that have been commercialized by Yissum currently generate $1.2b in annual sales. Ranked among the top technology transfer companies in the world, Yissum has registered 6,100 patents covering 1,750 inventions; has licensed out 480 technologies and has spun out 65 companies. (Yissum25.05)

8.6 Zetiq Reports Success in Clinical Trial Aimed for Early Identification of Cervical Cancer

Zetiq reported the successful completion of a clinical trial to validate feasibility of early identification of cervical cancer. The trial was conducted on cervical smears collected from 74 subjects at Meir MC and Macabbi health services in Israel. According to the results of the trial, the testing utilizing company's CellDetect technology has an average sensitivity of 90% to track and identify pre cancerous (dysplastic) cells, and a specificity of 74%. This mentioned sensitivity was found to be higher then the sensitivity of the traditional Pap test, routinely used today with over 300 million tests conducted world wide, and similar to that of the test for HPV, the virus that can under certain circumstances cause the disease. The specificity of the company's test was similar to that of the Pap test and significantly higher then that of the HPV test.

Ramat Gan's Zetiq Technologies (http://www.zetiq.co.il) develops effective cancer diagnostic tools. A significant medical need exists for early stage diagnostic tools for screening, monitoring or diagnosing cancer. Zetiq offers unique advantages in this market with its proprietary CellDetect technology for differential staining and morphological visualization to differentiate between non cancer cells and a wide variety of cancer indications. The Company's products alleviate the process of locating and identifying suspected cancer cells, reduce error, simplify the process and have a potential to be fully automated. Zetiq is a subsidiary of Bio-Light Life Science Investments, a management and holding company specializing in biomedical technologies. (Zetiq 26.05)

Israel Product & Technology News

9.1 Insightix Adds Support for IF-MAP from the Trusted Computing Group

Insightix has integrated support for IF-MAP from the Trusted Computing Group's (TCG) Trusted Network Connect (TNC) with its Business Security Assurance (BSA) solution suite. Insightix BSA provides 24x7x365 network, device, and user intelligence, maintaining a real-time inventory of ALL assets connected to the enterprise network, their profiles, and the identities of those using the assets. Network information is continuously collected to reflect the actual real-time state of the network. Through its support for TNC's IF-MAP, Insightix BSA can now integrate with a variety of security solutions supporting IF-MAP providing them with real-time network situational awareness, which makes the foundation needed, by every security solution. Ra'anana's Insightix (http://www.insightix.com) is an innovator of real-time security intelligence and control solutions. Insightix patent-pending technologies are used to detect, identify, profile, audit and control ALL devices connected to your network, providing real-time network, endpoint and user intelligence. Insightix discovers an additional 20%- 50% of the devices residing on the enterprise network, devices that otherwise remain undetected, and automatically audits for the security configuration of endpoints based on the asset classification information collected. (Insightix13.05)

9.2 TELICPHIL to Deploy ECI Telecom for Philippines Nationwide DWDM Expansion Network

ECI Telecom has been chosen as the sole supplier by the Telecoms Infrastructure Corporation of the Philippines (TELICPHIL) a consortium of seven franchised telecom operators, to expand its National Digital Transmission Network (NDTN). As a joint project, the NDTN is used by its various co-owners to lease bandwidth and deliver communication services nationwide across the Philippines. Utilizing ECI's XDM Multi-Service Provisioning Platform (MSPP), NDTN Co-owners thru TELICPHIL will extend the NDTN to provide for a 2 X 10Gb/s DWDM backbone network and offer greater bandwidth capacity for new, revenue generating data and international-calling services, while enabling future migration to a next-generation network. The XDM platform is part of ECI's 1Net business framework and enables operators to migrate from a legacy PSTN to next-generation networks, at their own pace, with ECI's Build-As-You-Grow architecture. Founded in 1961, Petah Tikva based ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. ECI's 1Net framework defines their focus on facilitating customer's optimal transition to Next-Generation Networks. This is based on the unique combination of innovative and multi-functional networking equipment extending from the access to the core of transport networks, fully integrated solutions and a full suite of professional managed services. (ECI19.05)

9.3 Teradyne & OptimalTest Agree to Jointly Market Test Operations Optimization Solutions

North Reading, Massachusetts' Teradyne OptimalTest have entered into a strategic alliance to offer Teradyne customers a comprehensive and expanded set of semiconductor test solutions that deliver up to 30% test time reduction, 20% more operational efficiency and 5% increased yield. The software also improves critical yield learning during production ramps. Based on Advanced Adaptive Test, OptimalTest's software can be scaled to meet customer needs ranging from local test floor operations to linking globally dispersed, multi-enterprise manufacturing supply chains. The software supports advanced adaptive test in real time and “near time” across a distributed supply chain, as well as offline post-processing, for faster decision-making on profitability, performance and product quality. OptimalTest's solutions for yield learning and reclamation, test time reduction, outlier detection and reliability, and quality meet Teradyne's requirements for easy use, implementation and deployment, as well as effectiveness. Established in 2005, Nes Ziona's OptimalTest (http://www.optimaltest.com) provides comprehensive test management software solutions incorporating advanced adaptive test techniques. The company's suite of software is unique for its breadth, incremental modularity, seamless connectivity and real-time capabilities. Its solutions allow adaptation and enhancement of test processes and operations through continuous automated learning, advanced adaptive test techniques and expertly culled data that is decision-ready. (Teradyne19.05)

9.4 Orckit-Corrigent Receives Network Products Guide 2009 Product Innovation Award

Orckit-Corrigent announced that Network Products Guide, industry's leading publication on information technologies and solutions, has named the CM-4140 product, a winner of the 2009 Product Innovation Award. This annually venerated award recognizes and honors vendors from all over the world with innovative and ground-breaking products that are bringing essential and incremental changes and are setting the bar higher for others in all areas of information technology. CM-4140 is a Layer 2 MPLS Carrier Ethernet + Transport (CE+T) switch highly optimized for 1st layer aggregation mainly due to its cost efficiency, high port density, small from factor and low power consumption. In addition, the CM-4140 supports wide set of transport features, including the ability to deliver both Ethernet, PDH (E1/T1) and SDH (STM-1/4/16) services over packet–based networks, and enables gradual migration of the existing SONET/SDH networking infrastructure to a next generation Carrier Ethernet networks. CM-4140 is the first product to introduce standard and interoperable Layer 2 MPLS at the metro edge network domain, and the first to introduce high switching capacity of 168Gbps at small 3RU footprint with minimized power consumption. Thus, CM-4140 is breaking the MPLS cost-performance paradigm.

Network Products Guide is a media sponsor of Interop and Technosium Executive Alliance Forums engaging Chief Information Officers (CIOs) and Chief Information Security Officers (CISOs). As industry's leading technology research and advisory publication, it plays a vital role in keeping decision makers and end-users informed of the choices they can make in all areas of information technology. The guide follows conscientious research methodologies developed and enhanced by industry experts.

Tel Aviv's Orckit-Corrigent (http://www.orckit.com) facilitates telecommunication providers' delivery of high capacity broadband residential, business and mobile services over wireline or wireless networks. With 20 years of field experience, a reputable list of worldwide Tier-1 customers and sound leadership, the company has a firm foothold in the ever-developing world of telecommunication. The company's product lines include Carrier Ethernet + Transport (CE+T) switches - An MPLS based portfolio enabling advanced packet as well as legacy services over packet networks with a wide set of transport features, and Personalized Video Distribution systems - An advanced video distribution portfolio, optimized for IPTV, enabling multiple HD streams per home over the existing DSL infrastructure. (Orckit-Corrigent18.05)

9.5 Wavion Selected by Coolnet to Provide Wi-Fi Coverage in Main Cities of the Palestinian Authority

Wavion and Coolnet, an Internet Service Provider (ISP) in the Palestinian Authority, announced the completion of a large scale Wi-Fi deployment based on Wavion WBS-2400 Base Stations in the Palestinian Authority. The WBS-2400 Base Stations will provide high-speed wireless (Wi-Fi) connectivity to medium and small businesses and residences in main cities in the Palestinian Authority. Wavion's WBS-2400 spatially adaptive beamforming base stations provide extended range, improved indoor penetration and better interference resilience. The WBS-2400 base stations where installed in the cities of Ramallah, Nablus, Bethlehem and Hebron and provide internet connectivity for business and residential users with 512KBps and 1MBps. Yokneam's Wavion (http://www.wavionnetworks.com) is transforming the metro Wi-Fi and rural markets with a new category of spatially adaptive base stations. The company's digital beamforming and SDMA technologies are the first and only to resolve the significant performance, penetration and profitability challenges facing large scale metro and rural deployments. (Wavion18.05)

9.6 SDN Communications Selects ECI Telecom to Upgrade Largest Regional Network in Upper Midwest

ECI Telecom, a global provider of networking infrastructure solutions optimized for next-generation network (NGN) migration, today announced that the CESR SR9700 Carrier Ethernet Switch Router platform has been selected by SDN Communications, a Sioux Falls-based regional service provider, to support its fiber optic network – the largest in the upper midwest – and expand its Carrier Ethernet-based services. ECI's award-winning CESR SR9700 is one of the industry's largest-capacity and highest density next generation Metro Ethernet solution. Optimized for Carrier Ethernet transport, the SR9700 has the ease-of-management and service-enabling qualities required by SDN for its next-generation network. Petah Tikva's ECI Telecom (http://www.ecitele.com) delivers innovative communications platforms to carriers and service providers worldwide. ECI provides efficient platforms and solutions that enable customers to rapidly deploy cost-effective, revenue-generating services. Founded in 1961, Israel-based ECI has consistently delivered customer-focused networking solutions to the world's largest carriers. (ECI 18.05)

9.7 QualiSystems Launches TestShell Studio

QualiSystems announced today the launch of TestShell Studio, the innovative latest addition to the TestShell system. TestShell Studio is a unique user-friendly test creation solution that enables easy and independent design of complex test scenarios without programming. Studio addresses a critical gap in the market, being the only fully integrated tool providing code-free creation of intricate event-driven tests while supporting parallel execution. These capabilities answer the need of a wide range of industries and testing environments. As Studio is an integral part of the TestShell System, all test data are automatically saved in a standardized format to the TestShell Foundation central database. Even remote QA and QC teams can run, edit, share and save test sequences, and then view detailed reports and dashboards. All the technologies that are essential for automating today's complex testing environments are integrated in the Studio application, enabling code-free test creation in a fraction of the time of traditional tools.

QualiSystems TestShell solutions constitute a suite of integrated test automation applications that can be used for testing virtually any type of hardware, device or embedded system throughout the test cycle. Each application manages and automates certain aspects of the testing process and supplies data to a unified database, turning the testing process into a complete quality optimization solution. Ganey Tikva's QualiSystems (http://www.qualisystems.com) is a test automation pioneer. The test automation world is evolving from a collection of various tools to an enterprise quality management platform. QualiSystems' TestShell system is used by leaders in diverse industries including telecommunication, mobile, aerospace and defense, automotive, electronics, medical devices and others. (QualiSystems 18.05)

9.8 Netcom Selects VocalTec for VoIP Network Rollout in Kirgizstan

VocalTec Communications announced that Netcom, an alternative carrier in Kirgizstan, has selected VocalTec as the solution provider for its Next Generation VoIP network. Netcom will deploy VocalTec's solutions throughout its network across Kirgizstan. At the heart of the deployment is VocalTec's Essentra BAX Class-5 application server, providing a comprehensive set of innovative residential and enterprise VoIP services. The deployment also incorporates VocalTec's Essentra iCX - an Integrated SIP-to-SS7 Solution – providing seamless interconnection between VoIP and TDM networks, and VocalTec's Essentra EX - VoIP Peering Manager – allowing the interconnection between disparate VoIP networks. This complete solution will enable Netcom to provide its customers with state-of-the-art packet based telephony services, while maintaining strong quality of service and a high level of voice quality. The solution will also enable Netcom to cost effectively carry telephony traffic across its network and provide PSTN termination services throughout Kirgizstan and worldwide. The deployment will serve to strengthen Netcom's infrastructure and presence in Kirgizstan, and will effectively position Netcom for future network growth and expansion.

Herzliya's VocalTec Communications (http://www.vocaltec.com) is a global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers. A pioneer in VoIP technology since 1994, VocalTec provides proven VoIP trunking, VoIP peering and residential/enterprise VoIP application solutions that enable flexible deployment of next-generation networks (NGNs). Partnering with prominent system integrators and equipment manufacturers, VocalTec serves an installed base of dozens of leading carriers including Deutsche Telekom and Telecom Italia San Marino. (VocalTec 26.05)

Israel Economic Statistics

10.1 Bank of Israel Key Index Falls by 0.3% in April

On 20 May, the Bank of Israel released its latest composite State of the Economy Index, showing that the country's economic indicators fell by 0.3% in April, its ninth consecutive monthly fall. The April decline compares with a revised drop of 0.7% in March and 1.3% in February. The Bank of Israel data indicated that the fall in the April index was led by a 2.3% drop in the imports of goods index, following a drop of 1.3% in March. The exports of goods index was down 2.2% in April, after a 3.6% % decline in March. The declines were offset by an increase in the exports of services index, which rose 8.3%, after advancing 3.3% in March. The industrial production index, which lags one month, fell 2% in March. The trade and services revenue index rose 3.9% in March, after falling 0.6% in February. The commerce and services sectors declined 4.6% in annual terms in the first quarter of this year, while industrial production dropped 6.4%. Hardest hit was the wholesale trade sector, which plunged 7.1% in annual terms in the first quarter. Also affected were the restaurant, financial and insurance-services sector, where revenues dropped 6.8% in annual terms, and the food-services and hospitality sector, where revenues fell 6.6%. Against the trend, the health and welfare-services sector saw an increase of 5.8% in revenues during the first quarter.

Growth in industrial production dropped 6.4% in annual terms from January to March. The growth rate in industrial production in the mixed-traditional technology sectors (rubber, plastics, metal goods and jewelry) plunged 27.7% in the first quarter. The growth rate declined 18.1% in the mixed hi-tech sector (chemicals and electronic equipment) and 5.7% in the traditional industry sector (food, textiles, clothing and wood). The hi-tech sector rose 5.7% in Q1/09, after falling 3.9% in Q4/08. The bureau reported that the number of full-time positions in the manufacturing sector fell 6.8% in annual terms in Q1, compared with a decline of 6% in Q4/08. The largest drop in the number of jobs, 10.9%, was registered in the mixed-traditional technology sector. (BoI20.05)

10.2 Central Bureau of Statistics Announces Israel Officially in a Recession

On 17 May, the Central Bureau of Statistics announced that Israel's economy contracted for a second consecutive quarter, plunging the economy into a recession for the first time in eight years. The economy shrank at a 3.6% annualized pace in the three months to 31 March, after contracting by 0.5% in the previous quarter. Gross domestic product is projected to shrink 1.5% this year, which would be the worst recession in the country's 61-year history, according to a Bank of Israel forecast. The economy is forecast to contract 2.1% and the business sector 2.6% this year. The unemployment rate will reach 8.7% this year, or 250,000 jobless. The quarterly drop was the biggest since 2001, when a global slowdown in demand hurt technology exports. Since the outbreak of the economic crisis last September, industrial output had fallen 6.5%. The decline was linked to the dramatic drop in global demand. Exports of goods and services fell an annualized 46% in Q1/09, after dropping 45% in Q4/08. Imports of goods and services dropped 63%, compared with a 19% decline the previous quarter. Consumer spending fell an annualized 4.3%, after a 3.1% drop in the previous quarter. Investment in fixed assets declined 28%, after rising 2.4% in Q4/08. While home construction increased 3.5%, investment by companies in machines and equipment fell 38%. Business GDP slipped an annualized 4.2%, after dropping 2.1% in Q4/08. (CBS17.05)

10.3 Number of Foreign Workers Rose By 12.5% During 2008

The Ministry of Industry, Trade & Labor announced that the number of foreign and refugee workers in Israel rose by 12.5% to number 225,000 during 2008, nearly half of whom were illegal workers. The rise in the number of foreign workers, refugees and Palestinians joining the labor market over the last four years of strong economic growth, until mid-2008, reduced the availability of mainly low-skilled jobs for Israelis, according to the ministry's report. At the end of 2008, there were 285,000 non-Israeli workers, including foreign workers, refugees and Palestinians, compared with 245,000 a year earlier, representing an increase of over 16%, the survey said. The number of foreign workers rose to 215,000 at the end of 2008, compared with 200,000 a year earlier, out of which 45%, or 97,000, were illegal. Since 2007, the number of illegal foreign workers has increased by 10%, the survey said. There were 10,000 refugees from African countries, including Sudan, who joined the labor market; 20,000 refugees were brought to the country in 2007 and 2008. Most were employed in agriculture and hotels in Eilat. The survey showed that the number of foreign workers employed in nursing in 2008 rose 19% to 54,500 compared with the previous year. During the surveyed period, 3,300, or 3.4%, out of 97,000 illegal foreign workers were expelled, compared with 4,000 the previous year. In April, Finance Minister Steinitz announced that he intended to work closely with the recently created Immigration Authority to crack down on illegal migrant workers. The survey reported that according to estimates by the Bank of Israel, the number of Palestinian workers employed in Israel rose by 20%, to 60,000, working mainly in construction and car repair garages. (MITL18.05)

10.4 Israeli Lawyers Face Increasingly Crowded Field

The number of lawyers in Israel has nearly quadrupled in the past 19 years, from 10,697 lawyers in 1990 to 40,469 today. The number of lawyers who joined law firms in the past nine years is not much below the number of lawyers who joined law firms between independence and the end of the second millennium: 23,127 lawyers joined law firms between 1950 and 1999, and 17,342 lawyers have joined law firms since 2000. The Israel Bar Association Conference recently published its "Lawyers Index" ahead of its annual conference in Eilat at the end of May. The condition of the legal profession is Israel is quite dismal, with a saturated market and competition for every client fiercer than ever. Bar Association figures show that the rise in the number of lawyers far outstrips population growth. The people-to-lawyer ratio has fallen from 1,687 to 1 in 1950 to 622 to 1 in 1970 and to an all-time low of 183 to 1 in 2009. There are more than 40,000 lawyers for Israel's population of 7.4 million.

The figures take on even sharper focus in an international comparison. Japan has 25,000 lawyers for its 120 million population and China has 150,000 lawyers for its population of 1.3 billion, or fewer than one lawyer per 8,000 people. What worries Israel's lawyers even more, however, is that at the current growth rate, the number of lawyers could double within a decade, and Israel will be in the unprecedented situation of having one lawyer for every 100 people. The Bar Association notes that most Israeli lawyers are young: 60% are under 40, including 45.6% aged 31-40, and fewer than 10% are older than 61. The Bar Association also notes that even in this era of liberal enlightenment, the legal profession is dominated by men, though less than in the past: 23,231 of Israel's 40,469 practicing lawyers - 57.4% - are men, and 17,238 lawyers - 42.6% - are women. (Globes 20.05)

In Depth

11.1 KUWAIT: IMF Article IV Consultation - Executive Summary

The 2009 Article IV consultation discussions with Kuwait focused on policies to contain the impact of the global financial crisis on the domestic economy.

Economic Developments & Outlook

Kuwait's macroeconomic performance in 2008 was strong but the outlook has been adversely affected by the global crisis and the sharp fall in oil prices. Real GDP is projected to contract by about 1% and inflation is expected to return to single digits. The sharp drop in oil prices will reduce substantially the fiscal and external current account surpluses. The outlook is projected to improve gradually over the medium term with the global recovery, but risks are tilted to the downside. The contentious relationship with parliament has resulted in the resignation of the cabinet - the fourth in two years - in mid-March 2009 and may delay key legislations, including a financial stability plan.

The IMF Authorities' Views

• The authorities are working on a comprehensive plan to preserve financial stability and support economic activity. While the related legislation is still being debated in parliament, the objective is to restructure systemically important financial institutions that are under stress but solvent, facilitate the exit of insolvent ones, and encourage lending to productive economic activities.

• Fiscal prudence through lower transfers and current expenditure while maintaining capital spending is necessary in light of the sharp decline in revenues and the uncertainty surrounding future oil prices.

• The return to a basket peg has enhanced the flexibility of monetary policy and has kept the Kuwaiti dinar (KD) broadly in line with fundamentals.

• The authorities will continue their ambitious investment plan in the oil sector despite the sharp decline in oil prices.

IMF Staff Recommendations

• The authorities' financial stability plan should not prevent the necessary consolidation and restructuring of the financial sector, favor upfront recognition of losses, avoid rewarding excessive risk taking, and minimize fiscal cost. The central bank should strengthen oversight of risk management practices and conduct comprehensive stress tests to assess the impact of a further decline in asset prices and a prolonged period of low growth. These tests would help determine how and whether the authorities should intervene.

• The authorities' financial plan should be complemented by a fiscal stimulus package focused on key infrastructure projects. Fiscal reform is key to reducing the dependence on oil revenue and preserving long-term sustainability.

• The KD is broadly aligned with fundamentals and the basket peg remains appropriate in the run up to the GCC monetary union.

• Implementation of structural reforms that are critical to private-sector led growth should be expedited. (IMF18.05)

11.2 KUWAIT: S&P Reaffirms AA-/A-1+' Sovereign Ratings on Strong Balance Sheet

On 19 May, Standard & Poor's Ratings Services (http://www2.standardandpoors.com) said it had affirmed its 'AA-/A-1+' sovereign credit ratings on the State of Kuwait. The outlook is stable.

"The ratings on the State of Kuwait are supported by the sovereign's rich resource endowment which, combined with prudent policies, has enabled Kuwait to build very strong external and fiscal balance sheet positions in recent years," Standard & Poor's credit analyst Luc Marchand said. "In our view, these strengths comfortably balance some short-term risks linked to the decline in oil prices, oil production cuts and lower non-oil real GDP growth, and increased contingent liabilities from the financial system."

Net external assets - primarily the accumulation of oil revenues held externally through Kuwait's sovereign wealth fund - are projected to reach 425% of current account receipts (CARs) in 2009, underscoring robust external balances. On the fiscal side, the government's net asset position is similarly robust, projected at about 250% of GDP by year-end 2009.

Despite the decline in oil prices, the general government budget in Kuwait should, according to S&P, again record a surplus of about 12.3% of GDP in fiscal 2009-2010, down from an estimated 17.9% in 2008-2009 (including investment income). Moreover, the government debt burden is light, and paper is issued mainly for monetary policy purposes. With the impact of the cut due to OPEC quotas and slowdown of non-oil growth, overall GDP growth is forecast to turn to negative 1.0% in 2009, before recovering at about 2.3% in 2010.

But politics in Kuwait remain complex. Following the dissolution of parliament by the Emir in March, elections held in mid-May yielded few surprises and the political scene is likely to remain unchanged in the medium term, with frictions between the conservative parliamentary majority and the government significantly curtailing policy-making. We can expect that the recently enacted Financial Stability Law will be ratified by parliament. The plan is aimed at bolstering the financial system, which has been negatively affected by the global financial downturn. But Kuwait stands out among peers in not providing any additional fiscal boost to the economy. Indeed, the 2009/2010 budget envisages a 36% fall in expenditure, including a 24% decrease in capital expenditure.

Although most of these cuts reflect a reduction in one-off expenditures that was present in the previous budget, it is clear that no additional fiscal stimulus was provided through the new budget. A number of planned infrastructure projects in the oil sector have been cancelled in recent months. While prudent from a fiscal viewpoint, these policies threaten, in our view, to exacerbate the cyclical downturn in the medium term given the predominance of government in economic activity.

Regional geopolitical risks remain high and weigh on the ratings, S&P said. These risks are, however, partially mitigated by good international alliances, relative domestic social stability and government assets. The stable outlook on Kuwait balances the government's strong financial position against elevated regional geopolitical risks, increased contingent liabilities and potential impediments to growth. Significantly reduced geopolitical risk would be important in raising the rating in the future.

A stabilization of the relationship between the government and the parliament along with a political consensus on accelerating both private domestic and foreign investments should alleviate major impediments to growth and would be a plus for the rating. Conversely, a sustained worsening of political and event risks, or a significant and sustained erosion of the government's asset position, could put Kuwait's creditworthiness under pressure. (S&P19.05)

11.3 KUWAIT: Economy Bears Brunt of Political Turmoil

Business Intelligence Middle East (http://www.bi-me.com) observed that economic development in oil-rich Kuwait has been hard hit by political disputes which have stalled vital projects, analysts and lawmakers said. Despite its oil-fuelled mega-wealth, Kuwait has seen more political turmoil than it has development projects in the past three years, leading to deterioration in services and stagnation in infrastructure programs. "The economy has been the main victim of non-stop political disputes. The national economy remains highly distorted and reform legislation stalled," economic analyst Hajjaj Bukhdur said. The situation worsened in the wake of the global economic meltdown that severely impacted dozens of local investment firms and to a lesser degree other economic sectors.

That prompted Moody's Investors Service in March to place Kuwait's sovereign ratings on review for possible downgrade, while rating agencies have downgraded the ratings of several banks and investment firms. "The rating action was primarily motivated by the recent resignation of Kuwait's government and the dissolution of parliament, the latest bout in the disruptive conflict between the executive and the legislature," Moody's said. "In Moody's opinion, these events reflect an erosion of institutional strength which is of particular concern given the current challenges presented to Kuwait by the global economic and financial crisis."

Central bank governor Sheikh Salem Abdulaziz al-Sabah warned on 2 May that continued political turmoil in OPEC's fourth largest oil producer could eventually undermine the country's sovereign ratings. "Urgent economic challenges require a national consensus on the economy which should be supported by tangible measures to overcome obstacles caused by political tension," Sheikh Salem said.

Under pressure from MPs, the government in December scrapped a $7.5 billion deal with US giant Dow Chemical for a joint petrochemical venture, and also put on hold a $15 billion refinery project. Many vital projects for power generation, a mega harbor and a causeway have either been put on hold or are running years behind schedule. Wrangling between the government and MPs also delayed for two months the approval of a government-sponsored multi-billion-dollar economic stimulus bill to aid ailing investment companies and banks.

After parliament was dissolved in March, the government issued the bill in a decree but under Kuwaiti law it must be sent to the new assembly, which has the power to reject it. Many candidates had vowed to vote against the bill if elected, including former opposition MP Mussallam al-Barrak who described it as a "bail-out for investment whales." "If the legislation is rejected, it will cause a major economic catastrophe. The national economy will suffer and the bourse could slump by 20%," Bukhdur said.

Former MPs and the government have been trading the blame for stalling key projects. "Accusations that parliament has blocked development are baseless lies aimed at tarnishing the image of parliament and democracy," insisted veteran opposition leader Ahmad al-Saadun at an election rally. "It was the government which stalled development because it is incompetent. We only stopped violations and attempts by influential people to take over state property," Saadun added. Former Islamist lawmaker Khaled al-Sultan said parliament saved about $30 billion by "blocking those projects which were marred by corruption."

Since 2006, Kuwait has seen the resignation of five governments and three parliaments have been dissolved, the last one after only ten months. Pumping 2.2 million barrels of oil per day, Kuwait has posted a healthy budget surplus in the past ten fiscal years topping $130 billion and has assets estimated to be worth more than $200 billion. Kuwait's oil-based economy is dominated by the public sector, which contributes about 77% of gross domestic product. GDP stood at $147 billion last year. A privatization bill has been in parliament since 1992 but neither the government nor MPs appear in a hurry to approve it. (BI-ME 19.05)

11.4 KUWAIT: Pharmaceuticals and Healthcare Report Q2 2009

Research and Markets (http://www.researchandmarkets.com) has announced the addition of the "Kuwait Pharmaceuticals and Healthcare Report Q2 2009" report to their offering.

The Kuwaiti pharmaceutical market - now slipping to fifth place from third out of the 17 regional markets surveyed in the Middle East and Africa (MEA) Business Environment Ranking matrix - will record unspectacular growth in the next five years. The rate of this growth will also be offset by inflation and the government's cost-containment policy, focusing on generic reimbursement. Overall, the market is likely to reach around $508mn at consumer prices by 2013, up from $377mn in 2008, equal to $131 per capita, with both figures small in global terms. The market will post a compound annual growth rate (CAGR) of 5.38% in nominal terms, or a slightly higher 6.15% in US dollar terms, While prescription medicines will continue to dominate a lion's share of the overall market, the recent region wide regulatory changes - notably the recent attempts to draft legislation on alternative and traditional medicines - will stimulate the development of the over-the-counter (OTC) segment, although it will still remain small in absolute term.

Other segments of the healthcare market are also severely limited by the small size of Kuwait's population. Nevertheless, BMI expects the medical device sector to grow over the coming years, supported by government's strategy to continue undertaking reforms in the healthcare sector as well as partially by the efforts of Kuwaiti distributers seeking new suppliers. We estimated that the market was worth $78.7mn in 2008, with the figure forecast to top $98.1mn in 2013, growing at a CAGR of some 3.74% in nominal terms. Given that imports meet virtually all of the demand, foreign companies and their local distributors will be the beneficiaries of this trend. The recent purchase by the Kuwaiti government of nuclear radiation protection drugs, amid concerns of fallout from a possible conflict between Israel/the US and Iran, or a meltdown of the soon-to-be-operational Iranian Bushehr nuclear power plant, may also lead to purchases of radiation detection and similar medical devices.

In the meantime, the Kuwaiti government is under increasing pressure to deal with the economic turmoil, and, as parliament becomes even angrier with the government, this could lead the latter to make some potentially damaging decisions. There is also a risk of early elections: new polls are not due until 2012, but Kuwait has a history of dissolving governments. While we would not expect this to result in any meaningful change of government - parliament is already dominated by the opposition and the royal family is not about to be overthrown - it could destabilize the country, delay reforms, deter investors and lead to even further fiscal laxity. Nevertheless, although Kuwait faces substantial structural challenges over the long-term, the energy sector will continue to grow in real terms to 2018, keeping the government in surplus. (R&M18.05)

11.5 QATAR: Transport for the Future

Thanks to its strong fiscal reserves, continued flow of revenue from gas exports and the financial sector's relatively low levels of exposure to the markets in the US or Europe, Qatar is better placed than most of its neighbors to weather the current economic downturn.

According to the IMF's latest projections, issued in early May, the Qatari economy will expand by around 17% this year, compared to the predicted 2.6% for the whole Middle East and North African region. As such, Qatar does not have to try and spend its way out of recession or go to the other extreme and cancel major infrastructure developments.

Though the Qatari economy is underpinned by the hydrocarbons sector, the state is planning for a time when this emphasis on energy will diminish as reserves dwindle, with Qatar estimated to have supplies to meet present demand for up to 100 years. The Qatar National Vision 2030, the blueprint for the social and economic future of the country released at the end of October, stressed the need for a diversified and competitive economy that would gradually reduce its dependence on the hydrocarbons sector, with an enhanced role for the private sector and an expanded place for industries and services within the economy. One of the criteria for achieving these goals was having "a world-class infrastructure backbone".

Current estimates put the budget for Qatar's four major transport infrastructure projects at $21.6bn. While the country already has an extensive transport network, this is being rapidly expanded to meet the present and future needs of the economy. Among these developments is a $2.7bn causeway that will link Qatar with the island state of Bahrain. With a length of more than 40 km, it will be the longest such link in the world. The construction of the New Doha International Airport, which when completed in 2015 will be able to handle 24m passengers a year; and a massive new port project at Mesaieed, 35 km from the capital.

Of equal importance to these schemes, and one that will strengthen Qatar's bid to gain an increased slice of the Gulf logistics market, is the country's first foray into rail. In August, German firm Deutsche Bahn was awarded a $1.1bn consultancy by Qatari Diar to design the country's first rail network, a grid encompassing a light people-mover system in and around Doha, along with heavy freight and mainline passenger services.

The fully integrated network foresees a passenger and freight railway along the eastern coast linking the Ras Laffan industrial complex with Doha and the Mesaieed sea port; a high-speed link from the new international airport to central Doha and across the planned causeway and bridge to Manama in Bahrain; a freight link to Saudi Arabia; a six-line metro system in Doha; and a 140 km light rail connecting urban centers Lusail, Westbay and Education City.

All of these projects are designed to work towards Qatar's national vision of a broad-based economy that is moving away from dependence on energy. By expanding its domestic transport infrastructure and through linking the network to the surrounding Gulf states, Qatar is positioning itself as a major cargo-handling centre for the region.

According to a recent report issued by Business Monitor International, Qatar's freight industry is set to expand by an average of 8.1% a year up to 2011, with air cargo movements expected to increase by 9.3% on the back of the expansion of national flag carrier Qatar Airways' freighting capacity. It is notable that this growth is predicted to take place before most of the new transport infrastructure projects come on-line.

Qatar is by no means alone among the Gulf states in seeking to build up its transport infrastructure as a means of supporting the economy, with most of its neighbors either carrying out or planning ambitious building programs. However, the emirate has the advantage of being able to follow through with its plans more quickly and in a relatively stable economic environment, a factor that could give it a considerable advantage in the Gulf's future transport race. (OBG25.05)

11.6 UAE: Moody's Says UAE Pullout From GCC Currency Union Plan Has No Direct Effect On Its Ratings

On 20 May, Moody's Investors Service (http://www.moodys.com) announced that the recent decision of the UAE not to participate in the Gulf Cooperation Council's (GCC's) proposed monetary union will not directly affect the country's sovereign ratings. Furthermore, any potential postponement or cancellation of the GCC currency union project that may or may not follow the UAE's decision would not directly affect the sovereign ratings of other GCC member states.

In November 2008, Moody's issued a special comment entitled "GCC Currency Union Unlikely To Affect Member States' Government Bond Ratings." In this report, Moody's argued that the formation or otherwise of a GCC currency union would, from an economic standpoint, be effectively ratings neutral. We continue to hold this view.

The special comment pointed out that many of the common advantages of a currency union - including the removal of internal currency risk, the potential boost to intra-union trade, and accompanying institutional and structural improvements - are muted in the case of the GCC. At the same time, the disadvantages of a currency union - such as members' loss of independent monetary and exchange rate policies - are also less applicable given that GCC states already have fixed exchange rate pegs.

"Today's decision by the UAE to withdraw from the proposed GCC currency union, if final, would seem to be a serious blow to the project given that the UAE is the second largest economy in the GCC and that Oman has already stated, in early 2008, that it would not take part in the scheme. Hence, it would not be a surprise if the proposed currency union were stymied by the UAE's decision," said Mr. Tristan Cooper, Head Analyst for Middle East Sovereigns at Moody's.

"The move is also a blow to GCC unity more generally and could be interpreted as a sign of how the balance of power between Saudi Arabia and the smaller, richer GCC states has shifted over time. The UAE's decision seems to be linked to the recent news that the GCC's Monetary Council will be located in Riyadh. It remains to be seen what the ramifications of the UAE's action will be for the UAE's bilateral relations with Saudi Arabia, but clearly it is not positive," added Mr. Cooper.

"Any adverse political consequences of the UAE's decision, such as a deterioration in intra-GCC relations or a structural worsening of the UAE's relationship with Saudi Arabia would be viewed negatively by Moody's and could potentially weigh on the UAE's sovereign ratings over time. However, such a scenario is unlikely and hypothetical at this stage and we are currently only considering the neutral economic effects of the move," concluded Mr. Cooper.

Moody's last rating action on the government of the UAE was taken on 9 July 2007 when the rating agency upgraded the country's ratings to Aa2 from Aa3 with a stable outlook. The ratings have remained unchanged since then. (Moody's 20.5)

11.7 OMAN: Harnessing the Sun

In an effort to spur economic development and reduce its dependence on hydrocarbons as a source of energy, Oman's government has announced plans for an international tender early next year for the country's first large-scale solar power plant. Speaking at the opening of a seminar on renewable energy on May 10 in Muscat, Mohammed Nasser Al Khasibi, the secretary-general of the Ministry of National Economy, said that the Public Authority for Electricity and Water (PAEW) was now recruiting industry experts to study the viability of a proposed concentrated solar power plant. "If the feasibility of a large solar plant is confirmed, and I am confident it will be, PAEW's advisers will prepare tender documentation for the Oman Power and Water Procurement Company to initiate in 2010 a fair and transparent competition to build, own and operate Oman's first large-scale solar plant," he said.

Perhaps unsurprisingly for a country that has as much sunshine as Oman, solar energy has emerged as the most viable resource of the future. Oman's solar energy density is among the highest in the world, and a 2008 Authority for Electricity Regulation Oman (AERO) report found that it had the potential to meet the Sultanate's entire electricity requirement and even provide some for export.

Bob Whitelaw, adviser to the chairman of the PAEW, who also spoke at the seminar, said that over 50 firms had expressed interest in participating in a competitive tender for advisory services linked to the planned power plant. "The response has been overwhelming," he said. "The plant would be sized at not less than 50 MW and not more than 200 MW, the optimum capacity of which would be determined by the feasibility study," he added.

Solar photovoltaic technology, which has been dropping in price over recent years, could be used either as a means of introducing electricity into the main interconnected system in northern parts of the country, or used in off-grid power plants in rural desert areas as a means of reducing reliance on diesel generators. There are many other uses for solar energy in Oman, particularly in the oil and gas sector. Zahran Al Aufi, the general manager of Falcon Oilfield Services, is particularly eager to see solar energy used to generate steam that is in turn used for enhanced oil recovery (EOR). "I see great potential for solar energy in generating steam for EOR. In fact, Petroleum Development Oman is presently studying using solar energy for just this purpose in Qarn Alam field, which is already using co-generation of steam and power," he recently told OBG. "This will result in valuable gas savings, which can be used for other purposes," he added.

While it seems clear that solar technologies have the potential to revolutionize Oman's energy sector, there are still some challenges to overcome. Currently, the cost of fossil fuel-based electricity is below that of electricity produced using renewable energy, but it is expected that as renewable energy technologies come down in price, and increasingly scarce fossil fuels become more expensive, solar will play an increasing part in meeting Oman's energy needs. In the meantime, it is being suggested that an important step for the government could be the provision of some incentives to promote the use of renewable energy by subsidizing equipment and reducing the import tax.

Progress of viable renewable energy projects will likely be incremental. An example scenario, based on AERO's predicted generation capacity of 5691 MW in 2014, would see 5% capacity (285 MW) provided by renewable energy, with solar energy contributing 165 MW to that figure. At today's prices this would require an investment of $900m, corresponding to $3 per MW. Although not as cheap as the estimated $1.6 per MW for a coal steam plant, the advantages are considerable, with solar energy both more environmentally friendly and never in danger of running out. (OBG18.05)

11.8 TURKEY: Moody's Says Turkish Municipalities Face a Challenging Environment

On 13 May, Moody's (http://www.moodys.com) announced that Turkish municipalities are currently facing a challenging combination of a severe economic downturn and tight funding environment.

Moody's expects municipal budgets to be impacted by the economic downturn that is hitting Turkey primarily on the revenue side, since a high proportion of their revenues comes from national shared taxes, including mainly value-added tax, corporate and personal income taxes. To date, growing revenues stemming from robust economic growth have helped Turkish municipalities to record buoyant operating performance and control their debt requirements. However, with the advent of the global crisis and the sharp deterioration of economic conditions in Turkey, tax collections are shrinking, directly impacting municipal budgets for 2009-10.

Overall, municipalities display limited shock absorption capacity in view of the very limited control on revenues and the socially-sensitive responsibilities. "In the near future, Turkish municipalities will be required to exercise fiscal discipline and to leverage their expenditure flexibility - primarily on the capital side of the budget - to manage budgetary pressures," explains Francesco Soldi, Assistant Vice President at Moody's and author of this report.

In addition, Turkish municipalities have been impacted by the recent credit market dislocation and are expected to continue facing tight liquidity conditions. "With the advent of the global crisis, risk aversion of investors has heightened and foreign capital flows have declined considerably, causing a widening of spreads, tighter lending conditions and shorter maturities on foreign-denominated borrowings. Such adverse conditions are unlikely to retrench this year," says Mr. Soldi. Whilst Moody's positively notes that the restricted access to foreign financing has been partially mitigated by increased accessibility to the domestic market, risk premiums requested by lenders are still high and overall funding conditions remain tight.

In this context and given the centralistic architecture of Turkey's local public sector, Moody's believes that the policy response of the central government will strongly influence the municipal sector's financial performance and stability. (Moody's13.05)

11.9 CYPRUS: Fitch Affirms at 'AA-'; Outlook Stable

On 26 May, Fitch Ratings (http://www.fitch.com) affirmed the Republic of Cyprus's Long-term foreign currency Issuer Default rating (IDR) at 'AA-' with a Stable Outlook and Short-term foreign currency rating at 'F1+'. The agency also affirmed the local currency IDR at 'AA-' with a Stable Outlook and the Country Ceiling at 'AAA' which is the common ceiling for euro area members.

'The Republic of Cyprus is now in its second year of euro-area membership, public finances are on an even keel and long overdue legislation to reform the state pension system promises to enhance their long term sustainability' said Chris Pryce, a Director in Fitch's Sovereign team. 'Euro area membership has brought many benefits, including the elimination of transfer and convertibility risk. Nonetheless, a large and growing current account deficit which reflects deteriorating international competitiveness and rising commodity prices remains a cause for concern."

Cypriot GDP has grown rapidly, averaging almost 4% per annum over the past decade, approximately double the EU average and well above the 'AA' median, bringing GDP per head up to 93% of the EU27 average. Inevitably the global recession will cause a slowdown but growth is still possible this year, in contrast to most other EU members. However, much will depend on tourism, residential construction (much of which is linked with tourism and has been in decline since mid-2008) and (non-banking) financial and business services. There is little domestic manufacturing. The first quarter's growth in 2009 was encouraging: GDP rose on a seasonally adjusted basis by 1.6% at an annual rate. Most other EU members recorded a decline in this quarter. For the year as a whole, tourism will be crucial and here the indications are less buoyant: visitor numbers fell in the first four months by almost 9% while revenue from tourism fell almost 13% in the first quarter. The summer season will be critical for overall growth in 2009.

Public finances are broadly supportive of the rating. However, a two-year period of fiscal surpluses, the first since 1971, during the fiscal consolidation drive over the past four years to qualify for euro area membership, is likely to end in 2009. The balance will now sink back into deficit, although the government believes it will be a relatively small one, which could be consistent with a further fall in the debt ratio this year. This has already declined to 49.1% of GDP at end-2008 from 70.3% in 2004, a significant achievement, as is the recent passage of pension reform through parliament.

Cyprus's role as a regional financial centre carries potential risks for the government. However, the domestic banking industry has had little or no involvement with toxic products. Most of its lending has been in Cyprus or Greece. The domestic loan/deposit ratio is a comfortable 90%. Foreign currency deposits, a lot of which have come in recent months from Russia, are subject to a minimum liquid asset requirement of 70%. Bank regulation is conservative. Nonetheless, Cypriot banks are relatively weak by western European standards: net external indebtedness has risen sharply in recent years and it is not known how far domestic non-performing loans will increase.

The political hopes associated with the election last year of moderate Greek Cypriot president, Demetris Christofias, in place of a hard-line opponent of a negotiated settlement, have suffered a setback, following the recent victory of a 'hard-line' party in parliamentary elections in the Turkish sector and a contentious European Court of Justice (ECJ) ruling. Direct negotiations between the Greek and Turkish Cypriots started last year and are continuing. A conclusion may be forthcoming around the end of the year. An agreement could enhance both economic prospects and the republic's credit standing over time. (Fitch26.05)

11.10 GREECE: Fitch Changes Greece's Outlook to Negative on Further Fiscal Deterioration

On 12 May, Fitch Ratings (http://www.fitchratings.com) revised the Outlooks on the Hellenic Republic's (Greece) foreign and local currency Issuer Default ratings (IDR) to Negative from Stable. The foreign and local currency IDRs have been affirmed at 'A' and the Short-term foreign currency IDR at 'F1'. The Country Ceiling has been affirmed at 'AAA', reflecting Greek membership of the European Monetary Union.

"Since gaining euro area membership in 2001, Greece has shown little capacity for sustained fiscal consolidation, despite a long period of strong growth by euro area standards," said Chris Pryce, a Director in Fitch's Sovereigns team. "It has achieved a general government deficit below the Maastricht limit of 3% of GDP only once - in 2006 - over the past decade."

This deficit continued to widen in 2008. Recent Eurostat estimates put the 2008 general government deficit at 5% of GDP, twice the government's own estimate only four to five months ago, inducing the EU Commission to re-institute the Excessive Debt Procedure (EDP). Fitch says the fact that this fiscal deterioration occurred despite strong economic growth raises longer term concerns about fiscal consolidation and public debt sustainability in a more difficult global economic environment.

Fiscal flexibility is weak. The authorities consistently over-estimate revenue while slippages in expenditure reflect weak controls and a lack of political will. There are high outgoings on public sector wages, pensions and debt service, despite the partial relief from low international interest rates. Fitch is skeptical of the authorities' ability to manage public finances in a more difficult global economic environment and forecasts that the deficit and public debt will rise to 6% and 106% of GDP respectively in 2009, significantly above official projections.

GDP could fall by 2% as steep falls in world trade and weak sterling hit Greek shipping and tourism hard. While a current account deficit of 13-14% of GDP may prove less challenging to finance in a euro area context, the risk to growth from economic deleveraging is high, while the Greek banking system is exposed to the troubled Balkans and Turkey regions.

Euro area membership is the key support for Greece's ratings: it has eliminated balance of payments and exchange rate risks, given the government access to a much wider investment pool and significantly reduced debt service costs. Fears that Greece would be shut out of public debt markets earlier this year have also proved unfounded, while EU convergence has seen Greek income per head rise well above the 'A' median.

The promise held forth in New Democracy's first term of office has not been matched by its performance since winning a second term in 2007. It has been subject to a string of scandals that the leadership has been unwilling to confront. Riots at the end of 2008 further sapped confidence in the government, which now has a thin majority in parliament and shows little appetite for an austerity program. Nor has the opposition party displayed any determination to tackle essential reforms, which bodes ill for longer term fiscal consolidation. Future rating actions will be driven primarily by public finance factors and the economy's ability to adjust in more difficult circumstances. (Fitch12.05)

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