General Introduction

Elections 2009: questionable, tough outcome

Israeli voters went to the polls on February 10 to choose a new Knesset, the country's unicameral parliament, and a new prime minister. But even after the votes were tallied, it was not clear who, if anyone, won the forced election to replace Prime Minister Ehud Olmert, who resigned under a never ending investigation.

Foreign Minister Tzipi Livni with her Kadima party was the victor, because its 28 seats makes it the largest single party in the 120-member Knesset. Former prime minister Benjamin (Bibi) Netanyahu, whose Likud finished a close second with 27 seats, claims that the fact is that the after election new virtual phenomena "national camp" consisting of the Likud and five smaller right-wing and religious parties together, captured a 65-seat Knesset majority. In third place with 15 seats was "Yisrael Beiteinu" (Israel Our Home), an amalgam of Russian immigrants and right-leaning veteran Israelis led by tough-talking Avigdor Lieberman, while Labor, the party that founded the country, fell to fourth with a mere 13 Knesset seats, down from 19 seats.

On the clear face of the situation, the top leading parties, Kadima with 28; Likud with 27; Lieberman's Yisrael Beiteinu with 15 seats and Labor with 13, are the most popular, forming a clear comfortable majority of 83 stable seats, out of 120 Knesset members. But not necessarily in Israel. Now the question is who will lead; Livni, the leader of the largest party suggests a rotation of the two leaders, each serving a two-year term. Netanyahu demands, as the recommended candidate of the right wing majority, a full 4-year term as premier.

The lack of clarity of Israeli law put a special burden on President Shimon Peres. The president is required to consult with leaders of all the parties in a new Knesset before asking the leader of one of them to attempt to form a government. But the law does not specifically require that choice to be either the leader of the largest party or the leader of the largest bloc of parties. Netanyahu became the strong favorite to be tapped by Peres on February 19 when Lieberman told the president that he recommended that Netanyahu form the next government, though he was willing to join a national unity government formed by either party leader.

Either choice would face problems in forming a government. Livni, if tapped, doesn't have enough Knesset seats in the center-left bloc to reach a Knesset majority and would have to convince Bibi's Likud and Lieberman's Yisrael Beitenu, to join it as coalition partners.

Benjamin Netanyahu has been given a second chance at one of the toughest jobs on the planet, as prime minister of Israel, a post he held in 1996-99. He did so - after an election made necessary by the forced resignation of Prime Minister Ehud Olmert under the shadow of charges - in what could hardly be called a clear victory.

In fact, Netanyahu and his Likud party only finished second in the February 10 voting for the 120-member Knesset, Israel's parliament; they won 27 seats, behind the 28 of first-place Kadima, led by Foreign Minister Tzipi Livni. And though Livni argued for a while that as head of the party with the most seats, she had earned the right to form a new government, President Shimon Peres had no choice after a 65-seat majority of the “nationalist camp” consisting of the Likud and five right-wing and religious parties, said they would support Netanyahu as prime minister. In third place with 15 seats was Yisrael Beiteinu (Israel Our Home), an amalgam of Russian immigrants and right-leaning veteran Israelis led by tough-talking Avigdor Lieberman, while Labor, the party that founded the country, fell to fourth with a mere 13 Knesset seats.

Under Israeli law, the Likud leader was given 28 days – plus the option of a 14-day extension – to cobble together a governing coalition. Doing so is faced with pitfalls.

Netanyahu is reluctant to take his easiest option - assembling a coalition from the parties that recommended him. He fears the negative impact that such an alignment - including two parties who refused to talk peace with the Palestinians (the National Union and the National Home) and Yisrael Beitenu, which advocates a hard line both in peace talks and in dealing with Israel's million-plus Arab citizens – would have on Israel's relations with the rest of the world, particularly with the new Obama administration in Washington.

Even more of a problem is the mutual antagonism of the Shas ultra-Orthodox Jewish party and Yisrael Beitenu. Though they generally share nationalist views on negotiations with the Palestinians and possible territorial concessions in exchange for peace, the two parties are as different as chalk and cheese on social questions and particularly on the role of religion in Israeli society. The cornerstones of Lieberman's domestic policies are anathema to Shas – reform of the electoral system that would weaken smaller parties, and institution of civil marriage laws, for certain part of the population who are denied marriage by the religious law.

During the campaign Rabbi Ovadia Yosef, the octogenarian sage who calls the shots for Shas, used “the devil” in a reference to Lieberman and his party. And the feeling is mutual: Large portions of Lieberman's ex-Soviet constituency are bitter about religious dominance of personal status issues, which for example bars those of whom who are of doubtful Jewish origin to marry Jews under the current laws. Any such coalition formed by Netanyahu would give the smaller special interest parties in it the kind of leverage that would constantly involve the prime minister in keeping his coalition together rather than governing effectively.

Faced with this dilemma inside his own camp, Netanyahu is attempting to reach out to Livni and her Kadima, a move that would both add international legitimacy and a chance for domestic stability to a government he forms. But the price of the full partnership he has reportedly offered the rival party to join such a government would be high, probably including two of the “big three” portfolios – Foreign Affairs to Livni and Defense to Kadima No. 2 Shaul Mofaz, a former chief of staff and defense minister when Ariel Sharon was prime minister. Such a government would also have its fault lines, and be prone to a premature break-up over a number of issues, primarily Israel's stance in negotiations with the Palestinians.

There are, of course, other possible permutations, but none that seem likely to produce what Israel needs: a government to deal with the fateful challenges of a disintegrating world economy, a nuclear Iran and the threats posed by Hamas in Gaza and Hizballah across the northern border in Lebanon. The odds are that unless Netanyahu will establish a wide-based coalition, Israelis, who has seen 30 governments come and go in the country's 60-year history, will be forced to go to the polls yet again. History may declare that there was no winner in the elections of February 2009 – but the nation, again denied the chance of stable government, can certainly be classified as the loser.

Gaza "Cast Lead" Operation

More than a month after the end of the Gaza Operation "Cast Lead," there is little doubt that the IDF - Israel Defense Forces won a decisive military victory over Hamas forces in Gaza. The question of whether the 22-day war achieved its political objectives is a separate one.

The war was launched in an effort to stop the continuous rain of Palestinian Qassam and Grad rockets pouring into Israeli territory from Gaza for the last eight years, including a 40-kilometer radius that includes all major Israeli southern cities - Beersheba, Ashdod and Ashkelon. Judged by this standard, the war was a partial, but not a total, success; though there has been sporadic rocket and fire across the border, the number of attacks has fallen sharply.

Can any level of cross-border attacks on the citizenry of a sovereign nation be considered tolerable? How would Her Majesty's government in London react if citizens of the Six Counties of Northern Ireland were subjected to even a trickle of rocket or mortar fire from across the border in the Irish Republic? What would happen if Chula Vista, south of San Diego was shelled from Mexico on Tijuana? Or, if Elten, in Germany, were subjected to even intermittent attacks by nationalists seeking to restore the sovereignty of The Hague to the once-Dutch town?

On a second level, Israel was clearly ready to pay a price what the comfortable world away, generally sees as use of excessive force in Gaza, inflicting large numbers of collateral civilian casualties despite its effort to target Hamas installations and fighters hiding behind civilians. The effect of the pictures showed to the world on its TV screens and stories of casualties suffered when IDF returned fire hit from a refugee center in a United Nations installation, has been felt around the world.

Israel maintains that the number of civilians among the amount killed by its forces is far smaller than the percentage claimed by Hamas and Palestinian reporters. Its defense has largely fallen on deaf ears.

Israel in mid-February completed a detailed report identifying more than 1,200 Palestinian deaths and saying one-third were civilians. First reported in the daily Jerusalem Post and later picked up by Time Magazine, the report by the IDF's Gaza Coordination and Liaison Administration said that 580 were positively identified as members of Hamas and other militant groups. Of the remaining 320, all men, the report estimated that two-thirds were "terror operatives" and some 300 were non-combatants.

The Gaza death toll has been disputed by international sources as well. In late January, right after the hostilities ended, Italy's Corriere Della Sera published a report by one of its staffers quoting a doctor in Gaza's Shifa Hospital saying the death toll could not be more than 600, and that most of the dead were Hamas fighters aged 17-23.

Israel says it has evidence to back up its assertion that Hamas deliberately caused many of the undisputed non-combatant casualties, because militiamen used them as human shields, or deliberately prevented them from moving out of the line of fire. Injuring civilians was never an objective, and was always unintentional, Israel has said.

Nor has the world paid much mind to reports emanating from Gaza of Hamas atrocities against other Palestinians. Hamas spokesman Fawzi Barhoumi dismissed as based on lies and one-sided, a February 10 Amnesty international report of a wave of Hamas reprisals against political opponents during the course of the war, including the killing of 24 men and the permanent disabling, by shooting in the kneecap, of dozens of others. A report by the Palestinian Authority, from Ramallah in the West Bank, claimed that Hamas had murdered more than 30 members of the rival Fatah movement in Gaza, and wounded an additional 250.

Nobody believes Hamas's exaggerated claims that its outmanned, outgunned and outmaneuvered fighters scored a military victory over the IDF. But on the political front, the Islamic rulers of Gaza appear to have registered gains. Though there have been no direct negotiations between it and Israel over either a long-term cease-fire arrangement or the return of Israeli soldier Gilad Schalit, kidnapped by Hamas along the Gaza border in June 2006, the movement has achieved some measure of de facto recognition in talks via Egyptian intermediaries. In addition, Israel apparently will allow the opening of border crossings with Gaza, contingent upon the return of the kidnapped soldier Gilad Schalit in exchange for captured Palestinian terrorists plus a long ceasefire.

The war may also have been the catalyst for an exchange deal to free Schalit, which seemed to be impending at the time of writing in mid-February. According to press reports, as part of such a deal Israel is willing to free high-profile terrorists including Marwan Barghouti, the Hamas bomb-making "engineer," and Ahmad Saadat, leader of the PFLP - Popular Front for the Liberation of Palestine, responsible for masterminding the October 2001 murder of Israeli tourism minister Rehavam (Gandhi) Zeevy. Obtaining their release, together with hundreds of prisoners, would provide a boost to Hamas's prestige.

A long-term cease-fire would be one positive item on Israel's side of the balance sheet, together with a rehabilitation of the image and deterrent capacity of the IDF, and the exposure of the fact that, even at its best, Hamas lacked anywhere near the military capacity exhibited by Hizballah in 2006. Most of all, however, Operation Cast Lead has prompted both the international community in general and Egypt in particular to take what they promised will be significant, serious action to prevent the smuggling of arms into Gaza, including the long-range rockets that threatened a large part of southern Israel. On that level, at least, Israel won both the battle and the longer-term war.

Comment & Opinion

Youssef M. Ibrahim, a former New York Times Middle East Correspondent and Wall Street Journal Energy Editor for 25 years, is a freelance writer based in New York City and Dubai in the United Arab Emirates. The article was originally published in the New York Sun in July 2006, during an Israeli operation into the Gaza Strip after the kidnapping of soldier Gilad Schalit by Hamas. It appeared again in Jan '09.

By Youssef M. Ibrahim

To my Arab brothers:

The war with Israel is over - and they won.

Now let's finally move forward. With Israel entering its fourth week of an incursion into the same Gaza Strip it voluntarily evacuated a few months ago, a sense of reality among Arabs is spreading through commentary by Arab pundits, letters to the editor, and political talk shows on Arabic-language TV networks. The new views are stunning both in their maturity and in their realism. The best way I can think of to convey them is in the form of a letter to the Palestinian Arabs from their Arab friends:

Dear Palestinian Arab brethren: The war with Israel is over. You have lost. Surrender and negotiate to secure a future for your children. We, your Arab brothers, may say until we are blue in the face that we stand by you, but the wise among you and most of us know that we are moving on, away from the tired old idea of the Palestinian Arab cause and the “eternal struggle” with Israel. Dear friends, you and your leaders have wasted three generations trying to fight for Palestine, but the truth is the Palestine you could have had in 1948 is much bigger than the one you could have had in 1967, which in turn is much bigger than what you may have to settle for now or in another 10 years.

Struggle means less land and more misery and utter loneliness. At the moment, brothers, you would be lucky to secure a semblance of a state in that Gaza Strip into which you have all crowded, and a small part of the West Bank of the Jordan. It isn't going to get better. Time is running out even for this much land, so here are some facts, figures, and sound advice, friends.

You hold keys, which you drag out for television interviews, to houses that do not exist or are inhabited by Israelis who have no intention of leaving Jaffa, Haifa , Tel Aviv, or West Jerusalem. You shoot old guns at modern Israeli tanks and American-made fighter jets, doing virtually no harm to Israel while bringing the wrath of its mighty army down upon you. You fire ridiculously inept Qassam rockets that cause little destruction and delude yourselves into thinking this is a war of liberation.

Your government, your social institutions, your schools, and your economy are all in ruins. Your young people are growing up illiterate, ill, and bent on rites of death and suicide, while you, in effect, are living on the kindness of foreigners, including America and the United Nations. Every day your officials must beg for your daily bread, dependent on relief trucks that carry food and medicine into the Gaza Strip and the West Bank, while your criminal Muslim fundamentalist Hamas government continues to fan the flames of a war it can neither fight nor hope to win.

In other words, brothers, you are down, out, and alone in a burnt-out landscape that is shrinking by the day. What kind of struggle is this? Is it worth waging at all? More important, what kind of miserable future does it portend for your children, the fourth or fifth generation of the Arab world's have-nots? We, your Arab brothers, have moved on.

Those of us who have oil money are busy accumulating wealth and building housing, luxury developments, state-of-the-art universities and schools, and new highways and byways. Those of us who share borders with Israel, such as Egypt and Jordan, have signed a peace treaty with it and are not going to war for you any time soon. Those of us, who are far away, in places like North Africa and Iraq, frankly could not care less about what happens to you.

Only Syria continues to feed your fantasies that someday it will join you in liberating Palestine, even though a huge chunk of its territory, the entire Golan Heights, was taken by Israel in 1967 and annexed. The Syrians, my friends, will gladly fight down to the last Palestinian Arab. Before you got stuck with this Hamas crowd, another cheating, conniving, leader of yours, Yasser Arafat, sold you a rotten bill of goods - more pain, greater corruption, and millions stolen by his relatives - while your children played in the sewers of Gaza.

The war is over. Why not let a new future begin?

The Economy

The downturn in the world economy in the last half of the year notwithstanding, year-end statistics indicate that 2008 as a good, not a very good – year for the Israeli economy. Preliminary estimates published by the country's Central Bureau of Statistics at the start of 2009 indicate that in 2008 Israel's Gross Domestic Product (GDP) grew by a respectable 4.1% percent. A comparison with 2007, however, indicated a minor impact of the global slowdown, from 5.4%.

The real measure, of course, is per capita GDP, which grew by 2.2% over 2007, to NIS 97,900, about $27,300. Per capital growth in the Organization for Economic Cooperation and Development (OECD), the exclusive club of industrial nations for which Israel is a membership candidate, was 0.8% in 2008. And, according to an informal survey by journalist Gad Lior of Yediot Aharonot, Israel's GDP per capita was far greater than the total of the four Arab states which share borders with Israel (Jordan $3,500, Egypt $3,600, Syria $4,500, Lebanon $7,500.) Only in the oil-producing states, Lior observed, was GDP per capita equal or greater: $27,000 in Bahrain, and $56,000 in Kuwait. Surprisingly to most casual observers, per capita GDP in Saudi Arabia amounted to only $21,220 in 2008.

According to predictions, the picture for 2009 is grimmer in Israel, similar to the rest of the world. Various projections, ranging from 1.5% by the Bank of Israel to 2.1% by a leading bank, put growth lower than the approximately 2.2% that Israel's population grows each year.

For 2008, GDP was almost NIS 716B, compared with NIS 674B the year before. Expenditure on private consumption increased by 3.9% in 2008, after growing by 6.7% the year before. After factoring in population growth, expenditure on private consumption increased by 2% in 2008.

Meanwhile, Bank of Israel Governor Prof. Stanley Fischer said that growth for 2009 would probably be the lowest since the recession of 2000-02, as the United States and Europe, Israel's biggest export markets, are gripped by economic downturn. Prof. Fischer said that while he expected the first signs of renewed growth to become apparent late this year, the recovery in Israel will take time.

"It depends mainly on the world economy," he said. "I expect that by the end of this year the U.S. economy will start growing, mainly because of the new Obama administration's programs about to get under way. I expect to see the first signs of growth before the end of this year." Fischer said the Gaza fighting should have a limited impact on the economy, based on the country's experience in the Second Lebanon War, which lasted about a month in 2006.

"The economy returned immediately to its prewar situation," he said. "This time the impact will be a function of the fighting's duration. If it ends relatively soon, the economic impact will be very small over the long run."

The Bank of Israel, in its review of economic developments published in mid-February, notes a major decline in economic activity that became more severe from September to December 2008. It shows a slowdown in nearly all industries, a loss of public wealth, erosion of real wages and consumer confidence and increased employment insecurity. In the second half of 2008, there was a major increase in the number of job seekers, especially among university graduates, and more unemployment compensation claims. And to top it all, Israeli exports, which had risen constantly for years, ceased to increase.

Slowed economic activity, the central bank observed, had caused a major shortfall in tax revenues over predicted levels, auguring a major shortfall from original projections in the 2009 budget. Financial assets held by the public have fallen, in part, due to the global crisis and partly because of early withdrawal of savings from retirement funds.

On the positive side, anticipated inflation was less than expected, due not to any economic move by the central bank or the Treasury, but to the fall in oil prices worldwide.

Stock prices rise, contrary to global trends

While the rest of the world's stock markets suffer, something unusual has been going on at the Tel Aviv Stock Exchange since the start of 2009. Leading indicators on the TASE have gained ground, a surprise considering the normally strong correlation between it and international bourses. In early February, the Tel Aviv 25 Index, covering top shares, was up 4.2% since the beginning of the year, while the Tel Aviv 75 Index rose by much more, 36%, on very high turnover. Much of the rise took place as Operation Cast Lead was under way in Gaza, in January.

One reason for the increase in trading volume and prices of Tel Aviv 75 Index stocks is the popularity of oil and gas exploration companies, in the light of the huge natural gas discovery in January off the coast of Haifa. At the same time, bond prices in Tel Aviv have risen by as much at 10% since December.

Exports rise

Israeli exports and imports both had a record year, but the country's trade deficit increased by $3.5B, the Central Bureau of Statistics said in mid-January. 2008's export of goods rose 10.6% over 2007 to $50.8B, import of goods rose by 15.0%, compared with 2007, to $64.5B. As a result, the 2008 trade deficit in totaled $13.7B, up from 2007's $10.2B.

In 2008, manufacturing exports (excluding diamonds) totaled $39.9B, a rise of 17.2%. Agricultural exports dropped by 5.4%, and totaled $1.3B. Diamond exports (polished and rough) totaled $9.6B, down from $10.5B in 2007. A breakdown of manufacturing export data, by technological intensity, points to a rise in all groups: high tech industries (8.8%), medium-high technology industries (27.7%), medium-low technology industries (26.1%) and low technology industries (1.8%). A breakdown of data on import of goods, by use, points to a rise in most groups: up 12.6% in import of raw materials (excluding diamonds and fuels); up 20.6% in import of machinery, equipment and vehicles for investment; and a rise of 18.1% in import of consumer goods.

The 2008 trade figures were influenced mainly by the rise in prices, which continued throughout 2008, as well as by changes in the value of the dollar against other currencies.

Interest cut

In late January, the Bank of Israel cut basic interest to 1%, the lowest rate in Israel's history.

Mammoth gas discovery

Exploratory wells off the coast of Israel had discovered three enormous underwater gas reservoirs, in what could be the largest natural gas find in history. After the mid-January disclosure of the discovery Yitzhak Tshuva, whose Delek Group is one of the owners of the well, about 90 km. in the Mediterranean off Haifa, says that the find could transform the Israeli economy; National Infrastructures Minister Binyamin Ben-Eliezer called the find "historic" and said it could meet Israel's gas needs for at least two decades.

"We will no longer be dependent [on foreign sources] for our gas, and will even export," Tshuva told Israel's Army Radio. "We are dealing with inconceivably huge quantities; Israel now has a solution for the future generations." But Israeli sources were quick to reassure that despite the find, the country would honor its existing contract to purchase Egyptian gas piped across the Sinai Peninsula to southern Israel.

The news sent the Tel Aviv stock market sharply higher. Shares of the Israeli partners in the Tamar-1 drilling site jumped between 42% and 124% before profit-taking took hold, and the Israeli shekel rose sharply.

Tshuva predicted that the find "could even turn Israel into a natural gas exporting country." Charles Davidson, chairman and CEO of Noble Energy, the U.S.-based partner in the well, said, "This is one of the most significant prospects that we have ever tested, and appears to be the largest discovery in the company's history."

Business Week said that initial preliminary estimates put the value of the offshore gas at $15B, but said it could go substantially higher. Development of the field, which could be operational in 3-4 years, will require an investment of about $1B from the partners in the project - Noble, Delek Drilling, Avner Exploration, Isramco and Dorgas.

In mid-February, there was even better news: Noble Energy said that flow test results increased the potential size of the field by 60%, from the original 3.1 trillion cubic feet to 5 trillion cubic feet.

Solar power to the people

The Arava Power Company in January received Israel's first-ever license to build a photovoltaic power plant, producing 4.9 megawatts of power that can be sold to the Israel Electric Corp. at premium rates. The plant will be located at Ketura, a kibbutz in the Arava desert just north of Eilat. The Public Utilities Commission also granted Edig Solar a license to build a 100-kw. plant using solar-thermal technology. (Photovoltaic power comes from a physical reaction transformed into electricity from the sun's rays, while solar-thermal uses solar energy to heat a liquid that runs an electricity-producing steam turbine. The licenses were subject to approval by National Infrastructures Minister Binyamin Ben-Eliezer.

Little Turkish delight

Heightened Turkish-Israeli tensions, particularly after Israel's operation in Gaza, have damaged business relations between the two countries that took years to develop, the head of the Israel-Turkey Business Council, Menashe Carmon, has told Yediot Aharonot. Problems seemed to be exacerbated after Turkish Prime Minister Recep Tayyip Erdogan stormed off the podium at the World Economic Forum in Davos, Switzerland, after verbally sparring with Israeli President Shimon Peres, even though it seemed that Erdogan was particularly peeved because the moderator of the session had not allowed him additional time to speak.

Commerce between the two countries has reached an annual $3.4B, as Israeli companies have in the past decade established factories and production lines in Turkish cities.

Foreign investment boosted

Foreigners invested a net $3.9B in Israel in December after Teva Pharmaceutical Industries Ltd., the world's biggest generics maker, purchased New Jersey-based Barr Pharmaceuticals Inc. for cash and stock. Of that total, $93M represented purchases of Tel Aviv Stock Exchange-traded stocks and bonds, the Bank of Israel said in a February 8 report. December's direct foreign investment reached $584M, the highest monthly total for the fourth quarter, according to preliminary figures.

Teva closed its $7.2B Barr acquisition in December; in the deal, Barr shareholders received $3.3B of Teva stock, which counted as overseas investment in Israel.

Record dismissals

The National Employment service said that 19,719 people lost their jobs in January, a record for a single record. The previous record was in December 2008, when 17,499 people were laid off.

Flying less

Another sign of the times: Overseas flights by Israelis fell by 23% in January compared to January 2008, according to Israel's Central Bureau of Statistics. At the same time, the CBS said, inbound flights by foreigners to Israel declined by 29%.

Mergers & Acquisitions

QLI-European casinos

Israeli casino magnate Yigal Zilka's QLI (Queenco Leisure International) completed a string of European casino acquisitions in early January. Through his Club Hotel Lutraki holding company Zilka, who is now resident in London, paid €42M to Grand Casino Austria AG for 51% of the Austrian firm's share in Grand Casino Beograd. The deal boosted QLI's stake in the casino in the Serbian capital to 30.7%, from 13.3%. In addition, a Grand Casino Austria subsidiary granted QLI a 10-year option to purchase a stake in Grand Casino Brussels. QLI currently owns or is a partner in four tourism and recreation ventures employing about 3,000 people - resort and casino Club Hotel Loutraki, and casinos in Rhodes, Bucharest and Belgrade.

Thales-CMT medical

The Thales group, a world leader in electronics and information systems for the aerospace, defense and security markets has made a friendly offer to take over CMT Medical Technologies for an estimated $31M. CMT, based in Yokneam near Haifa, specializes in high-resolution digital imaging solutions for the medical industry. CMT will become part of the medical imaging operation of Thales, which operates in 50 countries and has over 65,000 employees, including 22,000 high-level researchers.

St. Jude Medical-Mediguide

St. Jude Medical, a provider of medical equipment based in St. Paul, Minnesota, has acquired MediGuide, based in Haifa, for $300M. MediGuide's Medical Positioning System (GMPS), is a sophisticated navigation system through the body. It uses proprietary technology to track tiny sensors mounted on needles, guidewires, catheters, or other medical devices used for minimally-invasive intra-body navigation through the body. GMPS aims to provide a comprehensive tracking of movements through the patient caused by heartbeats, respiration, or other movements, and to increase the accuracy of information available to a physician during a catheterization. MediGuide was spun off some years ago from Elbit Systems, which, till the sale, still owned a 41% interest in the firm.

Harmonic-Scopus

Harmonic of Sunnyvale, California, a provider of high-performance video delivery solutions for service providers, said in late December that it was acquiring digital video solutions developer Scopus Video Networks of Tel Aviv for $86M. For the first nine months of 2008, Scopus, which has 300 employees worldwide, reported revenues of $55.4M, an increase of 35% over the comparable period in 2007. Scopus, founded in the mid-1990s as part of Tadiran, was sold to Israel's Optibase about two years ago. It provides solutions to hundreds of network operators around the world, including satellite, cable and ground-based operators, broadcasters and telecom service providers.

Check Point-Nokia security appliances

Check Point Software Technologies, the worldwide leader in Internet security, has signed an agreement to acquire the security appliance business of Nokia. Neither firm disclosed a purchase price, but Gil Shwed, founder, CEO and chairman of the firm based in Tel Aviv and Redwood City, California, said that it was not of major significance, while industry sources told Globes that it was tens of millions of dollars and The Marker, the business section of Ha'aretz, put it at $140M. Shwed did venture, however, that the business would produce 2009 revenues for Check Point in the $100M range. According to Globes, analysts predict 2009 Check Point profits of about $400M on sales of $850M.

Jasmine Holdco-Aladdin

Tel Aviv-based Aladdin Knowledge Systems, a data security specialist, has been sold to Jasmine Holdco and its parent, Vector Capital, at a company valuation of $160M. The price involves a premium of 20% over the Israeli firm's market value at the close of business the previous day, but is substantially lower than the offers turned down last year, when world share prices were substantially higher, by Aladdin CEO Yanki Margalit, who founded the company 24 years ago. After the sale is completed sometime in the first half of the year, Vector is expected to merge some of Aladdin's activities with those of its major competitor, SafeNet, which Vector purchased in 2007 for $634M.

DIM-Equity One

Equity One, a North Miami Beach, Florida-based real estate and shopping center operator in which Israel's Globus Gazit Group holds a 55% controlling interest, has added to its stake in Dutch investment company DIM Vastgoed. In a January share-financed deal, Equity One acquired 24% of DIM from Homburg, raising its holdings to 73.3% of the Dutch firm, which invests mostly in real estate in the southeastern United States. The deal added 21 properties to the portfolio of Equity One, which said that in September 2008, it owned or had interests in 162 properties, including 146 shopping centers.

Radware bid for Nortel unit?

Tel Aviv-based Radware, a network specialist, was reportedly poised to purchase all or part of the metro Ethernet business of troubled Nortel Networks of Canada, Globes said in early January. Purchase price was in the $30-$50M range, the Hebrew-language paper said. Nortel, hard hit by falling sales of wireless equipment, in September announced plans to divest itself of its metro Ethernet business. Reports since then have fingered Ericsson, Huwawei, Nokia, Siemens and Cisco Systems as prospective bidders for the Nortel business.

Microsoft-3DV Systems in talks

Microsoft is seeking to purchase startup 3DV Systems, a specialist in three-dimensional video imaging, according to mid-February press reports. Based in Yokneam, in northern Israel near Haifa, 3DV develops virtual reality imaging technology; its Zcam can follow body movements and allow users to control an electronic device with body motions, primarily for the gaming industry with videoconferencing as another possible application. The technology is similar to that of Microsoft's Vision, Nintendo's Wii or Eye Toy by Play Station. Industry sources say that Microsoft wants to use the technology in its Xbox line. Purchase price under discussion is reportedly $35M.

Medtronic-Ventor

Medtronic Inc, the world's largest independent medical device maker, plans to buy Ventor, based in Netanya north of Tel Aviv, for $325M in cash, according to mid-February media reports in Israel. Founded in 2004, Ventor has developed a prosthetic aortic valve capable of implantation on a beating heart without open heart surgery. Reporting the proposed sale The Marker said that Ventor had previously raised $20M from venture capital funds, including Tel Aviv-based Pitango.

Finance & Investment

NDS de-listed

At a mid-January London meeting of shareholders NDS, the maker of set-top boxes and other digital TV equipment, supported the management decision to take the company private. Trading of NDS shares on NASDAQ was due to cease, as the company shifted to the full ownership of Rupert Murdoch's News Corp. (72%) and Permira, a European private equity firm. The last day of trading NDS shares was February 4, and the company announced successful completion of the de-listing process on February 9.

LifeWare negotiations

Shares of Tel Aviv-based LifeWave Hi-Tech Medical Devices soared by some 300% on the Tel Aviv Stock Exchange in mid-January, after the company announced it was negotiating with an unnamed American company interested in investing in LifeWave. According to the announcement to the TASE, the American firm would hold some 51% of LifeWave's equity, in exchange for an investment of $38M - $46M for rights to LifeWave technology, and the remainder as operating capital. LifeWave develops wound-management devices; its signature product is BST (bed sore treatment), which uses electrical stimulation in a hardware/software technology to treat chronic wounds by leveraging the body's natural healing powers. BST can be used in hospitals or nursing homes. Based in Tel Aviv, LifeWave was founded in 2000.

Microsoft leads N-Trig investment

Microsoft was the lead investor in a $24M investment round in Israeli touch screen developer N-trig in January. In November, Microsoft announced that it would incorporate N-trig's multitouch technology in its Windows 7 platform, now under development. N-trig, which in the past two years has raised $52M, has signed two other major deals recently – with HP, to make its technology part of the firm's TouchSmart tx2 laptop, and with Dell for the Latitude Xt. Other investors in the round in N-trig, which is based in Kfar Saba in the technology belt north of Tel Aviv, included Aurum Ventures, Challenger Ltd., Canaan Partners, and Evergreen Venture Partners.

Chinese-Israeli Land deal

GTC China, a second-generation subsidiary of the Dutch-Israeli Kardan Group, has won a tender for a 63,000-square meter tract of land in Dalian (formerly known in English as Darien) in northeast China. A 292,000 sq. m. commercial-residential project will be built on the site, at a projected cost of €315M. Kardan, which specializes in real estate, financial services and infrastructure projects in Central and Eastern Europe and in Asia, now has projects in six Chinese cities.

Mizrahi-Tfahot on the move

Mizrahi-Tefahot, Israel's fourth largest bank, said on February 18 that it had raised NIS 200M (about $48M) in deferred capital notes, increasing the total debt issued in a 10-day period to NIS 600M. Earlier Calcalist, the business section of Yediot Aharonot, said that the group, which through Bank Tefahot currently controls about 36% of the local mortgage market, was seeking to increase that part of its business to as much as half of the national total by opening mortgage-sale operations in 15 branches of Bank Yahav. Mizrahi-Tefahot owns a 50% share in Yahav, most of whose client base consists of government employees.

High Technology

Power for the people (and their devices)

January's Consumer Electronics Show in Las Vegas was the venue for Powermat's introduction of its line of revolutionary wireless energy-charging products. The products, due to be available in stores this year, can deliver real-time wireless charging to a wide range of portable electronic devices including mobile phones, iPhones, iPods, Blackberrys, GPS devices, handheld games and laptop computers. The firm, established in 2006 in Neve Ilan, a small village about 10 kilometers outside Jerusalem, claims that its technology takes wireless charging to a new evolutionary level. In a press release, Powermat president Ron Ferber said: "Not only do we eliminate the unmanageable tangle of ‘wire spaghetti’ that accumulates behind and around work stations, we also eliminate the need to use multiple bulky chargers to power numerous electronic devices. Above all, we provide the consumer with a better, easier, and totally simplified one-stop method for powering multiple electronics in virtually any environment." he said, adding that the devices would serve a range of consumers from the "the i Pod playing Game Boy toting student to the PC-carrying, Blackberry-communicating adult." A correspondent for The Marker called the device the new Israeli-developed gadget to conquer the world, in the footsteps of the DiskOnKey developed some years ago by Israel's M-Systems.

WiMAX in Beijing

Israeli start-up Runcom has received an order from the ChinaTel Group to establish WiMAX wireless Internet infrastructure in Beijing. The deal with ChinaTel, which is a partner in China's largest mobile phone provider, is valued at $8M. Based in Rishon Lezion south of Tel Aviv, Runcom employs about 150 people. ChinaTel, one of the largest integrated service providers in China, has a license to operate fourth generation infrastructure using WiMAX, the first to have rights to the technology in China. In addition to Beijing, ChinaTel's subsidiaries have entered into a series of agreements to build and deploy a 3.5GHz wireless broadband system in up to 29 cities across the People’s Republic of China.

Teva keeps scoring new profit records

You'd never know about the economic hard times Israel and the rest of the world are experiencing from looking at Teva Pharmaceuticals. The Israel-based world leader in the production and sale of generic pharmaceuticals, whose original patents have run out, recorded record revenue of $2.8B for QIV 2008, an increase of 11%. Net profit for the quarter was $638M. For the year, Teva's revenues were $11.1B.

What's more, Shlomo Yanai, Teva's president and CEO, expects 2009 to be even better. He told a news conference announcing Teva's results that the world economic crisis was likely to increase demand for generics, which already brings in $75B a year globally. "Generics are a solution for government wanting to cut costs," he said.

Aerospace & Defense

More money for defense

The defense establishment will get an additional NIS 2.4B (about $595M) to restore operational capabilities depleted in Operation Cast Lead, Prime Minister Ehud Olmert announced on February 9. According to Yediot Aharonot, Olmert's move settled a Defense Ministry-Treasury dispute on the war allocation. The funds are set to come out of the 2009 budget, which, because of the fall of the government and elections, had not yet been passed.

Turkish deals

Despite signs of growing political tensions between the two countries, Israeli-Turkish defense trade continues to move forward. In late December, Israel Aerospace Industries and Elbit Systems said that their respective subsidiaries, Elta Systems and El-Op, had won a Turkish tender valued at a total of $141M to supply integrated military intelligence systems (IMINT) to the Turkish Air Force. Alesan, a Turkish firm, will act as subcontractor on the two deals.

Indian delivery

The first of three Phalcon AWACS Airborne Warning and Control System aircraft was delivered to India by Israel Aerospace Industries in mid-January, a few months behind the original schedule but several weeks ahead of a reworked timetable, according to reports from the subcontinent. In a $1.1B deal signed in March 2004, Israel contracted to supply three Phalcons, mounted on Russian-made Ilyushin-76 heavy military transport aircraft. Deliveries, originally intended to begin in November 2007, were subsequently postponed to late 2008 and then to February 2009. The second and third aircraft are now due in September 2009 and April 2010, and Indian sources say that a deal for a fourth aircraft may be in the works. The Phalcons will enable tactical surveillance over a radius of 400 km and collect surface target information deep inside Pakistan even as the aircraft operates within Indian airspace, according to Indian reports.

According to a report in Ha'aretz, Indian leftists are increasing pressure to cancel the AWACS deal. At an early February New Delhi solidarity meeting in the wake of Operation Cast Lead, Indian Communist party official Prakash Karat called for an end to what he called "the pro-Israeli tilt" in Indian policy.

Tunnel detection

Two researchers from the Technion, Israel Institute of Technology, have developed a system of sensors, which can detect and locate tunnels, similar to those used by Hamas and other militant groups to smuggle arms and materiel into the Gaza Strip. According to a report in the Jerusalem Post, the detection capability stems from the "underground fence" being developed by the Technion's Drs. Assaf Klar and Raphael Linker. The "fence" uses BOTDR (Brillouin optical time-domain reflectometry) to measure underground strain along optical fiber. The Post report says that analysts think such a detection system is capable of locating very narrow tunnels at depths greater that 20 meters underground. Such a system would be ideal to monitor the 30km. Philadelphi Corridor along the southern end of the Gaza Strip, the Gaza-Egyptian border, and would not be expensive because the needed fiber-optics cost only a few shekels per meter. Klar and Linker are due to present the results of their research at the Defense, Security and Sensing Conference of the International Society for Optical Engineering, to be held in April in Orlando, Florida.

Military hybrid

The Israel Defense Forces and the Defense Ministry are examining the possibility of developing an electric vehicle that can transport troops quietly and have the performance qualities of an ordinary vehicle, according to a report in Globes. The vehicle, Globes added, would have a conventional gasoline or diesel engine, both as an auxiliary and to recharge the electric car's batteries. Defense industry sources suggest that Elbit Systems, which has developed electricity-powered unmanned aerial vehicles (UAVs), would be a logical contractor for such a project. The Defense Ministry, according to the report, is also examining the electric refueling stations being developed by Better Place, the company seeking to introduce large-scale use of electric-powered automobiles in Israel.

Korean contract

Elisra Electronic Systems, jointly owned by defense contractors Elbit Systems (70%) and Israel Aerospace Industries (30%) said in early February that it had won a $7M contract to supply airborne electronic warfare systems for the FA-50 attack jet, which is supplied by Korean Aerospace Industries to the South Korean Air Force. KAI plans to install the system on at least 60 jets over the coming few years.

Namer's first battle

The Namer (Tiger), the new armored personnel carrier of the Israel Defense Forces, got its first battle experience during the recent Gaza Operation. Three of the advanced, made-in-Israel APCs were used briefly by the Golani brigade during the hostilities. The IDF has ordered 130 of the Namers, and expects to eventually acquire an additional 800.

Advanced gadgetry

A number of new gadgets that can help troops with surveillance and perform other battle tasks were unveiled by the Israel Defense Forces in mid-February. According to a report in The Jerusalem Post, at least some of the devices were used during Operation Cast Lead. They include the Eyeball, a baseball-sized spherical camera made by ODF Optronics that can be thrown into a closed location to see what is there, ODF's Eydrive, a remote-controlled wheeled robot with 360-degree surveillance capability, HTR200 (made by H-S Precision, of the United States) a long-range heavy tactical rifle, and Matador, a shoulder-launched anti-structure weapon.

Ashot shaft deal

Ashot Ashkelon Industries, a subsidiary of Israel Military Industries, said in mid-February that it had signed an $80M contract to deliver shafts to a large international manufacturer of jet engines. The contract, with a customer Ashot declined to name, is for 10 years, with an option to extend. IMI owns 85% of Ashot, which it unsuccessfully sought to privatize in 2007.

Presence at Aero India

Israel, together with Russia, had one of the largest representations at the 7th Aero India defense show, held at the Yelahanka Air Force base near Bangalore in early February. At the show, IMI featured its Delilah cruise missile and tank armor protection system, while Rafael showed new versions of the Spyder air-to-air missile.

Cyclone's contract

Cyclone Aviation Products, a subsidiary of Elbit Systems based in the northern city of Karmiel, has won a five-year contract to supply Bombardier, a Montreal-based aerospace and transport company, with a €53M contract to provide aircraft parts, mostly for the firm's ultra long-range business jet, Global Express. The deal was signed after the Ministry of Industry & Trade pressed Bombardier, which sold railroad cars to Israel Railways some years ago, to make reciprocal purchased amounting to 35% of the value of sales made to the government.

Sand Cat joins up

Plasan Sasa, owned by and located in Kibbutz Sasa on Israel's northern border, has begun supplying dozens of Sand Cat armored jeeps to Israel's Border Police. The Sand Cat, called Hatul Midbar (Desert Cat) in Hebrew, is based on a Ford F-Series 4x4 chassis adapted for military use, fitted by Plasan, as a subcontractor for Ford importer Delek Automotive Systems, with modular steel, ceramic and composite armor. Sand Cats replace the Sufa (Storm), Jeep Wrangler-based vehicles produced by Automotive Industries Ltd. of Upper Nazareth under license from Chrysler since the early 1990s.