The Happy Arab News Service

Sunday, December 30, 2007

Egypt in Transition

Very good analysis of Egypt's economic reforms by Al Ahram:

The Egyptian economy has delivered one of its most impressive performances ever this year, with a spurt in growth rates generated by reforms and solid macro-economic management. Better still, international organisations like the World Bank, IMF and rating agencies have issued laudatory reports on the state of the local economy and the outlook for 2007/08. Foreign investors poured billions of dollars into diverse sectors throughout the year, with some, such as real estate and information technology, witnessing double-digit growth rates.

For average Egyptians, however, there has been precious little of the trickledown that the government promised would be the fruit of economic reform, and patience appears to be wearing thin.

The country's economic recovery has so far been a jobless one, with stagnant wages falling well behind mounting inflation rates. The long sought-after high growth rates have come hand in hand with unbearable inflationary spikes and have failed to create job opportunities for millions of Egyptian youth. Persistent unemployment has exacerbated the obvious deterioration in standards of living, leading to increased poverty.

Uncharacteristically, Egypt's economic reform has recently met rare waves of labour unrest and public trust has dipped to an all-time low. In the past year, Egypt has seen an unprecedented number of strikes, sit-ins and demonstrations at its factories, the most famous of which was the eight-day demonstrations by property tax employees in early December in demand of higher salaries. This phenomenon is worrying the government, as it was virtually non-existent in the local economy for almost three decades.

Egypt's social unrest can be tied to the liberal economic policies followed by the government, which has led to booming stock and property markets, a bigger role played by the private sector and unprecedented levels of growth reaching an average of seven per cent during calendar year 2007. Economic growth was boosted by a dramatic increase in foreign direct investment (FDI), which climbed by 82 per cent in fiscal year 2006/07 to reach the current $11.1 billion figure. FDIs directed to the oil and gas sector accounted for only 28 per cent of the overall figure, with 25 per cent channelled to privatisation and sales of assets and 47 per cent going into new projects and the expansion of existing ones.

According to Ministry of Planning figures, growth in the construction sector throughout the year was the highest, reaching 16.2 per cent in the third quarter, compared to 15.2 per cent in the same quarter of the previous year. Tourism and Suez Canal revenues surged, pushing net foreign reserves to $30.92 billion by the end of October 2007, marking a 26.8 per cent spike from the previous year. The exchange rate is benefiting from a worldwide decline in the dollar value, a factor that, luckily, has so far not affected the appeal of Egypt's dollar-denominated exports.

The government was also able to raise its revenues by 16.3 per cent in fiscal year 2007, thanks to privatisation receipts, third mobile operator licences and land sales.

More significant is the thumbs up given by the World Bank in its annual Doing Business report which ranked Egypt the top reformer in the world during 2007 due to its delivery of the highest number of upgrades to its investment climate out of the 175 countries surveyed by the report. An IMF report published in September praised Egypt's economic growth that has come from a diversified economic structure -- namely agriculture, manufacturing, real estate and construction -- which has boosted consumer demand in the economy. Both Standard and Poor's and Moody's rating agencies, while harbouring reservations on the mounting public debt and government expenditures, maintained a positive outlook for the economy.

How have these figures that look so promising on paper trickled down to impact the daily lives of housewives, public workers and even the luckier private sector employees?

Not so well. Average household expenditures increased by almost 50 per cent since the beginning of the year. The government introduced a 10 per cent hike in electricity prices last month for both residential and commercial units. Talk about a possible elimination or reduction in subsidies makes the average citizen's view of the future even bleaker.

Government figures show a decline in the Consumer Price Index (CPI), the main measurement of inflation, to 6.9 per cent in November, down from 7.5 per cent in October and 9.3 per cent in September. The same figures point to an 8.9 per cent fall in unemployment in the third quarter of 2007, from 11.1 per cent a year earlier. This means that out of a workforce of 23.54 million, there were 2.1 million unemployed.

A recent UN survey issued in November gives a more realistic view of the economic situation. The survey revealed that the level of absolute poverty in Egypt is on the rise. An estimated 13 million Egyptians, or 19.6 per cent of the population, earned less than $2 a day in 2005, up from 16.7 per cent in 2000. This renders meeting basic needs a distant dream.

Economists also have reservations about the government's elation with the spurt in FDIs, claiming they were not directed to heavy labour industries and thus are powerless to create more employment opportunities. On the contrary, increased foreign investment in the real estate sector have led to skyrocketing real estate prices.

Even the more financially privileged of the country's citizens had a tough year. The cautious monetary policy followed by the government throughout the year by maintaining its bank lending and deposit rates at their December 2006 levels of 10.75 per cent and 8.75 per cent respectively has made the yield on investor deposits nil in light of the increasing inflation. Those with dollar savings received the hardest hit, with a severe decline in dollar value worldwide and a three-time reduction in interest rates this year.

Meanwhile, the government claims it is fully aware of its people's economic hardships during this time of economic growth. The popular line used by government officials is that this transitional period is a necessary evil that economies go through on their way to development and that people are advised to wait for future gains of the current pains. Minister of Finance Youssef Boutros Ghali told reporters early in the year that public discontent is normal because "fighting inequality becomes harder with economic expansion. The gap between rich and poor will inevitably increase in all economies going through a burst of activity."

All hope is not lost, though, as a strong outlook for 2007/08 and continued favourable external conditions provide a promising setting for future implementation of the reform agenda. The obvious and vital task ahead, however, is not merely to push for maintaining growth, but to sustain high job-creating growth, which has seemed to elude the government so far.

. . .


That was the beginning. The rest of the article is also interesting.

Midi Got It Right

Regarding the comment Midi has left on another thread which was:


Another blow to the Middle Eastern economies is the global increase in food prices (the reason for this is ethanol). Currently countries like Egypt and Morocco subsidies foodstuff in order to combat social unrest(Egypt even gets help from the US for this).

But as basic foodstuff gets more expensive (world market prices have more than doubled this year alone for wheat)and demand is growing, I don't think that any arab regime not allied with the US will be able to afford continuing subsidies. /midi


In fact it seems as if no Arab regime will be able to continue with subsidies regardless if it's allied with the US or not. The next piece by MEED is indeed about Egypt and Morocco, but Syria is planning to cut subsidies next year too while Jordan seems to be hit particularly hard by the rise of prices of oil and food. The next year is going to be hot for countries around us and not only because of the global warming.

Egypt and Morocco, the region's biggest wheat importers, face rising debts unless cuts are made elsewhere

Egypt and Morocco face soaring bills for food subsidies after the price of wheat reached a record high on international markets in mid-December. Egypt is the largest importer of wheat in the world, while Morocco is the second largest in the region.

Both countries will become more indebted unless they reduce government spending in other areas as neither can afford to let consumers bear the cost of rising wheat prices, according to a senior official at the UN's Food & Agriculture Organisation (FAO).

"They will not let [domestic] wheat prices rise, so I expect them to import what they need, and they will try to finance it through their own export earnings," says Abdolreza Abbassian, secretary for the intergovernmental group on grains at the FAO. "Egypt just makes sure it pays for its food subsidies. It will use aid to jack up those subsidies."

Egypt will import 7.5 million tonnes of wheat between July 2007 and June 2008, making it the world's largest importer of the grain, according to the UN organisation's estimates.

The Egyptian government increased subsidies for the retail price of bread to almost 52 per cent in September, following the steady rise of the price of wheat on international markets since May. As a result, bread subsidies are now thought to cost the government $2.47bn a year.

The price of hard red winter wheat, a benchmark price for the crop, increased from $203 a tonne in May to $332 a tonne in Nov-ember. Wheat prices have already increased by 19 per cent since the middle of November, after cold weather damaged the harvest in Argentina, which is a key producer.

On 14 December, wheat for delivery in March 2008 reached a record high of $9.80 a bushel on the Chicago Board of Trade, the world's largest market for agricultural commodities.

Any other disruptions to supply caused by poor weather conditions could result in further price surges, according to the commodities outlook for 2008, issued by investment bank Goldman Sachs.

However, Egypt should be able to get the best prices because of its purchasing power in the market.The General Authority for Supply Commodities, a government agency, buys about 50 per cent of the country's imported wheat, but many in the international commodity markets say the government effectively controls almost all imports.

Morocco's government also risks becoming more indebted after a drought in January and February 2007 caused its production of wheat to collapse from 6.3 million tonnes a year to just 1.5 million tonnes for the 12 months to the end of June 2008.

The FAO forecasts that Morocco's wheat imports will climb from 1.8 million tonnes to 3.5 million tonnes because of the drought. After the drought, the government slashed its import tariff on wheat from 130 per cent to 2.5 per cent.

Only Iran and Syria are net exporters of wheat in the region.

Published: 21 December 2007
Author: Will Hadfield. Staff Writer

Middle East Business Intelligence


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Tuesday, December 18, 2007

Independence Day

Last updated: October 14, 2009

December 18, 2007

Dia da independência

Middle Easterners visiting this blog are asked to follow the link above and help that fellow in his noble undertaking. This is a Brazilian cosmologist residing in Rio who took on himself a very difficult task of celebrating as many Middle Eastern holidays as he can. In particular help from representatives of religious minorities such as Mandaeans, Alawites or Druz is appreciated. But mainstream religions of Judaism, Christianity, Sunni and Shia Islams are sought after too. Show some heart, you maggots. For god's sake, why can't we just all get along?

October 14, 2009

Russia celebrating Independence

Source: Telegraph

A mysterious cloud was spotted over Moscow as Muscovites are readying themselves for celebrations of Russia's independence day. I don't want to be a spoiler but I do feel like I have to remind to our readers how such shit usually ends...

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Monday, December 17, 2007

Talking to Neighbors (Syrian Version)

Last Updated: December 30, 2007

December 17, 2007

Syria's economic reform will have its moment of truth next year when the government starts phasing out subsidies on oil products and other commodities. The government has made public a plan to increase diesel prices by 70% in 2008. The plan envisions subsidies to be completely eliminated by 2012 when prices should reach international levels.

In its latest reports from Syria IRIN (Integrated Regional Information Networks) has repeatedly referred to the possibility of social unrest in case the government proceeds with its plans to remove price controls. Over the last years problems have kept mounting for the regime in Damascus in the form of ballooning budget deficits, high unemployment and rising inflation. At the root of Syria's problems lays a combination of a failing socialist economy no longer capable of coping with the country's runaway demographics, declining oil production that used to provide a lion's share of state revenues and a massive influx of Iraqi refugees.

While public services are crumbling under stress generated by the rapid population growth, the government has largely failed to create alternative sources of revenues to compensate for the plummeting output of the country's oil fields. Being part of the UN Office for the Coordination of Humanitarian Affairs, IRIN should know well what it's talking about when reporting on the situation of Syria's health system.

Syria’s public health system is under severe strain. Although the quality of its health care remains regionally strong, growing budget deficits, ballooning demographics and the influx of an estimated 1.5 million Iraqis, all of whom qualify for free healthcare, means the need for state hospitals and clinics is soaring, even as the money to pay for them grows less each year.

Syria’s budget deficit has gone from bad to worse in recent years. Annual deficits have increased from 1.7 percent of gross domestic product (GDP) in 2001 to 5 percent in 2005 and with spending increases in 2006 Damascus-based economists estimate the deficit will reach 7.6 percent.

. . .

The deficits are growing as Syria’s demographics experience massive change. Syria’s population of 19 million is growing at 2.5 percent a year, around 475,000 people, while the influx of up to 1.5 million Iraqi refugees has further swelled the population by around 8 percent since 2003 and put an unsustainable strain on public services.

“Though there are a lot of public hospitals, which are free of charge, the quality is not so good and is decreasing,” said Syrian economist, Samir Seifan. “When you have 2.5 percent population growth each year you need to improve the budget by more than 2.5 percent at minimum. But the state budget doesn’t have enough resources; we’ve had a deficit for the last few years.”

DAMASCUS, 21 November 2007 (IRIN)


The unemployment situation is even more extreme as Syrian workforce is expanding at an even higher rate of 4% annually (that was the population growth 20 years ago).

Syrian socialism has a long tradition of subsidizing the price of basic commodities but recently the system has been displaying increasing signs of stress. In particular domestic oil consumption has overshoot earlier projections thanks to illegal smuggling to neighboring countries and growing demand from the rapidly expanding population. There is a real possibility that the budget may eventually collapse.

Syria’s socialist Baath Party government, with its centrally planned economy, has subsidised commodities such as bread, rice and sugar, as well as electricity and fuel by up to 40 percent since it came to power in 1963.

However, increasing domestic consumption by a rapidly growing population, further swelled by the influx of around 1.5 million refugees from Iraq, is now putting unbearable pressure on state coffers.

DAMASCUS, 25 September 2007 (IRIN)


Syria’s 40-year-old policy of subsidising everything from electricity to fuel and food is reaching breaking point. The rising costs of oil, increased fuel smuggling to neighbouring countries and declining state revenues have left the government struggling to pay its bills.

Next year’s subsidies will cost the government about US$7 billion, according to Deputy Prime Minister Economic Affairs, Abdullah Dardari, a situation he described as “no longer bearable”.

DAMASCUS, 30 October 2007 (IRIN)


The removal of oil subsidy is bound to produce a chain reaction affecting a wide range of products and services. The experience of other Arab regimes with price liberalization suggests a widespread social unrest in Syria next year.

Subsidy reform has led to unrest in countries across the region such as Yemen, Egypt, Jordan and Iran, and the government is acutely aware of the inflammatory potential of oil price hikes.

In the words of a minibus driver in Damascus on hearing of Dardari’s 70 percent increase in diesel prices by next year: “There is a lot of anger on the street about this new law. The situation might explode.”

“The government has already stopped subsidising olive oil and tea; we rarely cook meat now, only when we have guests and then we only cook chicken, never red meat,” said Muhammad Salem, a taxi driver in Damascus.

“If the government removes subsides on petrol and diesel the cost of everything will go up. Providing for my family is going to be very difficult if the cost of bread gets any higher,” Salem said.

Inflation, currently running at about 14 percent, according to the International Monetary Fund, would rise: “The government says they expect inflation to increase 5 percent next year but I think the figure is very much below what we can expect,” said Jihad Yazigi a Syrian economist and chief editor of The Syria Report.

Independent economists estimate unemployment levels to be over 20 percent and the UN Development Programme reported in 2005 that 30 percent of the population lived in poverty and 11.4 percent lived below subsistence level.

DAMASCUS, 25 September 2007 (IRIN)


While Israeli politicians and analysts are debating pros and contras of negotiating with the regime in Damascus, the regime itself may be living through its last decade. And the end of the regime may well spell the end for the country it used to rule. Nobody can know for sure what sort of Syria is there after so many years spent under this totalitarian regime, but it can easily happen to be worse than Iraq.


The original version of "Talking to Neighbors" is here.

General Arab demographics: Flowers of Life

December 30, 2007

Another One Stares into Demographic Abyss

IRIN reports from Yemen based on official sources:

A recent study, presented at a national conference on population policy on 10 December in Sanaa, said their was a widening gap between population growth and economic growth: Yemen has one of the highest population growth rates in the world - 3.2 percent per annum - but its economy is shrinking.

The study, entitled Balance Between Population Growth and Development Rates in Yemen, was written by experts at the National Population Council (NPC), a government body.

It said the gross domestic product (GDP) growth rate between 2001 and 2007 was well below what was planned: In 2001-2005 it was 4.5 percent instead of the planned 5.6 percent. In 2006 and 2007 it was 3.8 percent and 2.6 respectively, although the five-year plan envisaged growth of 4.9 percent and 5.5 percent in these years.

According to the Yemen Poverty Assessment report, prepared by Yemen’s government, the World Bank, and the UN Development Programme (UNDP) and which was released in December 2007, unemployment increased from 13.7 percent in 1999 to 16.3 percent in 2004: the labour force increased at a rate of 4.3 percent per year but the number of jobs increased by only 3.7 percent per year.

. . .

According to Mojahed al-Shaab, an NPC spokesperson, there is a natural increment of around 700,000 people a year. “They need health care and education. Population growth is putting pressure on the country’s resources. If the situation remains as it is, the state would not be able to meet the demands of its people,” he warned.

“The number of students increases each year. The state cannot cover the demand for new schools. The number of students increased from two million in 1990 to 4.7 million in 2004, while 40 percent of children do not attend primary school,” he said.

According to the NPC, 45.3 percent of the population is illiterate, and primary education enrolment is only 62.5 percent. However, 45 percent of the population is under 15.

. . .

SANAA, 27 December 2007 (IRIN)


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Friday, December 14, 2007

Israeli vs Religious

Last updated: December 14, 2007

November 2, 2007

The Palestinian Right of Return

Nizo double posted a post about this on his blog and the blog of Lurun. I've been commenting profusely on both. Here are the links:

Nizo: On the Palestinian Right of Return

Lirun: On the Palestinian Right of Return

December 7, 2007

A major ultra orthodox organization in the US, Agudath Israel of America, in a break with its previous practice has stated its position on the issue of Jerusalem in crystal clear terms: Jewish sovereignty over any part of Jerusalem cannot be surrendered because "It is the heart of Eretz Yisrael".

Agudath Israel of America has traditionally steered clear of matters involving Israeli sovereignty, on the grounds that a true Jewish homeland can be established only by the coming of the messiah. At its national convention last week, however, Agudath Israel passed a resolution stating that Israel should not surrender any part of Jerusalem to Palestinian sovereignty and that America's government should not pressure it into doing so.


The resolution was adopted with no objections. Even more, Rabbi Yaakov Perlow, the head of Agudath Israel of America, said that before the resolution he had consulted leading rabbis of the Agudath Israel in Israel, which suggests a broad intercontinental consensus in the ultra orthodox world on the issue of Jerusalem. The Haaretz reports that, shortly before Annapolis, the Aguda contacted several high ranking members of the Bush administration in what appears to be a lobbying campaign to persuade the administration to stop pressing Israel into making concessions in Jerusalem.

The position of the ultra orthodox on the peace process and on the future of Israel in general has been a mystery for some people. The presumed anti Zionism of the ultra orthodox made some people wondering if the majority of the ultras care for the Jewish statehood in Israel at all. The resolution passed by the national convention of the Agudath Israel in America leaves little space for doubts and confusion. At least as far as Jerusalem is concerned the majority of the ultra orthodox leaders are rejecting any compromise.

Two conclusions follow logically from this. First, while the ultras may not necessarily object to some land for peace solution in the West Bank/Gaza, their stance on Jerusalem makes any peaceful solution of the conflict pretty much impossible. Without a compromise in Jerusalem the Palestinians will reject any deal. It's as hard to see the Palestinians giving up on Jerusalem as Israel accepting the right of return at some point in the future.

Second, the resolution should be seen against the background of the demographic revolution under way in Israel and the rest of the Jewish world. The demographic surge of the ultra orthodox sector both in Israel and the diaspora means that within decades the ultras will become, if not the outright majority, then a major factor and decision maker in the Jewish world. By 2012 1/3 of all Jewish first graders in Israel will study in ultra orthodox schools. This is up from the 1/4 of today. Other reports suggest that by the middle of the century the majority of Jews in Britain will belong to the ultra orthodox community. Similar trends are observed in the USA.

Given that in the ultra orthodox universe not a single leaf falls from a tree unless it's sanctioned by the rabbis, the Aguda resolution on Jerusalem should have some theological underpinnings. It so formulates a position and an attitude that are here to stay and, as the ultra orthodox sector continues its demographic expansion, they are bound to grow stronger and more entrenched.

All this means that the window of opportunity created by the Oslo process is closing fast (if it still exists) and what's still possible now will be soon possible no longer. If no breakthrough is quickly achieved and facts on the ground are forcefully established by partitioning Jerusalem and removing some of the settlements, then both sides should start bracing themselves for another generation of a prolonged and bitter conflict.

December 10, 2007

Israeli Arabs and Israel as a Jewish State

Pride & Honor

December 14, 2007

Israeli vs Religious

An article published on Ynet should be very relevant to the subject of this post and to the discussion on the Chamsa blog. According to Israel Democracy Institute quoted by Ynet the balance of forces between the secular and religious sectors in Israel is rapidly changing.

A new study conducted by the Israel Democracy Institute shows that the secular sector in Israel is shrinking: Only 20% of Jewish Israeli citizens define themselves secular – the lowest number in 34 years.

. . .

Researcher Eliyahu Sapir told Ynet that the Israeli society has gone through dramatic changes in the past three decades (political reforms, rapid economic growth, increase in population, and four wars), and that sociologists' predictions that the society will be secularized – were proved false.

Probably one of the most important findings of the research is how religion influences political views:

Finally, some politics: In the religious group 71% are right-wing, compared with 49% of the traditional and 43% of secular. Only 8% of religious, 21% of traditional and 27% of secular reported they are left-wing.

The researchers were surprised by the fact that young Israelis appear to be more observant than their parents:

Another correlation was found between the respondents' age and the religious affiliation. 39% of the respondents ages 40 and under define themselves religious. Among 40-59 year olds, the number drops to 32%, and down to 20% among respondents' 60 years old and over.

. . .

Sapir said he was surprised to learn that young Israelis are more observant than older ones: "That means that when these youngsters age, the society will be even more traditional than it is today."


In reality there is no reason to be surprised. It's not that young Israelis have suddenly turned religious. It's rather that the findings of the study reflect the demographic nature of the shift. Religious people on average have more children than secular people and this is what we see here.

It's commonly assumed that young people tend to be more secular and leaning towards the left. This common assumption is in need of a serious rethink. In fact the findings of the Israeli study are echoed by the conclusions of similar studies in the US. Consider for example this piece from the Opinion Journal of the WSJ that explains the repeated failures of the campaigns targeting young voters mounted by the Democrats in recent years:

On the political left, raising the youth vote is one of the most common goals. This implicitly plays to the tired old axiom that a person under 30 who is not a liberal has no heart (whereas one who is still a liberal after 30 has no head). The trouble is, while most "get out the vote" campaigns targeting young people are proxies for the Democratic Party, these efforts haven't apparently done much to win elections for the Democrats. The explanation we often hear from the left is that the new young Democrats are more than counterbalanced by voters scared up by the Republicans on "cultural issues" like abortion, gun rights and gay marriage.

But the data on young Americans tell a different story. Simply put, liberals have a big baby problem: They're not having enough of them, they haven't for a long time, and their pool of potential new voters is suffering as a result. According to the 2004 General Social Survey, if you picked 100 unrelated politically liberal adults at random, you would find that they had, between them, 147 children. If you picked 100 conservatives, you would find 208 kids. That's a "fertility gap" of 41%. Given that about 80% of people with an identifiable party preference grow up to vote the same way as their parents, this gap translates into lots more little Republicans than little Democrats to vote in future elections. Over the past 30 years this gap has not been below 20%--explaining, to a large extent, the current ineffectiveness of liberal youth voter campaigns today.


This means that the effect produced by the demographics is such that young Israelis should be expected to be more religious and right wing than the older generation. These findings also allow us, to a certain degree, to get some idea about the future of Israel. In the coming decades Israel will be gradually getting more religious and right wing and, as far as the political views are concerned, the persistent failures to launch and relaunch the damn peace process have only deepened the trend.

Other studies suggest an increasing gap between the two groups of youth. In the secular sector there is a clear trend to favor the Israeli identity over the Jewish one while the religious sector remains deeply attached to the traditional Jewish identity:

Secular youngsters identify themselves as more Israeli than Jewish, according to research conducted by Dr. Hagit Hartaf of the University of Haifa.

For students attending the secular state education system, Jewish values play a secondary role in the building of their identity.

"In contrast to the concept of 'Jewish-Israeli identity,' which alludes to equality between identities, the new identity alludes to the centrality of Israeli components over Jewish ones," Hartaf said.

On the other hand, youth from the state religious school system are much more attached to their tradition and define themselves religiously. This has led to a polarization within society. "These two identities, which include the majority of Israeli youth, are removed from one another and are established separately, without any basis or bridge from which dialogue can begin" said Hartaf.

The study was based on extensive interviews with 55 adolescents and 21 teachers over a two-year span, monitoring more than 300 hours of educational activities.

A central aspect of Israeli youths' identity is the need for military defense, particularly in light of the Holocaust and anti-Semitism, according to the study. A lesser emphasis is placed on Jewish rituals and the relationship with Diaspora communities, especially in the United States. While the secular students do study Jewish issues in the classroom, these discussions are often at a very basic level.


There is a certain drifting apart between the two sectors as a significant part of the secular sector seems to be developing a new sense of national identity, more national and cultural in the usual sense of the word.

On the other hand the religious sector, or to be more precise its ultra orthodox section, has recently experienced an accelerated modernization and integration into the mainstream society. Following Netanyahu's reforms, that led to massive cuts in social spending on the one hand and to the rapid economic growth and falling unemployment on the other, thousands of ultra orthodox were forced to join the economy. The reforms forced large chunks of the ultra orthodox sector out of its isolation smashing many of the barriers the ultra orthodox have been keeping between themselves and the rest of the society for decades.

The future of Israel will be very much about the interaction between the two sectors and attempts to negotiate the differences. The gap may start shrinking at some point as the ultra orthodox population is also getting more Israeli in a way, though it should not be expected to proceed too far with this process.

Anyway, even if we can expect the gap to start closing in the future, this is not something that should be taken for granted. It's something that should be actively sought after on both sides.

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Monday, December 10, 2007

Advanced Biofuels

Last updated: December 10, 2007

October 4, 2007

The Economist
Sep 27th 2007

Ethanol, schmethanol

SOMETIMES you do things simply because you know how to. People have known how to make ethanol since the dawn of civilisation, if not before. Take some sugary liquid. Add yeast. Wait. They have also known for a thousand years how to get that ethanol out of the formerly sugary liquid and into a more or less pure form. You heat it up, catch the vapour that emanates, and cool that vapour down until it liquefies.

The result burns. And when Henry Ford was experimenting with car engines a century ago, he tried ethanol out as a fuel. But he rejected it—and for good reason. The amount of heat you get from burning a litre of ethanol is a third less than that from a litre of petrol. What is more, it absorbs water from the atmosphere. Unless it is mixed with some other fuel, such as petrol, the result is corrosion that can wreck an engine's seals in a couple of years. So why is ethanol suddenly back in fashion? That is the question many biotechnologists in America have recently asked themselves.

The obvious answer is that, being derived from plants, ethanol is “green”. The carbon dioxide produced by burning it was recently in the atmosphere. Putting that CO2 back into the air can therefore have no adverse effect on the climate. But although that is true, the real reason ethanol has become the preferred green substitute for petrol is that people know how to make it—that, and the subsidies now available to America's maize farmers to produce the necessary feedstock. Yet such things do not stop ethanol from being a lousy fuel. To solve that, the biotechnologists argue, you need to make a better fuel that is equally green. Which is what they are trying to do.

Designer petrol

The first step on the road has been butanol. This is also a type of alcohol that can be made by fermenting sugar (though the fermentation is done by a species of bacterium rather than by yeast), and it has some advantages over ethanol. It has more carbon atoms in its molecules (four, instead of two), which means more energy per litre—though it is still only 85% as rich as petrol. It also has a lower tendency to absorb water from the atmosphere.

A joint venture between DuPont, a large American chemical company, and BP, a British energy firm, has worked out how to industrialise the process of making biobutanol, as the chemical is commonly known when it is the product of fermentation. Although BP plans to start selling the stuff in the next few weeks (mixed with petrol, to start with), the truth is that butanol is not all that much better than ethanol. The interesting activity is elsewhere.

One route might be to go for yet-larger (and thus energy-richer) alcohol molecules. Any simple alcohol is composed of a number of carbon and hydrogen atoms (like a hydrocarbon such as petrol) together with a single oxygen atom. In practice, this game of topping up the carbon content to make a better fuel stops with octanol (eight carbon atoms) as anything bigger tends to freeze at temperatures that might be encountered in winter. But living things are familiar with alcohols. Their enzymes are geared up to cope with them. This makes the biotechnologists' task that much easier.

The idea of engineering enzymes to make octanol was what first brought Codexis, a small biotechnology firm based in Redwood City, California, into the field. Codexis's technology works with pharmaceutical precision—indeed, one of its main commercial products is the enzyme system for making the chemical precursor to Lipitor, a cholesterol-lowering drug that is marketed by Pfizer. Codexis controls most of the important patents for what is known as molecular evolution. This designs enzymes in the way that normal evolution designs organisms. It creates lots of variations on a theme, throws away the ones it does not want, and shuffles the rest in a process akin to sex. It then repeats the process on the survivors until something useful emerges—though, unlike natural evolution, there is a bit of intelligent design in the process, too. The result, according to Codexis's boss, Alan Shaw, is enzymes that can perform chemical transformations unknown in nature.

Dr Shaw, however, is no longer so interested in octanol as a biofuel. Like two other, nearby firms, he is now focusing Codexis's attention on molecules even more chemically similar to petrol. The twist that Codexis brings is that unlike petrol, of which each batch from the refinery is chemically different from the others (because the crude oil from which it is derived is an arbitrary mixture of hydrocarbon molecules), biopetrol could be turned out exactly the same, again and again, and thus designed to have the optimal mixture of properties required of a motor fuel.

Exactly which molecules Codexis is most interested in these days, Dr Shaw is not yet willing to say. But Amyris Biotechnologies, which is also based in California, in Emeryville, and which also started by dabbling in drugs (in its case an antimalarial medicine called artemisinin), is slightly more forthcoming. Under the guidance of its founder Jay Keasling, it has been working on a type of isoprenoid (a class of chemicals that include rubber).

Unlike Codexis, which deals in purified enzymes, Amyris employs a technique called synthetic biology, which turns living organisms into chemical reactors by assembling novel biochemical pathways within them. Dr Keasling and his colleagues scour the world for suitable enzymes, tweak them to make them work better, then sew the genes for the tweaked enzymes into a bacterium that thus turns out the desired product. That was how they produced artemisinin, which is also an isoprenoid.

Isoprenoids have the advantage that, like alcohols, they are part of the natural biochemistry of many organisms. Enzymes to handle them are thus easy to come by. They have the additional advantage that some are pure hydrocarbons, like petrol. With a little judicious searching, Amyris thinks it has come up with isoprenoids that have the right characteristics to substitute for petrol.

The third Californian firm in the business, LS9 of San Carlos, is cutting to the chase. If petrol is what is wanted, petrol is what will be delivered. And diesel, too, although in this case the product is actually biodiesel, which is in some ways superior to the petroleum-based stuff.

LS9 also uses synthetic biology, but it has concentrated on controlling the pathways that make fatty acids. Like alcohols, fatty acids are molecules that have lots of hydrogen and carbon atoms, and a small amount of oxygen (in their case two oxygen atoms, rather than one). Plant oils consist of fatty acids combined with glycerol—and these fatty acids (for example, those from palm oil) are the main raw material for the biodiesel already sold today.

LS9 has used its technology to turn microbes into factories for fatty acids containing between eight and 20 carbon atoms—the optimal number for biodiesel. But it also plans to make what it calls “biocrude”. In this case the fatty acids would have 18-30 carbon atoms, and the final stage of the synthetic pathway would clip off the oxygen atoms to create pure hydrocarbons. This biocrude could be fed directly into existing oil refineries, without any need to modify them.

These firms, however, have one other competitor. His name is Craig Venter. Dr Venter, a veteran of biotechnological scraps ranging from gene patenting to the private human-genome project, has been interested in bioenergy for a long time. To start with, it was hydrogen that caught his eye, then methane—both of which are natural bacterial products. But now that eye is shifting towards liquid fuels. His company, modestly named Synthetic Genomics (and based, unlike the others, on the east side of America, in Rockville, Maryland), is reluctant to discuss details, but Dr Venter, too, is taken with the pharmaceutical analogy. Indeed, he goes as far as to posit the idea of clinical trials for biofuels—presumably pitting one against another, perhaps with petroleum-based products acting as the control, and without the drivers knowing which was which.

Whether biofuels will ever be competitive with fossil fuels remains to be seen. That will depend on a mixture of economics and politics. But the political rush to back ethanol, just because it is green and people have heard of it, is a mistake. Let a thousand flowers bloom, and see which one wins Dr Venter's Grand Prix.


December 10, 2007

The New York Times
Published: December 9, 2007

Biofuel Race

For millennia, civilization’s main event, the harvest, has focused our attention upon the fruit of our agricultural efforts — the kernel, the grain, busheled and bagged. So it’s no surprise that the fledgling biofuel industry has been similarly focused: America’s favorite biofuels come mostly from corn and from soy. But when food crops are used as fuel, difficulties may follow. The vogue for corn ethanol has driven up the price of corn around the world, putting the poor in jeopardy. (An expert affiliated with the United Nations went so far as to label the production of biofuels derived from food stock “a crime against humanity.”) Corn ethanol is also astonishingly inefficient: because vast amounts of fossil fuels are required for its manufacture, every 1 unit of energy nets a mere 1.3 units of ethanol.

Is there a better way? In 2007, significant steps were taken toward a potentially great second harvest, some of it coming from the byproducts of animals, some of it from municipal waste and garbage but the bulk of it coming from plant biomass, which is really about breaking down cellulose, the key structural component of all plant cell walls and the most abundant of all naturally occurring organic compounds on earth. A recent Department of Energy study found the United States can produce a billion tons of plant biomass annually, yet 400 million years of evolution has made cellulose resistant — the term of art is “recalcitrant” — to manipulation. Unlocking its complex compounds of sugars, whose potential yield is 4 times that of corn on a gallons-per-acre basis, typically requires an aggressive, four-step thermo-chemical process. Taken together, these steps have been too costly or too energy intensive for cellulosic fuel production to become economically viable. Cracking the conundrum of plant cell walls cheaply has become a Brigadoon-like dream that has been “5 years away,” as one wry observer put it, “for the last 30 years.”

Until now — at least if you believe Vinod Khosla, one of the best-known venture capitalists in America, who was a founder of Sun Microsystems and an early investor in Google, and who has in recent years invested hundreds of millions of dollars into a dozen different biofuel companies using new and potentially revolutionary techniques. In November, a Khosla-backed firm called Range Fuels broke ground on the first cellulosic ethanol plant in the country. The plant, located in Georgia, employs an efficient process that eliminates two of the four traditional thermo-chemical steps. Range Fuels plans to use timber scraps, wood chips and paper pulp, though it could also use municipal waste and even olive pits, to produce 100 million gallons of fuel a year.

Khosla has also supported efforts to utilize the power of bioengineering. The goal here has been to create bacteria that will, in effect, eat cellulose and excrete oil. In February, a Khosla-backed company, LS9, announced its plans to make genetically engineered microbes that do just that. Another company, Verenium, exploits naturally occurring cellulose-eating enzymes in termites and fungus to produce ethanol.

But can products like these go to market? Yes, according to Khosla, who finances technologies only if he believes they can be ramped up to scale and compete with fossil fuels within five to seven years of their initial deployment — without government subsidy. “I believe in technologies that can compete in the marketplace,” he says. “Otherwise, it’s just toys you’re dealing with. Not solutions.”

According to Khosla, within the next two decades, petroleum, which accounts for 40 percent of the current total energy use in the United States, can be entirely replaced by biofuels. That’s a half-trillion-dollar market. In a kind of biofuels roulette, Khosla, a man with a big stack of chips, has covered the table with many different bets. One of them seems bound to hit, which would be a Google-like home run for Khosla and would similarly revolutionize life for the rest of us.


Looks like this guy has all angles covered

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