MENIA AND BENI SUEF TO JOIN THE QIZ Source: Beltone News, June 16, 2009
The governorates of Menia and Beni Suef have been granted authorisation to join the Qualifying Industrial Zones (QIZ) agreement, allowing their factories products’ duty-free access to the U.S., provided they satisfy the agreed upon Israeli component, as per the pre-defined rules of origin, said the Chairman of the QIZ Unit at the Ministry of Trade and Industry (link here), Dr. Ali Awny.
CENTRAL BANK REDUCES INTEREST RATES BY 50 BPS Source: Central Bank of Egypt, June 18, 2009
The Central Bank of Egypt (CBE) (link here) decided to cut its overnight deposit rate by 50 bps to 9 percent per annum. The discount rate was also cut by 50 bps to 9 percent per annum.
In its meeting held on June 18, 2009, the Monetary Policy Committee (MPC) decided to cut its overnight deposit rate by 50 bps to 9 percent and the overnight lending rate by 50 bps to 10.5 percent. Annual headline CPI inflation continued to decline in May 2009, reaching 10.2 percent down from 11.7 percent in April. This records a cumulative drop of 13.4 percentage points since its peak in August 2008.
The downward trend in headline inflation comes on the back of the decline in domestic food inflation, which fell from 31 percent (y/y) in August 2008 to 12.5 percent (y/y) in May 2009. In the meantime, the global financial crisis continues to interrupt the domestic growth momentum, bringing domestic GDP growth in 2008/09 Q3 to 4.3 percent compared to 7.1 in 2007/08. Moreover, despite tentative signs that the worst of the global downturn may be over, consensual projections point to a slow and gradual global economic recovery in 2010.
Against this background, the MPC's assessment of the balance of risks surrounding the inflation and growth outlook over the medium-term remains unchanged as risks to the domestic growth outlook continue to be on the downside while inflationary pressures are subsiding. The MPC will continue to take the necessary measures to contain the adverse effects of the global economic turmoil on the domestic economy, provided that they do not conflict with the price stability objective.
2009/2010 BUDGET TO BE IMPLEMENTED Source: Beltone News, June 30, 2009
The government will start implementing the new fiscal year 2009/2010 budget July 1, with expenditures being expected to reach LE324 billion, down from LE356 billion in FY2008/2009, while revenues are expected to drop to LE225 billion, from LE290 billion, resulting in a budget deficit of 8.4%, said the Minister of Finance, Youssef Boutros Ghali.
Nominal GDP is expected to reach LE1181 billion in FY2009/2010, with a nominal growth rate of 13%. Expenditures will drop, mainly due to the decline in the cost of subsidized goods, compared to FY2008/2009 price levels, while revenues will drop due to lower tax revenues, as a result of the domestic and global economic slowdown. Tax revenues will total LE146 billion, including LE59 billion from income taxes, LE61 billion from sales tax, LE14 billion from customs, while non-tax revenues will total LE72 billion.
Expenditures will include LE73.5 billion in spending on subsidies, LE36.5 billion on investment and LE87.5 billion on wages. Subsidies are expected to total LE133 billion in FY2008/2009, due to the spike in commodity prices in 2008. The government is currently considering a number of measures and incentives to boost growth in the economy to reduce the negative effect of the global crisis on the economy, the Minister indicated.
CBE TO IMPLEMENT THE SECOND PHASE OF THE REAL TIME GROSS SETTLEMENT SYSTEM Source: Al-Mal, June 28, 2009
The Central Bank of Egypt (CBE) (link here) is preparing to implement the second phase of the Real Time Gross Settlement (RTGS) system governing foreign currency transactions between banks, after succeeding in implementing the first phase which dealt in local currency transactions.
The CBE aims to reduce the shortage that could occur in foreign currencies due to lower FOREX revenues and increased demand from investors, leading the CBE to intervene in the market through the sale of foreign exchange to ensure the availability of funds in the market.
The CBE had restricted forward operations recently, in an attempt to regulate the foreign exchange market and prevent speculative activity affecting the FOREX market. The implementation of the second phase of the new system would allow banks to take out one-day loans from the CBE to cover any short term shortages in funds to avoid exerting undue pressure on the currency.
EGYPT RANKS 9th IN THE FTSE INDEX Source: Daily News Egypt, June 23, 2009
A Financial Times (link here) survey measuring the economic performance of emerging markets on the FTSE index showed that Egypt jumped to rank number nine, with economic performance improving by 30 percent in the first half of this year. The index average is 40 percent. Minister of Finance Youssef Boutro Ghali expected the economy to grow by 4.5 percent in the fiscal year ending June 30.
Russia ranked first after boosting its economic performance by 77 percent to become the country with the highest economic performance due to its oil and natural gas resources, which make up two-thirds of its exports.
EGYPT & FRANCE AGREE TO LAUNCH MEDITERRANEAN FIRMS FORUM Source: Egypt State Information Service, June 22, 2009
Egypt and France agreed to launch a forum for the development of Mediterranean firms in Cairo in December. The aim of launching the forum is to develop and establish about 400 joint firms, in addition to about 100 firms in Morocco, Algeria, Tunisia, Jordan, Syria, Lebanon and Turkey in the fields of farming, food industry, energy, environment, construction, décor, industrial equipment, health, commodities, tourism, trade, information technology and communications.
Minister of Trade and Industry Rashid Mohamed Rashid said his talks with the French Secretary of State for Foreign Commerce Anne-Marie Idrac tackled new mechanisms to cement economic cooperation between the two countries either in trade or investment domains.
EGYPT SETS UP TAX COLLECTION DEAL WITH STATE BANK Source: Ministry of Finance, June 21, 2009
The Ministry of Finance (link here) had signed an agreement with the state's National Bank of Egypt (NBE) (AmCham member) (link here) to collect taxes electronically to improve efficiency and reduce tax avoidance. The agreement will allow taxpayers to submit their filings at any NBE branch, which will then be filed directly to the Egyptian Tax Authority. Finance Minister Youssef Boutros-Ghali said the deal was a part of a series of moves to automate collection and boost efficiency. The minister added that several other banks would likely to join the scheme.
HDB ACQUIRES 60 PERCENT OF DAMAC Source: Beltone News, June 25, 2009
The consortium led by Housing and Development Bank of Egypt (HDB) (AmCham member) (link here) has signed an agreement with Damac Properties (link here) to buy 60% of the company’s shares after conducting the due diligence. The consortium led by HDB includes Egyptian Arab Land Bank (EALB) (link here) and the Holding Company for Investment and Development, a subsidiary of HDB, distributed as follows: 30% for HDB, 20% for EALB and 10% for HDB’s subsidiary. Meanwhile, an Emirati businessman might buy another 15% of Damac, leaving the mother company with a 25% stake, down from 40%.
GOZOUR WINS DEAL TO ACQUIRE DAIRY PRODUCER "ENJOY" Source: Al-Mal, Zawya, June 24, 2009
Gozour will acquire Nile Company for Food Industries "Enjoy" (link here) in a LE280 million deal. Gozour is a multi-category food conglomerate of a number of private local food producers that is managed by Citadel Capital (AmCham member) (link here). Enjoy is 100%-owned by Haykala Investment Managers (link here), a private equity firm that is 40%-owned by the Commercial International Bank (CIB) (AmCham member) (link here), Haykala Investment Managers Management (30%), and Samih Sawiris (15%), and the rest by other investors.
Gozour's deal includes a loan settlement of LE200 million and acquisition offer of LE80 million. Enjoy owed LE200 million to the six banks, which included the CIB (LE68 million), Credit Agricole Egypt (AmCham member) (link here) (LE50 million), National Societe Generale Bank (AmCham member) (link here) (LE40 million), as well as Piraeus Bank (AmCham member) (link here), the Arab Bank (AmCham member) (link here) and the Arab Investment Bank (link here).
Gozour rescheduled Enjoy's debts and will pay the full amount in semi-annual installments within seven years, which include a two-year grace period. The banks agreed that Gozour will pay interest based on variable market rates. Gozour had proposed to pay LE80 million for the full acquisition of Enjoy, implying it was done on multiples of EV/Sales 1.24x to 1.25x compared to similar industry acquisitions which were done in EV/Sales multiples ranging between 0.7x and 1.97x. The CIB agreed to provide Enjoy with a LE40 million credit facility to finance its working capital.
OT RECEIVES $4.9 MILLION CHADIAN SETTLEMENT Source: AMEInfo, June 23, 2009
Egypt's Orascom Telecom (link here) said it had received $4.9 million from Chad in a settlement over ownership of a Chadian mobile operator. The company said Chad's Telecommunications Ministry had invalidated the transfer of 51% of Chadian operator TchadMobile to OT, and the regional operator suspended its operation of TchadMobile in July 2004, and took the case to the International Chamber of Commerce (ICC) (link here) in March 2005, which ruled against Sotel Tchad, the country's fixed line operator, and the Chadian government.
ORASCOM WINS CONTRACTS WORTH $168 MILLION Source: Trade Arabia, June 17, 2009
Egypt's Orascom Construction Industries (AmCham member) (link here) said it had won two government contracts worth $168 million for road-building and sewage treatment projects.
One of the contracts, worth $128 million, is for the extension of a highway between Cairo and the coastal city of Alexandria that the company expects to complete the project by the end of 2011.
The other contract is for the construction of a sewage treatment plant with a capacity of 100,000 cubic meters per day in a city on Cairo's outskirts. That contract is worth LE225 million ($40 million).
OCI WINS $140 MILLION CAIRO METRO DEALS Source: Reuters, June 21, 2009
Egypt's Orascom Construction Industries (AmCham member) (link here) said it had won contracts worth $140 million for work on Cairo's third metro rail line. The contracts for the second phase of the development covers civil, electromechanical and railway works, the firm said. The new line is due for completion in the fourth quarter of 2013.
MINISTRY OF HOUSING TO SELL LAND IN NEW CAIRO Source: EFG-Hermes, June 24, 2009
The Ministry of Housing, Utilities & Urban Development (link here) will issue new land for investment in New Cairo. The ministry is currently working on finalizing the offer book and will issue it during the coming days. The land offered will vary between 1,000 meters and 10,000 meters for investment in commercial services, while residential investment will range from 5 to 100 feddans. The number of plots that will be issued has not been determined yet and will depend on demand. The sale will take place through a closed envelope auction system.
EGYPT AND U.S. PARTNER ON AIRCRAFT LEASING COMPANY Source: Daily News Egypt, June 17, 2009
Egypt’s Civil Aviation Finance Holding Co. (CIAF) and U.S. lessor Aviation Capital Group (ACG) (link here) entered into a joint venture to form an aircraft leasing company to serve Egypt, the Middle East and Northern Africa. The company will be named Civil Aviation Finance and Operating Leases Co. (CIAF-Leasing). Operations are expected to begin in the fourth quarter of this year. The shareholders are CIAF, ACG and the Civil Aviation Support and Development Fund, an Egyptian entity founded to support and develop civil aviation activities. The Egyptian entities own 90 percent of the venture and ACG has a 10 percent shareholding.
Egypt had signed a deal with Australia’s WorleyParsons (link here) for a nuclear power plant consultancy worth around LE900 million ($160 million). The firm will begin by looking into potential locations for the plant, including updated studies on the Dabaa site on the Mediterranean coast, where Egypt planned to build a power station in the 1980s, the cabinet said.
The company will prepare five other potential sites for future nuclear plants, including Safaga, Hamam Firaon and Al-Negeila, said Egypt’s Electricity Minister Hassan Younes. Under the 10-year contract, WorleyParsons will also choose the technology for the reactors, ensure quality control for the project, train personnel to run the power plant and provide other technical services.
ABB WINS $31 MILLION CONTRACT IN EGYPT Source: Daily News Egypt, June 19, 2009
International power and automation technology group ABB (link here) won $31 million contract from Egypt’s West Delta Electricity Production Company (WDEPC). The company will equip a new power plant in Alexandria’s Abu Qir that will help meet growing demand for electricity in Egypt, Peter Leupp, head of ABB’s power systems division, said. ABB will provide engineering expertise and power products including various types of transformers as well as generator circuit breakers. The Abu Qir thermal plant will be powered by two 650 MW steam generators. The project is expected to be completed in 2012.
SNC-Lavalin (link here) is pleased to announce that its Transmission and Distribution (T&D) Group has been awarded a contract for consultancy services on the High Voltage Direct Current (HVDC) electricity interconnection project between Egypt and Saudi Arabia.
The contract, valued at $3.9 million, includes the route selection of the proposed approximate 1500 km two-pole 500 KV multi-terminal HVDC link, the system and design studies for the link which would be able to transfer 3000 MW of power, as well as the preparation of the Request for Proposals for the HVDC stations and lines in both countries.
SNC-Lavalin T&D is currently completing a similar project for the GCC Interconnection Authority (link here), connecting Kuwait, Saudi Arabia, Bahrain, Qatar and the United Arab Emirates (UAE). It is also carrying out studies and engineering and supervision mandates for 66KV, 132KV and 220KV substations in Bahrain and UAE.
EGYPT AND SPAIN TO DEVELOP EGYPTIAN QUALITY STANDARDS Source: Egypt State Information Service, June 20, 2009
Egypt and Spain agreed to implement a project on developing Egypt's quality standards to be up to European criteria, Minister of Trade and Industry Rashid Mohamed Rashid said.
Under the agreement, Egypt will benefit from Spain's expertise in upgrading a number of industrial sectors to sharpen their competitiveness capabilities and hone staffers' skills. Spain will organize training sessions for Egyptian workers in factories. A number of technological centers will be established. The Spanish government channeled LE15 million as a grant for drawing up top-notch technology programs for food industries, furniture, leather and tanning.
Ministry of Trade & Industry (link here) signed a cooperation protocol with the Spanish Agency for International Cooperation (AECI). The protocol will open new markets for Egyptian products, give momentum to trade and boost investments between Egypt and Spain urging Spanish companies to take advantage of business facilities offered by Egypt.
NEW MEASURES TO IMPROVE INSPECTION AND QUALITY CONTROL OF IMPORTED WHEAT Source: Beltone News, June 24, 2009
The Minister of Trade and Industry (link here) announced new measures aimed at improving inspection and quality control of imported wheat. The measures will include doubling the financial sureties deposited by international cargo inspection firms and imposing penalties on those firms if they fail to ensure adherence to Egyptian wheat standards.
The penalties could include the loss of the deposited surety and striking them from a list of companies doing business with Egypt's wheat-buying authority. The usual process of tendering for wheat by the General Authority for Supply Commodities (GASC) would continue unchanged. Incoming wheat shipments, especially from Russia, have recently been found to include impurities and bugs, rendering the wheat unfit for human consumption, which prompted the government to return the wheat and impose strict regulations to ensure the wheat is suitable for consumption.
Egypt is one of the largest wheat importers worldwide, and is the biggest consumer of Russian wheat exports, with more than four million tons estimated this season, nearly a quarter of Russia's wheat shipments and almost a third of Egypt's total yearly wheat consumption, at 14 million tons.
PAINTS EXPORTS SLIDE 50 PERCENT Source: Bloomberg, June 17, 2009
Egypt’s exports of paints plummeted by 50 percent reaching 8,430 tons in the first three months of 2009 compared to 16,950 tons a year earlier. Consequently, the value of paints’ exports dropped by 30 percent reaching LE89.8 million compared to LE128.9 million over the same time span.
ARAB INTERNATIONAL BANK TO RETURN $4 BILLION OF INVESTMENTS ABROAD Source: Al-Alam Al-Yom, June 21, 2009
Arab International Bank (AIB) (AmCham member) (link here), jointly owned by the governments of Egypt, Libya, UAE, Qatar, and Oman, has started liquidating investments abroad, and reinvesting them in Egypt, said the bank’s managing director Hanafi Hussain. The value of its investments abroad exceeds $4 billion, mostly invested in government-backed securities such as treasuries issued by the G7 governments.
The bank has already been reinvesting some $500 million directly into high-return Foreign Exchange (FX) generating investments in the tourism, petrochemicals and energy industries. It has also been providing some $300 million in FX liquidity to local banks. Studies indicating that domestic investments have become more profitable and more guaranteed for the bank are behind the shift in the bank’s investing strategy. The bank, whose deposit base is entirely FX-denominated, has been investing it abroad since its establishment in 1974.
SYRIA ELIMINATES TARIFFS ON CERAMIC TILE IMPORTS FROM EGYPT Source: Al-Alam Al-Yom, June 21, 2009
Syria decided to end its import tariff on ceramic tile imports from Egypt. The decision will be effective by the end of this week. Syria had imposed a 20% import tariff on Egyptian ceramic tiles in response to Egypt's imposition of custom duties on textiles imported from Syria. Egypt's total goods exported to Syria were valued at LE563 million last year, compared to LE307 million that Egypt imported from Syria. On the other hand, Libya, another important export market for Egypt's ceramic tiles, insists on maintaining its 10% tariff.
CULTIVATION OF NEW KINDS OF WHEAT Source: Al-Akhbar, June 28, 2009
The Egyptian Agriculture Research Center (ARC) (link here) announced that the Genetic Engineering Research Institute (GERI) succeeded to cultivate new kinds of wheat in severe drought areas in Marsa Matrouh and Sinai governorates without irrigation, depending entirely on rain water, using the techniques of genetic engineering.
TWO PRESIDENTIAL DECREES ISSUED ON FINANCIAL CONTROL & BOURSE MANAGEMENT Source: Egypt State Information Service, June 16, 2009
H.E. President Hosni Mubarak issued two new presidential decrees. The first decree tackled the basic system for the General Authority for Financial Control while the second tackled the regulations of Egyptian Exchange (AmCham member) (link here) management. The decrees aim to protect customers and achieve stability of financial markets. The two decrees will be put into effect starting from July.
The presidential decree stressed that Egyptian Exchange should take all necessary measures and procedures to avoid violation of provisions which regulate dealings in the market, monitor violation and exert efforts to correct them and face their impacts.
Furthermore, the decree stipulated that the Chairman of the Stock Exchange should immediately report to the Chairman of the General Authority for Financial Control with any key developments or influential events on the Stock Exchange, as well as violations and breaches of brokerage companies and those operating in the field of securities.
Also, the presidential decree determined that the Stock Exchange must have a chairman and deputy chairman to be appointed by the Prime Minister based on nomination of the competent minister.
CBE TO IMPOSE NEW BANCASSURANCE REGULATIONS Source: Noozz, June 18, 2009
The Central Bank of Egypt (CBE) (link here) is preparing to impose new rules with respect to bancassurance regulation. In conjunction with the Egyptian Insurance Supervisory Authority (link here), the CBE is investigating the possibility of providing room for retail bank clients to independently choose their insurance providers regardless of specific bank-insurance company relationships. The issue arose from complaints filed by consumers highlighting unsettled claims by insurance policies provided by the banks on behalf of their cooperating insurance providers.
Compiled by: Business Studies & Analysis Center E-mail: Studies@amcham.org.eg If you want to receive this bulletin on a regular basis, fill out this form
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