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Inflation hits 19-year high
Inflation reached 19.7 percent in May, according to the Central Agency for Public Mobilization & Statistics (CAPMAS) – a 19-year high.
The Consumer Price Index (CPI), the benchmark inflation indicator, reached 16.4 percent in April, but rising food and beverage costs drove the index even higher in May. Another factor was the price increase decided by parliament on May 5 for a number of items on the CPI, including fuel and cigarettes.
On June 27, the Central Bank of Egypt raised key overnight interest rates for the fourth time this year, by 50 basis points, in an attempt to tame inflation. The overnight deposit rate now stands at 10.5 percent while the lending rate is 12.5 percent. The CBE last raised rates on May 9.
Banque du Caire sale scrapped
The government canceled the sale of state-owned Banque du Caire on June 25, claiming the bids received failed to meet the price set by a bank evaluation committee. Five foreign banks submitted bids for a 67-percent controlling stake in the state bank: National Bank of Greece, the UK’s Standard Chartered Bank, Saudi Arabia’s Samba Financial Group, the UAE’s Mashreq Bank and a consortium formed by Jordan’s Arab Bank and Saudi Arabia’s Arab National Bank.
The highest bidder, National Bank of Greece, valued Banque du Caire at $2.025 billion, making an offer of $1.35 billion for the 67-percent stake. The Central Bank of Egypt calculated the bank, which has 222 branches and about 6 percent of total deposits, to be worth $2.6 billion, and was seeking at least $1.6 billion for the stake.
The bank privatization would have been the country’s biggest since the government sold 80 percent of Bank of Alexandria in 2006. The government also put on hold a plan to float 28 percent of Banque du Caire on the stock market and sell the remaining 5 percent to employees. It is expected to put the bank on the block again after further improving its financial performance in order to receive a higher bidding price, analysts say.
In July 2007, the government called off the planned merger of Banque du Caire and Banque Misr. Critics questioned how Banque Misr, Egypt’s second largest state bank, stood to benefit considering the poor quality of Banque du Caire’s loan portfolio and the close proximity of the two banks’ branches. The government opted instead to sell Banque du Caire.
Exam leak investigated
More than a dozen suspects have been detained following a leak in Minya governorate of some sections of the General Secondary School Certificate (GSSC), or thanawiya amma, exam. Investigators believe the exam papers were stolen and sold to the parents of children who were to sit through the exam. Those accused of being involved in the scandal include students, education officials, senior police officers and a member of parliament. The public prosecutor is still searching for suspects in the case, and at least 15 people have already been detained.
The Ministry of Education has formed a special committee to investigate the extent of the leak and determine whether the students should be required to take the exam again. The ministry also announced that it is taking a number of steps to prevent a recurrence of this type of incident, such as instituting harsher consequences for students and officials caught cheating or facilitating cheating.
Egyptian parents spend an estimated LE 14 billion a year on private tutors to help their children score well on the GSSC exams, which are used to determine their placement in universities. The exam is a taxing experience for Egyptian students; at least two students have already committed suicide this year, reportedly due to exam-related stress.
PA urges fertilizer project relocation
The People’s Assembly has recommended that a controversial $1.4 billion fertilizer plant under construction be moved to another location. EAgrium, a subsidiary of Canadian fertilizer maker Agrium, was building the factory near the Mediterranean port city of Damietta until the government halted construction in April over local concerns about its environmental and economic impact. The parliamentary decision is non-binding.
Agrium officials say they will not consider relocating the plant, and will try to recover its losses, but may have to write off its $280 million investment. They agreed, however, to consider two alternatives proposed by Prime Minister Ahmed Nazif. The government offered a buyout of Agrium’s investment in the project and/or to transfer a nearby state-owned nitrogen plant to Agrium.
A separate parliamentary fact-finding committee cleared the project as having no environmental or permit issues involved.
Tighter controls on capital market
Parliament has approved amendments to Capital Market Law 95/1992, raising the level of punishment for serious violations to LE 20 million, from LE 50,000. It also extended the definition of illegal insider trading to include those who benefit from confidential information by trading accordingly to make profits or prevent losses. Previously, the law only applied to the person who shared the information.
The amendments also reduced the minimum nominal share value of stocks sold on the primary market to LE 0.10 instead of LE 1, in an attempt to widen the investor base and support the flexibility of transactions. The new law also merged the Cairo & Alexandria Stock Exchanges (CASE) into one entity, the Egyptian Stock Exchange.
Flour distribution scheme angers Fishermen
Demonstrators in Burullus, 300 kilometers north of Cairo, clashed with police during protests against the decision by local authorities to end the distribution of flour rations in the northern coastal town. About 8,000 protestors used burning tires to stop traffic and close the coastal highway. The police reportedly detained 87 individuals for questioning.
The protestors were angered by the decision to stop distributing subsidized flour directly to residents and instead deliver it exclusively to bakeries. Demonstartors, mostly fishermen, argued that they prefer to bake at home a special type of bread they take on long fishing trips rather than purchase subsidized bread from bakeries.
Illegal migrants drown off Libyan coast
A fishing vessel carrying around 150 African and Asian migrants, including 50 Egyptians, sank on June 7 in the Mediterranean near the Libyan coast. Only two people survived. The boat was overloaded with passengers causing it to tip over, according to Wael Nagy Abdel-Moutagali, an Egyptian man who survived after being rescued by a fishing boat. He was turned over to Libyan authorities and put in prison in northern Libya after receiving hospital treatment.
On June 15, another boat bound for Europe sank in the Mediterranean. The Egyptian navy managed to save all 55 illegal migrants, mostly Egyptians and Bangladeshis, after a six-hour search.
Anti-monopoly law amended
The People’s Assembly passed amendments to the anti-monopoly law after a heated debate in parliament on June 25. The revised legislation adjusts the penalties for companies found to be engaged in monopolistic business practices, and adds a leniency clause for whistleblowers.
Critics charged that the amendments were watered-down versions of proposed changes by the Egyptian Competition Authority (ECA), the country’s monopoly watchdog. The fine for monopolistic business practices, for instance, was capped at LE 300 million, rather than as 10 to 15 percent of a company’s sales, as the ECA had recommended.
The ECA also sought a leniency clause exonerating the first company to report monopolistic practices within an industry. Instead, lawmakers modified the clause, so that a company that comes forward with evidence of cartel-like behavior is still subject to a fine equal to one-half the applicable penalty.
Meanwhile, Minister of Trade and Industry Rachid Mohamed Rachid, who was absent during the parliamentary debate, refuted rumors that he had resigned from his post in protest of the outcome of the amendments. Rachid insisted that he was on a family vacation.
Property tax law approved
Parliament has approved a new property tax law, levying a tax rate of 10 percent on residential and commercial buildings. The prior tax rate was 40 percent on non-agricultural land and real estate in urban areas. The tax base is calculated as 1.8 percent of a property’s total value for units worth up to LE 5.5 million and 2.4 percent for units above that value. Property valued below LE 500,000 is tax-exempt, as are hospitals, government offices, political party headquarters and educational buildings.
The law removes the tax-exempt status of vacation homes and unused property, and is expected to generate up to LE 5 billion a year.
Esna residents demand more tourist time
More than 200 people in Upper Egypt protested against a decision by river boat companies to alter the schedule of cruise ships traveling on the Nile. Residents of Esna, 55 kilometers south of Luxor, are upset that a new lock has reduced delays at a river barrage beside the city, meaning tourists will now disembark in their town for only 15 minutes. Cruise ships used to dock there for several hours while waiting to pass through the old lock, giving passengers more time to visit local shops.
Unemployment recedes to 8 percent
The unemployment rate has dropped to 8 percent, according to Prime Minister Ahmed Nazif. The rate was 9.1 percent in FY 2006-07. Unemployment is now at its lowest level since the Nazif government formed in July 2004. Unofficial estimates put the unemployment figure at around double this amount.
Farmers acquitted in land battle
The Damanhour State Security Court has acquitted 18 farmers from the Nile Delta farming town of Sarando of inciting violence and other charges related to a clash in March 2005 with a local landowner, Salah Nawwar. The farmers say Nawwar tried to forcibly evict them from a plot of 25 feddans of land.
The dispute dates back to the 1950s, when the government appropriated much of the country’s arable land to create trusts, which were rented to tenants at low, fixed rates. In 1997, the government allowed former landowners to petition to regain full ownership.
Last month, it was also reported that some 23 families of farmers in Beheira governorate are facing pressure from a landowner to leave a 22-feddan plot near the town of Ezbet Moharram.
Arab League seeks to ‘correct’ media terminology
Information ministers from the 22-member Arab League are drafting guidelines for terminology to be used by media within their countries, the organization announced last month. The information ministers met in Cairo last month to work on a shared strategy for media in their countries. While the ministers insist the move is an effort to correct inaccuracies in the language employed by the press, critics see it as part of a continuing effort to reduce media freedoms.
The Arab League had decided in a February meeting to create a charter regulating satellite content in the member nations, although an attempt at last month’s meeting to get all members to sign a document mandating conformance to the charter was thwarted by opposition from the United Arab Emirates and Qatar, home of the Al Jazeera satellite news network. Satellite television broadcasts in the region are carried by two operators: Arabsat, based in Saudi Arabia; and Egypt’s Nilesat.
Redesigned financial complex unveiled
US-based architect firm Ohlson Lavoie has unveiled its design for the Cairo Financial Center, a $730 million mixed-use project being erected at the foot of the Moqattam Hills. The project had earlier faced staunch resistance from the Supreme Council for Antiquities (SCA), which said the massive project’s ultra-modern design was incongruous with the nearby Citadel, a UNESCO World Heritage site.
In July 2006, the SCA halted construction on the basis that it violated Antiquities Law 117/1983 by infringing upon the Citadel’s prominence. A UNESCO team mediated the dispute between the SCA and the developer. It set new design guidelines with restrictions on height so that buildings were no higher than the Citadel’s enclosing wall and its color matched that of surrounding rock.
Population growth could hinder development
Egypt’s population could double to 160 million by 2050 unless more measures are taken to slow population growth, President Hosni Mubarak said in an opening address at a two-day national conference on family planning in Cairo last month.
If sufficient measures are taken to reduce the rate of population growth, Egypt’s population of 78 million will reach 100 million in 2025 and 120 million by 2050, he said, citing experts’ estimates. Otherwise, social and economic development could be hindered.
The country’s population has more than doubled in 30 years and around a third of Egyptians are under 15 years old today. Egypt’s fertility rate of 2.7 children per woman ranks 88th in the world. The National Population Council has set the goal of reducing the fertility rate to 2.4 children by 2023.
Mobile call prices revised
Telecom Egypt reached an agreement with mobile operators reducing the rate for fixed line-to-mobile calls to LE 0.30 per minute all day, effective July 1. The previous rate was LE 0.45 during peak hours and LE 0.35 during non-peak hours. Revenue-sharing proportions will stay the same – 60 percent for mobile operator and 40 percent for fixed-line operator Telecom Egypt.
Airlines required to issue e-tickets
All major airlines were required to begin issuing only electronic tickets as of June 1, a deadline set by the International Air Transport Association (IATA), an international trade body representing 230 airlines. E-ticketing should result in savings for airlines by reducing transaction costs.
EgyptAir has “mostly accomplished” the transition, airline sources said. A major challenge has been serving destinations, especially in Africa, where there is a shortage of IT systems and computers.
Cable theft raises security concerns
The theft of a two-ton, 32-meter-long cable from the Aswan High Dam on June 15 raised questions about national security during a parliamentary session, reported the independent Al Masry Al Youm newspaper. MPs from the ruling National Democratic Party (NDP), as well as opposition parties, voiced concern over the incident. They warned that much of the country would be flooded in only eight hours if there was a breach of the dam.
There had been three prior attempts to steal the cable, said NDP MP Shereen Ahmed Fouad, citing High Dam director Mohamed Rida. Some suspect local fishermen of stealing the cable, presumably to sell as scrap metal
Privatization proceeds examined
The People Assembly’s Planning & Budget Committee has prepared a report on privatization proceeds at the request of a member of parliament. Independent MP Alaa Abdel Moneim had lodged a complaint with the committee alleging that the Ministry of Finance had failed to reveal the fate of LE 24 billion in privatization proceeds. The committee found that the revenue was properly accounted for, after studying a report by the Central Auditing Agency, the government’s watchdog.
Prosecutors appeal blood bag case
The public prosecutor appealed a judge’s acquittal last April of six defendants alleged to have supplied hospitals with substandard blood bags. Prosecutor Abdel Maguid Mohamed wrote that the judge’s acquittal ignored technical reports stating that the bags were below national standards.
The case began in January 2007 when a health ministry employee alleged that Haidylena for Medical Industries had supplied blood bags that did not meet regulation standards. The ministry recalled more than 263,000 bags. A trial began against Hani Sorour, the owner of Haidylena and an MP, as well as his sister and business partner, three Haidylena executives, and two officials from the health ministry.
Gov’t increases wheat purchases from local farmers
The Ministry of Social Solidarity purchased over 2.1 million tons of wheat from local farmers this year through early June, compared to 1.8 million tons in all of 2007. The ministry has said it will pay farmers prices above international levels for this year’s wheat crop, between LE 380 and LE 390 per ardab, equivalent to $472 per ton. International wheat prices have hit record highs due to steep demand and droughts. The average price of US wheat stood at $355 per ton in June 2008. The ministry buys local wheat for distribution at subsidized prices to make bread.
Wheat tender aborted
Egypt’s main government wheat buyer canceled a tender on June 19 for a wheat shipment sought between July 16 and 31. Officials at the General Authority for Supply Commodities (GASC) declined to give a reason for the cancellation.
GASC has purchased 6.26 million tons of wheat since last July, mostly from Russia, the US and Kazakhstan, with smaller quantities from France and Canada.
T-bill yields rise
The average yield on 91-day treasury bills rose to 9.66 percent at an auction on June 1, from 9.21 percent in the last auction, on May 18. The Central Bank of Egypt accepted bids for bills worth $1 billion, the amount it was reported to be seeking.
Downtown buildings cleared of placards
Advertising banners and signs are being removed from the facades of buildings in the downtown area as part of a campaign by the Cairo Governorate to improve the capital’s aesthetics. The campaign, initiated last month, aims to highlight the beauty of the original architecture obscured by these placards.
Many banners and signs have already been removed from buildings in downtown areas. Unified boards listing the occupants of each building are expected to replace the former way of marking one’s place.
Currency flexes muscle
The Egyptian pound rose to LE 5.3339 late last month against the US dollar, its highest level since the local currency was floated in 2003. The Central Bank of Egypt has allowed the pound to appreciate 4 percent since February 1, 2008 as a means to dampen imported inflation. The exchange rate is an effective tool for fighting inflation, many analysts believe, because a stronger pound can result in cheaper imports.
Warning graphics to appear on cigarette packets
Cigarette packages will bear visual warnings of the effects of smoking as part of a new government campaign aimed at discouraging smoking. These stark warnings, required to be on all packages as of August 1, will focus on the harmful effects of smoking on the health of smokers and those around them. Photos and graphics will highlight, for example, the health risk to pregnant women, as well as the potential for smoking to cause impotence.
Almost 60 percent of Egyptian men smoke, while it is estimated that about 2 percent of Egyptian women are regular smokers. It is also estimated that more than half a million of Egypt’s smokers are under the age of 15.
Egypt ratified the World Health Organization’s (WHO) Framework Convention on Tobacco Control in 2005. The country spends approximately $545 million annually to treat illnesses related to tobacco consumption.
Annual budget approved
The People’s Assembly has approved the state budget for FY 2008-09, increasing expenditure by LE 3 billion over the amount proposed in the draft budget. The draft budget originally allocated LE 340.9 billion for government expenditure, while projecting revenues of LE 257.8 billion. The LE 3 billion in additional spending is spread over a number of areas, including health, education and transportation .
Rice export ban extended
The Ministry of Trade & Industry extended the ban on rice exports on June 1 until April 2009 in an attempt to bring down domestic prices. A six-month ban on the export of rice was put in place beginning in April 2008.
Last month, the government also said it would urge farmers to reduce rice plantations from 1.7 million to 1.1 million feddans, to be substituted for corn, as part of an effort to reduce corn imports. The measure would reduce water consumption. Rice growers use about 7,000 cubic meters of water per feddan, double the amount used to irrigate a feddan of corn.
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