In Focus – Daily News Egypt http://www.dailynewsegypt.com Egypt’s Only Daily Independent Newspaper In English Sun, 28 May 2017 19:49:36 +0000 en-US hourly 1 How 5 alternatives left ‘no option’ for Maspero Triangle residents http://www.dailynewsegypt.com/2017/05/28/5-alternatives-left-no-option-maspero-triangle-residents/ http://www.dailynewsegypt.com/2017/05/28/5-alternatives-left-no-option-maspero-triangle-residents/#respond Sun, 28 May 2017 11:00:05 +0000 http://www.thedailynewsegypt.com/?p=626989 In Downtown Cairo, one area has been on the government’s agenda for the past 30 years, where they have tried to find solutions to develop the area that would be satisfactory enough to its residents. The area lies in a strategic location behind Egypt’s state owned media hub, Maspero, parallel to the famous local neighborhood …

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In Downtown Cairo, one area has been on the government’s agenda for the past 30 years, where they have tried to find solutions to develop the area that would be satisfactory enough to its residents. The area lies in a strategic location behind Egypt’s state owned media hub, Maspero, parallel to the famous local neighborhood of Boulaq, and is comprised of alleyways, small rooms, and wrecked houses.

One reason the area famous as “Maspero Triangle” was on the government’s agenda was that several foreign investors were reportedly interested in transforming it—the reason why residents have always rejected leaving.

During the past 30 years, the government tried several means of moving Maspero Triangle residents out of the area, but their solutions never came to reality due to several factors, whether the dissatisfaction of residents or change occurring inside the government.

However, earlier in 2017, the Ministry of Housing and Urban Development handed out to the residents forms to fill in, in which they had to pick one of five ‘alternatives’ for the status quo.

The five alternatives revolved around three main principles: either move out and let the government decide where, receive compensation and leave, or stay in the triangle under the condition of paying rent after reconstruction is conducted.

Financial compensation

In one corner between the worn out houses, one woman in her fifties hides behind her small sandwich kiosk, which she counts on as her only source of income.

The area of Maspero Triangle has not looked the same to her all the time, Sabra Mahmoud recalls, as she was born and raised, got married, and gave birth to her children in this very place.

“We [her family] have been here since these houses were only made of straw,” she said. However, Sabra’s family finally decided to take money and leave, as they chose the third option.

“We did not choose,” she said, arguing that they had no other option to take.

“We could never give up this place; this is our home and our people, but this is not our decision to make,” she explained.

Sabra also questioned the government’s promises of reconstructing the area, adding that “they said that the whole area [Boulaq] would be removed, so we decided to take money and leave, because reconstruction is not guaranteed. If this area is removed, we will be homeless; on the streets.”

Although many Maspero Triangle residents believe that whoever went with the “taking the money” option probably owned other properties outside of the area, Sabra said that she did not and that she was still looking for somewhere else near Maspero Triangle—the area where her and her whole family’s life is.

The option of financial compensation states that, for every room, the resident receives EGP 60,000, in addition to EGP 40,000 in compensation for moving out, according to the Ministry of Housing.

“This time, the talks and decisions are real, because those who asked for other houses are already in the process of moving, and those who asked for money, like us, are promised to receive the checks within the next two weeks. We already started packing our things,” she said.

Moving out 

Next to the wreckage of a house in the “triangle”, the smell of fried onion prevails from a small room, as the Abd Al-Sabour family prepares one of their last meals in the place they have always called home, after they filled out the form, ticking the option of moving to Asmarat.

The Asmarat neighbourhood was inaugurated by President Abdel Fattah Al-Sisi in 2016 to help end slums around Cairo. The neighborhood reportedly has 11,000 units and was established with a budget of EGP 1.5bn.

For the past 44 years, Mohamed Abd Al-Sabour was living in the same room where his mother gave birth to him, although its walls are worn out, they are still decorated with the wedding photo of his parents that dates back to half a century ago.

“We did not choose to leave, but we would be taken out of here anyway,” Mohamed Abd Al-Sabour said.

According to the ministry’s announcement, moving to the Asmarat neighbourhood allows the resident to receive a furnished apartment, for which he pays rent for 30 years, excluding the first year of residence.

“We pay here EGP 5 as a monthly rent, but now we would have to pay EGP 300 [in Asmarat], or if we wanted to stay, we would have to pay EGP 1,200,” he explained.

However, Abd Al-Sabour believes that moving out is “for the best” for Egypt, adding that “if you want this area for investment purposes, in the interest of Egypt, we would not mind; we would not stand against Egypt’s interests, but you cannot be cruel to the people.”

Abd Al-Sabour also explained that he was skeptical about the other alternatives, particularly the one where residents wait for reconstruction in the triangle.

“We believe that the decision to remove this area will happen. This is the first time for us to think about leaving; [reconstruction] is impossible. We don’t believe that if we leave we will be able to come back,” he said.

Deputy Minister of Housing and Urban Planning Ahmed Adel Darwish said that such concerns were actually valid; however, he assured that the residents were signing contracts with the government, which he considered as enough proof.

Darwish told Daily News Egypt that the residents who have submitted to moving to Asmarat have already started moving, while those who are receiving compensation would receive it during the next two weeks.

Staying post reconstruction

Meanwhile, 60 year old Yehya Abdallah, who lives with his sister and her son, ticked another box on the form: Rental in the same area.

Abdallah compares the triangle to the expensive neighbourhood in Cairo, Al-Zamalek, saying, “My whole life is here. If they tell me to move to Zamalek, I’d say to hell with Zamalek! It is nothing compared to here. We all live together here. When someone is ill, we’re there to help. When there is an issue, we solve it together. We’re all a family here,” he said.

Abdallah explained that three years of reconstruction would take place, and meanwhile he will have to stay outside Maspero Triangle.

Although he is afraid that if he leaves he won’t be let back in, he believes that it is the only option that has hope, as if they move to Asmarat, it will be impossible for them to come back, and the option of taking compensation makes him wonder where he could live with only EGP 100,000.

“Ever since we were children, we always heard that the whole Boulaq area would be removed, and every time, nothing happens; however, it is still hard to tell what would happen this time. What we can tell is that this time, some people really want to leave,” he said.

Darwish said that the reconstruction would start by the end of this year, and would take a minimum of three years.

He further clarified that the government does not own any properties in the area; the owners are either individuals or companies. He added that the government’s role was to assure the people that they would return after reconstruction occurred.

President Abdel Fattah Al-Sisi has put slum development as a priority. Last Tuesday, Minister of Housing and Urban Development Mustafa Madbouly announced during Al-Sisi’s inauguration of national projects that the budget of developing slums would be EGP 15bn.

However, Maspero Triangle residents still have concerns that the government’s intentions to develop the area would not be implemented, just as the previous government’s plans.

Darwish understands the suspicions of residents who view the current initiative as yet another empty promise, explaining: “it is true that development [of the area] has been stopped for 30 or 40 years, but this time, people have already started moving out.”

Meanwhile, residents are still second guessing the entire process, whether they submitted a form to leave or to stay.

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Are the high prices affecting Egyptians’ cultural way of celebrating Ramadan? http://www.dailynewsegypt.com/2017/05/25/high-prices-affecting-egyptians-cultural-way-celebrating-ramadan/ http://www.dailynewsegypt.com/2017/05/25/high-prices-affecting-egyptians-cultural-way-celebrating-ramadan/#respond Thu, 25 May 2017 08:00:13 +0000 http://www.dailynewsegypt.com/?p=626717 The Egyptian Fanous, Kunafa, and Qatayef prices increased, affecting the way they celebrate the holy month

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Egypt has been a nation that celebrates the Muslim’s holy month of Ramadan in its very own way.

Egyptians have their style of celebrating Ramadan with the Egyptian Fanous (lantern) as well as Kunafa and Qatayef (special Egyptian desserts for Ramadan).

However, since the Egyptian revolution in January 2011, the Egyptian economy has been facing many difficulties that have resulted in burdens upon the Egyptian people, such as the increasing prices of virtually everything, both products and services.

The prices of the traditional products that Egyptians use to celebrate Ramadan have also increased in a way that has made the poorest and middle class segments decide to stop using them or to find alternatives.

Daily News Egypt gathered the prices of Egyptian products that are used during Ramadan.

Egyptians think of food as a main thing to celebrate with, and that’s why every feast has its own type of food that Egyptians prefer to eat, such as lamb meat in the “Fattah” meal—a dish consisting of pita bread, rice, broth, and sauce—eaten during the Eid Al-Adha (Celebration of the Sacrifice) holiday, the Egyptian fermented fish “Fesikh and Ringa,” popular for the Spring feast, and the Egyptian sugar-covered cookies called “Kahk”.

Ramadan for Egyptians has its own food and drinks, as well as the traditional Egyptian lantern.

Kunafa is a main dessert for Egyptians during Ramadan, consisting of wheat flour, coconut, honey, and nuts.

Kunafa

Kunafa is a main dessert for Egyptians during Ramadan, consisting of wheat flour, coconut, honey, and nuts.

Its history dates back to the year 1250 A.D., when the Mamelukes were ruling Egypt, but others believe that it was invented earlier in Levant countries.

However, the simple, cheap dessert has witnessed an increase in its price, especially due to imported nuts, as well as wheat flour.

The price of coconut is around EGP 80 per kilogramme, while the price of nuts, which are used as stuffing, have hiked to EGP 220-300 per kilogramme according to the type—either almonds, hazelnuts, or cashews.

Almost 5 years ago, Egyptian confectioners decided to change the old style Kunafa and began using other ingredients, such as mango and Nutella chocolate.

The prices of prepared Kunafa cakes range between EGP120 and EGP 280 at fancy confectioners, depending on the stuffings and toppings.

At regular, local confectioners, a kilogramme of prepared Kunafa is around EGP 45.

Qatayef is also a simple cake stuffed with nuts and coconuts and covered with honey.

Qatayef

The history of Egyptian Qatayef goes back to 716 A.D., during the Umayyad era.

Qatayef is also a simple cake stuffed with nuts and coconuts and covered with honey.

The price of uncooked Qatayef is around EGP 15 per kilogramme, but it also increased by almost 50% for the same reasons as Kunafa. The high prices of nuts and coconuts represent the same problem. The price of prepared Qatayef at confectioners is around EGP 50 to EGP 92, depending on the stuffing.

Egyptian drinks in Ramadan

Egyptians prefer to start their meal after long hours of fasting with their special drinks, such as “Qamar El-Din” (a special apricot drink with nuts and coconuts), hibiscus, and other drinks.

The price of a pack of Syrian Qamar El-Din is between EGP 14 and EGP 22, and the price of a local packs ranges between EGP 15 and 35; however, the high price of nuts adds to the final price of the drink.

Meanwhile, the price of local hibiscus increased by 125% to reach EGP 90 per kilogramme, compared to EGP 40 last year. Imported Sudanese hibiscus costs around EGP 60.

The prices of Egyptian Fanous lanterns vary based on what are they made of and whether or not they include other features such as lighting or music.

The Egyptian Fanous

The history of the Egyptian Fanous lantern goes back to the Fatimid Caliphate, when the Egyptians were the first people to use the Fanous as a special tool to celebrate Ramadan. The kids also like the Fanous lanterns, either for playing or for decoration, as they are often hung in the streets. There are also various small toy lanterns produced specifically for children, which can include features such as playing music.

The prices of Egyptian Fanous lanterns vary based on what are they made of and whether or not they include other features such as lighting or music.

The price of wooden Fanous lanterns start at EGP 65 for the small size, while the bigger ones can reach EGP120. The metal Fanous lanterns range from around EGP 20 to EGP 150 depending on the size.

Small Fanous lanterns, which are usually used as a keychain or a toy recorded a price of EGP 20, and the price of the Fanous lanterns that use candles are around EGP 100.

Additionally, the price of the Fanous fabric ranges from EGP 30 to EGP 150, depending on the type of fabric and the size.

The price of Fanous lanterns made of glass, which are usually used to decorate the streets, starts at EGP 120.

People are not happy, boycotting products

People are likely to boycott the non-necessary products due to their high prices.

Ahmed Abdel Wahab, an engineer who lives in Giza, said that buying all the cultural products is not important to many people anymore, adding that they used to buy them before the prices increased, while they now mainly focus on the important goods so that they can save money.

He added that they also might buy Fanous lanterns for the kids if they are not overpriced, because children love to play with them.

“We cannot buy this stuff anymore,” says Aliaa Massoud, who is 28 years old.

She added that her family cannot afford to buy all that they used to buy years ago, adding that her mid-class family has more important things to buy, such as food and clothes for the Eid Al-Fitr holiday.

She believes that buying clothes for Eid after Ramadan is more important than buying desserts or food.

On the other hand, Nour El-din, a 25 year old graphic designer, said that the prices are affordable and that he is going to buy the desserts or Fanous lanterns if he wants, adding that celebrating the cultural days for him is as important as paying for food, explaining that “it’s only one month in the year.”

Moreover, Ghada Ali, a mother of four children, said that she cannot spend her money on unimportant things such as Fanous lanterns; however, she added that making Kunafa, Qatayef, and other desserts is important because she invites her family and friends for feasting, and she should provide them “something sweet after.”

She added, however, that buying desserts is not an option, because they are overpriced at the confectioners and also because she prefers to make them at her home.

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High prices affect the holy month of Ramadan in Egypt http://www.dailynewsegypt.com/2017/05/25/high-prices-affect-holy-month-ramadan-egypt/ http://www.dailynewsegypt.com/2017/05/25/high-prices-affect-holy-month-ramadan-egypt/#respond Thu, 25 May 2017 07:00:34 +0000 http://www.dailynewsegypt.com/?p=626720 The inflation affects the price of all products at the time of Ramadan

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Ramadan is one holy month in the year, when Muslims fast for 30 days before celebrating Eid Al-Fitr.

For Egyptians, Ramadan represents a month of good deeds and happiness, when they celebrate and give money to the poor.

Ramadan is a month for families and friends to gather, talk, watch special television series, and eat special dishes that are only being cooked in the holy month.

However, Ramadan is coming at a difficult time, when the people of Egypt are facing hardship and are bearing the burdens of increasing prices due to the reforms the government is implementing, which have affected the prices of electricity, gas, oil, and basic commodities.

The price of approximately everything has doubled, from vegetables and fruits to rice, macaroni, sugar, and vegetable oils, as well as meat, poultry, and fish.

Moreover, in November 2016, the government decided to float the Egyptian pound, which pushed inflation to its highest level in decades, affecting the prices of almost everything.

Yet the government did not implement enough precautions to protect the people who were not able to shield themselves from the harsh consequences of these problems.

In July, the government aims to cut yet more electricity subsidies, which would affect the cost of products and put more burdens on the people.

Under the impression of the current circumstances, Daily News Egypt conducted a survey of the prices of essential commodities and looked at what the government has done to reduce the effect of high prices and rampant inflation.

When the Central Bank of Egypt (CBE) floated the Egyptian pound back in November, the prices of almost every product increased due to the great loss of the value of the pound.

As Egypt imports a lot of raw materials, even the prices of local products have witnessed strong increases. Daily News Egypt surveyed the prices of the main commodities before Ramadan.

The prices of rice, macaroni, vegetable oils, and sugar differ according to the quality and the type of products, as well as whether they are locally produced or imported.

The prices of basic commodities

The prices of rice, macaroni, vegetable oils, and sugar differ according to the quality and the type of products, as well as whether they are locally produced or imported.

The price of rice is between EGP  7 and EGP 14.5 per kilogramme, while the price of macaroni recorded between EGP 7 and EGP 16.5 per kilogramme.

The price of vegetable oils stands between EGP 16 and EGP 25.5, varying according to the type of the oil and the brand. Olive oil prices stand between EGP 45 and EGP 86, varying according to the amount and the brand.

Additionally, the prices of meat, fish, and poultry are getting higher and higher since the flotation of the pound, which affected the poor who cannot afford paying for those anymore.

The price of meat is between EGP 11 and EGP 160, dependant on the type of meat and the cut.

The price of poultry witnessed increases before Ramadan, reaching EGP 40 per kilogramme of chicken. The price of duck recorded EGP 55-60 depending on the geographic area and quality.

The price of fish ranges between EGP 15 and EGP 45 per kilogramme, depending on the type of fish. The boneless fillet is around EGP 55 per kilogramme, while shrimp recorded the highest prices, starting from EGP 90 per kilogramme.

Governmental acts to reduce prices

The government planned to establish 122 fair zones named “Ahlan Ramadan” around Egypt, which almost 200 companies are participating in to provide cheaper products for the people, according to the Ministry of Supply’s press statement.

Furthermore, it also provided money on the first of May as a holy month grant for subsidy card holders in order to help them buy basic food products before Ramadan.

The prices of some products, however, were rather high. The prices of Brazilian meat—which is usually cheaper than local meat—recorded EGP 55 to EGP 74 per kilogramme.

The price of frozen chicken recorded EGP 40 to 50 per kilogramme and EGP 65-70 for boneless fillet, while the price of duck was EGP 34 per kilogramme. The price of rabbit recorded EGP 50 per kilogramme.

Inflation affected the prices, doubts about governmental actions

According to Reuters, Egypt’s inflation “rose to a three-decade high in April, piling pressure on the government to keep a lid on prices as it embarks on politically sensitive economic reforms likely to push them higher.”

Annual urban inflation recorded 31.5% in April, up from 30.9% a month before, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

“That was the highest since June 30, 1986, when it reached 35.1 percent,” according to Reuters data.

The government, however, did not have many other choices except for raising the interest rates in order to control inflation, based on the International Monetary Fund’s (IMF) suggestions.

It is important to mention that Egypt is committed to implementing reforms according to its deal with the IMF, which resulted in brokering a $12bn loan after the IMF’s approval of the Egyptian reform programme.

On Sunday, The Monetary Policy Committee (MPC) of the CBE raised the overnight deposit rate, overnight lending rate, and the rate of the CBE main operation by 200 basis points to 16.75%, 17.75%, and 17.25%, respectively—an action that many businesspeople, experts, and investors believe would not help with controlling the rampant inflation.

On the other hand, the Ministry of Supply and Internal Trade raised the prices of many products, such as meat, chicken, and duck, disproving the minister’s statements that asserted price stability.

People are not satisfied

Fathy Mohamed, who works as a customer service agent in the private sector and is a father of two children, says that the government is the only one responsible for the high prices, adding that his wage was barely enough to afford the most necessary goods for his family.

He believes that the government should have controlled the prices in a better way, as the current prices say that they do not care about the people at all.

Additionally, Magdy Samir, who works as a salesman, said that the current prices are unacceptable. He added that the price of red meat has reached a point where the majority of Egyptians cannot afford buying it, which means that white meat is the only available choice for the people; however, their prices are also increasing day by day.

“We cannot take it any more with the increasing prices,” says Om Hend, a mother of one child, who sells vegetables in a local market in Giza.

She added that the people are tired of the increasing prices and the government does not help them at all; instead, it raises the prices of everything to suffocate the people, she complained.

She believes that president Abdel Fattah Al-Sisi has to get involved to help the people who voted for him, because the situation is getting worse and worse.

Moreover, Amir Mohamed, a 32 year old lawyer, said that the sales in different supermarkets do not really constitute a reduction of prices.

He believes that the owners of the supermarkets want to fool them and sell the products in packages instead of pieces. He explained that there are no real offers that could help the people afford buying the food for Ramadan, while the government seems to not care about it.

From another point of view, the former dean of economics and political science at Cairo University, Aliaa El-Mahdy, said that the governmental decision of raising the interest rates will not help with controlling the prices. However, it would have negative effects on the investment climate.

She believes that if the government wants to control the prices, it has to establish serious free market rules, and then the producers will compete to provide the best prices.

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Pound flotation posed challenges for banks’ financial positions in 2016: Business News Index http://www.dailynewsegypt.com/2017/05/22/pound-flotation-posed-challenges-banks-financial-positions-2016-business-news-index/ http://www.dailynewsegypt.com/2017/05/22/pound-flotation-posed-challenges-banks-financial-positions-2016-business-news-index/#respond Mon, 22 May 2017 07:00:26 +0000 http://www.dailynewsegypt.com/?p=626356 SAIB, Audi, NBE recorded the lowest ratios of unregulated loans portfolios

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The decision of the flotation of the pound towards the end of last year affected all banks in the banking sector in one form or another. A large number of banks achieved large profits as a result of currency shifts, while also many capital adequacy rates were affected as a result of assets inflation following the flotation. Other banks were in a better financial position because of their small assets sizes and strong capital coverage rates.

This left small banks, those that did not have large deposits in foreign currencies last year, in a better financial position after the flotation of the pound in terms of capital adequacy rates.

The adequacy of the first tranche of capital decreased in 20 of 24 banks that were being monitored by Business News last year, while a number of banks fell under the regulatory limits required by the Central Bank of Egypt (CBE), which prompted them to inject last year’s profits into its reserves or to their directly paid capitals to ensure compliance with the regulations.

Assets quality has also been affected by the rise in non-performing loans over the past year, in the opposite direction compared to the situation in 2015, which witnessed a marked decline in the ratio of these loans to total banks’ portfolios.

Ahli United Bank (AUB), Barclays, NBK, Emirates NBD, Credit Agricole, and Blom Bank occupied the top six positions in the Business News Index for the most efficient banks.

AUB topped the efficiency index, thanks to the increase in the first tranche of its capital adequacy standard, the high return on average total assets, and the return on equity and loan-to-deposit placements.

The bank managed to increase the size of the first tranche of capital, unlike most of the banks following the flotation of the pound exchange price in the last quarter of 2016.

The net income on its total average assets represented 7%, equity 46%, and loan-to-deposits ratio 63%.

Barclays occupied the second position in terms of efficiency last year as it recorded the highest rate of tier I capital adequacy among banks and the highest net income on average total assets.

The first tranche of Barclays capital adequacy standard reached 15.46%, while the net income from the return compared to the total average of total assets reached 7%. Loans-to-deposits recorded 48%, while the costs of income increases registered 33%.

Al Ahli bank of Kuwait (ABK) occupied the third position, supported by the highest return on total assets average by 11%, and return on equity at 67%.

The Commercial International Bank (CIB) occupied the fourth position in the sub-index of return on equity at 39%.

The Export Development Bank Of Egypt (EBE) outperformed the National Bank of Egypt (NBE) and Banque Misr, the largest state-owned banks, to rank 13th, while NBE and Banque Misr banks occupied the 15th and 16th place respectively.

The government banks obtained the support of the CBE through a subsidised loan worth EGP 3bn last summer before the flotation of the pound.

The flotation of the pound did not affect the largest governmental banks’ balance sheets because they are lists according to the fiscal year, but the CBE provided a loan before the flotation to support their capital.

In terms of unregulated loans, the data index showed an increase at seven banks with growth rates ranging between 25% and 200%. However, the Egyptian Gulf Bank, Union National Bank, Blom bank, NBE, Banque Misr, Audi bank, Barclays, EPE, the Industrial Development & Workers Bank of Egypt, Misr Iran Development Bank (MIDB), SAIB, and Arab Banking Corporation (ABC) managed to reduce the proportion of the portfolio of unregulated loans during the past year.

The NBE, Audi, and ABC banks occupied the top three positions in the sub-index of non-performing loans in terms of the lowest proportion, ranging between 0.6% and 2%.

The results showed lower costs to revenues in most of the banks in the banking sector. Last year witnessed high rates of loan-to-deposit placements. The Industrial Development & Workers Bank of Egypt topped the list with a 144.13% ratio.

The Housing and Development Bank (HDB) occupied the second position, achieving a growth rate of 76.68%. The NBK occupied the third position with a growth rate of 69.5 %.

Audi Bank occupied the fourth position with a growth ratio of 67.11%. The value of loans granted by the bank in 2016 is estimated at EGP 30.561bn compared to EGP 18.769bn in 2015.

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Banks offering e-services have best retail banking: Business News index http://www.dailynewsegypt.com/2017/05/22/banks-offering-e-services-best-retail-banking-business-news-index/ http://www.dailynewsegypt.com/2017/05/22/banks-offering-e-services-best-retail-banking-business-news-index/#respond Mon, 22 May 2017 06:00:21 +0000 http://www.dailynewsegypt.com/?p=626359 Limited growth in retail banking portfolios of major banks due to the CBE's regulations

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Banks that offer the largest number of e-services outperform those that ignore this type of banking, the Business News Index of Best Retail Bank revealed.

The Best Retail Bank Index depends on the number of e-services for individuals at banks and the quality of transactions carried out through these services. It also measures the geographical spread, the number of loan products, and the volume of individual loan portfolios compared to total portfolios in banks, as well as wealth management services.

The Commercial International Bank (CIB) topped the Business News index for best retail bank for the second year in a row, followed by the National Bank of Egypt (NBE), which has the largest spread of ATMs in Egypt and the largest market share of individual transactions.

According to the index, the Housing and Development Bank (HDB) allocates the largest part of its loans to individuals, amounting to 61% of total loans, followed by the Bank of Alexandria, which allocates 43%.

The banks with small individual loan portfolios have achieved high growth rates of almost 200% in 2016. Ahli United Bank topped the list of fastest-growing banks in individual loans, according to Business News indexes. The bank’s individual loan portfolio reached EGP 1.98bn at the end of December 2016, compared to EGP 675bn at the end of 2015, with a growth rate of 193%.

Misr Iran Development Bank (MIDB) came in second place, achieving a growth rate of 191.6%, with an individual loan portfolio of EGP 570m, compared to EGP 196m last year. The Saudi Investment Bank (SAIB) was the third fastest growing bank in individual loans, at a growth rate of 160.6%, bringing its total portfolio to EGP 4.14bn, compared to EGP 1.58bn.

The Egyptian Gulf Bank (EGB) came in fourth place in terms of individual loans, with a growth rate of 104.6% as its portfolio reached EGP 2.53bn, compared to EGP 1.23bn. Banque Misr grew by 54.81%, ranking fifth on the list of fastest-growing banks in individual loans, with a total portfolio of EGP 16.08bn, compared to EGP 10.38bn last year. The National Bank of Kuwait was the sixth fastest growing bank, with a growth rate of 52.54%, reaching EGP 1.96bn, compared to EGP 1.28bn.

The banking sector faced many challenges in terms of individual loans due to the Central Bank of Egypt’s (CBE) regulations issued last year, obliging banks to limit the total instalments of a loan to only 35% of a customer’s monthly income. In addition, high inflation rates affected customers’ ability to bear the burden of the debt.

However, most banks seek to overcome these challenges by expanding their base of individual customers through offering diverse products and technological programmes.

The effects of these challenges have been further reflected in the growth rates of banks with large individual loan portfolios. The growth rate of the retail portfolio in the NBE, the largest bank in this sector, was 20.1%, reaching EGP 38.1bn at the end of 2016 compared to EGP 31.5bn at the end of the 2015. The growth rate of the retail portfolio in the CIB, the largest private bank, was 28%, with a portfolio of EGP 15.9bn at the end of 2016, compared to EGP 11.9bn in 2015.
Barclays’ individual loans growth declined by 2.69%, as its total portfolio fell to EGP 2.208bn at the end of 2016, compared to EGP 2.269bn at the end of 2015.

On the other hand, the banks competed last year in providing technological services and products, such as Internet banking, in order to reach new segments of customers and maintain their customer base.

The banks seek to strengthen their technological infrastructure in conjunction with the geographical spread despite its high cost and the importance of providing high security and confidentiality of data. However, this service will lead to fewer expenses in comparison to traditional branches.

There are 18 banks out of a total of 24 monitored by Business News that offer Internet banking services.

There are only nine banks that offer online banking transactions, including Qatar National Bank (QNB), Alexandria Bank, EGB, Abu Dhabi Islamic Bank, NBK, Barclays, and Blom, while the SAIB has provided online inquiries for the first time last year.

Only eight banks have obtained mobile banking licences, which allows the transfer of up to EGP 500 via mobile phones.

There are five service banks that offered the full service, including the CIB, Alexandria, Credit Agricole, Emirates NBD, and Audi Bank, while Faisal Islamic Bank, Banque Misr, and the NBE limited their mobile services to inquiries only.

The expansion of the e-wallet service was slow, as only four banks offered the service last year, namely the NBE, the CIB, Bank of Alexandria, and Banque Misr. Banks operating in Egypt face many obstacles that force them to expand in traditional branches rather than relying on technology, mainly the dominance of the cash culture, which amounts to 97% of all transactions done in Egypt, according to Tamer Al Kashef, the regional manager of Mastercard.

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Nasa Space Apps Cairo can transform country into tech hub http://www.dailynewsegypt.com/2017/05/18/nasa-space-apps-cairo-can-transform-country-tech-hub/ http://www.dailynewsegypt.com/2017/05/18/nasa-space-apps-cairo-can-transform-country-tech-hub/#respond Thu, 18 May 2017 07:00:05 +0000 http://www.dailynewsegypt.com/?p=625903 After several years marked by turbulence and uncertainty, Egypt’s economy suffers numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages, which led the government to adopt a reform programme to improve Egypt’s public finances. Innovation and economic progress go hand in hand; supporting SMEs and tech startups is a step …

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After several years marked by turbulence and uncertainty, Egypt’s economy suffers numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages, which led the government to adopt a reform programme to improve Egypt’s public finances.

Innovation and economic progress go hand in hand; supporting SMEs and tech startups is a step that is recommended by almost every financial expert and is part of Egypt’s economic reform programme, as they can absorb thousands who join Egypt’s workforce annually, using such human capital to boost the economy and increase exports.

The 2017 International NASA Space Apps Challenge Cairo Hackathon brought together developers, engineers, scientists, educators, and students. The Space Apps Challenge, which lasted 48 hours in cities around the world, played a role in empowering the participants with new knowledge and tools needed to face 21st century challenges.

Apart from the fact that the challenge has helped Egyptian innovators to begin to contribute to the global innovation ecosystem, it also afforded them the opportunity to share knowledge and solve tough challenges concerning the future of our local space and technology sector. The hackathon, which was held simultaneously in about 192 cities all over the world, was a unique platform that connected Egypt and Africa—in a new way—to the most cutting-edge technologies and economic drivers of tomorrow.

Yehia Ahmed Abdel-Aziz, the head of NRIAG’s space research lab.

Events such as these can pave the way into a larger tech startup and SME sector in Egypt, increasing knowledge and supporting young innovators financially and scientifically can be the cornerstone of such change.

“The International Space Apps is one of the greatest events that Egypt could host. Innovation is part of the youth’s characteristics. I encourage you all to delve into the topics of the International Space Apps, provide ideas, change perceptions, and keep on trying to think about space exploration and how we can improve life on Earth in the future,” said Farouk El-Baz, director of the Center for Remote Sensing and research professor at the Departments of Archaeology and Electrical and Computer Engineering at Boston University.

The small and medium enterprises (SMEs) form the backbone of any country, especially the emerging economies, and the growth of small and medium-sized companies is an important factor for any sector until the financial integration in the formal economy.

It is estimated that around 40-60% of Egyptians work in the informal sector, so absorbing this sector is integral to the growth of the economy, while providing support to short and medium enterprises (SMEs) was advised by the International Monetary Fund (IMF) and is a part of the Egyptian economic reform programme.

According to the Ministry of Planning, the communications and information technology (ICT) sector topped the state’s fastest growing economic sectors​ in the first quarter (Q1) of the fiscal year (FY) 2016/2017. The sector achieved a growth rate of 11.2% in this period. Improving this sector could play an important role in boosting Egypt’s economy.

This year’s Cairo NASA Space Apps​ Challenge was sponsored by IBM and various other parties, who together made it possible. IBM will provide internship programmes to the challenge’s winning teams, as well as provide technological support when needed.

The National Research Institute of Astronomy and Geophysics (NRIAG), which was the scientific sponsor for this year’s​ challenge, provided the technical guidance for the participants​. “The space research lab is in the final stages of the project of a telescope, which will allow us to track the debris of every satellite to avoid collision, in addition to studying the effect that space has on the material used in satellites. The research is done by creating plasma in our lab, which has the same properties as in space,” said Yehia Ahmed Abdel-Aziz, the head of NRIAG’s space research lab.

The challenge is organized by the Egyptian section of the IEEE, which is the world’s largest technical professional organization dedicated to advancing technology. The IEEE Young Professionals (YP) Egypt, which has members who graduated from engineering faculties in the last 15 years, organises various types of events other than the NASA Space Apps Challenge, such as “Egyptian Engineering Day” and the “Made in Egypt” competition, which supports graduation projects with business planning and analysis, according to Sally Hamady, secretary of IEEE YP Egypt.

Sally Hamady, secretary of IEEE YP Egypt, with the organizing IEEE team.

NASA Cairo Space Apps is a worldwide 48-hour hackathon, and Egypt started to participate in 2015. The participating teams try to resolve sets of challenges using different technologies.

This year’s challenge focus is empowering women in science and engineering and including school students in the challenges. 360 teams submitted applications for the 2017 challenge, but only 60 teams were selected, as this is the event’s maximum capacity for the time being. 20 of the 60 teams were school students.

One of the app ideas that was proposed was an app called “Solarify”, which is a mobile application that makes it easier to understand your power consumption and solar power production rates. By entering information about the appliances you have, Solarify will calculate your average daily power consumption, and depending on your location, it will display to you the recommended solar power system that would best fit your power usage and the geographical region that you are in.

Another app idea, which will greatly complement Solarify, is called Solar Output Calculator & Consumption Planner (SOCC-P). The app’s main purpose is to calculate the output of a solar panel and then predicts the output according to the location on Earth.

Despite Egypt being the largest non-OPEC oil producer in Africa, it is the largest consumer of oil on the continent. The country’s use of oil accounts for 20% of Africa’s total consumption. Moreover, Egypt has Africa’s largest oil refinery capacity. It faces numerous energy challenges. Ensuring reliable, affordable, and sustainable energy is still a major challenge for the Egyptian state, especially after the country’s shift in recent years from being an exporter of natural gas to an importer.

Furthermore, energy consumption increased in the first decade of the 21st century, and gas demand grew by almost 9%. Gas became the main source for Egypt’s energy needs, reaching 50% of the total energy supply, compared to 35% in 2000.

According to the American Security Project (ASP), non-hydro renewable energy makes up only 1% of the total energy consumption in Egypt. Since 2014, Egypt has redoubled its efforts to develop and use more renewable energy in order to address the growing energy challenges, with the goal of producing 20% of the country’s energy supply from renewable sources.

In January 2015, Egypt declared its objective of producing approximately 4,300 megawatts of energy from solar and wind power within three years.

Solar energy has much potential in Egypt, with has approximately 325 days of sun in a year and approximately 2,400 hours annually for potential solar operations, compared to Spain and Greece—the next sunniest countries—which have 1,900 hours annually.

One of the apps proposed was an app that will integrate all the satellite information about underground water locations into the app, so that it would be found by prospect farmers and agricultural investors. The app is designed by Bassam Sherif and Ahmed Nasr, two high school students.

It is worth mentioning that the competition of space applications for Cairo in 2016 was the largest event in the world for the second consecutive year, where 55 teams competed in Zewail City of Science and Technology. The competition in Cairo in 2015 at the Nile University campus was the largest event that year as well, where hundreds participated in the event in order to work together to find solutions to the challenges posed by NASA.

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The 1.5m-feddan project: challenges postpone implementing president’s megaproject http://www.dailynewsegypt.com/2017/05/17/1-5m-feddan-project-challenges-postpone-implementing-presidents-megaproject/ http://www.dailynewsegypt.com/2017/05/17/1-5m-feddan-project-challenges-postpone-implementing-presidents-megaproject/#respond Wed, 17 May 2017 09:30:42 +0000 http://www.dailynewsegypt.com/?p=625763 Transparency, encroachments are the main issues of the project

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On 30 October 2015, President Abdel Fattah Al-Sisi inaugurated the 1.5m-feddan reclamation project, which is one of three important megaprojects he announced.

However, on Sunday, the president seemed not too satisfied about what the government had achieved with the project so far.

He stressed that if the New Egyptian Countryside Development (NECD) continued to work with the current rate, nothing would happen to the project, noting that he is “not happy” with the current system of allocating land areas and acres.

He added that by the end of the current month, the military and police will get involved to take the land areas back to the NECD if they are not licensed or growing any agricultural crops.

On 30 October 2015, President Abdel Fattah Al-Sisi inaugurated the 1.5m-feddan reclamation project

But what has the NECD implemented up until now for megaproject? And what do experts currently think about the project? Will it get established as the way the president promised?

Daily News Egypt asked experts about the project and the best ways of solving its current problems during 2017, the year of reaping the benefits of reforms, as the government called it.

President Abdel Fattah Al-Sisi has proposed the megaproject as a major idea for increasing the agricultural area in Egypt.

Al-Sisi added that the areas will be sold to people, which will make the project both an investment to the country in securing enough food for its people as well as an investment in the Egyptian economy.

The government was supposed to provide subsidised land areas to enable more purchases, and the president promised that the agricultural lands will give farmers more economic stability, as well as provide places of residence and services to them and their families.

However, on 21 October 2016, the head of New Egyptian Countryside Development (NECD), Atter Hannoura, announced the offering of 500,000 feddans as part of the project’s first phase, at a price of EGP 5,000 per feddan.

And in spite of the efforts Hannoura put into the project, some experts believe there are lots of questions about the project that must be answered.

The executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, said that the government did not study the  project well, adding that the government should have done so. He added that the government should have also published the results of the study to be accessible by anyone belonging to the society, experts as well as investors.

He explained that no one from the government has created or released any feasibility studies to the public, which does not reflect transparency from their end.

Tawfik said that if the government wants to grow wheat, it would not be the best idea, because importing it will save far more for the country, which it needs in the current situation. He also explained that the biggest wheat exporters rely on growing wheat by utilising rain, which reduces the costs of growing it and, consequently, its price.

No one knows what the government wants to plant on the 1.5m feddans, and the government has to tell us what it wants to gain from the project as a final result, either by helping to guarantee self-sustainability or by exporting to create a source of foreign currency, said Tawfik.

It is worth mentioning that the NECD is willing to sign an agreement with Wageningen University to plan for the 1.5m-feddan reclamation project, according to Hannoura.

He added that Wageningen University is the only higher education institution in the Netherlands that focuses specifically on healthy food and the living environment and that it should help the government to plan the project.

Hannoura said that the government has taken back approximately 40,000 unlicensed feddans in Al Moghra and in the governorate

Hannoura stated in November 2016 that planning the project is what the company will do in order to prevent the unstudied planting of unnecessary plants that will waste a lot of the groundwater used for irrigation, which the project is mainly relying on.

He believes that plants that consume high quantities of water should not be allowed. Instead, NECD will study which plants are suitable to be planted and which are not, according to available groundwater and people’s needs.

Hannoura also wanted to help the investors in financing their own projects. He said that the company asked the Central Bank of Egypt (CBE) to provide financing for small investors, explaining that the company will also negotiate with the Social Fund for Development (SFD) for the same purpose.

However, all of the previous efforts seemed not enough to help the project get finished at the rate Al-Sisi wants.

In his speech last week, Al-Sisi seemed upset about the current situation of the project. He added that the current rate of getting the work done is not enough, adding that if the current situation continues, the project will never see the light.

The president ordered the army and police to reclaim any unlicensed lands, adding that the people have to legalise the land areas they have taken.

He noted that the current month is the deadline for them to get licenses for their land areas.

Hannoura said that the government has taken back approximately 40,000 unlicensed feddans in Al Moghra and in the governorate of Al Minya.

He added that the company will ask the government to use satellites to identify unlicensed lands by the end of the current month.

Hannoura added that the government will provide some land for the people in Ramadan.

Hannoura said that the government will provide some land for the people in Ramadan

The company wants to guarantee the project’s sustainability before exiting as a governmental company, Hannoura noted.

From another point of view, Gamal Seyam, a professor of agricultural economics at Cairo University, has previously told Daily News Egypt that the project up until now is “characterised by chaos and is improvised to a large extent.”

He criticised the lack of transparency of the projects, adding that the project’s vision is not yet clear and does not have a specific target or goal.

He believes that the government must make sure the project is transparent and that it must have all of its studies available for experts and investors.

However, the former minister of irrigation, Nasr Allam, is not satisfied regarding the actions the government is implementing up until now.

In spite of presidential statements, the real situation of land is not as good as the government is telling the people, he added.

He stated that during the past decades, Egyptian presidents announced many huge and mega projects, especially in the field of agriculture since 1952, starting with the popular land reform under former president Gamal Abdel Nasser, the Salihiya under Anwar Al-Sadat, and the popular Toshka project under former president Hosni Mubarak.

He added that the previous projects did not meet their goals, explaining that in some cases, the projects even collapsed, such as the project of Toshka.

The previous media consultant at the Ministry of Agriculture Eid Hawash has emphasised that there is no historical problems that could face the current 1.5m-feddan reclamation project. He said that “this project can’t be compared to previous projects, such as Toshka, which failed due to the absence of rigorous control and supervision, as well as other political objectives. It is not the case this time.”

He believes that the government has done many feasibility studies for the project to ensure that it will be of great success and to prevent the same thing that happened to previous projects to happen again.

The 1.5m feddans is a megaproject proposed by Al-Sisi. This project came alongside other projects, such as the New Suez Canal and developing its zone; developing the golden triangle; and establishing the New Administrative Capital.

The megaprojects are supposed to improve the current economic situation, create job opportunities, and increase the GDP growth rate, as the president announced when he came to office—which, in his opinion, would meet the people’s calls for reforms that resulted in the January 25 revolution.

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Egyptian sugar production to increase by 7% in MY 2017/2018: GAIN Report http://www.dailynewsegypt.com/2017/05/15/egyptian-sugar-production-increase-7-20172018-gain-report/ http://www.dailynewsegypt.com/2017/05/15/egyptian-sugar-production-increase-7-20172018-gain-report/#respond Mon, 15 May 2017 09:00:17 +0000 http://www.dailynewsegypt.com/?p=625412 The government increasing the supply price of sugarcane and beets will result in an expansion in total harvested areas to meet demands, according to GAIN

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The sugar crisis, which has been casting its shadow for several months over the Egyptian market, has been resolved at last. Now that the government has made sugar available in the Egyptian market, sugar reserves are forecast to increase in the country during the upcoming months of the new fiscal year. This is expected to result in higher sugar imports and more sugar availability in the market. The Egyptian government is now buying at higher prices, encouraging farmers to increase their production in order to avoid another year of short supply.

The annual report, issued by the Global Agricultural Information Network (GAIN) of the US Department of Agriculture’s Foreign Agricultural Services (FAS) for 2017, has forecast that total raw sugar production in Egypt is expected to increase by 7%, or 150,000 metric tonnes (MT), in marketing year (MY) 2017/2018, to eventually reach 2.42 million metric tonnes (MMT).

FAS Cairo attributes this increase to an expansion of the total areas to be harvested, which will be driven by an increase in the government’s supply price.

Total domestic consumption in MY 2017/18 is forecast to increase by 3.3%—that is, to 3.05 MMT, compared to 2.950 MMT in the previous year. Sugar imports are forecast to remain stable at 830,000 MT, while exports are expected to drop by 33% to 200,000 MT.

Current sugarcane cultivation in Egypt

According to the report by GAIN, the cultivated lands are distributed on sugarcane and beet crops.

When it comes to sugarcane, it is widely cultivated in tropical and temperate regions in Egypt, such as Upper Egypt. Sugarcane is planted on a narrow strip of land along the banks of the Nile, and it is specifically planted in spring and autumn. During spring, the crop is cultivated between February and March, while in autumn, it is cultivated from September through October. The crop takes 11 to 12 months to grow.

FAS Cairo forecasts that the cultivated areas of sugarcane will increase by 9% in MY 2017/2018. This means that cultivated areas will increase from 100,000 hectares (ha) to 119,000 ha. These areas are expected to produce about 12.580 MMT of sugarcane.

However, the government’s adoption of a policy to encourage farmers to grow beets over sugarcanes in order to rationalise the use of water has been apparently ineffective. The government’s attractive supply price of sugarcane makes it the cash crop of choice in Upper Egypt; hence, the economy of Upper Egypt is so heavily dependent on sugarcane production that disruptions to the areas planted with the crop would impact the living conditions of 150,000 families that depend on it. Also affected would be a plethora of ancillary businesses including input providers, irrigation providers, logistics, metallurgy, as well as all non-commercial activities, such as education and healthcare. The frame of mind of such an important economic pillar can be summed up by what a farmer remarked to FAS Cairo during a visit to the area: “we grow sugarcane because our fathers and their fathers used to grow it, and we cannot change this.”

Sugarcane refineries in Upper Egypt  

There are nine sugarcane refineries in Upper Egypt that have a production capacity of around 10,200 MMT of sugarcane, which requires a total area of at least 120,000 ha in order to operate.

The government has tried implementing policies to reduce the areas cultivated with sugarcane due to the crop’s high water consumption; however, these have been unsuccessful. Policies designed to move production away from sugarcane find themselves squeezed between the hammer of water scarcity and the anvil of sugar processors’ demand for raw material.

Beet production in Egyptian

FAS Cairo forecasts MY 2017/18 sugar beet area harvested to increase by 10%, or 20,000 ha, to reach 224,000 ha. With an increased area comes a concomitant increase in production, expected to reach 9.5 MMT, an increase of 3.4% or 313,000 MT. FAS Cairo estimates the area harvested in MY 2015/16 to stand at 204,000 ha. The increase in the area and the subsequent production is attributed to the increase in government’s subsidised supply price, which will encourage farmers to grow sugar beets over other crops.

Egypt does not produce beet seeds locally because of the requirements of temperature and sunlight. Among other conditions, seed production requires packing the roots at 8 degrees Celsius for three months and daylight duration of 16-18 hours. As a result, Egypt depends on seed varieties imported from Germany, Denmark, Netherlands, France, and Sweden.

FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.

FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the sugarcane harvest, sugarcane processors in Upper Egypt region reported an increase of 10% in the delivery of sugarcane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some of or all their crops to juice shops and molasses producers because of the higher prices offered, as compared to the government’s supply price.

Sugar production 

FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Of this total forecast, 1.32 MMT of sugar will be derived from sugar beets, while 1.1 MMT will be sourced from sugarcane. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year, as mentioned previously. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.

FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the cane harvest, sugar cane processors in Upper Egypt region reported an increase of ten percent in the delivery of cane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some or all their crop to juice shops and molasses producers due to the higher prices offered, as compared to the government’s supply price.

Consumption and trade of sugar in Egypt

FAS Cairo expects total domestic consumption in MY 2017/18 to increase by 3.4% or 100,000 MMT to reach 3.050 MMT. Consumption in MY 2016/17 is estimated at 2.950 MMT. The increase is attributed to the annual population increase. Additionally, Egyptians are expected to increase their sugar consumption to meet caloric needs, substituting sugar for other key commodities, such as poultry and beef, as a result of an recent increase in the price of food.

Egypt continues to provide refined sugar to food subsidy beneficiaries at prices below the free market prices. Egyptian citizen beneficiaries are receiving a monthly cash transfer of EGP 21 ($1.17) per person through a smart card system. A family of four is expected get a monthly cash transfer of EGP 84 ($4.7), enabling them to meet their sugar needs, as well as purchase other food commodities. 

In terms of sugar trade, Egypt’s sugar imports in MY 2017/18 are forecast to remain stable at 830,000 MMT. In MY 2016/17, the majority of sugar imports were imported through Holding Company for Food Industries (HCFI) and the Ministry of Defence’s National Service Projects Organization (NSPO). FAS Cairo believes that HCFI and NSPO will continue to lead and import most of the sugar needed to bridge the gap between domestic production and consumption. The devaluation of the Egyptian pound to the US dollar made it harder for importers to buy from international suppliers. According to GAIN’s forecast, Brazil is likely to remain Egypt’s main raw sugar supplier in MY 2017/18, while Sudan and Kenya receive 50% of Egypt’s sugar exports and are expected to remain the main export destinations in MY 2017/18. It is worth noting that Egypt exports sugar to the majority of Arab and some African countries

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Egypt’s oilseed imports to increase with expansions in crushing capacity: GAIN http://www.dailynewsegypt.com/2017/05/15/egypts-oilseed-imports-to-increase-with-expansions-in-crushing-capacity-gain/ http://www.dailynewsegypt.com/2017/05/15/egypts-oilseed-imports-to-increase-with-expansions-in-crushing-capacity-gain/#respond Mon, 15 May 2017 08:30:14 +0000 http://www.dailynewsegypt.com/?p=625414 Crushing capacity will total 15,000 MT per day in the course of MY 2017/18

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Egyptian oilseed imports are expected to grow in marketing year (MY) 2017/2018 as additional crush capacity is set to increase domestic edible soybean and soybean oil production, according to a recent report issued by the Global Agriculture Information Network (GAIN).

The report expected crushing capacity to stand at 15,000 metric tonnes (MT)/day in the course of MY 2017/18.

Crushing operations in Egypt are currently dominated by Cargill and Alex Seed Company, which account for more than 80% of the total crush. Thirteen other smaller operations make up the remainder.

MY 2016/17 domestic crush capacity is approaching 11,000 MT/day, the report noted.

The report forecast soybean imports to reach 3.1 million metric tonnes (MMT), while edible soybean consumption is expected at 3.2 MMT in MY 2017/18, up 6.6% from the current marketing year.

Total oil consumption, including food and industrial use, is expected to grow by 2.3% in MY 2017/18, due to the constant population increase.

Palm oil imports are expected to amount to approximately 61% of total oil imports on competitive pricing during MY 2017/18.

Soybean consumption on the rise

GAIN forecasts that soybean area and production will remain unchanged from USDA’s official forecast for MY 2016/17 at 9,000 hectares (ha) and 25,000 MT respectively.

Soybeans are planted on land south of Cairo along the Nile corridor during the first week of May.

The Agriculture Research Center (ARC) of the Ministry of Agriculture and Land Reclamation (MALR) is the authority responsible for the release and marketing of certified soybean seeds.

The ARC will release four new soybean varieties: Giza 21, Giza 22, Giza 25, and Giza 111 in 2018.

Soybean consumption in MY 2017/18 will stand at a record 3.14 million metric tonnes (MMT), up 40.1% from forecasts of 2.24 MMT for MY 2016/17.

The latter estimate was revised downward from USDA’s official projection of 2.44 MMT as a result of a 9% anticipated decrease in soybean imports.

The increase in consumption foreseen for MY2017/18 is a direct result of new expansion by the major private crushers Cargill and Alex Seed Company, which are doubling their crushing capacities.

The expansion at both companies’ plants adds 6,000 MT per day of production to the existing throughput.

Egypt’s domestic consumption of soybeans for food use will remain at 17,000 MT in MY 2017/18.

The food processing industry uses soybeans and soy-based ingredients to enhance the nutritional quality of bread, as well as two popular legume foods: lentil soup and falafel.

The increase in imports in the coming marketing year is expected to be a response to the increased local crushing capacity with the objectives of producing affordable, high-quality blended oil and high-protein edible soy products for the feed industry.

Import estimates in MY 2016/17 have been revised downwards from USDA’s official estimate by 9% due to the restrictive regulatory environment at the beginning of the marketing year and challenges in foreign exchange availability followed by the devaluation of the Egyptian currency.

In 2016, Ukraine was the largest supplier of soybeans to Egypt with 840,730 MT, Argentina coming in second with 632,500 MT, and the US third with 412,000 MT.

The current average price for imported soybeans is about $400/MT. The current price of an MT of soybeans in the local market is about LE 8,500, an increase in local currency of more than 100% after the devaluation of the pound in November 2016.

Sunflower eating consumption driving the market

Meanwhile, Sunflower seed plantation areas and production are forecasted to be 8,000 ha and 19,000 MT in MY 2017/18, higher than the USDA’s official MY 2016/17 forecast of 7,000 ha and 17,000 MT respectively.

The increase in area and local production is due to greater food consumption in urban areas.

This prompted local traders to sign contracts with farmers in Middle Egypt, roughly from Assiut northwards to Cairo, for the crop to be harvested in 2017.

Sunflower seeds are planted in the Delta in March and south of Cairo during June and July. The two main sunflower seed varieties currently planted are Sakha 53 and Giza 102.

Sunflower seed consumption for crushing is forecast at 70,000 MT during MY 2017/18, unchanged from MY 2016/17.

Imported sunflower seeds are largely processed by the public sector to extract sunflower oil used in Egypt’s food subsidy programme. In contrast, domestic sunflower seeds are crushed by local companies close to the production centres in Middle and Upper Egypt.

Consumption of sunflower seeds for food use is forecast to reach 10,000 MT in MY 2017/18 up from 9,000 MT in MY 2016/17, again driven by the population increase. MY 2016/17 the consumption figure of sunflower seeds for food use was revised upwards from USDA’s official estimates of 5,000 MT to reach 9,000 MT.

The increase in consumption is mainly attributed to its cheaper price compared to other snacks and increased awareness of health benefits of the product, especially with a certain segment of the population in big cities like Cairo and Alexandria.

Sunflower seeds are roasted, seasoned, and sold to consumers in shell.

Imports of sunflower for crushing in MY 2017/18 are forecasted to reach 65,000 MT, up by 5,000 MT from MY 2016/17 due to higher demand.

Most sunflower seeds in the Egyptian market are imported for human consumption, with minimal crush. China is the leading supplier, exporting almost 50,000 MT of sunflower seed to Egypt in 2016.

Poultry, fish, and milk suffer from feed price increases

The report attributed a jump in poultry and fish prices to higher Soybeans prices.

Soybean is the primary ingredient in animal feed in the poultry, aquaculture, and dairy sectors.

More than 80% of animal feed components are imported.

Currently Egypt has around 180 poultry feed mills, producing various types of feed for the poultry industry and supplying more than 95% of the domestic market’s demand.

The soybean percentage used in poultry feed usually ranges between 25% and 35% of the finished product.

As a result of the aforementioned devaluation, the price of poultry feed in the domestic market witnessed a 100% increase in local currency, from EGP 4000 per MT, or $222.2 per MT, to EGP 8000 per MT, or $444.4 per MT.

The high prices of feed have contributed to a 30% increase in prices of poultry in the local market.

The inflated price of feed and its components in the domestic market drove soybean food consumption down by 6.6% in MY 2016/17.

“Despite these challenges, the poultry industry remains one of the leading food industries in Egypt with investments of more than EGP 45bn, employing two million people, and annually consuming 10-12million tonnes of feed,” according to the GAIN report.

A number of vertical integration efforts are also expected to continue, as larger producers seek efficiencies through economies of scale.

In the aquaculture feed industry, 73 privately-owned feed mills provide 90% of marine feed, producing both conventionally pelleted feeds (80-85 percent) and extruded feeds (15-20%).

Most of marine feed, 85%, contains 25% crude protein.

The most common recipes for fish feed production use a percentage of soybean between 30% and 40% and fish meal between 5% and 22%.

“Not surprisingly, fish feed prices have also risen steeply, increasing by more than 100%. Price of extruded feed for tilapia increased from EGP 4,000 per MT, or $222.2 per MT, to EGP 8,500 per MT, or $472.2 per MT, while extruded feed developed for sea bass and other marine fish jumped from EGP 12,000 to reach EGP 23,000,” the report stated.

The potential use of meal soybean in the Egyptian dairy industry stands between 600,000 MT and 800,000 MT annually, while the potential use of soybean hulls is estimated at 500,000 tonnes annually.

The cost of feed mixes consumed by dairy cattle has slightly more than doubled to EGP 92 per day, up from EGP 45 per day.

As a result, raw milk prices have increased more than 50%. The surge in grain and feed prices has driven inflation to record levels, the report finished.

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Pressures mount on CBE as IMF calls for interest rate hike to tame inflation http://www.dailynewsegypt.com/2017/05/11/pressures-mount-cbe-imf-calls-interest-rate-hike-tame-inflation/ http://www.dailynewsegypt.com/2017/05/11/pressures-mount-cbe-imf-calls-interest-rate-hike-tame-inflation/#respond Thu, 11 May 2017 06:00:33 +0000 http://www.dailynewsegypt.com/?p=625050 Inflation extends rise in April on higher food prices

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When the Central Bank of Egypt’s (CBE) Monetary Policy Committee holds its monthly meeting to make a decision regarding interest rates later this month, pressures are mounting on them to hike interest rates after the International Monetary Fund (IMF) called on such a step as a means to tame the rising inflation.

Egypt’s inflation extended its rally in April, standing at 32.9% year-on-year (y-o-y), the highest in almost 30 years, according to official data released on Wednesday.

On 23 April, IMF managing director Christine Lagarde said at a press conference that Egyptian policymakers need to put special focus on inflation.

“Here is clearly a question that needs to be addressed, I would say, head on, and that is inflation. The other reforms have to continue, but there has to be a special focus on inflation. I think that the Central Bank and the finance minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population,” Lagarde said.

“It is critically important that the Egyptian authorities and the Egyptian people actually endorse the proposals there in order to take the economy forward.”

The managing director of the International Monetary Fund (IMF), Christine Lagarde

The statement appeared to be a push by IMF officials to see Egypt increase borrowing costs to curb its high inflation rate.

Following Lagarde’s statements, IMF’s director for the Middle East and Central Asia, Jihad Azour, said in a press conference that “interest rates are the right instrument to manage Egypt’s inflation.”

Last week, an IMF delegate arrived in Cairo to conduct its first review of the reform measures and determine whether it would disburse the second tranche of the loan, which amounts to $1.25bn.

Most analysts surveyed by Daily News Egypt confirmed that raising interest rates isn’t the right way to tackle inflation and could result in more problems for Egypt’s already fragile economy.

On the other hand, some analysts believe that hiking interest rates could be the proper means to curb inflation.

Cost-push inflation

“I think the IMF’s push to raise interest rates as a tool to tackle inflation may miss the mark this time. This is a cost-push inflation, not a demand-driven one,” Reham Desouki, a senior economist at Arqaam Capital, told Daily News Egypt.

Cost-push inflation basically means that prices have been “pushed up” by increases in costs of any of the four factors of production (labour, capital, land, or entrepreneurship) when companies are already running at full production capacity.

“In Egypt’s case, the rising inflation is due to floating the pound last November, which resulted in the rise of production input costs, and companies have passed these hikes to consumers. Raising the interest rate has nothing to do with inflation,” she added.

“Austerity measures, which the government took after floating the pound, are weighing on the inflation too.”

When Egypt floated its currency last November, the government introduced a series of austerity measures, including tightening fiscal policies, reducing subsidies, and raising taxes, while also tightening its monetary policy by raising the interest rate by 3% to 14.75% for deposits and 15.75% for lending.

In an interview with Bloomberg TV last month, Finance Minister Amr El Garhy said, “This is all a result from supply shocks rather than a demand-driven kind of inflation.”

“The further rise in the Egyptian inflation last month, to 32.9% y-o-y, was driven entirely by stronger food price pressures. We think inflation is now close to a peak, and today’s figures are unlikely to prompt the Central Bank to hike interest rates at its Monetary Policy Committee meeting later this month,” Jason Tuvey, a senior economist at the London-based Capital Economics, wrote in a note issued on Wednesday.

Food prices, which account for 40% of the consumer price index (CPI) basket, rose by 43.6% y-o-y last month, compared with 41.8% in March.

“The sharp rise in inflation over the past six months can largely be attributed to the effects of a weaker pound. Since it was floated in the beginning of November, the currency has fallen by 50% against the dollar. This has pushed up the cost of imports, and firms have been quick to pass the hit on to consumers. Inflation has also been pushed up by subsidy cuts and the introduction of a value-added tax,” Tuvey explained.

Meanwhile, Mohamed Abu Basha, a senior economist at EFG Hermes wrote in a note that the CBE is likely to keep policy rates on hold at its next meeting on 21 May.

“Recent calls by the IMF to hike policy rates, focusing more on the medium-term impact of the recent inflationary shock, are likely to be subject to further investigation, with authorities looking for more effective tools to contain inflation,” he said.

“We note that we had argued that an appreciation of the USD-EGP, by allowing the market to have access to portfolio flows, would be a more effective way to ease inflationary pressures. We maintain, for now, our call for a minor, more symbolic rate hike, towards the end of year, pending more clarity on the IMF’s statement.

Limited tools

“I think raising interest rates could be an important tool that could be used by the CBE to curb inflation. They have limited tools to use here taking into consideration that there would be another wave of austerity measures,” Fred Haung, a Middle East senior economist, told Daily News Egypt.

Egypt is expected to introduce a fresh wave of new austerity measures starting next July, including cutting oil subsides and raising electricity prices.

“I think that the CBE will tighten its monetary policy until the end of the year, as it wants to absorb the liquidity in the market to curb inflation,” Haung added.

Egypt’s domestic liquidity rose by 4.68%, or EGP 123.1bn, to total EGP 2.75tn by the end of March 2017 when compared to February, the Ministry of Finance said, according to the latest data released by the (CBE).

The annual growth rate increased by 38.4% in March 2017, the ministry added.

“I think raising interest rate to tackle inflation is an important tool for the Egyptian Central Bank but it is all about the timing of using it. For the moment the tool proves less efficient to curb the inflation, but it should be used at least one time before the year’s end,” Joias Goknit, a senior economist, told Daily News Egypt.

Capital Economics said in a note issued on Wednesday that “we doubt today’s data will sway the Central Bank to hike rates. Instead, we think the next move in interest rates is likely to be down, albeit not until the end of this year.”

Debt piles up and cost borrowings are at stake

“Rising interest rates will weigh on the borrowing costs of the Egyptian government; monetary and fiscal policy makers are taking this matter seriously,” Ramy Orabi, a senior economist at Pharos Holding, told Daily News Egypt.

The government estimates debt servicing for the current fiscal year to reach EGP 292.5bn, representing 30% of total expenditures, compared to EGP 173bn in FY 2013/14, which represented almost 25% of total expenditures.

“The government has expressed its wariness about service debt cost, which should reflect in its monetary and fiscal policies,” Orabi added.

In its budget statement for the next fiscal year due to start in July, the government said that “the possible rise in US interest rates would make it more attractive to foreign investments from all over the world, which lowers Egypt’s chances of getting credit at reasonable borrowing costs.”

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After approving Investment Law, what’s next to attract new investments? http://www.dailynewsegypt.com/2017/05/10/approving-investment-law-whats-next-attract-new-investments/ http://www.dailynewsegypt.com/2017/05/10/approving-investment-law-whats-next-attract-new-investments/#respond Wed, 10 May 2017 07:30:49 +0000 http://www.dailynewsegypt.com/?p=624912 Experts and investors believe that approving the new law is not enough to improve the investment atmosphere

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Minister of Investment Sahar Nasr said on Monday in a press statement that implementing the Investment Law now is the most important mission for her and her ministry.

She is responsible, according to the new law, for issuing regulations and organising the process of approving licences for establishing new projects.

Nasr stated that an important step has been taken by finishing the law’s approval and now the government will work on attracting new investments and solving all the problems that investors face.

The minister said that the current version of the law is the best one, because the parliament had long talks with the government about the added articles, especially about transparency and investment incentives, which shows that the government is serious about attracting new investments and it is also serious about supporting the private sector, especially in the poorest governorates, because it is the leading sector nowadays.

However, some economic experts do not seem fully satisfied with the law or believe that the problem of the current economic situation is a result of the old law.

In his opinion article in El Shorouk Newspaper, former deputy prime minister Ziad Ahmed Bahaa-Eldin named four major problems with the law.

He stated that the first problem is that the law allows working by investment incentives, after Egypt has suffered from such measures back in 2005 and ended them. He believes it opens the door for corruption and prevents taxes’ incomes that the country really needs today due to the huge budget deficit.

The second problem, in his opinion, is that the law institutes further bureaucracy in the system of licensing because it allows different ministries and institutions to get involved in this process as well as in the process of land allocations.

He added that the third problem is that the law makes the General Authority for Investment (GAFI) an organ of the Ministry of Investment instead of being an independent institution.

The final problem he stated was that the investment atmosphere problems cannot all be solved by this law, explaining that the problems that prevent investment inflows into Egypt are related to many laws and regulations of the Egyptian law, the unclear economic state of Egypt, and the severe, unnecessary involvement of governmental and military investments in the market, which create an atmosphere of unfair advantages.

From another direction, the vice president of 15th of May City’s business association, Abdel Ghany El Abassery, stated that the problem is not about the law, emphasising that the previous law was not that bad.

He believes that the problem is about the centralisation and bureaucracy that make investors struggle to establish their companies.

He said that the government has to simplify the process of licensing in order to make it easier to establish a company, adding that in Dubai, it takes only a couple hours to establish a company. “If the government allowed establishing a company in a month, I’ll call it progress,” he noted.

El Abassery said that the government must give every governorate the authority to approve licences on its own, like it was before 2011.

On the other hand, the former dean of Economics and Political Science at Cairo University, Aliaa El-Mahdy, said that Egypt has many other dimensions to look at besides implementing the new law.

She emphasised that the current inflation rate is very high, adding that the possibility of raising the interest rate once again above the current levels will lead to recession, which will not help in attracting any new investments to the Egyptian market.

She explained that it will raise the prices of all the goods and that it will make people spend less on unnecessary goods and services, which will not be a good indicator for new investments.

The managing director of the International Monetary Fund (IMF), Christine Lagarde, said during a conference held in April during the spring meetings of the IMF in Washington that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

It is important to mention that the International Monetary Fund (IMF) has officially asked the Egyptian authorities and the Central Bank of Egypt (CBE) to raise the interest rates for the banking sector to control the hiking inflation rate.

The managing director of the International Monetary Fund (IMF), Christine Lagarde, said during a conference held in April during the spring meetings of the IMF in Washington that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

Lagarde added that “the Egyptian programme that is underway has been very courageous and has led to major reforms for the country,” yet, she also believes that other reforms have to continue, but there has to be a special focus on tackling inflation.

“I think that the Central Bank and the Finance Minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population,” she noted.

It is important to note that Egypt implemented many serious reforms, such as floating the pound in November in order to make the IMF approve a three-year $12 billion programme, which includes ambitious economic reforms.

On the other hand, El-Mahdy stated that there are many other factors that could affect Egyptian abilities to attract more foreign investments.

She said that the declaration of the state of emergency by President Abdel Fattah Al-Sisi back in April has a seriously negative effect, because it tells investors around the world that Egypt is not safe or secure. She added that, unfortunately, it has outweighed all the efforts to convince American businesspeople to invest in Egypt back during the president’s visit to the United Stated of America at the beginning of April.

She believes that implementing security is a very important step that opens the door for new investments.

The Egyptian president declared a state of emergency for three months after explosions hit churches in Tanta and Alexandria on 8 April.

She also believes that the situation was already bad due to the numerous conflicts in the Middle East and North Africa.

Reham El-Desouki, an economist at Arqaam Capital said to Reuters, in an article published on Monday that “a large number of investors were waiting impatiently for the law in order to understand the investment environment in Egypt and its incentives, especially with regards to the cost of starting a project and incentives for land.”

Reuters stated that the government has approved an earlier version of the Investment Law in 2015, adding that the law would “bolster investor confidence, but the legislation was criticized for coming up short.”

“The new Investment Law includes a raft of new incentives, such as a 50% tax discount on investments made in underdeveloped areas and government support for the cost of connecting utilities to new projects,” the article read.

The law states that one provision will return to investors half of what they pay to acquire land for industrial projects if production begins within two years, according to Reuters. The law also “restores private sector free zones—areas exempted from taxes and customs—a provision that had held up the law’s passage because of objections over whether to forfeit tax revenues at a time of austerity.”

However, Reuters said that Egypt’s direct foreign investment jumped by 39% in the first half of the current fiscal year ending in June to reach $4.3bn.

“In light of current conditions, the investment incentives are needed,” according to Mohamed Abu Basha, an economist at EFG Hermes, who told Reuters that “the incentives will give a push to investors to come to Egypt.”

Reuters stated that the new law “is expected to boost badly needed investment by cutting down bureaucracy, especially for starting new projects, and providing more incentives to investors looking to put money in Egypt.”

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Porto Group Holdings considers further expansions as chief Mansour Amer quits http://www.dailynewsegypt.com/2017/05/09/porto-group-holdings-considers-expansions-chief-mansour-amer-quits/ http://www.dailynewsegypt.com/2017/05/09/porto-group-holdings-considers-expansions-chief-mansour-amer-quits/#respond Tue, 09 May 2017 08:00:05 +0000 http://www.dailynewsegypt.com/?p=624795 Mohamed El Mekkawy replaces Amer as the company’s chairperson

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Porto Group Holdings is eyeing new expansions in different fields as the Egyptian-listed company appoints a new chairperson and managing director to succeed Mansour Amer.

On Thursday, Porto Group’s board of directors approved appointing Mohamed El Mekkawy as the group’s new chairperson and managing director, replacing founder Mansour Amer, who stepped down.

“It is the proper time now for me to step down from Porto Group and leave the management for another trusted person,” Mansour Amer told a press conference at the company’s headquarters on Thursday.

“The company now can go on its own. We have paved its way to be an independent company with a new board,” Amer added.

In October 2015, Amer Group split into two companies, namely Amer Group Holdings, becoming the demerging entity, and Porto Group Holdings as the demerged entity.

Porto Group is capitalised on EGP 455.9m, distributed across EGP 4.5bn shares at EGP 0.10 per share.

The company’s market value hit EGP 1.1bn as of Monday 7 May.

Company’s projects are under way

Speaking about the company’s current projects, Mansour said that most of the developer’s projects are under way, noting that the company has new projects that value EGP 7bn.

“The first stage of our last project, Santorini, in Ain Sokhna is doing very well,” Mansour explained.

Porto Group Holdings signed the contract of establishing the Santorini project in Ain Sokhna last January, with investment costs likely to hit EGP 340m.

The project spreads across 32,500 square metres and comprises 500 touristic residential units.

“Our sales hit EGP 3.2 billion in the last couple of years. We also carried out projects that valued EGP 1.4 billion last year,” Mansour added.

According to Amer, the company’s land bank hit 5 million square metres.

“Our backlog stands at EGP 6 billion by the end of last year.”

Regarding the company projects abroad, Mansour revealed that Porto Agadir in Morocco is about to acquire the license needed to kick off the project.

“We are currently studying many plans to expand locally and abroad.”

Current income is on focus

We concentrate now on current income to maximise profits for our valued investors,” Mansour explained.

Current income is an investment objective for a moderately conservative portfolio of securities or companies that provide high dividends and annuity payments to satisfy an investor’s steady income requirements.

“We are now in the process of investing in such activities like education, health, and entertainment sectors,” he added.

“These activities could secure a quarterly income in addition to the real estate and hospitality income. This would be a good thing for the investors,” continuing that “our commercial sector is one of these important sectors which could generate regular revenue for our companies.”

Amer noted that the company’s commercial land bank could hit 352,000 square metres in 18 months.

“This would make Porto Group the market’s first commercial developer,” Amer noted.

Porto Group’s current commercial land bank stands at 30,000 square metres.

Securitisation and other debt options

Responding to a question from Daily News Egypt about the possibility to take to the debt market to finance further expansion, Mansour said that the company’s liquidity standing is at very good levels, but he noted that if there was a need to resort to the debt market, they would prefer securitisation and banks’ credit lines.

Securitisation is the process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. This process can encompass any type of financial asset and promotes liquidity in the marketplace.

Porto Group said at the beginning of 2017 that its board of directors gave the go-ahead to complete the studies regarding issuing securitisation up to a maximum of EGP 300m ($38.3m).

Company’s outlook

Speaking about the company’s outlook, Mansour noted that 2017 would be an exceptional year for his company, as it plans to expand in the local and international markets.

“This year we forecast a jump in our sales and net profits compared to last year,” Mansour said.

Porto Group’s consolidated financial statements showed a net profit of EGP 117.54m for the fiscal year 2016.

Consolidated net profit for the period from 30 August 2015 to 31 December 2015 amounted to EGP 37.25m.

Standalone profits declined 58.9% to EGP 39.74m from EGP 96.9m for the corresponding period.

“We have a land bank that could enable our company to achieve EGP 40 billion of sales in the few coming years,” Amer added.

“Any jump in our profit will reflect in our profit distribution policy,” he added.

The company’s board recommended distributing one bonus share for every ten shares in 2016.

In March, the general meeting of Porto Holding approved an increase of the company’s capital by EGP 45.59m, through the distribution of bonus shares at 10%.

During the meeting, it was also decided to transform part of the group’s capital to global depository receipts (GDRs).

Amer expected to get the Egyptian Financial Authority’s go-ahead in two weeks from now.

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Can Egypt become a net gas exporter again? http://www.dailynewsegypt.com/2017/05/04/can-egypt-become-net-gas-exporter/ http://www.dailynewsegypt.com/2017/05/04/can-egypt-become-net-gas-exporter/#respond Thu, 04 May 2017 06:00:06 +0000 http://www.dailynewsegypt.com/?p=624204 With total proven reserves of 65 trillion cubic feet at the end of 2015, Egypt is the 16th largest gas reserve-holder globally, says BNP Paribas

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Egypt has laid out its vision to become a regional energy hub following discoveries of large offshore gas reserves in the Eastern Mediterranean. This vision is critical as the energy sector remains the major driver of the country’s balance of payments. Recent developments suggest that Egypt has a clear potential to become a trading and exporting hub, notably for natural gas. However, the realisation of this ambition will depend on the country’s capacity to mitigate geopolitical, financial, and regulatory risks. This should go hand-in-hand with energy diversification to reduce dependence on gas and sustain anticipated exports.

In a study issued on Tuesday, BNP Paribas bank tried to answer the question “can Egypt become a net gas exporter again?”

The study said that with total proven reserves of 65 trillion cubic feet (tcf) at the end of 2015, Egypt is the 16th largest gas reserve-holder globally and the second largest gas producer in Africa.

BNP PARIBAS stated in a study issued on Tuesday that Egypt is viewed as a world-class hydrocarbon area with active drilling in four basins, including in the Mediterranean, which holds 65% of the country’s total gas reserves.

The study added that the Exploration and Production (E&P) segment is critical for the Balance of Payments (BoP) as it typically contributes two-thirds of incoming gross foreign direct investments (FDI) with at least four oil majors among the top 10 foreign investors in Egypt.

The study stated that hydrocarbons also underpin Egypt’s trade balance and account for nearly half of total exports, mainly in the form of light crudes and naphtha. Furthermore, as the largest source of corporate taxes in Egypt, the energy sector strengthens fiscal stability.

BNP Paribas said that Egypt’s energy sector boomed in the early 2000s, driven by strong domestic demand and Liquefied Natural Gas (LNG) exports. Gas production increased more than three-fold between 1999 and 2009.

“Since 2010, however, sharp macroeconomic deterioration and structural natural resource trends have pushed the sector into difficulties. The first hit was the decline in offshore Mediterranean gas production as a result of reservoir maturity and stalled investments. The production of four of Egypt’s major offshore gas fields started to decline in 2012 as they had been discovered and developed at the same time in the mid-1990s. The second hit was the accumulation of Egyptian General Petroleum Corporation (EGPC) arrears to upstream investors peaking at $6.3bn in 2012 (2% of GDP) as a result of mounting fiscal deficits and deteriorating external liquidity during the political transition,” the study read.

According to the bank, the third hit came from the decline in crude oil prices in 2014/15, thereby discouraging foreign investment, especially in high-risk deepwater exploration.

Egypt became a net gas importer in fiscal year (FY) 2015/16 with a hydrocarbon external deficit of $3.6bn compared with a surplus of $5.1bn in FY 2009/10.

During that period, BNP Paribas said that the current account deficit was largely driven more by the negative hydrocarbon balance than by the decline in tourism. Real economic activity was also impacted as households and energy-intensive industries suffered from occasional fuel and power shortages.

Steps taken by the government

BNP Paribas said that a series of policy measures was undertaken to rebalance the energy sector. In the short term, the government secured concessional fuel supply agreements with GCC sovereigns and launched LNG imports fulfilling 25% of domestic demand. In the medium term, the government repriced gas offtake from new blocks by 40-120% and upwards to incentivise production and auctioned large exploration acreage at competitive terms to accelerate reserve replacement. On the financial side, the government allowed some onshore producers to export 50-75% of their equity oil, the share by which the state can claim entitlement right, in order to decelerate the build-up of arrears. That, combined with a series of material payments to targeted E&P operators, has indeed halved EGPC arrears to $3.5bn. However, the study showed that the outstanding receivables continue to be a major constraint for new E&P investments primarily in gassy portfolios.

“The turning point was the discovery of the Zohr jumbo gasfield in August 2015. This gasfield, with its recoverable reserves of 22tcf, has not only replenished Egypt’s total gas resources by one third, but has also been fast-tracked to start production in 2H 2017,” says BNP PARIBAS.

The bank believes that Egypt is currently replenishing most of its gas production with new discoveries and is likely to achieve self-sufficiency by 2019. These new discoveries are comprised of two large offshore projects, Zohr and West Nile Delta, in addition to the smaller Noroos and Atoll fields that should jointly produce 5bcf/d at plateau representing 1.1x of Egypt’s current total gas production. Further discoveries of small and fast-to-plug plays such as Noroos and North Alam El Shawish have boosted investor confidence and attracted new entrants to the sector such as frontier national oil companies and private equity funds, the study noted.

When can Egypt become a gas exporter?

While Egypt is on track to regain a gas surplus by 2019, BNP Paribas believes the challenging question is how long it can remain a gas exporter.

The prime consumer of gas is electricity generation, which burns 60-65% of Egypt’s gas output. Gas consumption is dependent on both structural trends in demand and availability of energy for end-users. While gas consumption markedly rose during the first half of the 2000s, it has been almost stable since 2011 given shortages.

The study expects that, in the short term, domestic consumption should rise substantially due to the commissioning of Siemens’ 14.4GW combined-cycle generation plants that would add 37% to the national installed power capacity.

The key factor driving electricity consumption is population growth because two-thirds of power output is consumed by residential and commercial customers. Population growth is one of the highest in the Middle East and North Africa (MENA) region, a trend that is likely to last beyond the medium term due to Egypt’s youth boom (one-third of the total population is under 14).

Another source of gas demand is gas-intensive industry (steel, fertilisers), which is expected to return to full utilisation in step with the economic recovery.

Here, Egypt has to choose between exporting surplus gas in either LNG in order to accumulate foreign exchange reserves or industrial forms in a way that maximises factors of economic development such as employment and industrial integration, the study noted.

Pursuant to demand management, Egypt is challenged to manage gas supply, says BNP Paribas

Some producing legacy gasfields suffer from high rates of decline in production (12% annual average). While the four key offshore discoveries are being fast-tracked, they have varying production plateaus ranging from 11-18 years (Atoll, Zohr) to much shorter 3-5 years (Noroos, West Nile Delta). Replacing declining offshore production necessitates further exploration investments to proactively sustain Western Desert production that should start naturally declining in 2-3 years, albeit at smoother rates.

The study believes that under the conservative assumption that gas consumption will grow by 4% per annum on average in the medium term and based on Wood Mackenzie’s gas production forecasts (production to peak in 2021 and decline afterwards).

“Egypt’s capacity to export gas may not last beyond 2022,” says BNP Paribas.

“We believe that Egypt can sustain gas exportation only if further discoveries are made and subsequently developed. That is partly achievable if EGPC arrears are repaid on a regular basis to provide the needed certainty for private E&P investments,” the study read.

However, BNP Paribas said that in order to free up gas capacity for export, Egypt has to diversify the energy mix away from fossil fuels. Hydrocarbons made up more than 95% of primary energy consumption in 2015. Although Egypt launched an ambitious renewables strategy aiming to increase the contribution of solar and wind resources to 20% of power output by 2022, progress has been rather slow and restricted to public projects rather than Independent Power Producers (IPPs).

“As renewables accounted for only 0.5% of Egypt’s power generation mix, it will effectively take a long time for the country to reduce its dependence on gas for power generation,” according to the bank.

However, Egypt is expected to become a net gas exporter by 2019, the study noted.

Can Egypt become an East Med gas hub? 

BNP Paribas said that simultaneous offshore gas discoveries in Egypt, Israel, and Cyprus have opened a new opportunity for regional integration as discovered volumes seem to exceed domestic market capacities in the respective countries. Egypt’s bid to become a regional energy hub is built on three pillars: strategic location on key trade routes, proximity to resource-rich countries with relatively saturated domestic markets, and advanced export infrastructure. This last factor, in BNP Paribas’ view, “is the defining pillar of Egypt’s regional hub strategy.”

The bank’s understanding of the gas hub approach entails trading and export dimensions.

The trading dimension positions Egypt as a deep and open gas market where sellers and buyers transact freely under efficient regulatory conditions. Although this is an important dimension to developing gas-intensive industries such as petrochemicals, BNP Paribas said that it would require ample time and continuous regulatory adaptation to evolve. The second dimension positions Egypt as a gas export hub, not only for its own surplus domestic production, but also for the excess output of other East Med basin countries.

The study shows that Israel became gas-rich as result of Tamar and Leviathan discoveries in 2009-2010. Tamar (10tcf reserves) is currently in production, supplying 100% to domestic buyers. Tamar’s production remains below full capacity, which is estimated to be 1.2bcf/d. Leviathan (22tcf reserves, the equivalent of Zohr’s) should start marketing its production by 2020. The two fields combined comprise a total Israeli production capacity of 2.5bcf/d. The consortium in charge of Leviathan development has signed a contract with Jordan’s National Electric Power Company to supply 45bcm of gas over 15 years, thus completing phase I of the project, according to BNP Paribas.

However, in Cyprus, Aphrodite (4.5tcf reserves) was discovered in 2011, but a development concept is yet to be introduced. Nevertheless, there is no clear timeline, and the political specificities of Cyprus could slow the development of the project. There is further potential for a Zohr-like “exploration tail” in the promising Block 11 that will be drilled in Cypriot waters in mid-2017, a few kilometres northwest of the Zohr formation.

Egypt’s existing LNG terminals on the two flanks of Nile Delta seem to be the answer to the East Med gas surplus question. The two plants, which are currently nearly idle due to gas diversion to the domestic grid have an aggregate export capacity of c.12mtpa and are capable of exporting 1.7bcf/d with limited mothballing requirements. That theoretical export capacity provides a platform to handle combined production of Leviathan (phase II) and Aphrodite at mature levels as well as Egypt’s peak exportable surplus in 2021 based on BNP Paribas’ forecast. Moreover, connecting Mediterranean discoveries to Egyptian infrastructure requires substantially lower investment than construction of greenfield LNG facilities in Cyprus or Israel.

Excess reserves in both countries are, nonetheless, not material enough to justify new LNG investments on a standalone basis.

Egypt’s hub position would bring the region substantial benefits, such as optimising resources and investments, alleviating external balances in Egypt and Cyprus, diversifying gas supply to Europe and deepening the global LNG market.

Nevertheless, there are three constraints for the development of the Egyptian gas hub. The first constraint to East Med gas integration is geopolitical sensitivity between Egypt and Israel on the one hand and Cyprus and Turkey on the other.

BNP Paribas singles out two specific political risks to the hub strategy. The first risk is classic political reservation between Egypt and Israel linked to limited bilateral economic cooperation since the Peace Accords as well as pending arbitrations on previous energy disputes. The second and emerging risk is the complexity of Turkey’s political situation in the region.

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Unpredictable future of IMF loan http://www.dailynewsegypt.com/2017/04/27/unpredictable-future-imf-loan/ http://www.dailynewsegypt.com/2017/04/27/unpredictable-future-imf-loan/#respond Thu, 27 Apr 2017 06:00:10 +0000 http://www.dailynewsegypt.com/?p=623330 The IMF is to pay a visit to Egypt on 28 April after postponing it for the third time

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Nobody knows what the IMF delegation will say or decide about Egypt, or whether they will approve the second tranche of the loan or ask for more reforms.

However, managing director of the IMF, Christine Lagarde, stated during a conference held on Thursday that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

Lagarde said that the government has implemented many reforms, adding that the government must keep the current rate of reform while giving special focus to the hiking inflation.

She said in the conference, “I think that the Central Bank and the finance minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population.”

However, Lagarde stated that the IMF approved the Egyptian programme, which is the second largest financial programme globally.

Furthermore, Bloomberg published an article quoting Jihad Azour, director of the fund’s Middle East and Central Asia department, who stated that the “available monetary and fiscal policy instruments, including interest rates, can help to contain inflation.”

At a press conference on Friday, Azour said interest rates are “the right instrument” to manage Egypt’s inflation. “This is something that we are discussing with the authorities,” he said, according to Bloomberg.

In this regard, Aliaa El-Mahdy, a former dean of the Faculty of Economics and Political Science at Cairo University, believes that the government applied many steps in the way of implementing the programme approved by the IMF, such as cutting oil, electricity, and gas subsidies, and it will apply more subsidy-cuts in the next fiscal year (FY).

She also said the government wants to reduce its payments and set more austerity measures in the new budget; but, unfortunately, the new budget is getting bigger, even if they want to reduce it, although it is still lower than the rate of inflation.

Unrealistic goals, difficult reforms

El-Mahdy said that the government and the IMF expect a budget deficit of 9.5%, which she doubts the government could achieve.

The flotation was one of the most important decisions that was implemented, she noted; yet, the biggest problem is inflation.

She added that the current interest rate— 20%—is already very high, and if the Central Bank of Egypt (CBE) decided to raise the interest rate again in the current state of stagflation, there will be no new foreign or local investments.

“I believe that the main problem in the country is the inflation, and the rate of inflation is going higher, and the government cannot fix it by any decisions; the only way is to improve the way of attracting investments and encourage local investors to produce more,” she said.

However, she stated that achieving a general domestic product (GDP) growth rate of 5% is possible if the government worked on implementing solutions that improve the investment climate.

El-Mahdy added that fixing investors’ disputes is one of the main things that could help the government attract more investments, either by expanding local investors or by attracting foreign direct investments.

“The government has to find solutions for the disputes between the investors on one hand, and the government or the banks on the other,” El-Mahdy said. “Attracting foreign investments or promoting local investors are the only way to achieve the government’s goals of raising the GDP by 5%, which would also help reduce unemployment.”

However, it is worth noting that Lagarde said in February that Egypt is making good progress in the loan programme, adding that the currency is likely to stabilise after months of depreciation.

Lagarde added that the IMF sees good, noticeable progress by the Egyptian government, with a focus on Egyptian people and the most vulnerable segments of the society. She also noted that the IMF believes the state has been doing its best given the circumstances.

The government must be committed to the loan’s decisions

From another view point, the executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, said that the government has no other choice but to cut more petroleum subsidies, because that is what it has agreed to in order to receive the IMF’s loan.

He added that it is very serious to delay any decisions, because it shakes Egypt’s stability and international commitments, which could easily affect Egypt’s future loans or the process of attracting foreign investments.

If the government didn’t implement what it had agreed to, the IMF might freeze the next loan tranches, which would destabilise Egypt once again, Tawfik noted.

It is worth mentioning that the visit of the IMF delegation was postponed to April instead of March. This also postponed revising the progress that the Egyptian government achieved, consequently delaying the receipt of the second tranche of the loan.

Tawfik stated that if the government didn’t commit to its decisions, the country would face a lot of accusations about Egypt’s seriousness to implement economic reforms.

Moreover, Moody’s Investors Service said in a report last week that while Egypt’s IMF programme will support gradual improvements to the country’s fiscal and external position, its social and economic costs risk slowing the pace of fiscal reform.

“The implementation of the targets of the IMF programme—including reductions in fiscal deficits and government debt levels, as well as improvements in Egypt’s external liquidity position—will help address Egypt’s key credit challenges,” said Steffen Dyck, a Moody’s senior credit officer and co-author of the report.

“However, ambitious fiscal consolidation targets will be challenging to achieve and could face implementation risks in a scenario of mounting public discontent,” he noted.

Moody’s projects that Egypt’s fiscal deficit will decrease to 11% of its GDP in FY 2017 and 8.5% in 2019—down from 12.6% in 2016. Moody’s forecasts are more conservative than the IMF programme projections of 10% of GDP in FY 2017, reducing to 6.1% in FY 2019, driven by Moody’s somewhat lower growth assumptions and potential fiscal slippage, both in the near and medium-term.

Worries about the high debt

The managing director of Multiples Group, Omar El-Shenety, has different thoughts regarding the increasing foreign debt.

He stated that the IMF expects the foreign debt of Egypt to exceed $100bn by the year 2020.

He believes that during the near future, Egypt might fall into the trap of foreign debt, and it would easily exceed a rate of more than 150% of GDP, which is a very critical situation.

El-Shenety believes that the rates of public debt are not worrying; yet, it will reach the critical zone no matter what, because foreign debt is going to be greater than 50%.

He said that there are different types of loans that Egypt receives, but the main problem is about how the government will create other sources of foreign currencies to repay the main loans and interest.

El-Shenety added that Egypt’s government is planning to raise the GDP to the level where the debt represents a small rate of it, which is likely difficult to achieve, explaining that the government expects a growth rate of 6% in FY 2017/2018, but then decreased that expectation later to 4.6%, which is unlikely to happen in the real budget, due to the poor state of tourism, the region’s political turbulence, and many other factors.

The current rate of the public debt compared to the GDP is 130%, not including the debt of loans. According to the IMF, within three years, the rate will reach 150%, again without including loan debts, which will be used to fund national projects and institutions and will probably push the total amount to exceed 160-170%. This is a very high and dangerous rate, El-Shenety noted.

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The main economic results of wider US involvement in Syria http://www.dailynewsegypt.com/2017/04/13/main-economic-results-wider-us-involvement-syria/ http://www.dailynewsegypt.com/2017/04/13/main-economic-results-wider-us-involvement-syria/#respond Thu, 13 Apr 2017 07:00:42 +0000 http://www.dailynewsegypt.com/?p=621895 Egypt is likely to participate in any conflict in the region, and there are different opinions regarding the possible effects it would have on Egypt and the region.

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In March 2003, the United States, United Kingdom, Poland, Australia, Spain, Denmark, and Italy began preparing for the invasion of Iraq, with a host of public relations and military moves. In his 17 March 2003 address to the nation, George W. Bush demanded that Saddam and his sons surrender and leave Iraq, giving them 48 hours. But the US began bombing Iraq a day before the 48 hours ended after a rejection of the ultimatum by the Iraqi government. Unlike the first US war against Iraq, however, this war had no explicit United Nations (UN) authorisation.

However, the invasion of Iraq resulted in global consequences, such as a hike in oil prices—which effectively raised the price of the products all around the world—and marked the beginning of more radical Islamist armed movements.

And now, 14 years later, the US, under president Donald Trump, has yet again hit another country without UN approval. But what are the possible consequences that could result from this course of action?

On Friday, the US launched 59 Tomahawk cruise missiles from two destroyers in the Mediterranean against Shayrat air base in Syria. However, many news reports predicted that the strike might not be the last and that the White House will do so again if it considers that necessary.

But what would happen economically if the US decided to increase its involvement in the Syrian crisis? Daily News Egypt asked several economic experts about this issue.

The economic expert and member of the World Federation of Exchanges Medhat Nafea believes that the war in Syria is far more complicated than most people think.

He stated that there are many scenarios that would have terrifying effects on the whole region, not only on main commodities such as petrol or gold, but on the world economy.

He said that during the cold war, the tension between the world’s two superpowers did not lead to real conflict between them. A conflict between Russia and the USA in Syria would turn the world’s economy to a mess, he added.

The strike against Shayrat base was something that was known and approved by both the US and Russia in one way or another and would probably not result in a more dangerous situation, he added.

The strike was something important to make the Syrian president reconsider his stance and think about finding solutions to the current crisis, because he was the reason that prevented any progress in the Geneva talks, he added. Nafea believes the US took action to achieve some progress.

Another scenario is that the American president might be sending a message that he is not cooperating with the Russian president, Nafea said.

It was probably a deal that was made with Saudi Arabia to strike Syria, because of the ethnical and religious differences between Saudi and Syria. That is why the kingdom was one of the first countries to approve the American strike. There is a lot of meddling in the Syrian crisis.

Unfortunately, the Egyptian role was not clear. However, a wider American conflict in Syria would not benefit Egypt in any way.

The only people who would benefit from the war are weapon manufacturers, who sell more weapons during times of war. However, Egypt will lose economically if America expanded its strikes on Syria, as is an important market that used to import a lot of products from Egypt.

If Syria was divided, it would not benefit Egypt; even if oil-rich countries promised to provide more support, it would be temporary help, which would not match the price of losing an important country as Syria.

Moreover, the world is waiting for a more effective Arab role that would end Syria’s crisis.

The Price of oil would increase

Nafea explained the price of oil might get affected if more US strikes were to hit Syria, because the parties of the conflict—namely Russia, Iran, Saudi Arabia, the United Arab Emirates (UAE), and the US—are the main oil producers. He believes the price of oil will increase.

However, none of the oil-producing countries will halt their oil production, as they would not want to lose a market share. He added that even in Libya, the conflicting parties are always looking for ways of selling their oil.

Moreover, Nafea believes that, usually, when a declaration of war is announced, demand grows more rapidly than supply, which means the price of all products would increase in the region and the whole situation becomes worse.

From another perspective, the executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, stated that history does not repeat itself.

He explained that Russia, China, and Iran made it clear that there should be no further American involvement in Syria.

He stated that the US is the world’s largest economy and that it will not risk weakening its economic stance worldwide by being dragged into a new world war. The US is facing another problem, which is North Korea, Tawfik added.

From another direction, the managing director of Multiples Group, Omar El-Shenety, said one economic effect a war between the US and Russia in Syria will have is that the price of oil will rise again, which would create more fiscal surpluses in oil-producing countries, such as Saudi Arabia and the UAE, which are Egypt’s trading partners and would probably increase their support for Egypt such as what happened after of 30 June 2013.

He added that if any war in the region breaks out, Egypt is probably willing to participate in it.

Egypt might benefit of more conflicts in Syria

El-Shenety explained that back in 1987, the economic situation of Egypt was worse than the current period. Egypt’s participation in the first Gulf War made the US and Arab countries provide more aid and finances to Egypt, he added.

He believes that Egyptian authorities would be willing to place a bet on that. This is why the rate of Egypt’s imports of weapons has been on a rise since 2013.

El-Shenety stated that America’s involvement would make Iran reduce its role in the area, explaining that the last years of the former US president has showed that America is taking its hands off the Middle East, and now the strike shows that the US is probably back, which would reduce Iran’s influence.

“The importance of Egypt will increase,” he noted.

Regarding the price of oil, he believes it would increase along with the US dollar, because the war would automatically make the US pump more investments in its market, which would raise the value of its currency.

However, the former dean of Economics and Political Science College at Cairo University, Aliaa El-Mahdy, believes that more American involvement in Syria would have no more direct bad effects on Egypt, unless Egypt announces its participation in the conflict, which would probably affect Egypt negatively from political, economic, and social perspectives.

She added that a war might affect the whole region, because the region would become known as a war zone, which would effectively prevent any further investment or tourism to the region.

She added that Egypt has unfortunately wasted a precious opportunity when it announced a state of emergency this week, because that indicated that Egypt in fact is not secure for more investments.

She believes the region is in a dangerous and critical situation now.

Unlike other opinions, she stated that the US dollar price might not necessarily increase during a war, yet the American economy would definitely witness a higher growth rate.

She stated that both parties are likely to prevent more tension in the area, and the future of the country and its people is unpredictable.

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Robust economic policies needed to maximise private savings and finance growth in Egypt: World Bank http://www.dailynewsegypt.com/2017/04/10/robust-economic-policies-needed-maximise-private-savings-finance-growth-egypt-world-bank/ http://www.dailynewsegypt.com/2017/04/10/robust-economic-policies-needed-maximise-private-savings-finance-growth-egypt-world-bank/#respond Mon, 10 Apr 2017 07:00:52 +0000 http://www.dailynewsegypt.com/?p=621470 The research by the World Bank said that trust and internet access are significant to savings behaviour, whereas physical access and distribution of banks do not have an effect on one’s probability of participating in bank savings and/or informal savings

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Savings is alternatively defined as income minus consumption, the change in wealth, or the supply of capital. Given the comprehensive and consistent definitions of each of these terms, each definition of “savings” would represent the same concept and give rise to similar empirical measures. A research prepared by the World Bank Group—undertaken by Khaled Hussein, Mahmoud Mohieldin, and Ahmed Rostom—under the name “Savings, Financial Development, and Economic Growth in the Arab Republic of Egypt Revisited” discussed the nature of economic growth in Egypt and several areas it involves, relating them to the citizens’ behaviours in savings and trust in the financial development of the country.

The study illustrates the mechanisms linking national saving and economic growth, with the purpose of understanding the possibilities and limits of a saving-based growth agenda in the context of the Egyptian economy. This is done through a simple theoretical model, calibrated to fit the Egyptian economy and simulated to explore different potential scenarios.

Understanding savings behaviour is critical when designing economic policies that promote investment and growth, according to the research. Most of the empirical literature that analyses cross-country savings behaviour concentrates on aggregate savings for a multitude of reasons. The first reason is due in part to the lack of consistent information on household behaviour, as well as possible differences in the household savings in developing versus industrial countries.

A 4% growth rate of General Domestic Product (GDP) per capita requires a national savings rate of around 50% in the first decade and 80% in 25 years

A study by Hevia and Loayza illustrates the mechanisms that link national savings and economic growth in Egypt. The study uses a simple theoretical model calibrated to fit the Egyptian economy and simulated to explore different potential scenarios. Their main conclusion was that if the Egyptian economy did not experience progress in productivity, then a high rate of economic growth would not be feasible at current rates of national savings and would require a saving effort that is highly unrealistic. To obtain a constant 4% growth rate of GDP per capita with no total factor productivity (TFP), improvement would require a national savings rate of around 50% in the first decade and 80% in 25 years. However, if productivity starts to rise to at least moderate levels, sustaining and improving high rates of economic growth becomes viable. Realistically, to achieve the goal of high economic growth, the national savings effort must be alleviated by forcefully and purposefully improving productivity.

The research includes a mix of a “simple permanent income” hypothesis as well as “life cycle” hypothesis determinants, which are used to interpret real private savings behaviours in Egypt. The study was able to present new empirical evidence related to savings behaviour, financial development, and economic growth in Egypt.

By using high quality and high frequency quarterly data covering 1991-2010, the study employed a robust vector equilibrium correction modelling strategy. The key long-term determinants of private savings in Egypt are the real interest rate and level of financial development, as shown by the data. The data also showed higher persistence of real private savings in the short run.

The real interest rate varies negatively with real private savings in the long term for the period under consideration, 1991-2010. This translates to the fact that higher consumption is becoming more attainable at a lower cost. Hussein and Mohieldin reached the same conclusion on the relation between private savings and real interest rates during 1960-1990. However, they referred to the fact that the financial repression of the 1960s cannot be alleviated by an increase in the real interest rate, as it further deepens the problem of excess liquidity of the banking system, which is indicative to the liquidity crisis in the late 1990s.

In the short term, real private savings vary positively with real interest rates, whereas financial development positively reflects on higher private savings on both horizons. This is a literal translation of the McKinnon-Shaw hypothesis on financial development and growth, which strongly holds for the case of Egypt. The effect of higher inflation on real savings negates the presence of a precautionary motive for savings in Egypt. This can be attributed to seeking alternative non-formal inflation hedges, particularly in real estate and gold. This is common in less developed countries that suffer financial market imperfections. Unavailability of robust data on real estate holdings and gold prices in the domestic market limit the interpretation of this result and raise a feasible research question for future development of this model. Exchange rate movements reflect on higher private savings. It provides signals of macroeconomic uncertainty to economic agents and triggers precautionary motives for savings. In the absence of data on domestic and foreign currency denominated private savings, devaluation would reflect on raising the domestic currency equivalence of foreign currency savings, leading to a net positive effect of devaluation on private savings, according to the data of the research.

Individuals with trust in deposit safety and financial stability are likely to save funds

Relevant policy recommendations are imperative to the betterment of the Egyptian economic narrative. A multitude of sources indicate that trust is a significant determinant of savings; in other words, it has been observed that individuals who perceive that the economic situation within their country will improve are more likely to save. Moreover, regression analysis illustrates that trust in deposit safety and financial stability is highly correlated with trust in one’s government; therefore, an individual who trusts the institutions within their country is likely to save.

That said, it is imperative for Egypt to build creditability as well as maintain integrity in their financial institutions in pursuit of building trust to ultimately increase savings. In addition to trust, internet access is significant to savings behaviour, whereas physical access and distribution of banks do not have an effect on one’s probability of participating in bank savings and/or informal savings. In many underdeveloped countries, information barriers are generally associated with higher costs. With that being said, improvements in internet access lower transaction and information costs for stock market participation, thus increasing the likelihood of savings as well as helping a consumer make better financial decisions. However, one must be financially literate to reap the benefits cultivated from access to the internet. Increasing internet access within Egypt could be pivotal to savings behaviour; however, it should also be noted that it would only assist a specific cohort of individuals. Furthermore, the inception of funded private pension system schemes within Europe and Central Asia have been pivotal to savings behaviour. Essentially, a pension system encourages savings within the workplace to ensure adequate income for workers during retirement.

Regulatory requirements and misguided strategies have reduced the yield of such investments and impeded the overall objective of private pensions. Appropriately positioning a mandatory pension system within Egypt could dynamically alter savings behaviour; however, it is recommended that more research should be conducted in regards to regulatory requirements prior to implementing such a policy.

Overall, macroeconomic measures heavily influence resource mobilisation and particularly savings behaviour in Egypt during the period under consideration in this study (1991-2010). Robust economic policies, including macroeconomic and monetary measures, are prerequisites to maximising private savings and financing growth in Egypt.

Conclusion

If the Egyptian economy does not experience progress in productivity—supported by and stemming from technological innovation, improved public management, and reforms in the private sector—then a high rate of economic growth is not feasible at the current rates of national saving and would require a savings effort that is highly unrealistic. For instance, financing a constant 4% growth rate of GDP per capita with no improvement in total factor productivity would require a national savings rate of around 50% in the first decade and 80% in 25 years. However, if productivity rises, sustaining and improving high rates of economic growth becomes viable. Following the previous example, a 2% growth rate of total factor productivity would allow a 4% growth rate of GDP per capita with a national savings rate in the realistic range of 20-25% of GDP.

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Egypt’s public debt is reaching critical level http://www.dailynewsegypt.com/2017/04/06/621081/ http://www.dailynewsegypt.com/2017/04/06/621081/#respond Thu, 06 Apr 2017 06:00:23 +0000 http://www.dailynewsegypt.com/?p=621081 Experts believe there are no other options but to ask for more loans, while national and foreign debt is equally dangerous

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At the beginning of April, the Central Bank of Egypt (CBE) announced that the Egyptian public debt has increased significantly.

The CBE’s statement showed that the size of Egypt’s foreign debt increased by $19.522bn in 2016, recording $67.322bn by the end of December 2016, compared to $47.8bn by the end of December 2015.

Foreign debt amounted to 37.6% of Egypt’s Gross Domestic Product (GDP) in December 2016, compared to 13.6% in December 2015.

The reason for this increase is because of the government expanding its obtainment of direct foreign loans from several countries and international financing institutions, as well as its issuance of bonds in international stock markets during 2016 to bridge the gap in the general state budget.

On 10 November 2016, the Ministry of Finance issued bonds worth $4bn at the London Stock Exchange, with yields ranging between 4.62% and 7%, and maturity dates ranging from 10 December 2017 to 10 November 2028.

The reason for issuing those bonds is to gather the amount of money needed for the reform programme approved by the International Monetary Fund (IMF) last year, of which Egypt had received the first tranche, worth $2.75bn, last November.

Besides the IMF’s loan, Egypt has also received $1bn from the World Bank, $500m from the African Development Bank, $1bn from the United Arab Emirates, and $2bn from Saudi Arabia, during 2017.

National debt is more worrying than foreign debt

However, Egypt’s national debt has hiked by 28.9% within a year, reaching EGP3.052tn, compared to EGP2.368tn a year before. National debt is far more worrying than debt received from international bodies, according to the executive chairperson of Union Capital Incorporated, Hany Tawfik, who stated that local debt is a vicious circle caused by the current budget deficit.

He stated that, unfortunately, the national debt reached a critical amount, where the government has to pay a lot of interest, which increases the budget deficit, hence leading the government to ask for more local loans.

To fix the situation, the government has to increase its income of taxes through incorporating the informal sector into the formal economy, which would increase tax incomes to the right rate of 25% as many countries have. It might reach EGP1tn, instead of the current EGP400-500bn, according to Tawfik.

The local public debt has increased to 94.1% of the GDP, estimated at EGP 3.245tn at the end of 2016, according to the CBE.

He added that the main problem is that the government has a large number of employees, which would probably take a lot of time to reduce.

Regarding the foreign debt, he explained that there are three types of loans Egypt has received: a type, like IMF’s loan, that is allocated to supplying the budget deficits and other balances; the second type, like the World Bank’s loan, is the one Egypt uses to develop its infrastructure and other projects, all of which will probably not provide any profits.

The last type of loan, which is provided by the International Finance Corporation (IFC), is the one that is allocated to well-studied investment projects, Tawfik noted, adding that the foreign debt is not as worrying as the national debt.

It is worth mentioning that the Minister of Investment and International Cooperation Sahar Nasr said that the government uses all of the foreign debt for projects that will create income to pay back the loans, emphasising that the government will not create any financial burdens for future  generations.

Foreign debt will reach a critical level 

Furthermore, the CBE stated that Egypt’s debts to the Paris Club fell to $3.423bn by the end of December 2016. The CBE pays about $1.5bn to the Paris Club in two instalments annually—in January and July of every year.

However, last month, Daily News Egypt asked the Governor of the CBE, Tarek Amer, whether the CBE can pay its owed foreign debt—worth about $13bn—in the current fiscal year (FY) 2017/2018, which he affirmed.

Amer seemed confident in the state’s ability to repay its foreign debt, pointing out that the CBE expects cash flows in foreign currency in the coming period, in addition to the current, strong reserve of foreign exchange, which would help Egypt repay its dues on time.

The CBE’s reserve of foreign exchange amounted to $26.5bn at the end of February 2016, according to Amer. This amount of reserve is very good and will be sufficient to repay the CBE’s dues, whether or not the bank received more foreign exchange.

According to the CBE, the net foreign investment increased by 29% in the fourth quarter of 2016 to reach $2.415bn at the end of December 2016, compared to $1.872bn at the end of September 2016.

The foreign exchange flowing into the Egyptian market reached $3.981bn in the fourth quarter of 2016, while outflows recorded $1.566bn.

The CBE announced that foreign investments in treasury bills increased to about EGP 10.157bn in December 2016, compared to EGP 7.797bn in November, while they jumped to about EGP 21.686bn by the end of January.

Foreign investors were the fourth largest investors in the Egyptian treasury bills before January 2011, recording about EGP 56bn in December 2010. These investments fell to less than EGP 200m before increasing again after the liberation of the local exchange rate on 3 November 2016.

The managing director of Multiples Group, Omar El-Shenety, has different—and rather worrying—thoughts regarding the increasing foreign debt.

He stated that the IMF expects that the foreign debt of Egypt will exceed $100bn by the year 2020, explaining that the IMF does not even take into consideration the loans provided to establish local projects and institutions, such as the nuclear reactor of Dabaa, the power plants of Siemens, and military equipment. He believes that during the near future, Egypt might fall into the trap of foreign debt, and it would easily exceed a rate of more that 150% of GDP, which is a very critical situation.

El-Shenety believes that the rates of public debt are not worrying; yet it will reach the critical zone no matter what, because foreign debt is going to reach more than 50%.

He explained that the types of loans Egypt received are different, because international bodies provide loans with low rates and other international bonds with high rates. However, the main problem is not about the rates as such, but more about how the government will find sources of foreign currencies to pay back the main loans along with their interests.

He believes that any country in the world usually plans to increase its GDP to the point where the debt looks small in comparison, which is not guaranteed in Egypt’s case because the growth in its GDP is only slowly increasing. He explained that Egypt expected a growth rate of 6% in FY 2017/2018, and then decreased that expectation to 4.6%, which is probably not going to happen in reality, due to many factors, such as the situation of tourism and the political turbulence of the region.

The current rate of the public debt compared to GDP is 130% now, without the loans of other national projects and institutions. According to the IMF, within three years, the rate will reach 150%, again without the other loans to fund the national projects and institutions—which probably will push the total amount to exceed 160-170%. This is a very high and dangerous rate, El-Shenety noted.

However, El-Shenety believes that the interest rate of the loans represents approximately 35% of the budget, which is very high. He added that the government is working to reduce subsidies.

The public debt is going to increase and, unfortunately, there are no other options because Egypt is committed to its deal with the IMF, which makes Egypt apply for more loans so that it does not have any sources to pay it back, he noted.

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Egyptian food retail market grows stronger despite challenges http://www.dailynewsegypt.com/2017/04/04/620835/ http://www.dailynewsegypt.com/2017/04/04/620835/#respond Tue, 04 Apr 2017 06:00:59 +0000 http://www.dailynewsegypt.com/?p=620835 Egypt continues to maintain its position as the Arab world’s largest consumer market. With an estimated 92 million citizens and one of the world’s fastest growing populations, the demand for food products will continue to grow. Although the country faced various economic challenges following the 2011 and 2013 regime changes and subsequent decreases in tourism …

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Egypt continues to maintain its position as the Arab world’s largest consumer market. With an estimated 92 million citizens and one of the world’s fastest growing populations, the demand for food products will continue to grow. Although the country faced various economic challenges following the 2011 and 2013 regime changes and subsequent decreases in tourism revenues, the economic reforms adopted in late 2016 are beginning to bear fruit and become more apparent over the course of 2017. Analysts expect an improvement in economic growth and an increase in purchasing power during the coming years, as well as increased disposable incomes, which in turn should translate into more demand for imported food products, according to the “2016 Annual Retail Foods Egypt” report published by the Global Agriculture Information Network (GAIN).

retail 1Egypt market trends

Since the formation of the Arab Republic of Egypt, a planned economy was maintained until the late 1970s, after which the different administrations made gradual market reforms. However, the state still plays a considerable role in the economy, as it continues to be one of the largest importers of many commodities, such as wheat, sugar, and oils, as well as an important vendor of subsidised food products.

Since 2011, political and regional instability have taken a significant toll on the Egyptian economy, much of which can be attributed to a decrease in tourism-related revenues. Egypt has been grappling with significant account deficits, which were counter-financed through foreign aid and loans. Throughout much of 2016, the authorities tried to manage the outflow of foreign currency by reducing imports through import restrictions and capital controls. Such measures had an impact on consumer behaviour, especially among low-income citizens.

Consequently, in order to correct the underlying structural issues of the Egyptian economy, the government adopted an economic reform programme aiming to improve Egypt’s public finances, which included the introduction of the value-added tax (VAT), the reduction of fuel subsidies, the flotation of the Egyptian pound, and the obtainment of loans from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme in the period between September and November 2016.

Such measures, in conjunction with a number of other policy shifts, have helped bolster investor confidence and reduce capital outflows.

However, inflation has increased as a result of the devaluation. Official estimates put inflation at 24.3% for 2016, which increased to 31.7% in February, compared to an inflation rate of 10.4 % reported in 2015.

retail 2Egypt’s retail food market overview

Despite the immediate inflationary pressures, the overall purchasing power is expected to increase, and with it, the ability to purchase imported food products. According to the Economist Intelligence Unit, food, beverage, and tobacco sales in 2016 were estimated at $92bn, or approximately $999 per person, and are expected to rise to $114bn by 2020, while the total retail food sales made up $70bn in 2015, but are forecast to rise to $98bn by 2020.

According to the report, the total value of retail food sales stood at close to EGP 226bn in 2016, in terms of retail food sales from local grocers, markets, supermarkets, and convenience stores—an increase of 11% from 2015. Private sector forecasts project a similar growth into 2017, with sales reaching EGP 250bn.

The report classified Egypt’s food retail sector into three main segments

By the end of 2017, food sales at supermarkets and hypermarkets are expected to have doubled from their 2011 levels. The growth in sales is accompanied by a large increase in the number of small-scale supermarket outlets, including the rapid expansion of Turkish retailer BIM, which started in 2014 with 46 stores and currently has 220 branches, and Egyptian Kazyon, which started at around the same time and now has 168 stores across Egypt.

However, despite the rapid growth, modern supermarket chains still account for less than 1% of the establishments and only 23% of the total sales in 2016; while the hypermarket segment remains small with a total of only 35 outlets operating in the country in 2016, which accounted for 4.5% of total retail sales.

The second segment, convenience stores, witnessed a strong growth in retail sales, with a notable increase of 21.5% in 2016, due to an increase in the number of outlets. The market has seen growth over recent years in stand-alone convenience stores (kiosks) and convenience stores associated with petrol stations—currently numbering 229 locations—and the number of locations is expected to grow by 10% in 2017. Exxon-Mobil is the leader in this sector, with 138 outlets, or 54.5% of the total.

Finally, the traditional small grocery stores and markets that dominate the Egyptian retail scene comprise around 97% of total retail food establishments and 70% of total sales. Their numbers are estimated to be around 116,000 across all governorates. Most of these stores are located in densely populated urban centres, and they include small grocery stores, butchers, fruit and vegetable markets, and bakers that supply subsidised bread. The segment’s main advantage is maintaining a loyal, neighbourhood customer base, as they are easily accessible and sometimes offer credit to local consumers. However, they are clearly constrained by retail and parking space and their inability to compete with larger retailers.

retail 3Market Outlook

The report cites that the retail grocery growth rate is forecast at 9%, and growth in the number of outlets at 1%. The highest growth rates are among modern retail chains, while on the other hand traditional grocery stores will continue to grow, but at slower rates. Analysts expect to see the larger supermarket chains continue to expand their market share at the expense of the traditional, small privately-owned grocery stores.

The main drivers behind the Egyptian retail sector’s growth are the growing young population and the gradually increasing purchasing power, which has been recovering from the impact of the political unrest in 2011 and 2013, registering an increase of 2.6% in 2015, which marks the highest rate since 2008.

Furthermore, the report indicates that as long as the political and economic situations remain stable, retail growth is expected to continue or increase. In the last two years, the government has consolidated political power and ensured a stable security environment within the population centres, which is positive for continued growth.

It is worth noting that the two largest retailers in 2016 were both newcomers to the Egyptian market.

The Turkish BIM and the local Kazyon stores have both registered massive growths since their initial start of operations in the Egyptian market.

retail 4Egypt’s food imports

Imported food products in the Egyptian retail market face heavy competition from domestic products. Egyptian snack producers fill much of the domestic demand for chips, crackers, and cookies, although imported brands are perceived as being of higher quality. Egypt produces a wide variety of horticulture products, most of which are sold in the domestic market as either fresh or processed products.

Furthermore, Egyptian meat production meets only approximately 60% of the domestic demand, while the remaining 40% are accounted for by imports. Despite growing milk output, Egypt still imports close to $1bn worth of dairy products annually. Domestic egg production covers almost all demand, while domestic poultry production meets about 90% of the demand, with US poultry products remaining blocked from the market. Egypt’s per capita consumption of chicken stands at about 11 kg/person, which is below the global average.

The report indicates that Egypt has trade agreements with the European Union, Arab countries (GAFTA), African Countries (COMESA), and Turkey, which allows these partners preferential treatment in the Egyptian market, while many US products face a competitive disadvantage to comparable products produced by suppliers from these countries. However, the US remains the most competitive in tree nuts and some beef products, most notably liver.

US exports to Egypt have noticeably decreased in recent years as a result of the strong US dollar, Egyptian capital controls throughout much of 2016, and stiff competition from the EU and others. In 2015, US exports of dairy products—excluding cheese—decreased by 65.6%, while US cheese exports decreased 90.4%, and apple imports decreased by 19.3% . These losses were generally offset by increased imports from the EU.

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The Egyptian real estate market: a future between skyrocketing prices and fear of recession http://www.dailynewsegypt.com/2017/03/30/620348/ http://www.dailynewsegypt.com/2017/03/30/620348/#respond Thu, 30 Mar 2017 09:00:21 +0000 http://www.dailynewsegypt.com/?p=620348 Daily News Egypt has obtained data from Aqarmap, the real estate search engine, regarding land prices in Greater Cairo

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Egypt has suffered for over half a decade from turbulences and uncertainty. Since the 25 January Revolution, the economy encountered numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages.

Consequently, to adopt an economic reform programme aiming to improve Egypt’s public finances, the authorities decided to introduce the value-added tax (VAT) law; raise the price of subsidised fuel; free-float the Egyptian pound; and obtain loans from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme in the period between September and November 2016.

The real estate sector was one of the of the most affected sectors after the Central Bank of Egypt’s (CBE) decision to float the pound on 3 November 2016, when it lost around 52% of its value as a consequence. This resulted in uncertainty and doubts in the real estate sector, leading both investors and owners to postpone their decision until the value of the pound stabilises.

Moreover, the currency devaluation greatly increased costs of raw materials, and this had a negative impact of investors’ cash flows. The extra costs were transferred to the end customer, resulting in huge price hikes. Yet, some real estate developers decided to either offer more flexible payment plans or more price-efficient designs, according to JLL’s “Cairo Real Estate” report.

Within a month from the currency flotation, the prices of real estate have spiked. Most real estate developers had increased their prices between 15 and 20%. However, a lot of Egyptians started to buy properties at the new prices with longer payment plans of between 5 and 7 years—some real estate developers, such as ARCO, even offered 10-to-12-year payment plans—as a result of the fear of more price increases in the future.

Consequently, various top-tier real estate developers’ new projects were sold out within a very short period. With the rising uncertainty about the value of the Egyptian pound, many Egyptians tend to consider the real estate sector a safe haven to invest their savings. The longer and more relaxed payment terms allowed people to conserve current prices since they are paying in instalments according to the contract they signed.

2According to Aqarmap, a real estate search engine, the average price per metre for New Cairo’s Fifth Settlement has risen from EGP 5,450 for apartments and EGP 11,550 for villas in November 2016, to reach EGP 6,250, and EGP 13,050 respectively in March 2017, which marks a 12-15% increase.

However, the average price year-on-year increase of 30% in Egyptian pounds was not enough to overcome the decrease in the value of the Egyptian pound as a result of the currency flotation. Average sales prices for both apartments and villas decreased significantly in US dollar terms.

On the other hand, the resale market took a completely different turn. Property owners started to realise they have to increase unit prices, as keeping the same pre-flotation prices would mean losing 55% of the value’s property in dollar terms.

As a result, various property owners doubled the price of their properties after the pound flotation; others calculated the value of their properties in dollar terms previous to the currency flotation and sold their properties at that price. However, buyers cannot afford these prices, as there was no increase in income or savings to fill the gap between the new and old prices.

Furthermore, the difference in expectations between sellers and buyers has led to the reduction of transaction within the market, with the exception of high end luxury properties, which maintained their prices in US dollars.

6.Age2016 was a very busy year for the real estate residential sector, as it witnessed the completion of several new projects across both 6th of October City and New Cairo. In 6th of October City, significant apartment sales were recorded in Ashgar City, Palm Parks, and October Park. In New Cairo, significant sales were recorded by TMG’s Rehab and Madinaty, Emaar’s Mivida, and SODIC’s East Town, according to JLL report.

Yet, rentals within the residential sector have shown more resilience towards currency flotation than sales prices. One of the reasons that could be attributed to this is that some units for rent are targeting foreigners, where asking prices are usually in US dollars—even though the exchange rate used is generally capped at a lower rate than the market rate.

In regards to the office sector, Q4 2016 has witnessed the completion of Majarrah Business Complex in 6th of October City, which added 17,000sqm to Cairo’s office supply. Post flotation, smaller companies have abandoned their plans to upgrade their office spaces and are considering relocating to areas with lower rents as a result of the spike.

The office market has also been significantly impacted. As most lease contracts were formally quoted in US dollars, rental prices have effectively doubled for office occupiers in terms of Egyptian pounds. However, vacancy rates remained unchanged throughout 2016, which represents a sign of limited office activity across the market. New Cairo kept its lead as the most desirable destination for office occupiers, while the activity witnessed in Q4 2016 in 6th of October was very limited. Vacancy rates in the office markets JLL monitored currently stand at 27% and are expected to increase as new supply is added to the market and demand remains at its current levels.

Moreover, because of the witnessed increase in office rent prices, in addition to the increased prices of raw materials, workers demanded higher wages. Companies now naturally face difficulties in paying their rents, which drove some landlords to agree on exchange rates that are below the actual market rate.

7.Family MembersOn a year-on-year basis, office rents stabilised—at least in US dollar terms—as the market is still adjusting to the current business conditions; however, New Cairo was the exception, as a 7% decrease was witnessed. A further lowering of office rent prices might occur during the medium term. A stronger demand could, however, be generated by improved business conditions as a result of the structural and economic reforms being introduced.

No additional retail space was completed in 2016 for the retail sector, leaving the stock at 1.3 million square metres. But in March 2017, the opening of Mall of Egypt took place—a project worth EGP 6bn. The opening of Madinaty’s Mega Mall has been postponed from Q1 2017 to 2018.

On the other hand, vacancy rates have marginally increased year-on-year in 2016 on the back of limited new completions, and are still expected to increase in the short term. While rents for prime units remained stable at $1,600 annually per square metre, the number of units that are being developed and can achieve this level is stagnating.

Further decline in the average price of rent is expected as a result of diminishing purchasing power. A possible recovery in the second half of 2017 is expected in case sufficient foreign currency is available and the adopted economic programme bears fruit.

According to the JLL report, rent to the retail sector was doubled, also quoted in US dollars. Retail tenants faced import restrictions and a diminished demand from customers as a result of the skyrocketing levels of inflation post flotation. Some mall developers have capped the exchange rate in order to alleviate pressures faced by retail tenants while other developers changed their quoting currency to EGP.

During 2016, 500 hotel rooms were added to Cairo’s hotel sector. The opening of the refurbished and rebranded Steigenberger in Tahrir Square, the St. Regis Cairo, and the Radisson Blu Nasr City have been delayed and are now scheduled to enter the market in the first half of 2017.

According to the report, to create value from more efficient operations rather than investing in new buildings during the current volatile business climate, it is forecast that older buildings will be renovated in the short term.

Although Cairo’s occupancy rate was being forecast to be high in Q1 2017 and has increased in comparison to 2016, a pronounced drop in hotel revenues per available room (RevPAR) is expected as a result of the devaluation of the Egyptian currency in November, according to Colliers International’s “The MENA Hotel Forecasts” February report.

9.Purchasing objectiveEven though occupancy rates are increasing, average daily rates (ADRs) did not increase at the same rates due to the current reliance of hotels on the local market, and a ceiling to price increases was established to attract visitors. Once travel bans are lifted and foreign tourists and currency begin to flow, ADRs are expected to increase.

The hotel and tourism industry is the sector of the market that should benefit the most from the currency flotation. Demand in this sector is expected to increase as visiting Egypt has now become 52% cheaper. This has helped increase occupancies in the hotel market. However, the travel ban imposed by Russia and the UK took a significant toll on tourism inflows, especially in Hurghada and Sharm El-Sheikh.

What’s next? 

JLL has released data on construction costs for different asset classes in Cairo, with this data collected from their growing project and development management teams. The devaluation of the pound has resulted in a major spike in construction costs in 2016, and this is expected to result in double-digit increases in tender price inflation over the next two years.

Furthermore, there is a higher risk of approaching a real estate bubble, following the current boom witnessed within the sector, as a result of the incredibly high profit margins, decreasing demand, and increasing prices, Samih Sawiris, head of Orascom Development Holding, told Daily News Egypt.

One of the main issues facing Egypt’s real estate resale market is the fact that it is still underdeveloped, and most property owners ask for the requested amount as an upfront payment. During the current environment of volatility and uncertainty, buyers will avoid paying large amounts of cash. As a result, buyers tend to buy new properties with long-payment plans.

If Egypt’s real estate market indicators are measured in Egyptian pounds, prices will show a general increase. Yet in US dollar terms, prices will show a decrease. The decrease, however, does not equal the 52% devaluation of the pound caused by the flotation in November but is slightly lower due to the value indicators’ increase in pounds.

In the near future, real estate market prices are forecast to increase further to match the value lost by the Egyptian pound and rising inflation. However, in US dollar terms, prices of real estate properties have witnessed a significant drop, and they are not expected to reach pre-devaluation levels. While in regards to the resale market, it is expected to take a few months to stabilise but will eventually increase by percentages comparable to the new sale market.

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Will Al-Sisi’s visit write a new chapter in Egyptian-American relations? http://www.dailynewsegypt.com/2017/03/30/620275/ http://www.dailynewsegypt.com/2017/03/30/620275/#respond Thu, 30 Mar 2017 06:00:12 +0000 http://www.dailynewsegypt.com/?p=620275 A special relationship between Egypt and the United States has been established in the wake of the 1973 war, as a result of late Egyptian president Anwar Al-Sadat’s decision to gradually shift from the Soviet camp, sign the 1979 Camp David peace treaty with Israel, and establish stronger ties with Washington in return for various …

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A special relationship between Egypt and the United States has been established in the wake of the 1973 war, as a result of late Egyptian president Anwar Al-Sadat’s decision to gradually shift from the Soviet camp, sign the 1979 Camp David peace treaty with Israel, and establish stronger ties with Washington in return for various kinds of support, whether economic, military, or political.

However, what was once a symbolic alliance, gradually deteriorated over the time, to a mere transactional relationship where the US provides Egypt with $1.3bn in military assistance, and $250m of economic aid. In 2013, following the ousting of former president Mohamed Morsi, Obama’s Administration decided to suspend the $1.3bn of military aid to Egypt and hold the delivery of ten Apache helicopters, in a step which wasI opposed by Israel and the American Israel Public Affairs Committee (AIPAC). Washington decided to deliver the Apaches in 2014, and to fully restore military aid in 2015.

With Donald Trump in office, a new chapter of American-Egyptian relations could be written, especially with the mutual understanding between the two leaders, as Al-Sisi was the first Arab leader to congratulate Trump on his election victory, and Trump announced that there is good chemistry between them when they met in New York while Trump was still on the campaign trail. Egypt, which has been plagued by economic and political turmoil, as well as security challenges following the 25 January Revolution that toppled former president Hosni Mubarak, could greatly benefit from stronger economic ties with the US.

Although Al-Sisi previously visited the US in 2014 and met with Obama at the UN General Assembly, this visit is the first working visit for an Egyptian president to the US since 2009. Different important issues are on the table, especially counter terrorism and the anti-Iran alliance that Trump is reportedly eager to form. Since the Trump administration came to power, Washington has reasserted the importance of Egypt-US ties. White House spokesman Sean Spicer said on 23 January that Trump was committed to providing military assistance to Egypt in support of the Egyptian army’s fight against terrorism.

egypt_graph_4Aspects of Egypt-US economic ties

Egypt’s trade and investment relationship with the United States has deepened over the last thirty years. Since that time, the two countries have sought ways to increase their economic and trade ties, notably through various partnerships and agreements. At the beginning of the 1990s, negotiations for a free trade agreement were a topic of discussion, but no comprehensive conclusions could be reached. Egypt and the US finalised a Trade and Investment Framework Agreement (TIFA) in 1999. After the failure to reach a bilateral agreement, the US shifted to giving regional trade agreements priority, such as the 2003 Middle East Free Trade Area initiative (MEFTA). It did, however, conclude free trade agreements with Israel, Jordan, Morocco, Bahrain, and Oman. Further FTA negotiations with the United Arab Emirates and Egypt were put on hold in 2005 and 2007 respectively.

The United States is one of Egypt’s largest single trading partners, with a volume of trade reaching $3.9bn in 2016, down from $6.3bn in 2015. Egypt’s exports to the US amounted to $1.3bn in 2015/2016, representing 7% of total Egyptian exports, while Egypt’s imports from the US totalled $2.6bn, equivalent to 4.6% of total imports during the same period.

A large portion of Egypt’s exports to the US comes from the Qualifying Industrial Zones (QIZ), which comprise around 45% of Egypt’s total exports to the US and about 2% of Egypt’s total exports. QIZ exports to the US amounted to $ 895.1m in 2015. The agreement between Egypt, the US, and Israel was signed in 2005, granting duty-free entry to the US for products jointly manufactured by Egypt and Israel. Originally, QIZ products had to have 11.7% of their content comprised of Israeli inputs in the form of labour and/or material, but as of January 2008, the minimum content requirement was reduced to 10.5%.

Furthermore, in 2015 Egypt and Israel agreed to double duty-free textile exports to the United States to $2bn in a 3 year period, in addition to planning the addition of other industrial sectors to the agreement, such as food and plastics, in order to contribute more to the Egyptian economy, according to Gabi Bar, the head of the Middle East desk at the Israeli Economy Ministry.

“Our QIZ agreement with Egypt keeps getting stronger,” Bar said recently.

“It was strong under the Mubarak administration, but surprisingly got even stronger when Mohamed Morsi took over Egypt’s leadership in 2012, and now with Al-Sisi leading the country, it continues to flourish,” according to Ohad Cohen, who heads the Foreign Trade Administration at the Israeli economy ministry, as reported by the “Times of Israel.”

Economics professor at Cairo University Fakhry El-Fekki believes that Trump’s administration will positively affect the agreements between Egypt and the US, especially regarding the QIZ. He added that the amendment and promotion of the agreement will encourage other companies from other countries to invest in the Egyptian market—such as China—in order to make use of the agreement’s privileges.

Moreover, the US foreign direct investments (FDI) in Egypt registered at $ 21.3bn in 2015, making up around 33.2% of US direct investment in Africa. Egypt’s Minister of Investment and International Cooperation Sahar Nasr announced on Tuesday that Egyptian authorities are looking forward to a new phase of Egyptian-American relations and aspire to achieve greater economic cooperation and more US investment.

egypt_graphs_1_2Prospects of stronger partnership

In the wake of the new age of terrorism, the ongoing battle against the Islamic State (IS) insurgency in Sinai, Iraq, and Syria. The importance of a stronger Egyptian-US relationship intensifies as counterterrorism is one of the most important issues for the new US administration, which could create common ground for deeper relations between both countries.

Anis Aclimandos, president of American Chamber of Commerce in Egypt (AmCham), expressed the importance of Al-Sisi’s visit to the United States in April.  He highlighted the importance of the summit between Al-Sisi and his American counterpart, Trump, in strengthening the Egyptian-American relations in all fields—in particular the political and economic ones.

He added that a delegation from the Egypt-US Business Council (EUSBC) and AmCham will take part in the visit to hold meetings with American investors and businesspeople. During the meetings, the Egyptian side will explain the economic circumstances in their country and the government’s efforts to improve the investment climate.

Moreover, US ambassador to Egypt Stephen Beecroft said the US will work with Egypt to confront ongoing problems in the coming period—particularly regarding the economy—pointing out that the US has provided Egypt with aid and investments worth $70bn since 1979.

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The deal of economics: Egypt needs Saudi oil, but for what price? http://www.dailynewsegypt.com/2017/03/28/620038/ http://www.dailynewsegypt.com/2017/03/28/620038/#respond Tue, 28 Mar 2017 06:00:56 +0000 http://www.dailynewsegypt.com/?p=620038 Experts believe the US role made the rich oil country resume its oil shipments

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Since the 3 July revolution that ousted the former Muslim Brotherhood-affiliated president, Mohamed Morsi, the Kingdom of Saudi Arabia has been one of the main supporters of the new regime headed by President Abdel Fattah Al-Sisi. Saudi King Salman bin Abdulaziz stated many times that the bilateral relations between Saudi and Egypt are powerful and strong. However, the past months have witnessed tensions between Egypt and Saudi Arabia, which happened after a dispute in the Security Council of the United Nations.

The oil-rich country notified the Egyptian government that oil shipments would be resumed, without clarifying the reason of suspending it or resuming it.

But what do the benefits of the deal between Aramco and the Egyptian government represent for Egypt and Saudi Arabia? And what was the Kingdom’s reason to freeze its shipments? And what is the reason for resuming them?

Aramco will resume oil product shipments to Egypt some six months after suddenly halting them
Aramco will resume oil product shipments to Egypt some six months after suddenly halting them

Daily News Egypt asked experts about their opinions, and they pointed out that it’s more of a political issue than an economic one.

The former dean of Economics and Political Science at Cairo University, Aliaa El-Mahdy, said that the deal is important to Egypt because it supports Egypt’s need of oil products to generate power and provide the market’s demand.

She added that the Egyptian side made deals with Libya and Iraq when Saudi Arabia froze its oil, yet the deals seem not to be equivalent to the Aramco deal, which provides easier ways of payment over many years, which currently helps Egypt due to its shortage of foreign currencies.

“If the Kingdom froze the shipments again, the government must announce the other options it might have,” El-Mahdy added. She explained that gas companies that work in Egypt announced many new gas discoveries, which are supposed to be enough to generate electricity for local demand.

It is worth mentioning that British Petroleum (BP) has made a gas discovery in the North Damietta Offshore Concession in Egypt’s East Nile Delta. BP said its third discovery in the area, according to Reuters.

The Katameya Shallow 1 exploration well was drilled to a total depth of 1,961 metres in a water depth of around 108 metres, the company said.

“This latest discovery confirms our belief that the Nile Delta is a world-class basin,” BP chief executive Bob Dudley said in a statement.

The well is 60 kilometres (37 miles) north of Damietta city in northern Egypt. BP has 100% equity in the discovery.

Additionally, Aramco will resume oil product shipments to Egypt some six months after suddenly halting them, the Egyptian Ministry of Petroleum said on Wednesday, signaling a potential thaw in relations after months of tension.

Saudi King Salman bin Abdulaziz stated many times that the bilateral relations between Saudi and Egypt are powerful and strong
Saudi King Salman bin Abdulaziz stated many times that the bilateral relations between Saudi and Egypt are powerful and strong

The ministry said in a statement that it was working with Aramco on a timetable for the resumption of shipments and that the reasons behind the October cutoff were purely commercial.

“It was agreed that the Saudi Arabian side would resume Aramco’s shipping of oil products as per the commercial contract signed between the Egyptian General Petroleum Corporation (EGPC) and Aramco,” the statement said.

It’s important to mention that on 7 November last year, Bloomberg published an article, stating that Saudi Arabian Oil Company halted shipments of oil products to Egypt indefinitely, forcing the Arab world’s most populous nation to buy fuel in world markets at higher costs.

“The state producer, known as Saudi Aramco, informed the Egyptian General Petroleum Corporation in early October that it would suspend supplies of refined oil products, leaving Egypt little choice but to resort to tenders for meeting local demand. It wasn’t clear at the time if the freeze was only for October. Aramco had agreed earlier this year to provide Egypt with 700,000 metric tonnes of refined products each month for five years, in an arrangement valued at about $23 billion,” the article read.

Egypt, which relies on imports to meet its energy needs, faces higher costs for gasoline and other oil products after the government decided to allow its currency to trade freely as a step towards stabilising an economy weakened by a dollar shortage. Tarek El Molla, the Egyptian oil minister, confirmed the indefinite suspension of Saudi fuel supplies on Sunday during a conference in Abu Dhabi, without giving reasons.

El-Mahdy stated that the Saudi side might get its benefits from the US or Egyptian side, because the political deals are usually done in the dark.

However, she stated that the deal won’t increase Egypt foreign debt, because the department of oil and electricity has its own profits, which would be used to repay Aramco.

However, Bloomberg’s article added, “this leaves Egypt in a very difficult position—the pound flotation means the government will have to pay much more for its imports, and now it has to go to the international markets to secure its gas oil and diesel supplies on much more difficult payment terms,” London-based Ehsan Ul-Haq, an oil-market analyst at KBC Energy Economics, said in a phone interview. “I don’t think Egypt will be able to get similar conditions from any other countries in the region.’’

State-owned EGPC has agreed to buy eight gas oil cargoes for November delivery to Alexandria, according to three traders with knowledge of the matter. Egypt also signed a memorandum of understanding to import crude from the State Oil Company of the Azerbaijan Republic—known as Socar—to supply its refineries, the oil ministry said on Thursday. The deal came after Egypt reached a deal with Iraq on 31 October to form joint ventures to produce oil and natural gas, the article read.

It seems that Egypt has other options, yet the Saudi deal is the best until now, according to the executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, who believes that the deal is very important to Egypt since it reduces the demand of foreign currencies due to the easier methods of payment, adding that Egypt needs every amount of money in the current bad situation.

Yet it is important for the Saudi company to guarantee that the shipments aren’t going to get frozen again.

Unofficial dispute happened when Egypt voted in favour of a Russian-backed—but Saudi-opposed—UN resolution on Syria in October, which excluded calls to stop bombing Aleppo
Unofficial dispute happened when Egypt voted in favour of a Russian-backed—but Saudi-opposed—UN resolution on Syria in October, which excluded calls to stop bombing Aleppo

Tawfik doesn’t believe that the disputes between the biggest Arab countries might affect the bilateral economic relations, explaining that both Saudi Arabia and Egypt have strong relations that face the ups and downs, yet don’t get into diplomatic incidents.

It is important to note that the unofficial dispute happened when Egypt voted in favour of a Russian-backed—but Saudi-opposed—UN resolution on Syria in October, which excluded calls to stop bombing Aleppo. Then, in January, an Egyptian court rejected a government plan to transfer two uninhabited Red Sea islands—Tiran and Sanafir—to Saudi Arabia.

According to an article issued by Reuters, Pharos Holding energy analyst Karim Ezzat said about the resumption of oil product shipments, “politically, it is a very positive step.”

“It’s not the nominal amount that you get as such, but really the investments, the backing, and the political backing, those are the most important sides,” he continued.

Egypt had turned to the spot market in recent months, but also sought similar deals to make up the shortfall. Crude oil from Iraq is expected to arrive in late March as part of an agreement for 1 million barrels per month.

Still, the Aramco deal, which includes a low 2% interest rate to be repaid over 15 years, was difficult to match at a time of low oil prices and fiscal belt-tightening.

From another viewpoint, the CEO of Multiples Group, Omar El-Shinity, believes that the problems are being fixed politically and getting better economically.

El-Shinity said that the deal is very important to Egypt because it helps improve the trade balance and reduce its deficit. He added that the inflows of foreign currencies would increase in the future, allowing Egypt to pay for the shipments.

He also believes that the tension is political, adding that the problem of the two Red Sea islands might be a part of the problem, along with the UN dispute.

Regarding Egypt’s other options, he said that the products and commodities are available, but the problem is about money and finances.

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Fish markets in Egypt: challenges and obstacles that threaten the vital industry http://www.dailynewsegypt.com/2017/03/16/fish-markets-egypt-challenges-obstacles-threaten-vital-industry/ http://www.dailynewsegypt.com/2017/03/16/fish-markets-egypt-challenges-obstacles-threaten-vital-industry/#respond Thu, 16 Mar 2017 06:00:54 +0000 http://www.dailynewsegypt.com/?p=618671 Egypt’s total fish production reached 1.53m tonnes in 2015, according to CAPMAS, yet the numbers are not quite accurate

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In its report about fish production in Egypt, which was issued on 20 February, the Central Agency for Public Mobilization and Statistics (CAPMAS) published the “2017 Annual Bulletin of Fish Production Statistics for 2015.”

The study showed that Egypt’s total fish production reached 1.53m tonnes in 2015, compared to 1.48m tonnes in 2014—an increase of 2.5%—due to a greater output of fish farms and rice fields.

According to CAPMAS, the total production of fish farms and rice fields ranked first, with 1.5m tonnes, followed by lake production with 171,500 tonnes, marine waters with 102,900 tonnes, and finally fresh water production with 69,700 tonnes.

The report added that the production of bony fish held the first place of total fish production at 1.5m tonnes (97.0%), crustaceans amounted to 18,600 tonnes (1.2%), other varieties of fish totalled 17,700 tonnes (1.2%), lung fish production recorded 5,900 tonnes (0.4%), and cartilaginous fish and molluscs reached 3,000 tonnes (0.2%).

Ahmed El-Said, who runs fish production farms, said that the governmental production of fish is not satisfying at all, adding that the new state-owned farms might increase the production of fish in Egypt if the government knows how to run it in a better way.

Ahmed El-Said, who runs fish production farms, said that the governmental production of fish is not satisfying at all, adding that the new state-owned farms might increase the production of fish in Egypt if the government knows how to run it in a better way. (Photo Handout to DNE)
Ahmed El-Said, who runs fish production farms, said that the governmental production of fish is not satisfying at all, adding that the new state-owned farms might increase the production of fish in Egypt if the government knows how to run it in a better way.
(Photo Handout to DNE)

The government’s role

He believes that if the government wants to increase fish outputs from the sea, it should provide more boats with refrigerators that preserve the fish while the boat is at sea, adding that if it wants to increase production from fish farms, it must establish good places for farms and provide cheaper feed that would increase the amount of produced fish at the end of the process, while reducing its price at the same time.

Regarding fish output from Egypt’s lakes, he stated that the government has to implement more cleaning processes and impose rules that prevent overfishing in order to raise Egypt’s production from lakes, adding that in past periods, the government did not make any effort to properly organise fishing from lakes.

He explained that the governmental production of fish is not good, because they are run by government employees, who—at the end of the day—do not care about the amount of production since their figures are not being controlled.

El-Said furthermore mentioned that the feed prices are currently high due to the flotation, which raised the price by almost 50%, which made it reach an average of EGP 8,000 per tonne of feed, which is enough to produce around 500-700kg of fish.

He stated that the government needs to help farmers to grow more feeding locally, including soy beans and corn, in order to reduce the amount of imports, hoping that would lead to cheaper prices of feed.

He explained that the imported components of the fish industry are the main determinant for the Egyptian market, since even the local suppliers raised their prices after flotation, taking advantage of the increase of prices of imported components.

On a different note, Koudijs Kapo Feed Company, which specialises in locally producing fish and animal feed, established a new feed factory in February, according to Alaa Kamar, a member of the company’s board of directors.

Kamar told Daily News Egypt that the cost of the company’s new factory in Borg El-Arab City is EGP 120m. Most of the costs was self-financed, while EGP 30m was financed by the Commercial International Bank (CIB), he noted.

He added that the new factory’s maximum production capacity is 150,000 tonnes annually, which is destined for the local market.

Kamar said that 15% of the components were local, while 85% were imported.

He believes that fish feed sales will grow by 10-12% during 2017, because of the current expansion in fish farming.

It is worth noting that Koudijs Kapo Feed was originally established by an Egyptian-Dutch partnership, with a 15,000sqm factory.

Kamar added that the poultry sector is being negatively affected by the spread of infections and diseases, which has become a problem due to the farms’ standard procedure of waste disposal.

He furthermore believes that the size of the Egyptian fish market will increase in the coming months.

The Egyptian market and the fishermen

Additionally, El-Said also believes that the market will get better in 2018, adding that the demand of fish is increasing due to the hikes in other protein sources’ prices, namely meat and chicken. Investors are also expanding their farms to increase the production in order to meet the demand, he noted.

However, the former Minister of Agriculture, Essam Fayed, announced in 2016 that total fish production stands at 1,481,882 tonnes annually, pointing out that the ministry has a plan to develop fisheries in Egypt by increasing fish production, as to meet the domestic consumption and compensate for the shortage of meat.

Fayed added in a press statement that this plan relies on the expansion of intensive aquaculture and marine hatchery, noting that the ministry has already established a fish hatchery at kilometre 21 of the Cairo-Alexandria-Matrouh road, financed by an Italian grant.

He continued, stating that another fish hatchery was created on the coast of Bardawil Lake for high-value fish at a cost of EGP 31m—in addition to 140 sea cages in Mariout Valley to produce 700 tonnes of fish.

Moreover, in order to increase the production, a fish farm was established in the New Valley governorate on an area of ​​25 feddans (25.95 acres)—using fresh water from wells—while another fish farm in South Sinai was built on an area of ​​three feddans (3.114 acres) for the production of tilapia. According to Fayed, Egypt ranks first in Africa and the Middle East in aquaculture for the production of tilapia.

El-Said believes that the government has no real account of the total production in Egypt, explaining that it is not possible for the government to count the true amount of production for many reasons.

He explained that the government cannot usually reach the right amounts of fish with fishers in order to know the accurate production of Egypt.

“95% of the fish farms are not legalized, and the government does not know anything about them,” El-Said noted.

The fishermen seem to be having a hard time under the current circumstances as well, due to the high prices of spare parts and the lower amounts of fish they catch.

A fisher in Port Said, Mohamed Sallam, said that his outdated boat is not enabling him to fish the same amounts that he used to get before.

He explained that the tools he uses in trawling have doubled in price, so he cannot afford to fix them currently.

He also stated that the government does not help the fishermen with anything, adding that if one of the fishers was injured, he would not have the money to afford treatment at the hospital; and the syndicate also does not provide enough aid to them either.

He stated that the government and the syndicate must understand how important the fishermen are, adding that they both have to cooperate to provide health insurance for the fishermen and for the people who provide cheap food to Egyptians. Also he called upon them to provide cheaper spare parts to help fishermen fix their boats and keep them working.

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FX is not only indicator for assessing economy: Arqam Capital http://www.dailynewsegypt.com/2017/03/13/618163/ http://www.dailynewsegypt.com/2017/03/13/618163/#respond Mon, 13 Mar 2017 06:30:01 +0000 http://www.dailynewsegypt.com/?p=618163 Most of the foreign exchange (FX) flows to banks are being directed to alleviating longstanding pressure on the corporate and household sectors to spur economic activity and reduce inflationary pressures, while meeting the demands of foreign companies and investors for repatriation. According to Arqam Capital’s report “The Devil in the FX” published in February, the …

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Most of the foreign exchange (FX) flows to banks are being directed to alleviating longstanding pressure on the corporate and household sectors to spur economic activity and reduce inflationary pressures, while meeting the demands of foreign companies and investors for repatriation.

According to Arqam Capital’s report “The Devil in the FX” published in February, the backlog of corporate dividends of around USD 200m is expected to be cleared, and caps on individuals’ transfers and importers’ deposits are to be lifted by June 2017, along with restrictions on individuals’ access to the FX by the year’s end—according to FX availability in banks.

The report indicates that the system is not fully funded yet. Since there are still some companies that report some unmet FX needs, individuals still need to provide documents for their FX needs and a corporate backlog still exists, although it is diminishing. However, three months after the Central Bank of Egypt’s (CBE) decision to free float the currency, a rise in FX flows, better repatriation, and a focus on getting the real economy working can be observed. Therefore it is time to focus on real flows and the economy, instead of just the FX.

The government will need to improve the restructuring to protect the less privileged from the negative impact of the reforms, especially future ones, while improving the investment climate to pave the way for the bigger,  longer term local and foreign direct investment, the report states.

Historically, Egyptians have treated the FX rate as the indicator of choice when evaluating the economy. The FX rate appreciated 16% from EGP 18.91 per USD on 19 January to EGP 15.84 per USD on 20 February. The report forecast that the uptick in the rate—which occurred on 22 February—to EGP 15.86 per USD could be a plateau before the rate reverses its direction as imports pick up towards Q2 due to seasonal factors (a prediction which came true with the FX rate of EGP 17.8 on 10 March).

devil official vs parallelThe report further examined the facts and indicators post flotation. First the CBE has reportedly cleared the pending FX financing for imported “essential goods” held up at different ports before flotation. The amount is undisclosed, along with what is left to finance imports of “non-essential goods,” although there is evidence that the latter has either been cleared as well, or is minimal at this point. Public statements had indicated $5bn was the commodities’ backlog at ports before November 2015 and which was cleared when the current CBE governor came to office at that time.

Secondly, the backlog of FX, which is estimated at about $ 400m, owed to investors attempting to exit the fixed income and equity markets in the past few months was cleared in early February, as confirmed by the CBE, some banks, and, more importantly, some major investors operating in the Egyptian market. Dividends of foreign companies operating in Egypt have shrunk in size as well, from around $400-500m to $150-200m and are expected to be processed by the banking sector by June.

Moreover, funds which multinational companies need to clear, arising from the intercompany transactions between the overseas headquarters and the company in Egypt, represent a significant bulk of the outstanding FX needs that are yet to be entirely covered by the banks, which is estimated to be between $1bn and $1.5bn.

The financing initiative—agreed on between the CBE and investors in February—will allow a significant bulk of outstanding FX loans by the corporate sector to be paid off by the CBE to banks to cover clients owing $5m or less, with the EGP equivalent being paid at an interest rate of 12%. The total outstanding corporate driven FX loans are estimated to be around USD 1.5bn.

On the other hand, FX flows to the banking sector from all sources have risen to $13.5bn since 3 November, which reflects the acceleration of FX inflows from fundamental sources, including remittances, tourism, and portfolio and equity investors. The banking sector has been able to provide $15bn for commercial transactions since the flotation on 3 November, compared to $71bn secured by the banking sector in the entire period from November 2015 to February 2017.

While the caps on individuals’ FX withdrawal and purchase limits have been raised, documentation still needs to be presented to prove the need for FX purchases. Upon submission of documents proving travel, medical billing, or tuition expenses, banks mostly fulfil clients’ FX needs—indicating an improvement in availability. Arqam Capital forecasts that once banks’ FX coffers are replenished and the remaining pending FX needs are fulfilled, the self-imposed FX limits by banks will be abolished. Sometime in late 2017, individuals will be able to request FX from their banks without the documentation restriction. According to the IMF report on the staff agreement with Egypt, the restriction on the documented transfer of $100,000 or above and the deposit cap of $ 50,000 by importers of non-essential products should also be lifted by June 2017.

In depth review of the real economy

The report continues to examine the economic indicators, such as the difference between the official and parallel FX, which has finally converged. However, the report indicated that the recent appreciation of the EGP was the result of increased FX inflows and a temporary drop in imports in January and February. A bounce back is forecast, followed by a slight depreciation in the coming month or two, as pressure builds up again with the rise in seasonal imports ahead of Easter and Ramadan, as well as for Umrah, which officially resumed recently.

Regarding the tourism sector, tourist arrivals bottomed in June 2016 in the absence of European tourists and Arab tourists from countries with banned flights, as well as the fasting month of Ramadan taking place. Prior to the downing of the Russian plane in October 2015 and the subsequent banning of flights from Russia and the UK, tourist arrivals registered at 909, 000, very close to the one million plus benchmark levels prior to the 2011 revolution. Russian tourists represented around 30-35% of total arrivals in Egypt, while UK tourists represented 8-10% of total tourism.

Afterwards, arrivals dropped to 364,000 in January 2016 and then started rising again thereafter with more tourism inflows from the Ukraine, Czech Republic, Arab and Asian countries, and some European countries, such as Germany and Italy. Recent data indicates a rise in tourists from 473,000 in September 2016 to 551,000 in December 2016, with evidence of higher spending averages per night, resulting in a rise in revenues from $510mn in Q4 FY16 to $826mn in Q2 FY17.

The 25.4% rise in December 2016 arrivals represented the highest witnessed rise in tourism inflows since November 2014, confirming the positive effect of the flotation on pricing. With the expected lifting of the Russian and UK flight bans sometime in 2017, tourist arrivals and revenues will continue to increase as pent up demand will trigger higher arrivals once the ban is lifted.

Moreover, remittances from Egyptians abroad have also been on the rise, from $3.9bn in Q2 of FY 2016 to $4.6bn in Q2 FY 2017, as a result of the restored confidence in the official FX market and the ceasing of illicit offshore activities due to the convergence of the official and parallel FX rates.

On the other hand, the manufacturing indices are reflecting an improvement in the production of food, textiles, chemicals, glass, bricks, and electrical appliances. In 2015, the FX crisis, inflation, and uncertainty took their toll on Egypt’s industrial sector, but that gradually started to change in 2016 following the economic events that took place. The overall manufacturing index reflects over 50% of total activity in each sector in Egypt.

devil tourismEgypt’s PMI index remained below the 50 point benchmark since September 2015, which implies a contraction in economic activities included in the index, the PMI bottomed out in November 2016 at 41.8 points, as businesses were in dire straits. However, it started to slowly improve in December and January 2017, registering 42.8 and 43.3 points respectively. Although prices and costs have been reportedly rising in recent months, exports of non-oil products were on the rise as well, reacting quickly to the more competitive pricing.

Moreover, while exports have not historically been very responsive to competitive pricing, that started to change following the flotation, when exports started inching up—rising from $1.6bn in September 2016 to $2.0bn in December.

On the other hand, imports registered negative annual growths of 30% and 11% in November and December 2016, respectively, following the spike in import costs. Imports dropped from $6.2bn in August 2016 to $4.4bn in December.

However, not all indicators reflect positive aspects of the flotation. High inflation and the ensuing higher poverty level—at least 30%—is unfortunately the harsh cost of the economic reforms. The lengthy delay in the implementation of major economic reforms magnified their impact on inflation, raising inflation to a 30 year high of 33% in February.

The report forecast that the annual headline inflation will remain at these elevated levels throughout 2017, as seasonal and one-off shocks (higher VAT, energy prices), coupled with a negative base effect, maintain high headline numbers.  An overall average of 28% in 2017 is expected, compared to 15% in 2016. Monthly inflation will be more indicative of inflationary pressures going forward, until headline figures start declining slowly in 2018.

The way forward

While the abovementioned indicators show some improvement in the real economy, Arqam believes that the environment in which corporations and consumers alike are operating is deeply challenging. Both sectors are recalibrating their behaviour to better suit the short term volatility and a new more flexible system overall in different economic systems (taxes, customs, etc.).

Therefore the greater burden now falls on the government to pick up the pace as well to cope with the structural change that has occurred in Egypt. Consumption growth will decline in the short term until wage growth and savings/transfer flows pick up and inflationary pressures decline. Corporations will attempt to squeeze costs and secure their rising working capital needs, and both sectors need a revamped playing field to support their morphing exercise.

The report concludes that the government needs to restructure subsidies to better target the poor, while increasing efficient spending on public services and goods for the less privileged. The government also needs to finalise essential regulations, like the investment law and changes to tax laws, industrial laws, and their likes in order to create a better environment for the private sector to overcome the shock therapy it experienced in 2016. Targeted sectoral changes with an improved regulatory environment will attract more investment going forward.

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Egypt’s new “restructuring, pre-insolvency conciliation, and bankruptcy” bill http://www.dailynewsegypt.com/2017/03/12/617998/ http://www.dailynewsegypt.com/2017/03/12/617998/#respond Sun, 12 Mar 2017 09:30:06 +0000 http://www.dailynewsegypt.com/?p=617998 Federation of Egyptian Banks prepares a note of its remarks on the bill, which will be sent to the CBE and the legislative committee of the Ministry of Justice

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The Federation of Egyptian Banks (FEB) prepared a note of its remarks on the new “restructuring, pre-insolvency conciliation, and bankruptcy” bill. This will be sent to the Central Bank of Egypt (CBE), which, in turn, will send it to the legislative committee of the Ministry of Justice, a senior official told Daily News Egypt.

The source explained that the Ministry of Justice had already sent a copy of the bill to the CBE in February, before it was sent to the FEB for review.

The FEB called for banks’ officials to hold extensive meetings to study the bill. Several meetings have been held already by banks’ legal affairs officials under the umbrella of Egypt’s legal technical committee, most recently on Monday.

According to the source, this law is very important for the economic life in Egypt, as well as for both Egyptian and foreign investors.

The bill, of which Daily News Egypt obtained a copy, has 264 articles regulating restructuring, pre-insolvency conciliation, and bankruptcy procedures.

The provisions of this bill shall be imposed on all traders—whether on an individual or a corporate level—except for joint ventures, public sector companies, and public business sector companies. This is in accordance with the definition provided in law No. 17 of 1999 on commerce.

Regarding the bankruptcy procedures, the bill stipulates that each economic court shall establish a bankruptcy department to manage mediation procedures in the restructuring, pre-insolvency conciliation, and bankruptcy requests.

The bill stipulates that if a settlement of the dispute was reached, the parties in question shall sign a settlement agreement that shows details of the agreement and the mediation procedures. The bankruptcy judge shall approve the agreement and end the request. This agreement shall have executive power. If the disputed parties could not reach an agreement, the judge shall refer the request to the specialised court. If the applicant did not attend before the bankruptcy judge for two consecutive sessions, the judge shall save the request.

According to the bill, the bankruptcy verdicts are final and could not be challenged, unless the law mentions something else.

The economic courts are obliged by the bill to use bankruptcy management experts—among others—who assist the judges. Those experts should include members of restructuring and asset management companies. Additionally, there will be representatives from the ministries of finance, manpower, investment, trade, and industry, as well as representatives from the CBE, the General Authority for Investment and Free Zones (GAFI), the Egyptian Financial Supervisory Authority (EFSA), the Egyptian Exchange, the Federation of Egyptian Industries (FEI), and the Federation of Egyptian Chambers of Commerce (FEDCOC).

The bill regulates the restructuring operations, where each trader with a minimum capital of EGP 1m who did not commit fraud is entitled to request the restructuring of the company. It also prohibits the restructuring of companies in liquidation. It is also not permissible for companies to request restructuring if the court announced the company’s bankruptcy or during the beginning of the pre-insolvency conciliation.

According to the bill, the restructuring aims to develop a plan to reorganise the financial and administrative affairs of the trader. It also includes the procedures of ending the company’s financial turmoil and paying its debts, as well as suggesting funding sources, including re-evaluating assets, restructuring debts, increasing capital, increasing internal cash flows, reducing external flows, and restructuring administration.

The company owner shall provide the restructuring request in which they state the reasons for and the date of financial turmoil, as well as the previous measures taken to avoid it or treat its effects. They must also provide suggestion to solve the crisis at hand.

The restructuring commission shall provide its report to the judge specialised in bankruptcy cases within three months, stating its opinion about the reason for the business disruption and the feasibility of restructuring as well as the proposed plan. The preparation of the plan can be extended for more than three months with the permission of the judge, on the condition of implementing it in a period of no more than five years.

The bill allows traders or company owners to continue their management of the assets throughout the restructuring period. They would also be responsible for the company’s obligation and previous or future contracts since the date of adoption of the restructuring plan. However, owners should not engage in any conduct that affects the interests of their creditors.

According to this bill, traders or companies that did not commit fraud are entitled to request a pre-insolvency conciliation, in case the business experienced any trouble that prevents it from paying its debts. However, the pre-insolvency conciliation request is not allowed in case the company was in liquidation.

The bill obliges creditors to provide documents of the debts of the court on certain dates; otherwise, they will not be allowed to engage in the conciliation proceedings. The same case applies to creditors whose debts have been rejected.

According to the bill, the conciliation requires the approval of the majority of creditors whose debts were accepted, on the condition that they seize two-thirds of the value of these debts.

If the company requesting conciliation has issued bonds or financing instruments worth more than one-third of its total debt, the conciliation would not be allowed unless the general assembly of the owners of these bonds approved this step.

The bill allows for the pre-insolvency conciliation to give debtors deadlines to pay their debt or interest, and also allows debtors to be exempted from a part of the debt or interest.

According to the bill, the pre-insolvency conciliation will be invalid should the debtor be convicted of fraud after the ratification of the conciliation. It includes hiding money or debt or deliberately exaggerating the value of the debt. The creditors must request the cancellation of the pre-insolvency conciliation within six months since the day they discover the fraud, or else their demand will be unacceptable.

According to the bill, the bankruptcy may be declared upon the request of the same trader or the request of a creditor or the prosecution. It also may be declared after the trader’s death or retirement from trade or when they stopped paying their debts. The bankruptcy request must be submitted within a year after the death of the trader or the date of removing their name from the commercial record.

According to the bill, traders must request their bankruptcy within 15 days from the date they stopped payment, through presenting an application to the bankruptcy department in economic courts. They must also state the reasons for stopping the payment. The bankruptcy request shall be rejected in case the trader stopped paying criminal fines, taxes, fees, or social insurance.

In the case of bankruptcy, the specialised court has the right to take the necessary steps to preserve the debtor’s funds or manage them for a renewable period of three months, until the lawsuit is closed. It also has the right to take any necessary measures to identify the financial situation of the debtor and the reasons for stopping payment.

Any interested party, except those who have been convicted, can object the declaration of bankruptcy from the court that issued it within 30 days from the date of its publication in newspapers—unless they have it challenged in the appeal court, where they can present their objection to the court trying the appeal.

The bill allows the specialised court to ban the trader who is bankrupt from leaving the country for a renewable period of up to six months, if they harm the rights of creditors. The trader can then challenge the travel ban; however, this challenge will not stop it from being implemented. The court can decide to cancel the travel ban at any time.

According to this law, whoever is convicted of criminal bankruptcy shall be banned from exercising political rights or running for parliament or local council for a period of six years since the date of the sentence. This ban shall be nullified if the trader was rehabilitated or the court suspended the execution of the sentence.

Traders that have gone bankrupt and have not been rehabilitated shall be banned from joining commercial or industrial chambers, unions, or professional associations. They are also not allowed to become managers or board of director members of any company nor engage in banking, business agencies, export or import, securities brokering, or auctions (whether buying or selling).

Those who are bankrupt shall be banned from the management of their own assets, including funds gained on the same day of bankruptcy or after that.

The bill obliges creditors to hand over the original documents of their debts, accompanied by a statement of these debts and their value in the local currency at the exchange rate declared by the CBE—according to the sale, closure, remittance, or banknote prices—if there was no price on remittances on the day of declaring bankruptcy.

With respect to the bankruptcy of a company, the bill stipulates that any company established based on the Companies Law that has stopped paying its debt due to financial disruption shall be considered bankrupt. The court must then declare the company’s bankruptcy, even if it was during liquidation.

The legal representative of the company is not allowed to request bankruptcy only after obtaining permission from a majority of the partners or of the general assembly.

The bill permits the court to order on its own, or at the company’s request, the delay of declaring bankruptcy for a maximum period of three months, if the company is likely to support its financial position or if the delay serves the interest of the national economy. The court may accordingly take the necessary measures to preserve the assets of the company.

If the court declares the bankruptcy of a company, it shall also declare the bankruptcy of all its partners. The court may also declare the bankruptcy of every person who used the company for their own interest and made use of the company’s money as if it were their own. The declaration of the company and its partners’ bankruptcy shall be issued in one judgment, even if the court was not competent in trying the bankruptcy of these partners.

If the company’s assets were not sufficient to pay at least 20% of the debt, the court would oblige the members of the board of directors or managers of the company to pay its debts or part of them, unless they prove that they were keen in the management of the affairs of the company.

According to this bill, the legal representative of the company can submit proposals to reconcile with creditors. If the company requesting conciliation has issued bonds or financing instruments worth more than one-third of its total debt, the conciliation would not be allowed unless the general assembly of the owners of these bonds approved this step.

With regard to rehabilitation of those sentenced to bankruptcy, they shall restore all their rights after three years of the end of bankruptcy, except in the case of fraud.

The court is obliged to rehabilitate those sentenced to bankruptcy, even before the end of the three-year period, if they paid all their debts including the expenses and revenues for a period of up to two years. If the person in question has gone bankrupt and was a partner in the governance of another company that has also been bankrupt, that person would not be rehabilitated unless they paid all the company’s debts, including the expenses and revenues for a maximum period of two years.

The court is obliged to rehabilitate those sentenced to bankruptcy, even before the end of the three-year period, if the person has reconciled with their creditors and implemented its conditions; if they proved that the creditors have discharged them from all debts; or if they unanimously agreed to approve the rehabilitation.

According to the bill, those in bankruptcy who have not been convicted in one of the bankruptcy crimes of negligence shall not be rehabilitated, unless they implemented the punishment or have been exempted. According to the bill, those who are bankrupt, who were convicted in one of the bankruptcy crimes of fraud, shall be rehabilitated only after five years from the date of implementing the punishment or since the date of exemption.

According to the provisions of this bill, any trader who stops paying their debts is considered in bankruptcy fraud if they concealed or destroyed their company’s documents or hid part of their money to harm creditors.

The trader is charged of bankruptcy negligence if they contributed to the loss of their creditors because of negligence in their personal or home expenses, if they spent large sums of money in gambling or any fake work, if they bought goods and deliberately sold them for less to delay their bankruptcy and improve their financial situation, or if they borrowed funds or issued securities or used other ways which led to severe losses only to delay his bankruptcy.

Those convicted of bankruptcy fraud and those who have participated in the issue shall be sentenced to 3-5 years in prison and shall be fined between EGP 50,000 and EGP 500,000, while those convicted of bankruptcy negligence, shall be fined EGP 50,000 to EGP 200,000.

According to this bill, the members of the board of directors and managers of a company that has gone bankrupt shall face the penalties prescribed for bankruptcy fraud, in case it was proven that they contributed to the company’s bankruptcy by fraud, or caused the halt of the company through hiding the truth about the subscribed or paid capital, or through distributing fake profits or fraudulently taking sums of money for themselves more than authorised by the company’s contract.

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The future of product prices is unpredictable http://www.dailynewsegypt.com/2017/03/09/617727/ http://www.dailynewsegypt.com/2017/03/09/617727/#respond Thu, 09 Mar 2017 06:00:45 +0000 http://www.dailynewsegypt.com/?p=617727 Experts, businesspeople, and investors remain unsure about whether the prices will be hiking or dropping in the future

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Since the pound floatation, which was implemented last November, the price of almost every product, component, or service has increased because of the low price of the Egyptian pound alongside many other factors.

The price of the Egyptian pound has sharply decreased against foreign currencies, as it reached more than EGP 19 per US dollar immediately after the flotation.

However—continuing its volatility—the value of the pound increased again, which led the government to set the customs price of the US dollar to EGP15.75.

The decision made some manufacturing companies, importers, and dealers reduce the prices of their products, while others chose to raise their prices in spite of the new value of the pound.

The price of poultry has increased EGP 2 for the kilogram, which reached EGP 20, mainly due to the higher input costs of feeding as well as lower production rates because of widespread diseases in the winter.

Poultry feed has reached EGP 4,000 per tonne of corn and EGP 8,100 per tonne of soy beans.

Concerning building materials, the price of steel has also increased to record EGP 9,150-10,000 per tonne, which affects the price of housing units.

In the smart phone sector, Samsung reduced the prices of its mobile phones for the second consecutive time, at a ratio between 3% and 5.6% at the beginning of March. The price of the Piton declined from EGP 420 to EGP 400, a reduction of 4.8%, according to a price list obtained by Daily News Egypt. Moreover, the price of iPhones declined by 3% in February according to the new price list of Apple products.

The prices of Samsung televisions also saw drops in February by 3.9-8.1% as part of a plan to expand in the Egyptian market and acquire a larger share.

Regarding the automotive market, car prices have witnessed hikes that made them unaffordable for many Egyptians.

And since the value of the pound is likely to witness drops again in the next few days after it reached more than EGP 17 per US dollar, economic experts and businesspeople are left guessing about what is going to happen about the prices next; yet they believe that the informal market for foreign currencies is rising again.

Aliaa El-Mahdy, the dean of the College of Economics and Political Science at Cairo University, stated that the current situations of ups and downs for the US dollar would go on for a while.

She added that the exchange rate’s instability in the next period will continue because of the natural mechanism of supply and demand, explaining that this in itself is not worrying and a normal thing in any free market.

Regarding the product prices, El-Mahdy said that prices would soon drop, because the government reduced the customs dollar rate for importers. She furthermore stated that this is a good thing and that it would be wise if the government kept it stable at its current price of EGP 15.75.

“I was talking to a banking official (not the governor of the Central Bank of Egypt), and he stated that the banks are providing foreign currency to any investor who asks for it,” El-Mahdy noted regarding the possibility of another rise of the informal market—something which is not going to happen in her opinion.

The managing director at Multiples Group, Omar El-Shinity, believes that the price of the US dollar will remain unstable in the near future, stating it could reach EGP 18.5 before it drops back again to EGP15.75.

He said that after the flotation, companies expected the dollar price to hike to EGP 25 and adjusted their prices accordingly, again reducing them after it started dropping—assuming that the fair price for the pound would be between EGP 16 and 18.5.

“I believe that local companies will not easily reduce their prices, because the US dollar is one of many factors that affect the price, including factors such as customs restrictions, the value added tax, and inflation,” El-Shinity noted.

Regarding the informal foreign currencies market, he stated that the informal market is coming back to life due to a lack of supply by the Central Bank of Egypt (CBE) and the banking sector that occurred after the customs US dollar rate was lowered.

El-Shinity believes that the government might raise the customs dollar rate again because they reduced it rather sharply, but he thinks that the government must keep it stable for the next three months in order to stabilise the market.

From another view point, head of Middle East for Clothes company, Abdel Ghany El-Abasiry, estimated that the prices of products will reduce, but that this would take time, explaining that manufacturers and investors bought their components at high prices when the dollar stood at EGP 19. He explained that it takes time for them to import new components at the new lower prices.

He added that the price of textile products would decrease by around 8-10%, probably within the next 15 days.

“The government has to provide US dollars, because the return of the informal market is a negative sign,” he noted.

Furthermore, the head of the Investors Association for 15th of May City, Fouad Amin, said that prices are unlikely to decline soon.

He believes that the exchange rate could rise again, which would affect the price due to the state of instability that the exchange rate is witnessing.

He added that the return of the informal market is the natural result of banks being ignorant regarding investors’ needs for foreign currency.

He believes that the lower price of the US dollar is not going to remain this low for a long time, explaining that there is a lack of sources for foreign currency in Egypt. However, prices might reduce if the exchange rate stays at EGP 16 for some time, he noted.

Moreover, the head of Badr City’s Businessmen Association, Bahaa El-Adly, said that prices of products may remain at their current level until the prices of foreign currencies stabilise.

He added that producers would not reduce prices immediately, because there still is demand, adding that once the market is sated, prices would decrease too.

El-Adly stated that no investor will reduce the price, unless he is certain about the stability of the exchange rate.

From another direction, a source at the Arabian Food Industries Company (Domty) said that his company will move its prices in accordance with drops in the exchange rate and a certain amount of stability. The source, who preferred to remain anonymous, added that the company will lower its prices only if the exchange rate remains low and does not hike once again. He noted that the company will reconsider its price lists in the two coming months.

The source explained that the company did not raise its prices significantly during the dollar exchange rate hike following the flotation.

He said that a lower exchange rate will not impact prices immediately, as distributors and traders have a stock of high-cost products, noting that prices may go down in a few months when the official price of the greenback at customs stays low or drops further.

Moreover, the deputy chairperson of Obour Land, Ashraf Hamed, told Daily News Egypt that his company does not intend to raise prices again since the pound strengthened to EGP 16 against the USD, adding that it will cut the prices by 15% if the exchange rate stabilises at EGP 15.

Hamed pointed out that the strong competition, both at the level of distributors and companies, will push the prices down if costs decline, also saying that “it is naïve to expect lower prices according to a lower intraday exchange rate,” he stressed.

He explained that the company did not raise prices at the same level as their own costs have risen.

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The chances and opportunities of the chancellor’s visit to Egypt http://www.dailynewsegypt.com/2017/03/02/616880/ http://www.dailynewsegypt.com/2017/03/02/616880/#respond Thu, 02 Mar 2017 06:00:09 +0000 http://www.dailynewsegypt.com/?p=616880 The chancellor of Germany, Angela Merkel, is paying a two-day visit to Egypt on Thursday, to discuss several political and economic issues between Egypt and the most powerful industrial country in the European Union. Throughout the visit, it is scheduled for Merkal to meet Egyptian President Abdel Fattah Al-Sisi, the Grand Imam of al-Azhar, Ahmed …

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The chancellor of Germany, Angela Merkel, is paying a two-day visit to Egypt on Thursday, to discuss several political and economic issues between Egypt and the most powerful industrial country in the European Union.

Throughout the visit, it is scheduled for Merkal to meet Egyptian President Abdel Fattah Al-Sisi, the Grand Imam of al-Azhar, Ahmed Al-Tayeb, and the Coptic patriarch, Pope Tawadros II. Meetings between German and Egyptian businesspeople will also take place during the visit, according to a press statement issued by the German embassy in Egypt.

However, the relationship between Egypt and Germany witnessed ups and downs since the 25 January revolution, especially after the ouster of former president Mohamed Morsi in 2013.

Egypt expects many things from the visit, such as attracting further investments from the industrial stronghold of Europe
Egypt expects many things from the visit, such as attracting further investments from the industrial stronghold of Europe

Under Al-Sisi, Egypt relied on German energy company Siemens to establish three power plants with a turnkey system in Beni Suef, Borollos, and the New Administrative Capital with a capacity of 14,400 MW, worth €8bn for both gas and wind plants.

It’s worth to mention that Al-Sisi paid a visit to Germany in June 2015, with the scheduled visit of Merkel to Egypt being her third to the country but her first one since 2009.

Egypt expects many things from the visit, such as attracting further investments from the industrial stronghold of Europe. The German chancellor is planning to discuss regional and national problems concerning refugees, the crisis in Libya, and the situation of German institutions in Egypt.

Daily News Egypt asked experts about how Egypt could benefit from the visit, and how it might affect the bilateral relationship.

The head of risk management at the Egyptian Exchange, Medhat Nafei, stated that Egypt has many fields that need reimbursement from Germany to attract more investments.

He explained that the value of German investments in Egypt is fair if compared to any other non-petroleum related investment by any other country.

The value of German investments in Egypt reached $619.3m, with a total number of 1029 companies. This ranks Germany as the 20th largest investor in Egypt.

President Abdel Fattah Al-Sisi and Merkel will witness the inauguration of the first phase of the three Siemens power plants in Beni Suef, Borollos, and the New Administrative Capital, to add 4,800MW
President Abdel Fattah Al-Sisi and Merkel will witness the inauguration of the first phase of the three Siemens power plants in Beni Suef, Borollos, and the New Administrative Capital, to add 4,800MW

Nafei stated that the United Kingdom for example has a lot of petroleum-related investments that have a high value, which makes it the biggest investor in Egypt.

He said that “Egypt has the opportunity to attract great investments in renewable energy—mainly in the solar energy sector—which could raise German investments and create many job opportunities.”

“Egypt and Germany have also cooperated in the field of training Egyptian workers for many years until now,” he noted.

Egypt also could provide Germany the opportunity to establish a German economic area in the Suez Canal Economic Zone, which might increase German exports to all nearby countries.

He emphasised that Merkel would hold meetings that would boost investments in both countries, adding that leaders such as Merkel do not waste time in ineffective meetings.

“Unfortunately, Egypt has a huge trade deficit with Germany,” he mentioned. “Egypt has the opportunity to export many products and raw material to Germany, which could reduce the trade deficit between both countries.“

As for political support, Nafei claimed that Egypt does not need political support anymore since the recent security issues have come to an end.

The European castle

The business and investment website Investopedia.com published an article about Germany on 15 April 2015, saying that over the last 15 years Germany has been widely viewed as the economic catalyst and stabiliser for its fellow European Union states.

The article stated that even after the 2008 financial crisis, the German economy was able to bounce back more quickly than neighbouring euro zone states.

“Despite a number of post-crisis reforms, EU countries continue to suffer due to lack of global competitiveness. Greece, in particular, is in dire straits and continues to leverage the support of the European Central Bank and fellow euro zone states to avoid financial collapse”, the article read.

Investopedia wrote that until the date of publishing, Germany had borrowed Greece €56bn.

About the possibility of getting economic aid, Nafei believes that Egypt is not like Greece, adding that Germany protects it due to its membership in the European Union—fundamentally different to Egypt.

He believes that Germany has also provided aid to Egypt in the field of establishing power plants by allowing easier ways of payment.

 

Egyptian-German economic relations

The website of the German ministry of foreign affairs, auswaertiges-amt.de, says that Germany and Egypt enjoy close economic relations, especially in the area of trade.

It stated that in 2015, bilateral trade grew by approximately 20% compared to the previous year, now worth EUR 5.2bn.

However, it added that Egypt’s economic and investment climate has developed positively since mid-2013 but is still not favourable, especially for small and medium-sized enterprises (SMEs) due to the existence of a wide range of bureaucratic hurdles.

“The Egyptian government’s economic policy currently focuses on extensive infrastructure projects, such as developing the Suez Canal area, road and housing construction, increasing electricity production, and land reclamation. Positive impetus is also evident in the property sector, manufacturing, and the food industry,” the ministry’s website noted.

Managing director at Multiples Group, Omar El-Shinity, believes that this visit will be beneficial for both countries regarding both, economics and politics.

He believes that one of the top priorities for Germany is to make sure that the important deal between the government and Siemens would follow through.

He said that after the International Monetary Fund’s loan of $12bn, it made Egypt review the deal and tried to stop it, due to its high value.

El- Shinity stated that the Siemens deal is very important to Germany.

As for attracting investments, he believes that German investments are very modest due to their low value. However, he added, what’s beneficial for Egypt is the positive picture of the relationship with the European Union that would become even better after this visit, which could allow the country to attract more European investments in the future.

He explained that German investors are not willing to risk entering a market that is currently recovering, adding that German companies are specialising in industrial endeavours, therefore the visit might not increase the German investments in Egypt.

From another perspective, El-Shinity believes that Germany views Egypt as a main consumer of  German products, especially in the current period that is already witnessing slow growth for a lot of European countries.

Germany would simply focus on exporting many industrial products to Egypt instead of investing in it.

He believes that the deal with Siemens is designed to open a new path towards the EU, rather than just a deal to increase Egypt’s capacity of energy.

 

 

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Currency flotation is paying off as foreign flows drive foreign-exchange stabilisation: EFG Hermes http://www.dailynewsegypt.com/2017/03/01/616703/ http://www.dailynewsegypt.com/2017/03/01/616703/#respond Wed, 01 Mar 2017 06:00:50 +0000 http://www.dailynewsegypt.com/?p=616703 Squeezed by turbulence and uncertainty since 2011, Egypt’s economy encountered numerous challenges, such as the prolonged political transition that led to the build-up of macroeconomic imbalances. The government decided to adopt an economic reform programme—backed by the International Monetary Fund (IMF)—which included the introduction of the value-added tax (VAT) law, the reduction of fuel subsidies, …

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Squeezed by turbulence and uncertainty since 2011, Egypt’s economy encountered numerous challenges, such as the prolonged political transition that led to the build-up of macroeconomic imbalances. The government decided to adopt an economic reform programme—backed by the International Monetary Fund (IMF)—which included the introduction of the value-added tax (VAT) law, the reduction of fuel subsidies, and the liberalisation of the foreign exchange market, which took place in November.

Three months after the Central Bank of Egypt’s (CBE) decision to free-float the Egyptian pound in November, improving external flows are driving stabilisation in the foreign exchange (FX) market, spearheaded by the successful Eurobond issuance, which has encouraged carry trade investors, who have now invested more than $2bn in T-bills since the float, according to the CBE. The ensuing USD-EGP appreciation over the past couple of weeks that came after the currency stabilised at a trading range of EGP 18-19 for nearly two months, in addition to narrowing bid-ask spreads, all point to a more healthy and efficient market, according to EFG Hermes’ “Egypt Economic Update” report published in February.

EFG Hermes forecasts limited risks of the Egyptian pound weakening beyond this range in the medium term and expected a trading range of EGP 16-17 by the end of 2017. The report mentions that the magnitude of the appreciation could have been larger had it not been for the fact that most portfolio flows were neutralised by flowing through the CBE repatriation mechanism. The report added that the recent EGP appreciation is likely to be counterbalanced in the short term by remaining backlogs, pent up demand for FX, and removing remaining capital control in June. Key risks for further appreciation are mainly more portfolio inflows outside of the repatriation mechanism and tourism recovery.

In regards to receiving the second tranche of the IMF loan, the report explains that authorities have largely met the various monetary, fiscal, and reserves targets to receive the second tranche of the IMF loan. They believe this will further boost confidence. However, longer-term fiscal targets remain to be challenging, given the larger than expected devaluation. As such, it is forecasted that such targets would be subjected to some revision when the IMF visits Cairo for a first review.

EFG 1Economy still absorbing shock

According to the report, interim data point to a typical post-float oscillation between slowing domestic demand and improved external ones. For instance, automobile sales collapsed to a more than three-year low in November, which highlights the shock to consumer spending. Yet, a small export base is likely to limit the immediate spillover of improved exports on the broader economy, especially as tourism continues to suffer as a result of the Russian travel ban.

Economy is on the path to stability

Three months following the CBE’s decision to liberalise the foreign exchange market, the Egyptian pound slowly moved in its stabilisation path as inflows improved and backlogs gradually cleared. The currency is finding a stable trading range between EGP 17-19 against the US dollar, with spreads between bid ask prices narrowing, which signals improvements of market conditions. While the banking sector was successful in attracting strong inflows within the same period, driven by de-dollarisation and migration of liquidity into official channels. According to a previous CBE statement, total inflows into the banking sector stood at $9bn in the three months leading up to January, with a normalised running rate of $2bn a month.

On the other hand, with regard to private capital inflows, the carry trade is showing remarkable signs of recovery, with foreign holdings of government debt reportedly crossing the $2bn mark by mid-Feburary from nearly zero for the past few years. The main driver for further inflows was the successful Eurobond issuance in late January as it reinsured investors on the outlook of the Egyptian pound. Consequently, the test-trades with small tickets in November and December have shifted into bigger ones in the past couple of weeks, according to the report.

Furthermore, a similar trend is witnessed in foreign flows into the equity market, with net purchases by foreign investors reaching $491m since the flotation. More sizable flows are challenged by the market’s dwindling size and liquidity over the past few years. The government’s planned pipeline of initial public offerings (IPOs), largely comprising a couple of banks and some companies in the petroleum sector, remains a catalyst for further inflows.

Moreover, the witnessed recovery in remittances provided an additional source of inflows, in line with EFG Hermes’ previous expectations. Remittances jumped by 37% quarter–to-quarter, and 17% year-to–year, to reach $4.6bn in Q4 2016, following five consecutive quarters of continuous decline. The liberalisation of the FX market was the main driver behind encouraging Egyptian expatriates to send money back home, which ended the phenomenon of an off-shore parallel market, which, together with challenging macro conditions in the countries of the Gulf Cooperation Council (GCC), dealt heavy blows to such transfers.

EFG 2EGP appreciation in 2017

EFG Hermes forecast that the Egyptian pound will be on an appreciation path in 2017, which is reinforced by the recent strengthening in the local currency as flows continue to improve. The report noted that appreciation would have been potentially stronger had it not been for most portfolio flows hitting the market through a repatriation mechanism that leads dollars to flow into the CBE’s accounts rather than the market.

According to the report, the cornerstone of the recent Egyptian pound appreciation was the Eurobond issuance, as it completely covered the funding gap of fiscal year (FY) 2016/2017, leaving investors at ease with taking the currency risk. With some of the bigger tickets into the fixed-income market flowing outside the mechanism, the interbank has seen decent improvement in volumes with the repatriation backlog cleared.

EFG 3The report forecast the currency to remain within the EGP 17-18 range through the end of 2017, as the recent appreciation is likely to be balanced with higher demand as the currency becomes relatively more affordable. Additionally, seasonality associated with Ramadan may also yield some short-term pressure on the Egyptian pound.

Moreover, remaining backlogs, in addition to the lifting of the last-standing capital controls, namely deposit limits on importers of non-essential goods and caps on personal transfers by June 2017—in contrast with the IMF agreement—may also yield some short-term pressure on the Egyptian pound. Outstanding payments to international oil companies are excluded from the backlog estimate, as they are to be cleared directly through reserves.

One additional key upside risk to EFG Hermes’s Egyptian pound forecasts is the recovery of the tourism sector, with revenues currently running at nearly a two-decade low. This would be mainly through lifting the travel ban imposed by Russia, Egypt’s largest tourist market. With estimated potential revenues of around $2-3bn, it will represent a major boost for the current account balance.

According to the report, leading macro indicators suggest that Egypt’s economy remains in a shock absorption period as a result to a second wave of the inflationary pressures—which emerged following the float—with the currency dashing any hopes of short-term appreciation. Businesses went on an aggressive and immediate path of price increases to accommodate their new cost structures.

EFG 4Thus, a clear divergence can be seen between domestic and external demand, as Purchasing Manager Index (PMI) data show. Domestic demand is still showing signs of weakness due to the fact that consumers are largely showing a typical knee-jerk reaction to the rising inflationary pressures. Automobile sales, a proxy for consumer sentiments, fell by 38% month-to-month in November, reaching a three-year low, with no signs of recovery in December.

In regards to inflation, the stability of the USD-EGP exchange rate in the last couple of months is likely to tame inflation expectations for both consumers and businesses. EFG Hermes argues that inflation is approaching its peak, which they forecast to be reached in March/April before starting to stabilise.

However, EFG Hermes has adjusted their inflation forecasts for FY 2016/2017 to 23.5% from 19.8%, and to 13.9% in FY17/18 from 11.2%, as a result of their expectation of a slower pace of the Egyptian pound’s appreciation. The report explains that a key upside risk to the inflation forecasts is the rally in global food prices, in addition to the recent pick-up in global oil prices following the Organization of the Petroleum Exporting Countries’ (OPEC) deal, leaving the balance of risks mostly to the upside.

On the other hand, EFG Hermes growth forecasts for FY 2016/2017 remained at 3.8%, while forecasts of FY 2017/2018 were decreased slightly to 4.4% from 4.8%, yet the report cites that the economic growth outlook remains largely intact.

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Challenges that new ministers face http://www.dailynewsegypt.com/2017/02/21/challenges-new-ministers-face/ http://www.dailynewsegypt.com/2017/02/21/challenges-new-ministers-face/#respond Tue, 21 Feb 2017 06:00:42 +0000 http://www.dailynewsegypt.com/?p=615847 On 16 February, Prime Minister Sherif Ismail got parliamentary approval for the new ministers that he had chosen for the cabinet reshuffle. The reshuffle comes during a time that is seeing extreme instability of the economy. The new ministers will also have to deal with the heavy burdens that citizens face after the implementation of …

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On 16 February, Prime Minister Sherif Ismail got parliamentary approval for the new ministers that he had chosen for the cabinet reshuffle.

The reshuffle comes during a time that is seeing extreme instability of the economy. The new ministers will also have to deal with the heavy burdens that citizens face after the implementation of major economic reforms that include subsidy cuts, inflation, and price hikes.

Therefore, the current time is a very sensitive one for the new ministers, who will face a lot of challenges if they are to improve the currently bad situation.

Daily News Egypt asked experts about the most pressing challenges that they are facing and about possible solutions for these issues.

Minister of International Cooperation Sahar Nasr
Minister of International Cooperation Sahar Nasr

Civil Service Law and Investment Law, main challenges for ministries of investment, planning 

Since Dalia Khorshid came to office as minister of investment in March 2016, she said that the ministry will issue the new Investment Law, which it didn’t actually do. She also worked on solving the problems between investors and the government.

The Investment Law is one of the main problems that Egypt has been facing since the revolution of 25 January 2011, after the outflows of foreign capitals from the Egyptian market.

On 16 February, the cabinet asked Minister of International Cooperation Sahar Nasr to take over the Ministry of Investment, becoming the first minister in Sherif Ismail’s cabinet to head two ministries.

Nasr said that Khorshid did what she could with the ministry, and it’s now the time for her to work on the challenges that face it.

Daily News Egypt asked experts about Khorshid’s performance and about what they expect to see from Nasr as the new Minister of Investment.

Aliaa El-Mahdy, the former dean of the Economics and Political Science College at Cairo University, said that Khorshid didn’t change anything worth mentioning during her tenure, explaining that she didn’t finish the Investment Law, which was supposed to have been issued.

She added that the investments in Egypt didn’t noticeably change, especially the foreign investments, because investors are waiting for the new law.

“The only thing that she made was the Supreme Council of Investment, which also didn’t make a noticeable change in the investment climate.”

Regarding Nasr, El-Mahdy believes that there is a difference between the two ministries, and Nasr shouldn’t have taken over the ministry, adding that the Ministry of International Cooperation deals with international institutions and donors, unlike the Ministry of Investment, which has a different scope of work.

“The minister of investment needs to work on attracting investments as the main job,” El-Mahdy noted.

Moreover, Abubakr Emam, the head of the research department at Prime Holding, said that the performance of Khorshid was extremely unsatisfying, adding that she wasted a lot of time and didn’t propose the Investment Law.

However, he believes that Nasr achieved great progress with the loans and grants that she received, but if she faces the same milestones, then it could not achieve anything with the Ministry of Investment.

“Khorshid achieved great success with Orascom Company,” says Emam, explaining that the problem is with the minister’s team, who could prevent any progress rather than enhancing it.

The minister should focus on choosing the right team, while all of the ministry should be reformed, including employee restructuring, Emam noted, adding that the government must fight bureaucracy.

Hala El Saied , the minister of planning
Hala El Saied , the minister of planning

Challenges of Ministry of Planning

Since he took over the Ministry of Planning in 2012, Ashraf El-Araby hasn’t left his office until the cabinet reshuffle under Prime Minister Sherif Ismail, who replaced him with Hala El-Saied, who left her position as dean of Economics and Political Science at Cairo University.

El-Araby, who struggled to get the parliament’s approval for the Civil Service Law, has left the ministry that will face a lot of challenges in the next period under El-Saied.

El-Mahdy said that the Ministry of Planning does not have a tangible structure. She believes that it does study the different classes of society, from the grass-roots level up until the middle class, in order to know the requirements of society and hence plan accordingly.

She stated that El-Araby was completely doing his job in the part of planning.

She added that he also has done his job with issuing the Civil Service Law, which was approved by the parliament. “It’s her job to implement the law on all of the country’s employees,” she noted about El-Saied.

And about administrative reform, El-Mahdy stated that what Egypt needs is to fix a lot of its governmental institutions, adding that if the new minister did solve the problems of the administrative structure, Egyptians will feel a lot better.

From another view point, Emam said that El-Araby was doing a great job, although there’s no problem with El-Saied.

He stated that he wants to see an effective role for the ministry, as well as for there to be a real plan regarding everything to the country, in order to predict how the country is going to grow.

Emam believes that the government must plan for the future in order to know how and what types of investments it should attract, along with what type of education it should provide its people to ready them for the targeted future investments. This, Emam said, is the role of the Ministry of Planning.

“I hope that El-Saied will keep the same good performance of the previous minister and will work to improve the administrative structure of the government,” Emam noted.

 

The new Minister of Transportation Hesham Arafat
The new Minister of Transportation Hesham Arafat

More reforms needed, smaller budget available: new challenges for a new minister

The new Minister of Transportation Hesham Arafat took office on 16 February. When Arafat started his job as a minister, he promised to look for ways to keep the price of metro tickets as cheap as it currently is, and he also called for the authorities responsible about conducting the research about the train system’s level-crossings that have caused a lot of accidents in previous years.

He stated that he is not satisfied with the current railway situation, stating that it needs reform.

Moreover, Omar El-Shenety, managing director at Multiples Group, said that the government needs to understand that it must depend more heavily on the private sector by giving it more space to expand in the economy or by privatising some of the current projects, which is one of the challenges the ministry faces and the new minister will have to take on.

Another challenge is to implement reforms with a small budget, he added, explaining that the government has to cut the budget because of the economic crisis it faces. El-Shenety stated that the minister has to find solutions to improve the efficiency and the quality of services on a smaller budget, which is not an easy challenge to overcome.

Regarding the metro, he believes that the price of the tickets is going to go up sooner or later. He stated that increasing the price would not change everything, so the minister has to find a solution to the core of the problem, claiming that increasing prices would not turn losses into gains.

The Ministry of Supply and Internal Trading has witnessed a reshuffle, making Ali Meselhy head of the ministry
The Ministry of Supply and Internal Trading has witnessed a reshuffle, making Ali Meselhy head of the ministry

Subsidies are the main challenge for the new Minister of Supply

The Ministry of Supply and Internal Trading has witnessed a reshuffle, making Ali Meselhy head of the ministry.

Meselhy held a meeting—after he assumed office on 16 February—with the directors of the ministry, in order to talk about food reserves, especially wheat and other grain supplies.

It seems like the new minister has to find solutions for a lot of problems that might take great efforts to be resolved.

Daily News Egypt asked Sherien El-Shawarby, professor of economy at Cairo University, about the challenges that might face the new minister.

She said that it will take a lot of effort in order for the new minister to succeed, stating that the subsidy system is transforming from food subsidies to cash subsidies, which is one of the main challenges. The ministry needs to work around the advantages of both systems in order to make the poorest segments of society benefit from it.

She also believes that the prices of products are increasing and that the people are not satisfied with that.

Concerning the aspect of internal trading, she believes that the minister must understand the supply and value chain in order to draw up plans for a new infrastructure, to revise the available reserves, and to stabilise the market.

Furthermore, a professor of economy at the American University in Cairo, who preferred to remain anonymous, stated that the change in leadership does not make a difference at all, as long as the system remains the same.

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Dabaa prepares to receive nuclear power plant http://www.dailynewsegypt.com/2017/02/20/615776/ http://www.dailynewsegypt.com/2017/02/20/615776/#respond Mon, 20 Feb 2017 06:00:08 +0000 http://www.dailynewsegypt.com/?p=615776 40% of construction of the nuclear school to be completed in May at cost of EGP 70m

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Dabaa City in Matrouh governorate is currently witnessing a cultural shift after the announcement of the start of implementation of the nuclear power plant project on a part of its territory. A number of development projects are currently being inaugurated for the advancement of the city and the providence of service for the power plant project.

Daily News Egypt conducted a field tour to highlight the development projects established in Dabaa.

 

Investing in Dabaa

Governor of Matrouh Alaa Abu Zeid said that Dabaa entered into the strategic development of the governorate in order to keep pace with the nuclear power plant project, through development projects that include a new residential city, Dabaa-Rod El-Farag axis, a sewage project, the nuclear school, El Alamein-Natrun Valley axis, and Dabaa hospital. It is also planned to conduct urbanisation projects in the South Dabaa area.

Mohamed Gaber, managing director of investment in Matrouh, said that the governorate consistently receives requests for investment in Dabaa. He added that Dabaa includes about 28 tourism projects with investments between EGP 50m and about EGP 800m, and these projects provide between 100 and 250 opportunities.

Daily News Egypt interviewed former head of Dabaa City Al-Husseini Ahmed Sanusi two days before Minister of Local Development Ahmed Zaki Badr issued on 27 January decision No. 52 of 2017 to appoint 91 general managers to work in leadership positions including six heads of cities in Matrouh governorate.

Ahmed Mohamed Abdou El-Eskandarani was appointed head of Dabaa to follow Sanusi.

 

The school will accommodate 375 students and includes 15 classes on three floors with a total built-up area of 3,260sqm.
The school will accommodate 375 students and includes 15 classes on three floors with a total built-up area of 3,260sqm.

The nuclear school

Sanusi said that 40% of the construction work on the nuclear school was completed. Governor of Matrouh had issued a decision No. 374 for 2015 to allocate land on an area of 33,600sqm (equivalent to 8 acres) in west Dabaa to establish the advanced technical secondary school for energy technology in Dabaa. The Authority for Educational Building offered the school project.

The total cost of the school amounts to about EGP 70m, divided between the establishment of the school buildings at a cost of EGP 43.5m, school furniture worth EGP 7.8m, and workshop and laboratory equipment worth EGP 1.5m. The cost of radiation protection workshops and laboratories amounts to EGP 12.75m.

 

The school will accommodate 375 students and includes 15 classes on three floors with a total built-up area of 3,260sqm. This is in addition to two dormitories with 436 beds on an area of 11,580sqm. Each building consists of a ground floor and four upper floors.

The school also has workshop buildings, which include mechanical and electricity workshops, electronics workshops, stores, and a radiation protection laboratory, as well as a football stadium, volleyball court, basketball arena, green areas, and a Roman theatre.

The establishment of a station using 130KW solar cells is planned for the roofs of the buildings, using an on-grid network, as well as using solar light columns in the school’s internal streets and walkways.

 

Sanusi explained that the implementation of works at the school started in June 2016, and is planned to be ready for delivery in May, to start operating in the new academic year in September.

The period of study extends to five years, and lecturers are supposed to be graduates from the College of Engineering. It is planned that school graduates work in the nuclear plant. There will be training courses for applicants before their enrolment in the school.

In terms of curriculum, it will review the courses of technical and industrial education, besides forming working groups of representatives of the nuclear sector and representatives of technical education to prepare and review the curriculum—electronics, electricity, and mechanics—and materials for the nuclear field—nuclear technology, radiation protection, and maintenance of components and systems of nuclear plants.

He added that the school is one of the first schools specialising in teaching energy technology in the Middle East and will provide students with a number of skills, including the identification of concepts related to nuclear technology; programmes for radiation protection; the diagnosis, repair, and maintenance of electronic devices and mechanical equipment; and the identification of the systems and components of nuclear plants.

He pointed out that the land has been allocated for the public benefit of the Egyptian Nuclear and Radiological Regulatory Authority, on an area of 1,000sqm east of Dabaa, to oversee the nuclear plant project.

 

The total cost to develop the Central Hospital of Dabaa is worth about EGP 84m.
The total cost to develop the Central Hospital of Dabaa is worth about EGP 84m.

Developing Dabaa Hospital

The total cost to develop the Central Hospital of Dabaa is worth about EGP 84m.

Mahmoud Al-Halawani, director of the Central Hospital of Dabaa, said that the development work included the construction of buildings and departments of internal fittings, and it increased the hospital’s capacity to 50 beds. It also added a number of new sections and units, including the inner section, CT scans, clinics departments, an emergency reception, laboratories, and pharmacies.

He added that a unit for dialysis that includes five machines was established, as well as six premature babies nurseries. The work included developing and processing an operations department that receives a variety of surgeries, including for bones surgeries, obstetrics, and women’s diseases.

He added that the hospital is being developed in stages to keep work going in the hospital as usual. The area of the hospital after the development work amounts to about 1,500sqm.

He pointed out that the Health Affairs Directorate of the governorate is considering adding a radiation treatment department at the hospital or the establishment of an independent centre.

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Freedom of expression in Egypt in 2016: an overview  http://www.dailynewsegypt.com/2017/02/18/freedom-expression-egypt-2016-overview/ http://www.dailynewsegypt.com/2017/02/18/freedom-expression-egypt-2016-overview/#respond Sat, 18 Feb 2017 21:00:15 +0000 http://www.dailynewsegypt.com/?p=615723 AFTE highlights freedom challenges, experts provide their evaluation

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The Association for Freedom of Thought and Expression (AFTE) issued Tuesday its annual report titled “More Than One Authority to Oppress” in which it monitored the situation of freedom of expression and speech in Egypt in 2016.

The report tackled the problems facing different types of freedom of expression within the legislative circumstances organising freedom of speech, information, academic work, and creativity.

Daily News Egypt further obtained experts’ observations on the same points.

Press and media freedom

Press and media freedom came on top of the problematic issues in Egypt, reaching new levels in 2016 with the assault on the Press Syndicate and the sentencing of its leaders to prison.

According to AFTE, “this might not be the worst year of violations against the press in numbers, but certainly a historical turning point.”

The case is still open before an appeals court—while, at the same time, the syndicate is hosting new elections for the position of head and board members.

This comes as AFTE traced 438 incidents of assault against press and media workers. Those varied between a judicial action taken against them, detention, physical assault, dismissal from work, censorship, security raids, closure, and travel bans.

As for entities responsible for the violations, they included security apparatuses with 191 incidents, newspapers and media entities with 17, judicial authorities with 69, the parliament with 30, and government officials with 35, with 86 incidents attributed to civilians and 8 to private security guards.

This comes as a new legal environment is being shaped for the press and media, which AFTE doesn’t see promising, given that a law was recently issued organising press and media institutions under national councils partly formed by the president and other state institutions, in comparison to lesser representation of members designated by the Press Syndicate.

AFTE argued that while the point of new legislations was to protect the independence of press and media, the laws that are actually issued push for more control.

Media expert Yasser Abdel Aziz told Daily News Egypt that, in general, the status of press freedom in Egypt isn’t well, despite the ambitions for openness and independence after the revolutions of 25 January and 30 June. “However, challenges of terrorism, economic crisis, and political and security pressure led to a retreat in reform plans,” he explained.

Abdel Aziz argued that the current constitution set the basics to build an independent media but that they are not effectively translated into legislations.

However, he stated that the new legislations, particularly the law organising media institutions and forming national press and media councils, pave the way for an improving environment.

“For the first time in a hundred years of broadcast, Egypt will have a media syndicate,” he said. Moreover, he argued that there was a variety of members forming the upcoming national press and media councils. “Some state institutions will appoint members, but also independent organisations—such as syndicates, the Supreme Council of Universities, and the State Council—will appoint members,” he said.

While Abdel Aziz admitted that new legislations might not completely eliminate suspicions of state control of the media, he claimed they provide a more independent atmosphere for the media and press.

“Because before the revolution, the media and press were controlled by the legislative and executive powers, including the former ruling National Democratic Party,” he stated.

Abdel Aziz further commented on the trial of the press syndicate leader and two of his deputies by saying that “the incidents that led to the trial were unfortunate and miscalculated on both sides,” referring to the syndicate and the Ministry of Interior.

To him, the ideal solution, on one hand, would be for the court to acquit the three of charges and for the state to acknowledge the special position of the syndicate, and for the syndicate to focus, on the other hand, on its professional and services roles rather than to be involved in politics.

Despite that he would not blame the judiciary in case of a verdict being issued, Abdel Aziz said the sentencing of the trio would negatively impact the image of Egypt worldwide, and that the executive power would have little gains in comparison to the damages.

Freedom of artwork creativity

AFTE argued that the “year 2016 was the harshest in ten years in terms of the number of violations committed against the freedom of artwork creativity.”

The NGO reported a total of 78 violations in 2016, compared to 46 in 2015 and 21 in 2014. The reasons were mainly related to censoring or banning artworks and restricting artists.

Besides the three taboos of politics, religion, and sexuality, AFTE reported that artwork is also being banned on grounds of breaching public morale, stating the example of the recently released novelist Ahmed Nagy, whose novel was judged “publicly immoral” because of writing about “drugs, sex, and offensive words.”

Political satire art is generally oppressed such as in the case of “Street Children”, a musical band whose members were imprisoned over a video mocking the controversial Red Sea islands’ maritime deal, and the arrest of the administrator of the satirical Facebook page titled “Translated.”

This comes as Magdy El-Afifi, writer and former editor-in-chief of Akhbar El-Adab, a literary publication where Nagy’s chapter was published, provided a different approach to evaluating the status of freedom of creativity.

In comments to Daily News Egypt, El-Afifi first pointed out his rejection of restrictions on creative artwork, saying that “a society that doesn’t breathe creativity is like a patient in an ER unit at a hospital.”

“A real creator is one who clashes with society; writers and intellectuals are always ahead of society in their visions, and without them it’s just a silent society,” El-Afifi said, explaining that “real creativity is that reaching to humans before authorities.”

El-Afifi discussed the three traditional taboos, assuring that real creators are those who can break taboos. According to him, religion is supposed to be a positive factor helping society move forward; and even in current unfortunate times where those who claim to represent religion are fostering negative images, it is not among artwork creativity to insult divinity and prophets.

As for the taboo of sexuality, El-Afifi highlighted that the topic itself is the essence of humanity. “Great writers like Ihsan Abdel Qouddous, Youssef Edris, Naguib Mahfouz, and Nizar Kabbani tackled the topic but from a humanistic approach that went beyond sensuality,” El-Afifi said.

On the other hand, he opposed the “grotesque” depiction of sexual scenes in written and visual artwork—which would have been accepted in the past—because they would never be accepted in today’s society.

As for the political taboo, El-Afifi argued that intellectuals should rather tackle ideologies instead of wasting time and energy on the politics of daily life, which eventually die, while their artwork will remain.

He concluded that the evaluation of artwork creativity in Egypt should be based on actual art and creative work, by looking at the great intellectuals and artists rather than work aimed at commercialising these concepts.

Meanwhile, AFTE highlighted that the new VAT law has affected the costs of TV, cinema, broadcasting, and theatre production. This is in addition to an increase decided by the Supreme Antiquities Council to increase fees for filming in historical and monumental places.

As for the entities responsible for the violations, AFTE listed monitoring bodies, security and military institutions, religious institutions, judicial bodies, professional syndicates and ministries, and governmental institutions.

Furthermore, AFTE criticised the pursuit of the syndicates of actors and musicians of the right to arrest members breaking the law in a legal case. “As so, syndicate officials have the right to search, arrest, receive complaints from citizens, file reports against artists, and refer them to prosecution authorities so that they can be penalised by jail and fines,” a statement read.

However, actor and senior member of the syndicate’s board of directors Sameh El-Sereity denied in statements to Daily News Egypt that this would be the point of having that legal authority.

“There are legal violations happening that cause damages to the syndicate’s members and public funds. The legal authority doesn’t make me arrest people but allows me to monitor violations which, if found, my job is to report it to the police who can take legal action,” El-Sereity said, giving as an example of violation the unlicensed media production companies or actors that are not licensed by the syndicate, as required by the law.

Legal environment for freedoms

In 2016, the parliament approved several legislations that were supposed to represent the needs of the transitional phase the country faced after the revolution. But according to AFTE, most laws were passed without social dialogue or the inclusion of different communities and social groups concerned with the topics, resulting in mounting criticism to the parliament.

Examples of law that was approved without these dialogues, was the Non-Governmental Organisations (NGOs) Law related to civil society work, which legal experts and civil groups have criticised, urging that it includes an article restricting civil work and could completely eliminate it.

Moreover, in bills related to freedom of expression, AFTE noted that the parliament’s Legislative Committee issued contradicting bills and decisions. For instance, the committee approved a law submitted by memeber of parliament (MP) Alaa Abdel Moneim and 60 other MPs that required removing the region section from the national ID and all official papers, which was seen as a positive step against discrimination.

Meanwhile, the same committee rejected a draft law calling for the abolition of Article 98 from the penal code related to imprisonment in cases of contempt of religions, which have significantly increased in the past years.

AFTE further pointed out to laws restricting citizens’ freedoms in terms of pre-trial detention, arguing that “throughout the past years, the prosecution has been continuously using pre-trial detention in all types of crimes, especially after 30 June,” and that more forms of so-called precautionary measures are being implemented.

The NGO referred to a new amendment for law No. 145 of 2006, adding alternatives to pre-trial detention, such as releasing prisoners on precautionary conditions, which includes banning them from leaving home or the country or requiring them to check in at police stations at scheduled times, along with not visiting certain places in the country. The prosecution continued using the aforementioned punishments despite lawyers’ calls for other alternatives, such as medical reasons, AFTE stated.

On the other hand, experts and officials commented to Daily News Egypt on some of the above mentioned examples.

Regarding the parliament, member Ahmed Sherif, the deputy head of the Legislative Committee, denied to Daily News Egypt the claims of his committee passing any law without community dialogue, adding that they made community discussions for all the bills that required it. “Such claims would be only for the sake of media propaganda,” he said.

But MP Ihab Ramzy told Daily News Egypt that not all laws were properly open for social dialogue with concerned groups. “There should have been more inclusion of different groups for discussions, and the outcomes of such meetings with MPs should have also been published in the media to give more transparency to the public opinion,” Ramzy said.

He concluded saying that every MP should also be aware of the topic of a law, prior to his participation in the discussion, for the sake of issuing fruitful laws.

As for detentions and conditioned releases, former head deputy of State Council, Mahmoud Fahmy, told Daily News Egypt that renewal detention punishment in Egypt is regulated, and that the prosecutions are practicing in accordance to law.

Famhy explained that the aforementioned measures are required to prohibit any defendants from changing any legal document or commiting any illegal act, or cause any action that would hinder the justice work.

Major General Hamdy Bakhit told Daily News Egypt that this legal method is required to serve requirements of current security conditions in Egypt. “No one can deny the difficulty of security conditions in Egypt, and such claims are for shaping people’s opinions, as it neglects the state situation,” he added.

Freedom of information flow, academic work  

AFTE’s report stated that there was a media blackout, non-transparency, and gags in certain issues in the country, such as the Red Sea islands issue and the dismissal and trial of former head of the Central Auditing Organization (CAO) Hisham Genena over corruption statements. The report depicted this situation as a violation of freedom and people’s rights to information.

According to Yasser Abdel Aziz, restrictions on circulation of information on sensitive issues could stem from the state’s concern of maintaining national security in face of terrorism challenges, where a balance of media is difficult to achieve.

On a different note, AFTE further mentioned some restrictions facing academics in their work as university professors and researchers, including the control of travel under the supervision of security authorities.

At the end of the report, AFTE advised against the control of social media channels as the latest means to restrict freedom of expression.

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