By Nihal Mounir
“We will not offer new licences for steel and cement before solving the energy crisis,” Minister of Trade and Industry Mounir Fakhry Abdel Nour vowed. He began his interview with Al-Borsa with this statement, attributing a lack of new investments in these two sectors to the gas production shortage that pushed the government to approve the use of coal as part of Egypt’s energy supply.
Mounir Fakhry Abdel Nour, former Tourism Minister under the three governments that succeeded the January 25th Revolution, was removed from his position when Hesham Qandeel became Prime Minister in the second half of 2012. One year later, Abdel Nour was appointed Minister of Industry and Trade.
The current minister was a supporter of the decision to use coal in factories, and at the same time seeks to revamp the mandate of the Industrial Development Authority regarding land offered for industrial use. Currently, the Urban Communities Authority has broad power over the land, while the IDA has a limited role in granting technical approvals to applicants.
Abdel Nour’s tasks under Mehleb’s second government expanded to include small and medium enterprises alongside industry and trade.
The minister said that the government will not offer new licences for steel and cement before resolving the energy crisis, explaining that this means no new investments will be injected into those sectors until imported gas shipments arrive from abroad and new gas discoveries are made, which will not happen for at least three more years.
Despite his expectations for a lack of new investments in the near future, Abdel Nour described the issue as a temporary one, ruling out the possibility of a reduction in energy prices for the industry sector in the near future.
The government approved an increase in energy prices for energy intensive industries two months ago, and rates for steel mills, cement, fertiliser, aluminum, and petrochemicals industries are now EGP 0.396 per KW hour for FY 2014/2015. The rate will increase to EGP 0.384 for FY 2015/2016, EGP 0.393 for FY 2016/2017, and EGP 0.41 for FY 2017/2018.
Abdel Nour said that a shortage of industrial lands represents one of the largest problems facing local and foreign investors, reflected in a shortfall in land tenders in recent years.
He announced that the ministry expected a protocol of cooperation to be signed in the coming days with the Urban Communities Authority to re-organise the mandate of the IDA. The Urban Communities Authority would take over granting land to the IDA, while the IDA would annex and award tracts to investors.
Abdel Nour stated that the ministry intends to review the role of industrial development companies in the process of awarding industrial lands according to new ministry rules aimed at regulating the pricing process for investors. This move would ensure that prices are not exaggerated.
The Ministry of Housing signed a cooperation protocol with the Urban Communities Authority through which the Authority would allocate, annex, and develop industrial lands and offer them to investors. The IDA would provide technical approvals for any projects developed.
He pointed out that the usufruct system will not be the primary mechanism employed by the government in the coming period.
He added that land prices in industrial areas in Upper Egypt will decrease compared to their counterparts in Greater Cairo and other industrial areas where demand has been higher. The reduction is part of the state’s plan to develop the Southern Valley.
Abdel Nour said that land tender mechanisms will be determined by the circumstances of the tender while granting the investor multiple choices, whether it be through usufruct or ownership, depending on the industrial area and other factors. He said, “The nationality of the investor will determine the variety of land ownership, either usufruct or ownership.”
Abdel Nour gave an example of a land tender in Sinai for foreign investors that will be offered under the usufruct system, as the area is strategically connected to national security.
He said that the chairman of the board of the National Bank of Egypt is a member of the Urban Communities Authority Board, and welcomed usufruct tenders, saying, “The banks take contracts into account according to this system.”
Investors discussed negotiation difficulties with the IDA and the Urban Communities Authority in signing a joint cooperation protocol to organize the utilisation of industrial lands, claiming that this would threaten the economy with total paralysis.
Abdel Nour said that the goal of the Euromoney Conference was to restore investor and global market confidence in Egypt’s economy, pointing out that the economy requires investments to increase toa rate of least 25% of GDP. He noted, “Egypt’s savings rates are low and do not exceed 15%.”
He then added that during the conference, the government will address its economic reform policy, plans to bridge both the budget and balance-of-trade deficits, and declining growth rates.
The government has announced various investment opportunities associated with the Suez Canal Axis Development and Golden Triangle projects in an attempt to increase economic growth rates.
He pointed out that the financial policy adopted by the state aims to increase resources and decreasing spending by reducing energy subsidies and reallocating this spending on public services like education, health, transportation, and social security.
He added that the government is striving to fill the balance of trade gap by jumpstarting tourism and security presence, pointing out that the number of tourists visiting Egypt has decreased by 50% compared to 2010 when 15 million tourists visited Egypt.
Abdel Nour described the government’s vision of attracting 25 million tourists over the next five years in accordance with an integrated plan to promote Egypt as a tourism destination in various markets.
On the other hand, Abdel Nour predicted a high volume of exports registering a record $24bn by the end of 2014 compared to $21.5bn at the end of 2013.
He said, “Despite the energy crisis, high production costs, and the loss of someArab markets including Libya, Syria, Iraq, and Sudan, non-petroleum exports increased by 24% in August, registering $1.6bn in trade compared to $1.3bn in August 2013.”
Abdel Nour ruled out the establishment of a free trade zone in Libya at present due to the ongoing security crisis in the country.
He said that the ministry is negotiating with the United States to reduce the proportion of local Israeli products exported from 10% to 8% in accordance with the QIZ agreement, a move in line with an expansion in constructing industrial areas in Upper Egypt under the framework of the agreement.
Abdel Nour revealed that the government is studying the conditions that must be met in order to export rice once again, which is not inconsistent with the targeted volumes for local stores.
He explained that a tripartite committee consisting of the ministries of Supply, Industry, and Agriculture will discuss the possibility of beginning to export rice again in a manner that does not conflict with the needs of the domestic market nor raise prices for Egyptian consumers.
Dr. Hazem Beblawy, former Prime Minister, issued a resolution last year to halt rice exports abroad in order to avoid a shortage on the local market.
However, rice producers have launched an extensive campaign to begin exporting once again, asserting that the state has an estimated surplus of 8 million tons of rice, 4.8 million of which are white rice supplies. As local consumption does not exceed 3.2 million tons, this means that a surplus of 1.6 million tons of white rice could be exported.
With regard to the law favoring domestic products recently issued by the cabinet, Abdel Nour stressed that this does not conflict with international trade agreements, adding that anyone whoindicates otherwise is ignoring World Trade Organization regulations.
Abdel Nour said that “Most countries in the world have a law that grants preferential treatment to local industry, including America, Russia, and Canada. This law helps reduce import costs.”
The cabinet headed by Prime Minister Ibrahim Mehleb has approved a draft law submitted by the Ministry of industry on preference for Egyptian industrial products in government procurement and contracts.
The Minister also discussed Egyptian-Russian rapprochement, and the two countries have become closer since President Abdel Fattah Al-Sisi visited Russia. He had also visited the nation previously while serving as Defense Minister.
AbdelNour said that the European Union and the United States are not happy with Egypt’s close economic relations with Russia.
The minister said, “I don’t rule out the possibility of these countries imposing economic sanctions against Egypt if Egyptian-Russian economic cooperation continues.”
The EU and United States imposed economic sanctions on Russia following its annexation of Ukraine’s Crimea.
Regarding Egypt’s steel industry, Abdel Nour said that Chinese steel imports amount to 18,000 tons according to ministry figures, not 57,000 tons as rumored.
He emphasised that steel imports on the Egyptian market from January through June 30 do not represent 10% of the size of the market, pointing out that the increase in local steel company profits are a result of expanded sales.
Steel manufacturers and producers have submitted a complaint demanding that protection fees be imposed on imported steel to protect local companies and investments worth more than EGP 7bn.
Abdel Nour added that the decision to impose the fee is not an easy one and requires extensive study of the effects on producers and consumers.
The minister also stressed that any complaint must be submitted by representatives of the steel sector and not just two companies, with figures proving the harm incurred as a result of imports.
The complaint filed by steel companies does not reflect the metallurgical industry as a whole, Abdel Nour said, stressing that the ministry approached steel companies requesting that they submit figures for import volumes for July, August, and September to study their impact on sales.
He continued, saying, “The decision may harm the interests of the consumer and therefore must be considered carefully before the fees are imposed.”
With regard to an estimated 952 financially troubled factories, Abdel Nour said that this issue is not under the purview of the Ministry of Trade and Industry, but rather under the jurisdiction of the Ministry of Finance and Banking.
According to Abdel Nour, the ministry’s tasks are limited to monitoring and determining a list of struggling factories and presenting it to the Ministry of Finance. He explained that the Industrial Modernization Center (IMC) is not charged with financing factories but instead works to study the reasons behind the financial difficulties and negotiate with the Ministry of Finance and banking system to address the issues.
He also pointed out that if the reasons behind the financial troubles are technical, the ministry will attempt to provide technical support for marketing programs at home and abroad through participation in exhibitions.
Regarding the EGP 500m stimulus package approved by the government during FY 2013/2014 to finance struggling factories, Abdel Nour said that this amount was not used towards the Central Bank’s position on the funds and the inclusion of the factories on a list of companies that have failed to pay debts and cannot receive funding from banks until they are repaid.
The minister said, “We have had enough blame being placed on the ministry. Cooperation must take place between various ministries in order for the crisis to be resolved.”
He also stressed that continuous meetings have taken place with the ministry of Finance and Customs Department to discuss the smuggling crisis and produce a bill to confront it. He added that the phenomenon has become destructive to domestic industry, especially garment, textiles, and other sectors.
Abdel Nour said that the ministry is working to enhance standards applied on the domestic market and cooperating with the Financial Supervisory Authority (FSA) on quality specifications and tightening control of customs ports.
The minister believes that these measures help upgrade market production and protect consumers from shoddy goods. He cited the example of road accidents caused by imports of low quality tires on the domestic market.
Regarding legislation being prepared by the ministry, Abdel Nour said that a group of new laws will be issued in the near future, along with a microfinance bill that will regulate funding for projects.
He said that a draft law to incorporate informal economy workers into the formal economy by providing them with financial and technical incentives as well as possible tax exemptions is currently being researched by the ministry.
In conclusion, he stated that new procedures will facilitate the process of granting licenses to informal economy workers, and foreign expertise will be employed to prepare the incentives.