CBE CUTS SINGLE OBLIGOR LENDING LIMIT TO 20% Source: Arab Finance, August 10, 2009
The Central Bank of Egypt (CBE) (link here) sets the single obligor lending limit for banks at 20 percent of capital base and 25 percent for related partly loans, a change from 25 percent and 30 percent that was applied three years ago. The CBE will give banks a grace period until next December to comply with the new measures.
The CBE reported that loans extended by the Egyptian banking sector increased by 8.2 percent in the year to May, but saw a slight month-on-month 0.1 percent decline. Total loans outstanding stood out at LE428.7 billion, of which LE135 billion were extended in foreign currencies. Deposits showed a year-on-year increase of 8.3 percent in May to reach LE813.7 billion.
MPC TO CUT ITS OVERNIGHT LENDING AND DEPOSIT FACILITY INTEREST RATES BY 50 BASIS POINTS Source: Beltone News, August 2, 2009
The Central Bank of Egypt’s (CBE) (link here) Monetary Policy Committee (MPC) decided to cut its overnight lending and deposit facility interest rates by 50 basis points to 10% and 8.5%, and its discount rate by 50 basis points to 8.5%, at its meeting on July 30, 2009.
The MPC statement indicated that “during the first six months of 2009, transient supply shocks mainly related to volatile food items, namely fruits and vegetables, have emerged. While these shocks have flattened the disinflation path, they do not characterize the underlying inflationary pressures.
EGYPT'S FISCAL DEFICIT STEADY IN FY2008/09 AT 6.9% OF GDP Source: EFG-Hermes, August 4, 2009
Egypt's budget deficit was unchanged at 6.9% of GDP in FY2008/09 despite increased spending on investment to support economic growth and lower Suez Canal revenues, Minister of Finance Boutros-Ghali said.
Total revenue rose 24% Y-o-Y to LE274.8 billion, while total expenditure expanded 21.7% to LE343.7 billion. Expenditure increased in part because of the LE15 billion fiscal stimulus package and a 16.5% increase in civil servants' wages, Boutros-Ghali said. Tax revenue rose 20% Y-o-Y to LE163 billion, partly due to improved collection.
Total government debt was 80.6% of GDP while foreign debt stood at 13.7% of GDP by 30 June. The figures for the deficit are in line with the preliminary figures announced earlier by the Ministry of Finance (link here). Corporate taxes in FY2008/09 mostly depended on 2008 profits, which have been relatively less affected by the crisis, also supported revenue growth.
The Minister added that the deficit will decline sharply after FY2009/10 and the government seeks to reduce the budget deficit to 3% of GDP by 2015. While we believe that such a target is achievable, it will greatly depend on rapid recovery in economic growth, improvements in tax collections, the introduction of a value-added tax and reduction in spending on wages and subsidies.
EGYPT INFLATION UNCHANGED Source: Bloomberg, August 10, 2009
Egypt’s urban inflation rate was unexpectedly steady in July after declining for the previous seven months, easing pressure on the central bank to keep cutting interest rates. Urban inflation, the benchmark rate that the central bank monitors, stayed at a 19-month low of 9.9 percent, Central Agency for Public Mobilisation and Statistics (CAPMAS) (link here). The nationwide inflation rate fell to 9.7 percent from 9.8 percent in June.
NEW FORMATION FOR EGYPT SIDE OF U.S.-EGYPT BUSINESS COUNCIL Source: Daily News Egypt, August 4, 2009
Trade Minister Rachid Mohamed Rachid announced that Taher Helmy will be the president of the U.S.-Egypt Business Council. Helmy, a partner at Baker and McKenzie (AmCham member) (link here) international law firm and former president of the American Chamber of Commerce in Egypt (link here), will head a team of 16 Egyptian private sector business leaders as well as leading figures in a variety of sectors including Raed Hashim, Waleed El Zorba, Sherine Iskandar, Basel El Baz, Hassan El-Khattib, Akil Beshir, Magda George, Ahmed El-Wakil, Amr Badr, Hisham El-Khazendar, Alaa Saba, Amr El-Garhy, Mohamed Younis, Hesham Ramez, Laila El-Baradie and Abdel Moneim El Saied.
The council will bring together business leaders from Egypt and the U.S. for a variety of goals, especially to remove impediments that could obstruct trade, said Helmy. He emphasized that the council is a private sector not a governmental entity, but that it works closely with the governments of both countries. The Council plans to hold its inaugural meeting next November in Washington. The fields of education and training, human resource development, infrastructure projects, corporate governance, trade barriers, WTO issues, labor law and environmental issues will all be on the agenda, he explained.
AL-FUTTAIM SIGNS TWO CONTRACTS WORTH LE419 MILLION Source: Daily News Egypt, August 4, 2009
The first phase of Cairo Festival City’s residential district is now underway after Al Futtaim signed two contracts worth a combined value of LE 419 million with SIAC and the Arabian Construction Company (ACC) (link here).
SIAC, which has already begun construction, was awarded a LE316 million contract and ACC, expected to begin developing Oriana’s infrastructure early September, won a LE103 million contract.
“Phase one will see the completion of 172 of the final 480 villas. We expect this phase to be completed by the end of 2011”, Cairo Festival City’s Senior General Manager Mohamed El-Mikawi said.
DANA GAS MAKES NEW EGYPT GAS DISCOVERIES Source: Khaleej Times, August 1, 2009
UAE-based Dana Gas (AmCham member) (link here) said on it had made two gas finds in Egypt with reserves totaling an estimated 76 billion cubic feet. The finds were at the Sharabas-1 and Sama-1 wells in the Nile Delta region.
“The Sharabas-1 and Sama-1 discoveries will boost Dana Gas’ production and profitability, and will take us closer to achieving our target production of 40,000 barrels of oil equivalent per day by the end of the year; a target that we are already well on the way to achieve,” Chief Executive Ahmed al-Arbeed said in the statement.
The Sharabas-1 discovery, which has estimated reserves of about 28 billion cubic feet gas plus the associated condensate, tested at 7 million standard cubic feet per day of gas with 198 barrels per day of condensate. The Sama-1 discovery tested at 13 million cubic feet per day of dry gas. The estimated reserves for this find are about 48 billion cubic feet of gas and it has the potential to produce about 20 million cubic feet per day, it added.
Dana Gas, which relies on Egypt for the bulk of its income, said last year that it planned to invest about $500 million in Egypt and Iraq’s Kurdish region in 2009 to boost natural gas output.
MARIDIVE TO RECEIVE 'MARIDIVE 515' VESSEL Source: EGX, August 2, 2009
Maridive & Oil Services SAE (AmCham member) (link here) announced that it had received a vessel, Maridive 515, on July 31, 2009. The vessel, which is an Anchor Handling Tug (AHT) has 5,200 horsepower and is equipped with a fire fighting system.
Accordingly, Maridive’s total fleet currently stands at 62 marine units (52 vessels and 10 barges), having received 5 units, so far, in 2009. In addition, 2 more units are expected to be delivered before the end of the year, namely Maridive 232, which is an Anchor Handling Tug Supply vessel (AHTS) and Maridive Constructor, which is a pipelaying barge.
Moreover, Maridive announced that its backlog of contracts for the OCS and OSV segments currently stands at $780 million (up from $640 million previously) to be performed until 2012.
ABAZA APPROVES FERTILIZERS ALLOCATION Source: Al-Ahram, August 2, 2009
Minister of Agriculture and Land Reclamation Amin Abaza approved the allocation of around 35,000 tons of fertilizers to co-operatives for a three-month period at the official prices. The allocation will take place during the coming three months. The minister’s approval is considered to be a step towards the liberalization of fertilizers.
CEMENT PRICES DROP TO LE530 PER TON Source: Arab Finance, August 4, 2009
The price of imported cement declined by 5.4 percent from LE560 per ton to LE530 per ton.
CI Capital (AmCham member) revised local cement consumption estimates for 2009 upwards from 42 million tons to 46 million tons based on low steel prices, government infrastructure projects and the backlog of private sector construction projects.
The upward revision is based on a 25 percent growth in local cement consumption since the beginning of the year, up from a 14 percent overall growth in consumption recorded in 2008.
EFIC TO BEGIN OPERATIONS ON TWO LINES Source: Al-Alam Al-Yom, August 3, 2009
The Egyptian Financial and Industrial Company (EFIC) (link here) will start operating its calcium phosphate production line within a week with a total production capacity of 20,000 tons and a total investment cost of LE40 million.
The company will also start operating its ammonium sulphate production line in September 2009, with a total production capacity of up to 15,000 tons and a total investment cost of LE80 million.
CUSTOMS DUTIES ON IMPORTED SUGAR TO BE REMOVED Source: Beltone News, August 11, 2009
Egypt will exempt raw and refined sugar imports from duties starting August 15 until the end of December 2009. The decree will be submitted to the Prime Minister for ratification and issuance. "The decision aims to decrease, by a large measure, the price of sugar available in the local market during the month of Ramadan," said the Minister of Finance Youssef Boutros Ghali.
Egypt has a 2% duty on raw sugar and a 10% duty on refined sugar. The Ministry of Trade and Industry had also removed LE500 per ton safeguard duty on refined sugar in July. This extra duty had been imposed in January 2009, when the Ministry indicated there was evidence that foreign sugar was being dumped in Egypt. Egypt consumes around 2.2 million tons of sugar a year, about 1.4 million tons produced domestically. Around 60% of its imports come from Brazil.
EGYPT CEMENT IMPORTS TO HIT MILLION TONS BY END OF AUGUST Source: Reuters, August 11, 2009
Egypt imported 512,000 tons of cement from January to August 5 and the figure is expected to almost double to 1 million tons by the end of August, Ministry of Trade and Industry (link here) said.
Rising local demand for cement had prompted the ministry to extend a ban on cement exports first introduced in April until October 2010. Housing demand in Egypt remains buoyant even as hundreds of billions of dollars worth of construction projects have been put on hold elsewhere in the Middle East since the financial crisis curbed property investment.
Cement producers said in July they were ready to import around 1 million tons in the next two months to help meet the growing demand. Suez Cement, one of Egypt's largest cement makers, has also postponed planned maintenance work in order to continue producing at full capacity, the Trade Ministry said in a statement. The ministry had warned cement producers last week not to carry out any work that would cut production in the coming period.
Suez Cement (AmCham member) (link here), which produces 900,000 tons a month for the local market, has contracts to import 90,000 tons of clinker and bagged cement for August delivery, of which around 25,000 tons have already arrived from the Ukraine and Turkey. The Egyptian operations of Greek cement maker Titan (link here) also have contracts to import 250,000 tons of clinker and cement for delivery August and September. Of that total, 120,000 tons have already arrived in Egypt in the past two weeks and another 50,000 tons are expected by next week.
Egypt's agriculture minister has not issued a decision to ban the import of genetically modified crops, the state news agency MENA said. The agency quoted an unnamed official at the Ministry of Agriculture and Land Reclamation as stating that earlier reports citing Amin Abaza ordering that a certificate accompany all imports to show they were free of genetically modified materials were "not correct." The original report of the decision was published by MENA on Wednesday and picked up by other media.
Egypt is one of the world's largest wheat importers and also imports other products such as corn, edible oils and sugar. It exports products such as vegetables and fruits, particularly to Europe. Traders had expressed surprise at the move, saying some of Egypt's main food imports at the moment included genetically modified products, especially soyoil and corn.
PRESIDENT MUBARAK INAUGURATES SERVICES & DEVELOPMENT PROJECTS IN DAMIETTA Source: Egypt State Information Service, August 4, 2009
H.E. President Hosni Mubarak opened several service and development projects in Damietta, Daqahliya and Kafr el-Sheikh worth LE530 million. The ventures included 16 drinking water and sanitary drainage stations.
INSURANCE & PENSION FUNDS UP 13 PERCENT Source: Egyptian Gazette, August 3, 2009
Egyptian insurance and pension funds grew by 13 percent to LE23.5 billion ($4.26 billion) in the fiscal year that ended on June 30, Finance Minister Youssef Boutros-Ghali said. Funds for government employees stood at LE12.9 billion and funds for the public and private sector totaled LE10.6 billion, Boutros-Ghali said.
An additional 1.7 million people joined the ranks of the insured in the fiscal year. The increase was partly a result of 74,000 entities coming under the insurance umbrella and partly due to the net job additions of 850,000, Boutros-Ghali added. This included the jobs made vacant by retirement.
Egypt had for a long time a thriving informal economy where workers have little or no access to insurance and other benefits. There were 15.9 million insured Egyptians in 2007, according to the Central Agency for Public Mobilisation and Statistics (CAPMAS) (link here). The government is seeking to deepen insurance and pension coverage by reducing the burden of contributions and increasing the value of pensions.
UAE'S JANAN & EGYPT TO SIGN AGRICULTURE DEAL Source: Reuters, August 4, 2009
UAE’s agricultural investment firm Janan will sign a deal with Egypt to cultivate 100,000 feddans (about 42,000 hectares) of land with wheat, corn and feed. Janan will sign the deal with Egypt's Ministry of Agriculture and Land Reclamation (link here) for the project, which will extend until 2015.
The land is located in the South West of Egypt in the agricultural development area of East Oweinat. All grain production will be consumed within Egypt. The project is expected to produce 350,000 tons of wheat per year for local consumption.
The project will be executed over several phases. Each phase comprises 20,000 feddans. Janan has already invested $320 million in East Oweinat to grow 6,000 feddans with green feed and inaugurated an animal feed plant in the area.
Arafa Holding (AmCham member) (link here) announced that its 35%-owned subsidiary, Forall Group (link here), has singed a renewable 5-year license agreement with Cerruti Group (link here) to sell the Cerruti 1881 brand in 33 countries across the Middle East, East Asia and Latin America. Arafa said it expects revenue from Cerruti 1881 to reach EUR3 million in 2010 and EUR9 million by 2014. Arafa added that it will leverage its production facilities in Egypt to enhance the brand's profitability through its vertically integrated model.
NEW PRICING POLICY FOR THE TOURISM SEASON Source: Beltone News, August 11, 2009
The Hotels and Tourism Entities Chamber announced the new pricing policy for the tourism season, extending from October 2009 to October 2010. The new policy allows tourism entities to freely determine their rates, provided they are not 20-25% lower than previous rates, to enable hotels to deal with the repercussions of the global economic slowdown. Rates will not differ according to nationality, as previously was the case for Arab tourists, and Egyptians will enjoy special discounted rates to encourage domestic tourism.
EGYTRANS TO SIGN MOU WITH GENERAL AUTHORITY FOR RIVER TRANSPORTATION Source: EGX, August 2, 2009
Egyptian Transport & Commercial Services Co. (Egytrans) (AmCham member) (link here) announced it has signed a Memorandum of Understanding (MoU) with the General Authority for River Transportation to establish a river port to handle transport containers. Furthermore, the company announced it has signed a Term Sheet with Beltone Capital Holding to establish a new joint venture with a total capital of LE150 million, in which Egytrans will hold a 51% stake.
WORLD BANK SUPPORTS DEVELOPMENT OF RAILWAYS Source: Egypt State Information Service, August 6, 2009
Minister of Transport Mohamed Lotfi Mansour said that the World Bank (link here) will extend a loan of LE1.5 billion ($270 million) allocated to upgrade the efficiency and enhance the safety of railway services as part of the reforms aimed at improving the transportation sector.
The loan extends over 30 years with a grace period of 5 years, after which it will be charged an interest rate of 1.5% annually. The Authority will finance payment of the debt without incurring additional burdens on the government.
The renewal of the railway is expected to begin in March 2010 and end in September 2012, while developing the signals system will start in September 2010 and end in September 2014.
EXECUTIVE REGULATIONS FOR PROPERTY TAX LAW RELEASED Source: Al-Alam Al-Yom, August 9, 2009
Minister of Finance Youssef Boutros-Ghali released the regulations for the new Property Tax Law stating that Egypt plans to introduce the new residential and commercial property taxes in January.
The law stipulates that houses and flats valued less than LE450,000 would be exempted from taxes, while houses valued at LE1 million would be taxed LE660 per year.
Individuals and corporations must submit their real estate assets by the end of the year for valuation, which will take into account location, quality of construction, provision of basic services and proximity to public parks, health and education facilities. Taxes on industrial real estate would be deducted from the overall income tax paid by the owners.
AMENDMENTS TO THE SCOPE OF THE MORTGAGE GUARANTEE AND SUBSIDY FUND TO BE FINALIZED Source: Beltone News, August 3, 2009
The Ministry of Investment (link here) finalized legislative amendments to the scope of the Mortgage Guarantee and Subsidy Fund, allowing the fund to deal with all income levels and not just low income clients, as previously mandated by the Fund’s regulations. The Minister of Investment had referred the amended version of the presidential decree No. 4 (2003) to the State Council for review, in preparation for its issuance during the Parliament’s new session, commencing in November 2009.
The Fund currently supports low income clients, who want to buy housing units, by reducing the value of the mortgage to a level affordable by the low income client, as well as covering up to three months of delinquencies in payments in a 5-year period. The maximum ratio provided through the Fund is 15% of the mortgage or LE10,000, which reduces the monthly mortgage installment, for a client who has a maximum annual income of LE12,000.
Compiled by: Business Studies & Analysis Center E-mail: Studies@amcham.org.eg If you want to receive this bulletin on a regular basis, fill out this form
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