EGYPT ON COURSE TO BEAT 7 PERCENT GROWTH Source: Reuters, January 27, 2008
Egypt is on course to beat last year's 7.1 percent economic growth despite indications of an international slowdown, Finance Minister Youssef Boutros-Ghali said. Boutros-Ghali also said that Egypt plans to issue a Eurobond around mid-year, probably of 5 billion Egyptian pounds with a 10-year maturity.
"I not only plan to match (last year's growth), I plan to exceed it," he said. "With the setback in the world economy and all this talk about recession and stagnation we may not be able to do 7.5 percent -- but we will do more than 7 percent." Growth in the last two fiscal years ending in June has reached 6.8 percent and 7.1 percent, up from 2 or 3 percent in the years before that, Boutros-Ghali said.
EGYPTIAN GOVERNMENT TO RAISE ENERGY SUBSIDIES BY USD3.6 BILLION Source: Reuters, January 23, 2008
The Egyptian government has approved an additional EGP19.7 billion (USD3.6 billion, or 2.2% of estimated FY2007/08 GDP) in fuel subsidies in FY2007/08. The government had budgeted EGP36 billion for fuel subsidies for the year, but high international oil and gas prices have made the cost of fixing prices more expensive. It took tentative steps to reduce spending on fuel subsidies in mid-2007 when it introduced a new industrial energy policy that will eliminate subsidies for a number of energy intensive industries by the end of the decade.
EGYPT TO INTRODUCE MNP SERVICES WITHIN DAYS Source: Al-Alam al-Yom, January 17, 2008
The National Telecommunications Regulatory Authority (NTRA) (link here) will launch mobile number portability (MNP) services in Egypt in a few days. The cost to subscribers of switching their number, including the prefix, to another operator will be EGP75 said NTRA president Amr Badawi.
CIRCLE OIL FARMS INTO 40 PCT OF NW GEMSA BLOCK IN EGYPT Source: Thomson Financial, Forbes, January 29, 2008
Circle Oil PLC’s (link here) wholly owned unit has signed a farm-in agreement with Vegas Oil & Gas SA (Amcham Member), covering the exploration and exploitation of hydrocarbons at the NW Gemsa Block in Egypt.
The agreement, which was signed through Circle Oil Egypt Ltd but yet to be ratified by the Egyptian authorities, will result in Circle Oil holding a 40 pct interest in the concession.
Vegas Oil is operator of the concession with a 50 pct interest, while Premier Oil PLC (link here) holds 10 pct. The concession includes the Al Amir-1 well, which discovered oil in April 2005 and flowed 787 barrels of oil per day on test.
AUB SEEKS LICENSE FROM CENTRAL BANK OF EGYPT TO OFFER ISLAMIC BANKING Source: Bloomberg, Zawya, January 16, 2008
Bahrain-based Ahli United Bank (AUB) (link here) plans to expand its Islamic banking business in the Middle East, including Egypt, and is now working to get an Islamic banking license from the Central Bank of Egypt (link here), according to its head of Islamic banking Abdulla al-Raeesi. Ahli United Bank began operating in Egypt after it and other investors bought 89.3% of Delta International Bank in August 2006, which they later named Ahli United Bank (Egypt) (Amcham Member) (link here). The Egypt bank now has a network of 17 branches. AUB currently offers Islamic banking products in Qatar.
CAR FINANCE PROVIDER CONTACT TO SET UP MORTGAGE COMPANY Source: Al Mal, January 16, 2008
CONTACT Car Trading Company, Egypt’s biggest car finance provider, will establish a mortgage finance company with a paid-in capital of EGP50 million, which it will later increase as lending grows. CONTACT, which plans to cross-sell mortgages to its existing car financing client base, expects to receive a license from the Mortgage Finance Authority (MFA) (link here) by end-March,said general manager Amr Lami. A group of shareholders led by CONTACT’s management recently bought 62% of CONTACT’s shares from two shareholders, Commercial International Bank (CIB) (Amcham Member) (link here) and Concord International Investments (Amcham Member) (link here). Current shareholders include Banque Misr (Amcham Member) (link here) and the Egyptian Private Investment Fund Ltd. Egypt now has five mortgage finance companies, four of which specialize in lending to retail and one to corporate customers. Total mortgages in Egypt rose to EGP2 billion as of end-2007, and the MFA expects the figure to rise to EGP5 billion by the end of 2008.
EGYPTIAN BANKS RAISE SYNDICATED LOANS FOR TELECOM AND INDUSTRIAL SECTORS Source: Al-Alam al-Yom, January 21, 2008
Egyptian banks have been raising large loans to finance local telecom and industrial companies. Banque Misr (Amcham Member), CIB (Amcham Member), NSGB (Amcham Member) (link here) and HSBC (Amcham Member) (link here) are managing an EGP2.2 billion loan to mobinil to finance the installation of 3G technology. Banque Misr is expected to contribute with EGP600 million to EGP700 million. The allocation between other banks is still unknown. The four managing banks will invite other banks to participate at a later stage. Priority will be given to banks that participated in last year’s syndicated EGP2.3 billion loan to Egyptian Company for Mobile Phone Services (Mobinil) (Amcham Member) (link here).
Banque Misr agreed to lend EGP700 million to Nile Sugar, with Piraeus Egypt (Amcham Member) (link here), Banque du Caire, and Abu Dhabi National Bank (link here) also participating. Banque Misr is also expected to sign an EGP2.2 billion loan agreement with GB Auto in February.
Bank of Alexandria (Amcham Member) (link here), meanwhile, has acquired EGP200 million from Bank Misr’s share in the EGP4 billion syndicated loan to Vodafone Egypt (VFE) (Amcham Member) (link here). Vodafone will use 75% of the loan to finance the cost of its 3G license and the remainder to finance its network infrastructure. Vodafone also received an EGP3 billion revolving loan. Banque Misr, CIB, NSGB, HSBC, Barclays (Amcham Member) (link here), Citibank (Amcham Member) (link here), Arab African International Bank (Amcham Member) (link here), and Arab Bank (Amcham Member) (link here) are among other banks participating in the syndicated loan.
EGYPT AUCTIONS EGP3 BILLION IN 8-YEAR BONDS Source: Reuters, January 22, 2008
The Central Bank of Egypt has accepted offers worth EGP3 billion in an auction of 8-year bond, with rates ranging from 8.5% to 8.85%. The bonds carry a coupon of 8.7%, up from 8.6% in October, and mature on 22 January 2016. The Ministry of Finance (link here) announced earlier this year that it intends to borrow EGP12 billion in bonds with maturities from six to 10 years. Egypt plans to issue EGP-denominated Eurobonds in the first quarter of 2008.
THE CBE AWARDS LICENSE TO EGYPTIAN CREDIT BUREAU “I-SCORE” Source: Al-Ahram, January 23, 2008
The Central Bank of Egypt (CBE) awarded a license to Egypt’s first credit bureau, the Egyptian Credit Bureau “I-Score”, after ensuring the new company’s policies are in line with the CBE’s regulations. The bureau, owned by about 25 private and state banks and the Social Fund for Development (Amcham Member) (link here), will exchange credit information on borrowers with banks, mortgage finance companies and leasing companies. The license allows the company to track retail clients with no limit and SME clients whose debt balance does not exceed EGP1 million. Banks, mortgage and leasing companies will be able to seek information from I-Score when giving, increasing or renewing credit to retail customers and from both I-Score and the CBE for SME clients.
GOVERNMENT TO OFFER BANK OF ALEX SHARES IN IPO AFTER 2007 RESULTS Source: Al Mal, January 24, 2008
The government plans to offer 15% of Bank of Alexandria’s (Amcham Member) shares in an initial public offering (IPO) after the bank announces its results for the year to end-December, which it is expected to do in two weeks. Italy’s Sanpaolo bought an 80% stake in Bank of Alexandria in October 2006, and 5% of the bank’s shares have been allocated to its employees. The committee responsible for determining the offer price in the IPO will comprise representatives from the Ministry of Investment (link here),Ministry of Finance, CAPMAS (link here) and the CMA (link here).
JP MORGAN PREPARES FOR DUE DILIGENCE ON BANQUE DU CAIRE, 12 INTERNATIONAL BANKS SUBMIT OFFERS Source: Al Mal, January 24, 2008, Ahram, January 31, 2008
Twelve international banks have submitted offers to buy a 67% stake in state-owned Banque du Caire. The Central Bank of Egypt is expected to shortlist four to six institutions to carry out due diligence on the bank. JP Morgan (link here), the financial adviser on the sale of state-owned Banque du Caire (Amcham Member), will invite potential buyers to perform due diligence on the bank. The government plans to sell between 51% and 67% of Banque du Caire, Egypt’s third largest bank, to a strategic investor by May. Some 5% of the remaining shares will be allocated to the bank’s employees and the rest to the public in an IPO. Banque du Caire had assets of EGP50 billion, net loans of EGP7 billion and customer deposits of EGP39 billion as of June 2007. It has 215 branches. The government has removed the non-performing loan portfolio and non-strategic investments from the bank’s balance sheet prior to its sale.
OCI SIGNS EGP560 MILLION CONTRACT FOR WORK AT SIDI KRIR AND WINS $1.1 BILLION CONTRACT IN QATAR Source: EFG-Hermes, January 16, 2008
Orascom Construction Industries (OCI) (Amcham Member) (link here) signed an EGP560 million contract with the West Delta Electricity Production Company for construction work on new two 250 megawatt combustion turbine generators and one 250 megawatt steam turbine generator at Sidi Krir near Alexandria. OCI will build the plant's on-shore, out-fall and inlet cooling system and its non-process building, the steel structures and all civil works related to the power block. OCI will undertake the work as part of a joint venture with its subsidiary Besix S.A. The work is scheduled for completion within 32 months. Also, Orascom Construction Industries (OCI) won a $1.1 billion contract to build a medical center in Doha, Qatar. The company will build the health center with Spain’s OHL (link here) and the whole contract is valued at $ 2.4 billion.
BANKS ARRANGE USD2 BILLION LOAN TO FINANCE CITADEL’S PETROLEUM PROJECT Source: Al-Alam al-Yom, January 28, 2008
Local and international banks are arranging a USD2 billion loan to finance Citadel Capital’s (Amcham Member) (link here) USD3 billion refinery project. Participating banks will include HSBC Egypt (Amcham Member), Commercial International Bank (CIB) (Amcham Member) and Banque Misr (Amcham Member). The financial adviser on the project is France-based Societe Generale (NSGB) (Amcham Member). Citadel plans to set up an oil refinery with a designed capacity of 5,000 tons per annum of benzene, diesel and other oil products. The Egyptian General Petroleum Corporation (EGPC) (link here) will own about 15% of the project and Citadel the rest.
Banks also arranged USD600 million for National Petroleum Company (NPC) (link here), an affiliate of Citadel Capital, to finance NPC’s acquisition of the Canadian oil and gas company Rally Energy Corp. (link here). NPC announced last last year it was acquiring 44.2% of Rally for USD843 million. Among the international participants in the loan syndication were BNP Paribas (Amcham Member) (link here), HSBC (Amcham Member) and Barclays (Amcham Member), whereas local banks included Banque Misr (Amcham Member)and CIB (Amcham Member).
OHD BUYS 5-STAR HOTEL IN SAHL HASHISH, ESTABLISHES NEW DEVELOPMENT ARM Source: EFG- Hermes, January 28, 2008
Orascom Hotels and Development (OHD) (link here) agreed to buy a 51% controlling stake in a 530 room, 5-star hotel with an attached marina at Sahl Hashish for USD17.8 million (EGP98 million), implying a total value for the hotel and marina of USD35 million (EGP192 million). The hotel is expected to be operational by 2Q2008. OHD also announced it established a new wholly owned subsidiary, Orascom Development and Management (ODM), to develop properties in return for a share of the proceeds from the sale of the property. ODM has already signed a contract with Joud Fund Management to develop 1.1 square meters in Sahl Hashish and is negotiating to develop another project in cooperation with Joud Fund outside Egypt.
NASR CITY HOUSING TO JOINTLY DEVELOP AL NASR GARDENS LAND Source: Al-Alam al-Yom, January 28, 2008
The board of Nasr City Housing and Development (link here) approved an offer by New Cairo for Real Estate Investments Co. to develop a 1.7 million square meters plot of land, Al Nasr Gardens, said Nasr City’s managing director AIiwa Shalabi. The project will comprise a residential city, villas and golf courses. The project's revenues will be divided between Nasr City Housing (61%) and New Cairo (39%). New Cairo will bear all of the project’s EGP5 billion in costs, while Nasr City Housing will supply only the land. The 3.8 million square meter Nasr Gardens plot lies on the Cairo-Suez road opposite the JW Marriott Hotel (Amcham Member) (link here) and Golf Club.
AL WADY CEMENT WINS LICENSE FOR CEMENT PLANT IN NEW VALLEY GOVERNORATE Source: Al-Alam al-Yom, January 16, 2008
Al Wady Cement won a license to build a new 1.5 million ton, EGP1 billion cement plant in the New Valley Governorate, said Amr Assal, director of the General Authority for Industrial Development. Al Wady expects to start operations within three years. The government will put a license for another cement plant out to tender in Sohag within a month, since no company won the license in an earlier tender, Assal added.
RETAIL PRICE OF STEEL RISES TO EGP 4,200 PER TON Source: Al-Alam al-Yom, January 16, 2008
The retail price of steel has climbed to EGP 4,200 per ton, said Aly Moussa, director of the General Branch for Building Materials at the Egyptian Chamber of Industry. The ex-factory price ranges from EGP 3,800 to 3,925 per ton, including taxes and distributors’ expense. The price of steel in March 2007 was EGP 3,350 per ton, said the Ministry of Trade and Industry (link here).
TOURIST ARRIVALS IN NOVEMBER JUMP 37% Y-O-Y AND TOURISM REVENUE INCREASES 64% Source: Reuters, January 17, 2008, Al-Ahram, January 24, 2008
Tourist arrivals in November jumped 37% Y-o-Y to 1.1 million. Tourism arrivals grew by an average 27% Y-o-Y in the first five months of FY2007/08, up from 8.1% in the first five months of FY2006/07. It is believed that strong European economies and a boom in Russia and the GCC helped fuel the growth. Estimated tourism revenue in November jumped 64% Y-o-Y to USD1.05 billion.
Tourist arrivals to the Red Sea governorate grew 22.6% in 2007 to 3.5 million, or 32% of Egypt’s total arrivals. The Red Sea governor inaugurated 20 new hotels and resorts, increasing the governorates total capacity to 55,000 rooms. Another 32,000 rooms are under construction.
OLYMPIC GROUP ANNOUNCES ALLIANCE WITH SWEDEN’S ELECTROLUX Source: EFG-Hermes, January 22, 2008
Olympic Group (OG) (Amcham Member) (link here) has entered into alliance with global home appliance producer Electrolux. OG will become the sole distributor of four of Electrolux’s best known brands: Zanussi (link here), Electrolux (link here), AEG (link here) and Frigidaire (link here). OG will also coordinate its regional distribution network with that of Electrolux to distribute the brands to the Arab and African regions. OG, which makes Ideal Zanussi automatic washing machines that have been co-branded since 1982, will expand the line to include gas and electric cookers, refrigerators and electric water heaters. OG will export finished products to Electrolux to be sold in European markets under the Electrolux brand. It will also be a major supplier of components for Electrolux’s automatic washing machines, refrigerators and gas cookers. Sweden-based Electrolux, one of the world’s leading manufacturers of home appliances, sells its products to about 150 countries, with Europe and North America being its largest markets.
GOVERNMENT TO IMPOSE ANNUAL GASOLINE TAX Source: Al Masry Al Youm, January 24, 2008
The Egyptian government plans to impose an annual gasoline consumption tax to help it reduce fuel subsidies. The tax, designed to help the government distribute subsidies more efficiently, will be based on engine capacity and will be added to the car’s registration fees. The government does not plan to impose the tax on cars running on diesel, whose price it intends instead to raise directly.
The government, which increased fuel subsidies by EGP19.7 billion (USD3.6 billion) earlier this week, estimates it will spend EGP60 billion on fuel subsidies in FY2007/08. High oil and food prices continue to increase pressure on the state budget, which had a deficit of 7.5% of GDP in FY2006/07, according to revised figures, despite record Suez Canal revenues.
FIVE COTTON GINNING COMPANIES RAISE FEES 21.7% TO REFLECT HIGHER FUEL COSTS Source: Al-Alam al-Yom, January 16, 2008
Three public and two private cotton ginning companies raised their ginning fees by EGP5 per kantar (157 kilograms) of seed cotton, or 21.7%, to EGP28 to reflect a 100% increase in the price of fuel oil (mazot) at the beginning of the year. In response, exporters have begun preparing a protest memo to submit to the two private companies and to the state holding company that owns the three public firms. The export companies argue that the proportion of energy in ginning costs has been decreasing and that the price increase was more than what is justified. The price increase was also too late in the ginning season, which began three months ago, to allow them to modify their selling prices to cotton dealers. The different parties are likely to reach a settlement or postpone the price increase until next season, or else take the matter to court.
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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