THEIR EXCELLENCIES PRESIDENT BUSH AND PRESIDENT MUBARAK TO OPEN WORLD ECONOMIC FORUM Source: Trade Arabia, May 5, 2008
US President George W Bush and Egyptain President Hosni Mubarak will open the three-day World Economic Forum (link here) on May 18 in Sharm El Sheikh. More than 1,500 participants, including key heads of state and government, ministers, leading business figures and leaders from civil society and the media will take part in the meeting. The meeting, which runs till May 20, will welcome leaders from more than 55 countries.
The meeting in Sharm El Sheikh, held in partnership with the Government of Egypt, will have as its theme "Learning from the Future". A key pillar of the program focuses on a series of futuristic scenarios that explore the impact of long-term global trends on the Middle East. It is designed to highlight the actions that need to be taken today to meet the challenges and opportunities for the region in the next 20 years.
EGYPT RAISES TAXES AND FUEL PRICES AFTER GOVERNMENT WAGE HIKE Source: Al-Ahram, May 6, 2008
The Egyptian Parliament approved on May 6 several proposed actions to finance 30 percent salary increase announced by H.E. President Mubarak. The government expects the measures to generate LE 14.4 billion annually. The actions are:
I) Increase in the prices of 90, 92 and 95-octane gasoline, diesel (gas oil) and kerosene by respectively 35%, 32%, 57%, 47% to LE1.75, LE1.85, LE2.75, LE1.1 and LE1.1 per liter.
II) Increase in sales tax on local and imported cigarettes ranging between 10% and 33%.
III) Increase in the price of natural gas for energy-intensive industries, from LE0.36/m³, equivalent to an approximated rise from US$1.8/m BTU to US$2.8/m BTU.
IV) Imposing a development tax of LE35/ton on clay from quarries.
V) Increasing annual registration fees on vehicles. The fees will depend on the engine capacity of the car; below 1030 CC the fee rose by 625% to LE116; the next class till 1330 CC went up by 517% to LE 143; next class till 1630 CC rose by 600% to LE 175; the class till 2030 CC will be a maximum of LE1000; the final class for cars above 2030 will be charged 2% of the value of the car with a minimum of LE 1000
VI) Removal of tax exemption for private schools and universities.
VII) Removal of free zone status from energy-intensive companies operating in free zones areas.
VIII) Removal of tax exemption on Treasury bills.
CBE TO RAISE ITS OVERNIGHT DEPOSIT BY 50 BPS TO 10 PERCENT PER ANNUM Source: The Central Bank of Egypt, May 8, 2008
The Monetary Policy Committee (MPC) decided to raise the overnight deposit and lending rates by 50 bps to 10 percent and 12 percent, respectively. The headline CPI inflation has maintained its upward trend reaching 16.4% in April as domestic food inflation perpetuated to 22% driven mainly by the elevated international food prices. Moreover, further spillover to non-food prices contributed to the latest inflation outturn.
Despite tentative signs of moderation in international wheat prices, the domestic inflation outlook is affected by the latest regulated price adjustments. While the immediate one-off effect would be reflected in the next inflation reading, the consequent second round effects of these price adjustments pose an upside risk to the inflation prospects. This could be intensified by a potential worsening of inflation expectations.
These unfolding developments will likely keep annual inflation rates high until the
combined effects of price increases related to the international food price shock and the current regulated price adjustments taper off. Given the clear evidence of underlying inflationary pressures, the MPC judges that the balance of risks to the inflation outlook continue to be on the upside and today’s decision is aimed at containing inflation expectations.
The MPC will continue to closely monitor all economic developments, especially the factors underlying inflation, and will not hesitate to adjust the key CBE rates to ensure price stability over the medium-term.
EURO-MONEY CONFERENCE ON THE REAL ESTATE MARKET Source: Al-Akhbar, May 7, 2008
The Euro-Money conference (link here) that is expected to be held on May 26 will touch upon significant issues related to the real estate and mortgage finance in Egypt, its challenges and the domestic market growth. Many officials, money and economics experts will participate in the conference.
Euro-Money association stated that the conference will address the real estate market development worldwide, its impact on the Egyptian market and the available opportunities in the domestic real estate market. The one-day conference will also discuss the impact of the international credit market crisis on the mortgage projects in Egypt and the possibility that mortgage finance companies overcome the gap between the low income and the increase in real estate prices.
The discussions will also cover mortgage supply and demand in Egypt, new legislations and tax systems in this area. It will focus on the importance of real estate insurance, credit rating, valuation, transfer of ownership and methods of accommodating inflation. A number of senior officials will participate in the conference, including the Ministers of Investment, Housing and Tourism, MFA Chairman, I-Score Managing Director and Housing and Development Bank Chairman.
EGYPT ASKS MOBILE FIRMS TO BAR ANONYMOUS USERS Source: Reuters, May 5, 2008
Egypt has asked mobile phone companies to block service to anonymous subscribers as a public security measure, and at least two firms have begun efforts to comply. The move is expected to affect several hundred thousand customers who did not register their names and addresses when they acquired phone lines, still a small portion of overall subscribers in the most populous Arab country.
Vodafone Egypt Telecommunications (AmCham member) (link here), one of three mobile operators in Egypt, has started disabling text messaging capabilities for anonymous subscribers, and was asking them to come forward with their details. Egyptian Company for Mobile Services (Mobinil) (AmCham member) (link here) linked the move to government plans for mobile number portability, which would allow subscribers to change service providers while keeping their original phone numbers.
WIND HELLAS TO INVEST EUR70 MILLION IN TELLAS Source: Bloomberg, May 13, 2008
Greece-based Wind Hellas Telecommunications SA (link here), controlled by Egyptian businessman Naguib Sawiris through his investment vehicle Weather Investments, plans to invest EUR70 million to upgrade the infrastructure of and services offered by its fixed-line unit Tellas Telecommunications SA (Tellas) (link here). The management of Wind Hellas is seeking growth in “convergence of fixed, wireless and broadband services” offered by both companies, the CEO of Wind Hellas, Socrates Kaminakis, said.
EGYPT AND IRAQ TO SUPPLY GAS TO THE EU Source: EarthTimes, May 6, 2008
The European Union has agreed gas deliveries of 7 billion cubic metres annually with Egypt and Iraq, Energy Commissioner Andris Piebals announced. Iraq is to supply around 5 billion cubic meters of natural gas from 2011 when the Akkas gas field in the western part of the country is producing sufficient amounts. Egypt has also agreed to supply the EU with 2 billion cubic meters of gas when the Arab gas pipeline is completed in 2009. The pipeline will be connected with the Nabucco pipeline which will traverse Turkey en route to Europe.
EGYPT'S EZZ STEEL PLANS 1.1 BN EGP BOND ISSUE Source: Economic Times, May 3, 2008
Egypt's Ezz Steel Rebars (AmCham member) (link here), the largest independent steel producer in the Middle East plans for a bond issue worth 1.1 billion Egyptian pound ($204.8 million) to pay debts owed to banks. The company said it will issue 11 million bonds in one tranche, each with a nominal value of 100 Egyptian pounds and an 11.5 percent coupon. Ezz Steel said each investor should buy a minimum of 10 bonds in the public subscription, which starts in two weeks and lasts for up to two months.
LAFARGE SELLS STAKE IN TITAN JOINT VENTURE IN EGYPT FOR 330 MLN EUROS Source: Thomson Financial, May 6, 2008
French cement company Lafarge (link here) has sold its 50 percent stake in an Egyptian joint venture to its partner Titan Cement (link here) of Greece for 330 million euros, Lafarge said. The joint venture, Lafarge-Titan was created in 1999 and operates two cement plants with combined annual capacity of 3.1 million tons. Titan management said that the enterprise had turnover of 127 million euros for 2007, EBITDA of 62 million euros, and net profits of 34 million euros.
GLOBAL INVESTMENT HOUSE STARTS ITS OPERATION IN EGYPT Source: Al Bawaba, May 12, 2008
Global Investment House (link here) "Global" just announced its plans and the strategy that it will implement in Egypt. Mr. Omar El-Quqa, Executive Vice President at Global, said “Global aims to play a major role in the Egyptian capital market by introducing value added investment products and services, a role the company believes to undertake in all the markets and countries in which it operates”. It would also aim to further integrate the Egyptian capital market with others in MENA and GCC in particular. Global currently operates in 16 countries including the Kuwait, Bahrain, UAE, Qatar, Oman, Saudi Arabia, Jordan, Tunisia, Sudan, Yemen, Iran, Turkey, India, Pakistan, Hong Kong, and now Egypt.
EGYPTIAN BOND RULES TO BE CHANGED Source: GulfNews, May 12, 2008
Egypt plans to revise the tax exempt status on Egyptian government bonds as it seeks revenue to cover the cost of public sector salary increases, Finance Minister Youssef Boutros Ghali said. The measure would balance a decision announced last week to charge a 20 per cent tax on interest on treasury bills, Boutros Ghali said.
Boutros Ghali said the move would be effective with a new budget law expected in July. The abolition of tax-exempt status of interest on treasury bills was part of the financial package parliament approved last week to cover the cost of a 30 per cent increase in public sector salaries.
ARAB COTTON GINNING SELLS BELTONE INVESTMENT STAKE TO GULF INVESTOR FOR EGP107 MILLION Source: EFG-Hermes, May 13, 2008
Arab Cotton Ginning (ACG) sold a stake in Beltone Investment (AmCham member) (link here) to an unnamed Gulf investor for EGP107 million. It bought the investment at the end of 2006 for EGP33 million, implying a 3.2x gain. The transaction, which took effect Monday, will be reflected in the company financials for the financial year ending June 2008. ACG also has an EGP80 million stake in Beltone Capital.
HOLDING COMPANY FOR TEXTILES TO SELL STAKES IN FOUR TEXTILE COMPANIES WITHIN DAYS Source: Al Mal, May 13, 2008
The state-owned Holding Company for Textiles will sell its stakes in four textile companies within the coming days, chairman Mohsen Al-Gilani said. The companies are Misr Iran Spinning (a 27.5% stake), Indorama Shebin Textiles (link here) (18%), Arab Polvara Spinning and Weaving (16.2%) and El Nasr Clothing and Textiles – Kabo (link here) (4.2%). The Holding Company plans to direct the proceeds from divested companies to restructure other subsidiaries through the Ministry of Investment’s (link here) restructuring fund, Al-Gilani said. In FY2006/07, which ended 30 June, the holding company reported profit of EGP5.0 million from the four companies, a 77% increase Y-o-Y.
CIB CUTS OFF MERGER TALKS WITH ARAB AFRICAN INTERNATIONAL BANK Source: EFG-Hermes, May 15, 2008
Commercial International Bank (CIB) (AmCham member) (link here) has cut off discussions with Arab African International Bank (AAIB) (AmCham member) (link here) over a potential business combination, it disclosed to the stock exchange. The two banks had announced in October 2007 that merger talks were underway. CIB was not able to reach agreement with AAIB shareholders and the length of negotiations was detracting it from looking at other potential opportunities. EFG had taken an intial positive view on the merger, price considerations aside, as the deal could have allowed CIB to accelerate its expansion in the domestic market. Their valuation and positive stance on CIB are nevertheless based solely on the banks' fundamental prospects, which they believe remain strong.
ORASCOM PLANS BUDGET HOTELS IN CAIRO Source: GulfNews, May 6, 2008
Orascom Hotels and Development (link here), the largest hotel owner in Egypt, announced joint venture plans to develop five budget business hotels under a central brand, in Cairo at a cost of $80 million to $100 million. The venture, Centro, is in conjunction with Abu Dhabi-based hotel operator Rotana Hotels and Resorts (link here) and Shuaa Hospitality Fund 1, managed by Shuaa Partners, the private equity arm of Shuaa capital (link here). Centro will be managed by Rotana.
PHOSPHATE FERTILIZER INVESTMENT EXPECTED TO RISE Source: Noozz, Al Mal, May 14, 2008
The government’s recent ban on setting up more energy-intensive nitrogen-based fertilizer plants has led to increased investment in phosphate fertilizer production, said Sherif al-Gabali, chairman of the Chamber of Chemical Industries. Phosphate fertilizers are less profitable than nitrogen fertilizers, whose price has soared to nearly USD500 per ton in the international market. Phosphate fertilizers, on the other hand, require high-quality raw materials that exist only in few areas in Egypt, particularly in Aswan. Twelve international investors have submitted proposals to the state General Authority of Industrial Development to set up phosphate fertilizer plants, but the authority has approved only one. Egypt’s proven phosphate reserves are estimated at 81 million tons. The government banned new fertilizers plants, which are intensive users of natural gas, for five years.
HILL IN JOINT VENTURE IN EGYPT Source: Philadelphia Inquirer, May 6, 2008
Hill International (link here) is forming a 50-50 joint venture with Talaat Moustafa Group (link here) of Egypt to provide construction project management services, Raouf S. Gahli, president of the company's Project Group International, said. The joint venture, based in Cairo, will run some of Egypt's biggest high-end construction projects: the Mega Mall and a new Four Seasons Hotel in Cairo's wealthy Madinaty section, a new Four Seasons at the Luxor tourism and archaeology site, and an expansion of the Four Seasons in the Red Sea resort of Sharm El Sheikh. The joint venture will also build a 5,000-unit residential development in Riyadh, the Saudi capital. Hill shares were trading at $14.60 this morning on the New York Stock Exchange (link here), up 30 cents from Friday's close.
INSURANCE LAW AMENDMENTS APPROVED Source: Ministry of Investment, May 5, 2008
Amendments to Law No. 10/1981 on insurance supervision and control will strengthen the role of the Egyptian Insurance Supervisory Authority (EISA) (link here), the Minister of Investment, Dr. Mahmoud Mohieldin stated. The new law, approved by the People's Assembly, is to reorganize the brokerage profession and provide the legal framework of the banking insurance marketing system, he added.
With the new law in place, the Egyptian Insurance Supervisory Authority's (EISA) role will be based on risk management and financial solvency in order to preserve policyholders' rights and increase its administrative independence, Dr. Mohieldin explained. Amendments introduced to the insurance law strengthen the role of insurance companies' federations, which will be unified in a single federation with a mandatory membership for all insurance companies in the market. Activities of life insurance companies will be separated from those of property insurance companies, within efforts to create specialized financial entities capable of competition and serving policyholders professionally.
Legal personalities will be allowed to perform the brokerage profession since they have multiple experience and specialized technical staff. Brokers will be trained as major contact elements with the public. According to the new law, insurance companies are required to increase their minimum capital, in proportion with their risks and rights of their stakeholders. Insurance companies are expected to adjust their positions with a transitional period of two years, which may be extended for two more years based on an approval of the EISA.
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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