EGYPT TO RECEIVE ARMS PACKAGE Source: Reuters, August 24, 2007
The U.S. Defense Department (link here) has recently announced a plan to sell up to 125 MIA1 Abrams tank kits, including thermal viewers, firepower enhancements and armor upgrades tank kits to Egypt, a package worth up to $847 million.
The sale, contracted in large part by General Dynamics Corporation, would boost the output of an Abrams tank co-production program, started in 1988, from its current 880 tanks to 1,005.
ANOTHER HEAVY WHEAT ORDER Source: Washington Post, August 21, 2007
Egypt made another heavy purchase of 240,000 tons of soft, red winter wheat from the U.S. recently, a repeat of last month. Egypt has emerged as a major buyer of U.S. soft, red wheat _ the kind used in flatbreads and crackers _ even as prices have climbed to their highest in decades.
Egypt's purchases in wheat through August, the third month in the crop-marketing year, have been estimated at 140 million bushels, some 46% of the U.S. Department of Agriculture’s 160 million-bushel reserve of soft, red wheat.
HEALTHCARE TECHNOLOGIES MISSION COMES TO EGYPT Source: U.S. International Trade Administration website, August 26, 2007
This fall, a healthcare technologies trade mission organized by the U.S. Department of Commerce (link here), scheduled to run October 24 through November 1, will be stopping in Istanbul, Amman, and Cairo to enhance sales opportunities in healthcare technology. The mission will be headed by several leading American manufacturers of medical equipment wishing to launch or expand their business overseas and local distributors, agents, administrators and purchasing managers looking for new product.
CBE ANNOUNCES FY2006/07 MACROECONOMIC GAINS Source: Al Alam al Yom, EFG-Hermes, Gulf News, August 26, 2007
According to the Central Bank of Egypt (CBE) (link here) Egypt's current account surplus jumped 54% in fiscal year 2006/07, up from $1.75 billion in the previous fiscal year to $2.7 billion, as exports, tourism and Suez Canal revenues grew to new heights. The broader indicators of current account flows, however, remain unchanged. The trade deficit deteriorated from $12 billion in FY 2005/06 to $15.8 in FY 2006/07 due to strong import growth. Strong non-oil export growth of 45% to reach $11.9 billion, booming services income, rising from $8.2 billion to $11.5 billion in the fiscal year, and worker remittances of $6.2 billion, however, helped push the overall current account into a surplus.
Net foreign direct investment (FDI) also made impressive gains in FY 2006/07, nearly doubling to $11.1 billion for an overall increase of 82%, accounting for a 8.6% share of estimated GDP for the fiscal year. 47% percent of the investments went to establish new companies and raise capital, 28% to the oil and gas sector and 25% to acquire companies and productive assets. $39 million of the investments were directed toward the real estate sector while $5.2 billion went toward establishing and expanding companies and $2.8 billion went toward acquiring existing assets including the sale of the Bank of Alexandria for $1.6 billion. Countries with the largest investment flows into Egypt included the U.S. U.K., Saudi Arabia, UAE, Kuwait and the Netherlands. UK and Saudi investments were concentrated in the tourism and industrial sector, while UAE investments came mainly in the telecommunications sector.
Egypt’s foreign reserves rose by $5.3 billion to a total balance of $28.6 billion.
SUBSIDY REDUCTIONS SCHEDULED THROUGH 2013 Source: Al Ahram, August 23, 2007
On 14 August, Egypt’s Ministry of Trade and Industry (MTI) (link here) announced that fuel subsidies for single companies – mainly cement, steel, fertilizer and petrochemicals - will be phased out over the next three years. Natural gas prices will rise from $1.25 per million British thermal units (mBtu) to $2.65 per mBtu, the current cost to the government, by mid-2009. Electricity prices will be raised according to three categories of consumption. The price of high voltage energy will rise from EGP 0.111 to 0.178 per kWh, high voltage prices will rise from EGP 0.134 to EGP 0.216 per kWh and medium voltage prices will rise from EGP 0.183 to EGP 0.295 per kWh. The subsidy reduction, currently under review by the Supreme Energy Council, is expected to reduce the government’s subsidy bill by some EGP 15 billion by 2009.
By 2013, the government plans to reduce all industrial subsidies on energy.
New energy costs for gas-dependent industries are expected to average about 40% of total cash costs for an approximate value of $20-25 per ton through the end of the 2007 calendar year, rising to some $23-30 per ton in 2008 and $27-35 per ton by 2010. But industries other than cement, steel and fertilizers are also expected to feel the pressure of subsidy reductions.
In a similar vain, the MTI has further raised export tariffs on cement exports from EGP 65/ton to EGP 85/ton, effective immediately—a net rise of $11 per ton of cement and $15 per ton of clinker. Cement tariffs will be gradually reduced as subsidy reductions gain momentum. Industry giants like Orascom Construction Industries (OCI) (Amcham Member) (link here) are expected to feel the effects of subsidy reductions very little, while smaller firms like Tourah (Amcham Member) and National feel the brunt of the pressure.
Egypt’s apparel and home textile industries are also expected to see reductions in tariffs on their intermediate imports, down from the current 8% to 5% by 2010.
SOUTH KOREAN AND JAPANESE FIRMS TEAM UP TO BUILD REFINERY Source: Reuters, August 30, 2007
Japanese trading house Mitsui & Co and South Korean construction firm GS Engineering & Construction Corporation have jointly won a $1.8 billion contract to build a diesel oil plant in Egypt.
GS on Wednesday announced the same deal to build secondary processing units as part of a new refinery being built by Egyptian Refining Company, but it did not mention Mitsui's involvement.
GS said the units will be built in the refinery in Mostorod, north of Cairo, by September 2011.
The complex includes an 80,000-barrel-per-day (bpd) vacuum distillation unit and a 40,000-bpd hydrocracker that can transform low-quality products into middle distillates which are in higher demand.
The hydrocracker will have capacity to produce 2.5 million tonnes of diesel oil a year, but initial output is expected to be 1.5 million tonnes per year.
INTERNATIONAL FIRMS TO SELL GAS TO LOCAL FACTORIES Source: Al Ahram, EFG-Hermes, August 29, 2007
Egypt’s Ministry of Petroleum (link here) is currently designing a plan to further liberalize the energy market by permitting international oil companies operating in Egypt to sell part of their natural gas share directly to domestic factories. The plan aims to increase investments in gas exploration, discovery and production.
BROWNFIELD DEVELOPMENT CONFERENCE COMES TO CAIRO Source: Union of Arab ICT Associations website, August 29, 2007
In September, Cairo will host the 2007 International Brownfield Development and Production Optimization Conference and Exhibition—a technical conference and exhibition designed to bring together information, experience and research in energy technologies and strategies.
This year’s conference is set to focus on the regional development of brownfields as a way to increase positive returns on investment in gas and oil. Conference participants will discuss identification and quantification strategies for hydrocarbons, production optimization possibilities, and improved reservoir management techniques.
The 2007 conference will be held at the Cairo International Convention and Exhibition Centre (CICC) on September 9 & 10.
TATA AND ESSAR VIE FOR STEEL DEAL Source: India Times, August 24, 2007
India’s largest steel producer Tata Steel (link here) and Essar Steel Holdings (link here) are being considered by the Egyptian government for a $3 billion steel and billet plant which would focus on exporting to the subcontinent. The overall project will include two steel plants, each with an annual capacity of 2 million tonnes, and two billet plants, each with an annual capacity of 1 million tonnes.
The two Indian companies are among seven global firms who have made it to the final round from the initial 24 bidders, a list including Ezz Steel (Amcham Member) (link here), Suez Group (Amcham Member) (link here) and the Egyptian Iron & Steel Company (link here).
Essar Global also plans to invest some $3 billion for a new oil refining facility in Egypt.
EGYMAC TO PRODUCE ELECTRICAL TRANSFORMERS Source: Al Alam al Yom, EFG-Hermes, August 23, 2007
The publicly owned Egyptian-German Company for Electronics (Egymac) has recently begun producing 66 kilovolt electrical transformers in cooperation with Swiss company Battelle (link here). This type of transformer, which is only produced in a few countries around the world, is being manufactured with 100% local components and sold at a rate 30% cheaper than imports of the same type as a way to dominate the local market. Egymac also plans to begin exporting the goods to Africa and some Arab countries such as Iraq, Syria, Libya, Jordan and Yemen this year.
EL SEWEDY APPOINTS HSBC TO FINANCE COPPER SMELTER Source: Reuters, EFG-Hermes, August 29, 2007
El Sewedy Cables (Amcham Member) (link here) has recently announced its appointment of HSBC (Amcham Member) (link here) to finance an $850 million copper smelter and refinery on the Red Sea coast, a joint venture planned with Swiss-based Glencore International (link here). The bank is already preparing documentation for the project financing, which is expected to be 70% debt and 30% equity. The final feasibility study is expected early in 2008.
The joint venture, dubbed Red Sea Copper, which will be 74% owned by El Sewedy and 26% by Glencore, will have an annual capacity of 300,000 tons of copper cathodes, and will sell other by-products such as sulphuric acid, with operations beginning 30 months from the date of approval.
El Sewedy has also reiterated its plans to double its annual cable production capacity to 283,436 tons by 2011 through expansions in its existing facilities, in addition to new plants in other African and Arab countries.
RISING CONSTRUCTION ACTIVITY DRIVES APPROVAL OF 18 NEW PLANTS Source: Al Alam al Yom, EFG-Hermes, August 27, 2007
In FY 2006/07, Egypt’s construction industry saw a 25% activity increase, causing the Ministry of Trade and Industry (MTI) (link here) to recently approve plans for 14 new cement plants and 4 new steel plants. MTI representatives defend the approval as a move to upgrade cement output to even higher levels such that Egypt can avoid importing cement in the future to keep up with rapid construction. Egypt construction industries, a main target for recent energy subsidy reductions issued by the MTI, are not expected to see dramatic price increases in the domestic market as a result of subsidy reductions, an assertive program scheduled to completely eliminate subsidies by 2011.
3 PUBLIC INSURANCE COMPANIES TO MERGE Source: Al Ahram, EFG-Hermes, August 27, 2007
According to the Ministry of Investment (link here), the merger of state-owned Al Chark Insurance and Egyptian Reinsurance into Misr Insurance Company (link here) will be complete once their financial assessments are approved over the first week of September. The main purpose of the pre-announced merger is to boost the companies’ profitability—the joint company has already been assigned an EGP 1.9 billion book value, with an asset base of EGP 18 billion since June 2006 which is expected to grow to EGP 45 billion through 2013. The merger is also expected to raise each firm’s market share—anticipated around 65% in life insurance and 70% in other forms of insurance.
The new firm’s shareholder base will be significantly diversified by public share offerings intended to raise some EGP 2 billion, which could ultimately raise the firm’s capital value to EGP 4 billion. The public offering is expected to follow the merger, which itself is expected to conclude sometime over the next six months. A certain percentage of company shares will be designated only for company employees.
OLYMPIC GROUP AMENDS AL ABD BUY-OUT AGREEMENT Source: EFG-Hermes, August 29, 2007
Olympic Group (OG) (Amcham Member) (link here) amended its agreement to buy the assets of Al Abd Company as requested by the company’s owner. Under the final agreement, OG will only buy the assets of Al Abd Industrial Company, including its brands Al Abd Hi-Tech and Al Abd Guaranteed, for a total of EGP 38.5 million. OG will not, however, buy the assets, inventory or brands of Al Abd Trading Company as initially agreed.
The amendments will save OG about EGP 65 million and will not affect OG’s agreement with Electrolux to become its sole distributor in Egypt starting January 2008.
VISA LAUNCHES RESPONSIBLE CREDIT CAMPAIGN Source: Al Bawaba, August 29, 2007
Visa International (link here) announced the launch of its responsible credit education campaign in Egypt. The campaign, part of Visa’s work to promote financial literacy in the region, is currently underway and will conclude on September 12, 2007. It aims to share advice with the public on financial management skills and how to make the most of payment cards.
BOA, SANPAOLO TO OFFER MORTGAGE FINANCING Source: Mist News, EFG-Hermes, August 29, 2007
Bank of Alexandria (Amcham Member) (link here) and Italy’s Sanpaolo (link here) will allocate a preliminary EGP 750 million to finance mortgages beginning in September, with the potential to increase available funds in the coming months. Mortgages are expected to be offered with a maturity of up to 15 years at competitive rates.
INDIA’S INVESTMENT SET TO RISE Source: Ministry of Foreign Affairs website, August 17, 2007
Indian-Egyptian Fertilizers Company is scheduled to invest around $500 million in Egypt through 2011 while a second, unnamed Indian firm plans to invest $10 billion in petrochemicals, refinery, and hydrocarbon over the coming years, according to an Indian delegation in Egypt recently.
Egypt has become the main target of Indian companies seeking to invest in a large consumer market with inexpensive labor — with total Indian investments expected to soar to $1.5 billion by 2009.
Egypt-India trade ties has been on the rise with bilateral trade totaled at $1.8 billion in Egypt’s 2006/07 fiscal year. India’s exports to Egypt rang in at $355 million while Egypt’s exports to India, mainly oil and gas, reached nearly $1.4 billion.
WIPRO COMES TO THE SMART VILLAGE Source: Topnews.in, August 23, 2007
Indian firm Wipro Infotech (link here) will set up shop in Egypt’s Smart Village (Amcham Member) (link here), establishing a development centre to target IT export services for the Middle-East and worldwide markets. The company has recently signed a memorandum of understanding (MoU) with Egypt’s Ministry of Communications and Information Technology (link here) for the setting up of operations this September—operations likely to include software development, integration and consulting services.
After just seven weeks of operations, Etisalat Egypt (Amcham Member) (link here), the Egyptian arm of UAE-based Etisalat and Egypt’s third mobile operator, has gained 1 million subscribers and will work hard to reach 3 million subscribers in Egypt by the end of 2007.
EGYPT RECEIVES RECORD 9.7M VISITORS IN 2006-07 Source: Reuters, Gulf News, August 27, 2007
Egypt received a record 9.7 million visitors in FY 2006/07 (July-June), up 13% from $8.6 million in the previous year.
The visitors brought $8 billion to the country, 10.7% up from $7.2 billion in the 2005/06 fiscal year, showing tourism’s high contribution to the current account, along with oil and gas exports, Suez Canal transit fees and remittances from Egyptians working abroad. The sector is also has a relatively high potential for job creation, since every five visitors create roughly one job for the Egyptian economy.
According to the Ministry of Tourism, a total of 92.3 million nights were spent by visitors in FY 2006/07, 8.5% up from 85.1 million in 2005/06.
The government is planning to receive 14 million visitors a year in 2011, which will be met by a 30.4% increase in the number of hotel rooms, expected to rise from 184,000 to 240,000.
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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