US TO PROVIDE EGYPT WITH $1.7 BILLION IN AID Source: Al-Ahram, February 7, 2007
The United States will provide Egypt with $1.721 billion in economic and military assistance in the US financial year that begins in September, putting Egypt second only to Israel, the Director of Foreign Assistance and Administrator of the US Agency for International Development (link here).
The US is expected to budget $20.3 billion in foreign aid for FY2007/08, up 12% from the previous year. $415 million of the aid to Egypt will be allocated to support economic, health and education reform programs and the remaining $1.3 billion to the military. The US directs its aid to support politically important countries to increase regional stability and help in the war on terror, and Egypt's role is vital, said Tobias.
AMERICAN VISITORS` ARRIVALS INCREASE IN EGYPT Source: PRNewswire, February 8, 2007
The number of Americans traveling to Egypt in 2006 soared to 228,165, a 16% increase over 195,800 visitors in 2005. Globally, Egypt succeeded in attracting 9,082,000 visitors in 2006, a 5.5% increase over the 8.7 million visitors of the previous year. These are strong results given that the global growth rate for tourism worldwide is 4.5%, according to the World Trade Organization (link here) .
"We were very pleased with 16% growth of American travelers in 2006," said Ayden Nour, Consul-Director of USA & Latin America for the Egyptian Tourist Authority (link here). He noted that tourist nights soared to 89.3 million versus 85.1 million in 2005, representing a 4.9% increase. The average stay lengthened slightly to 8.3 nights from 8.2 nights in 2005. Tourist revenues, meanwhile, amounted to $7.6 billion for the year, an increase of 11.8% over 2005.
Click here for AmCham’s information on Egypt-U.S. Economic Relations
GOVERNMENT BEGINS PREPARING FY2007/08 BUDGET Source: Al-Ahram, February 5, 2007
The government has begun preparing the FY2007/08 budget that takes effect on July 1, 2007. The budget will expand the use of the Treasury Single Account (TSA), which is an account at the Central Bank (link here) that all government entities have been asked to switch to.
The unified account has helped the government save LE2.5 billion of the cost of LE25 billion deposited in the account. The FY2007/08 budget should also include the remaining LE2 billion of the supplementary LE5 billion that was allocated last year to improve the railway system. LE1 billion will be allocated to subsidize low-cost housing, and other funds will be provided to increase wages, including those of teachers, and to develop exports and expand industrial development and training. The government will maintain at least the same level of subsidies in the budget as last year.
MUBARAK REVIEWS ECONOMIC PROGRESS, CALLS ON GOVERNMENT TO CONTROL INFLATION Source: Al-Ahram, February 5, 2007
President Hosny Mubarak called on the government on Sunday, February 4, 2007 to implement monetary and fiscal policies to curb inflation and protect low-income groups. He recommended reducing customs duties to lower prices and production costs. Speaking at a meeting of the economic ministerial group, President Mubarak asked the government to quickly approve a package of incentives to encourage investment in Upper Egypt.
He emphasized the importance of securing an additional LE 20 billion for waste water projects in Upper Egypt and the Delta, according to presidential spokesman Soliman Awad. President Mubarak was pleased with the progress in reducing the debt of state-owned companies to LE 10 billion last year from LE 31.5 billion in 2004. After reviewing the results of financial sector reform, President Mubarak called on the government to continue with this reform. Growth in credit to the private sector had exceeded the growth of deposits for the first time in seven years, Awad said.
President Mubarak also reviewed reports on economic growth. Real growth rose to 7.1% in 4Q2006, foreign reserves now stand at $26 billion and Y-o-Y growth in exports rose to 34.2% in 2006. Egypt ranked second among African countries in attracting foreign direct investment last year, and new companies had attracted 54.8% of FDI in Egypt. In response to a question by Mubarak, Minister of Finance Youssef Boutros-Ghali said the government planned to reduce the deficit to 6% of GDP next year from the current year's 9%.
GOVERNMENT REDUCES TARIFFS Source: Al-Ahram, February 6, 2007
The government reduced import duties on 1,114 items, including foodstuffs, raw materials and intermediary and final goods, in a presidential decree that comes into effect today. The changes reduce the weighted average of import tariffs to 6.9% from 9%.
Following the reductions, 90% of all items in Egypt’s tariff schedule are charged at less than 15% and another 8.5% are not charged at all. The only items in Egypt whose tariffs still exceed 40% are vehicles that are not electricity-gasoline hybrids. Tariffs on cloth were reduced to 10% from 22%, yarn to 5% from 12% and apparel to 30% from 40%. The 2% tariff on nitrogen and phosphate fertilizers was eliminated. The tariffs on appliances and consumer products were cut by 10%, without specifying the new tariff rates.
The tariff reductions on food items were designed to reduce inflation, while those on intermediary and consumer goods, including appliances and durables, were designed to lower costs for manufacturers and to increase competition in the domestic market, said Trade and Industry Minister Rachid Mohamed Rachid. In both cases the interests of Egyptian consumers will be served, he added. The tariff reduction on apparel and textiles also aims to help export-oriented manufacturers and to eliminate smuggling. The government is allocating LE 150 million to increase the competitiveness of Egyptian manufacturers, added Rachid. The reductions are expected to reduce customs revenue by LE 1.4 billion, but increased economic activity will compensate for some of the revenue loss, said Finance Minister Youssef Boutros-Ghali.
MUBARAK CALLS FOR TRANSPARENCY Source: Al-Ahram & Al-Akhbar, February 7, 2007
President Mubarak said the government’s program to manage and sell its assets should be fully transparent and that the state monopolies that are now being dismantled should not be replaced by private monopolies. Speaking after a presentation by the Investment Minister Mahmoud Mohieldin, he said that a social safety net should exist to protect citizens, especially low-income groups.
Mubarak has been holding a series of meetings with Prime Minister Ahmed Nazif and other ministers to review performance of the economy. After listening to a review of monetary policy and financial sector reform by the central bank governor, Farouk El Okda, Mubarak said the government would not sell the National Bank of Egypt (AmCham Member) (link here) or Banque Misr (AmCham Member) (link here) at all, Egypt’s two biggest banks, but should continue modernizing and developing them. The Minister of State for Economic Development, Osman Mohamed Osman, told Mubarak that GDP should have risen to LE 1,345 billion from LE 700 billion by the time the government’s five-year plan ends in 2012, with average real GDP growth of 8% a year. The plan aims to create 3.8 million jobs at a rate of about 750,000 a year.
GOVERNMENT PREPARING TO SEND DRAFT LAWS Source: Al-Ahram, February 7, 2007
The government is preparing to send draft laws to parliament on property taxes, traffic regulation, teachers wages and a unified building code, in addition to amendments to the constitution proposed late last year, Prime Minister Ahmed Nazif told the Shura Council. He said the government’s priorities were reducing unemployment, reducing inflation and increasing salaries.
By encouraging investment and exports, the reduction in tariffs that the government implemented yesterday should gradually help the government achieve some of these goals. The government is also increasing its focus on improving health and education and infrastructure in less privileged areas to attract investment. The government is also drafting a bill on access and disclosure of information that it will present at the parliamentary session that begins in November 2007, said the Minister of State for Legal and Parliamentary Councils Mufid Shihab. The law, designed to guarantee public access to information except when harmful to national security, was to be referred during the current round but was postponed by the proposal to amend the constitution and by the Shura Council elections that will be held in April.
EGYPT’S TRADE WITH INDIA MORE THAN DOUBLES IN FY2005/06 Source: Al-Akhbar, February 7, 2007
Egypt's trade with India jumped to $1.5 billion in FY2005/06 from $627 million the year before, India’s Ambassador to Egypt told Egyptian businessmen. India exported goods worth LE 1.2 billion to Egypt, while Egypt sent $300 million in goods to India. Egyptian exports were mainly cotton and petrochemicals, while its imports were mainly machines and equipment, textiles, plastics and pharmaceuticals. India ranks 12th in countries investing in Egypt, with investments of $400 million concentrated in petrochemicals, textiles and tourism, said the ambassador, who was speaking at an "India Day" meeting organized by the Egyptian Businessmen Association.
NTRA MAY ALLOW MOBINIL TO USE EDGE UNDER NEW, LOWER-COST LICENSE Source: Al-Mal, February 5, 2007
The National Telecommunications Regulatory Authority (NTRA) (link here) may allow MobiNil (AmCham Member) (link here) l to provide 2.75G services under the Enhanced Data for GSM Evolution (EDGE) technology for license fees that are lower than those that Etisalat Misr (AmCham Member) and Vodafone Egypt (VFE) (AmCham Member) (link here) paid for their 3G licenses, NTRA president Amr Badawi said. Even if the EDGE technology proves to be a 2G technology, MobiNil will have to pay additional fees because the service wasn’t included in the original license, he said. MobiNil’s chairman Naguib Sawiris insists that EDGE technology is part of the 2G services and does not need a 3G license. MobiNil has decided not to buy the 3G license for the time being in the belief that it isn’t economically viable under current conditions. Both of its competitors, Etisalat Misr and VFE, paid EGP3.34 billion for their the 3G licenses and agreed to pay an additional 2.4% of their total mobile revenues for the license’s duration.
ERICSSON BEGINS BUILDING 3G NETWORK FOR VODAFONE EGYPT Source: Al-Mal, February 5, 2007
Ericsson (link here) has begun installing equipment in several locations to build a 3G network for Vodafone Egypt (VFE) (AmCham Member) (link here). The locations are Greater Cairo, Alexandria, Hurghada, and Sharm el Sheikh. The National Telecommunications Regulatory Authority (NTRA) (link here) gave Ericsson the license to build the network last month. Although VFE awarded Ericsson the contract, it still needed a license from the regulator. Ericsson won the contract last year to build the network after bidding against four other suppliers.
TEJARI LAUNCHES OPERATIONS IN EGYPT IN PARTNERSHIP WITH AL AHLY FOR DEVELOPMENT & INVESTMENT Source: AMEINFO, February 5, 2007
In partnership with Al Ahly for Development and Investment (ADI) (AmCham Member) (link here), Egypt's first venture capital company, Tejari Egypt will introduce the benefits of e-procurement and e-commerce services to the country's government departments and private enterprises.
Tejari (link here) CEO Omar Hijazi said: 'Over the next five years, we plan to cater for more than 20,000 Egyptian organizations who will adopt e-procurement through Tejari Egypt, resulting in more than $1 billion worth of trade being transacted through our marketplace. We see enormous potential for e-commerce and e-procurement in Egypt, and with ADI, Tejari has the ideal partner to offer the measurable procurement efficiencies and other benefits that our online marketplace can bring to organizations in Egypt.'
Tejari Egypt will introduce e-procurement services to enterprise and government customers in the country, through its Tejari Marketplace service. Tejari customers across the Middle East have realized direct procurement savings of up to 15-20% plus indirect savings of more than 40% through the adoption of e-procurement, and now Tejari Egypt believes that the public and private sector in Egypt is ready to enjoy the same benefits. At a press conference to launch Tejari Egypt, officials highlighted Egypt's role as the current largest market of Internet users in North Africa, the growth of broadband availability in the country, and the increased focus on e-government as encouraging factors in the creation of the new online initiative.
'The Egyptian government has committed itself to leveraging the benefits of new technology, and the ICT infrastructure required for e-commerce is being created in many parts of the country,' said Fouad Sultan, Chairman & managing director, ADI. 'Government organizations with large procurement requirements stand to gain many benefits of moving to Internet-based procurement. Many large enterprises in Egypt, particularly in the industrial sector, are well positioned to adopt e-procurement, having deployed ERP systems, and we look forward to seeing them reaping the benefits of e-procurement.'
TWO INTERNET SERVICE PROVIDERS SELECTED FOR FIRST COMMERCIAL WIMAX NETWORK IN EGYPT Source: AMEINFO, February 10, 2007
The ISP providers, EgyNet (AmCham Member) (link here) and TE Data (AmCham Member) (link here), have been selected to develop the first wireless outdoor networks for commercial application of WiMAX technology in Egypt. WiMAX is a wireless alternative for DSL and can deliver enough bandwidth to offer high speed Internet access to hotels, businesses, and end users. EgyNet will develop the network in Naama Bay, and TE Data will develop the network in Luxor. These networks are planned to be operational mid-May, 2007.
The National Regulatory Telecommunications Authority (link here) has agreed to provide a demonstration license for WiMAX in the 3.5 GHz spectrum for this project. The WiMAX license will support wireless hotspots across Naama Bay and Luxor, and is complementary to the new 3G licenses awarded to Etisalat and Vodafone.
The While in Egypt Stay Connected project is sponsored by the Ministry of Communications and Information Technology (MCIT) (link here), and financed by the United States Agency for International Development (USAID)(link here). Emerging Markets Group (EMG) (link here) is the prime contractor for this project.
EGYPT GROUP BUYS GREEK PHONE FIRM Source: BBC, February 7, 2007
Greece's third largest mobile phone firm is to be sold to an investment group led by an Egyptian for $4.4 billion. The Naguib Sawiris-controlled Weather Investments will snap up TIM Hellas, subject to EU commission and local regulatory approval. Mr Sawiris is also head of the Middle East's leading mobile phone operator, Orascom Telecom (link here) . And Weather Investments owns Italy's number three mobile operator, Wind (link here). TIM was sold by the private equity firms Apax Partners (link here) and Texas Pacific Group (link here), which bought it from Telecom Italia (link here) for 1.6 billion euros in 2005. After buying Tim Hellas in 2005, the private equity firms bought Greece's number four operator Q-Telecom (link here) from Info-Quest for 360m euros and combined the two.
STATE, HOPING TO LOWER BUTANE PRICES, PLANS NEW DISTRIBUTION COMPANY Source: Al-Masry al-Yom , February 5, 2007
The Ministry for Social Solidarity, the Social Fund for Development (SFD) (AmCham Member) (link here) and the National Bank of Egypt (AmCham Member) (link here) plan to form a new company to distribute butane gas canisters to consumers in response to a recent surge in prices. The price of a canister of butane gas has jumped to as high as LE 18 in some parts of the country due to the “unethical behaviour of small suppliers”, said General Maged Farag, chairman of the state-owned PETROGAS Company. The government sells canisters at an official price of LE 3.50 to LE 4.00, although each canister costs LE 42 to produce, according to government sources. Consumption is at a peak at this time of year, Farag said. The problem is the way energy subsidies are distributed, said Saied ElAlfi, chairman of the Consumer Protection Agency and former chairman of the Industry Committee at the People’s Assembly. A new company would do little to solve the problem or to lower prices. With transportation and delivery costs added in, the price of canisters is more than what low income groups, the main consumers of canisters, can afford, ElAlfi added. Butane gas accounts for about 20% of all energy subsidies, which in turn constitute an average 70% of total subsidies, according to Ministry of Finance (link here) projections for the 2006/2007 budget. The government raised the price of a number of energy products in September 2004 and July 2006, but not butane, which is consumed mainly by lower income groups.
IFC SUPPORTS GAS DEVELOPMENT IN EGYPT AND BULGARIA, PROMOTING CLEANER FUEL Source: International Finance Corporation, February 5, 2007
The International Finance Corporation (AmCham Member) (link here), has signed an agreement to support natural gas development in Bulgaria and Egypt in an effort to promote consumption of gas as a cleaner and more convenient fuel. The IFC has provided a $50 million loan to the Bulgarian and Egyptian subsidiaries of UK-based oil and gas producer Melrose Resources (link here). IFC is making the investment in partnership with commercial banks that have provided another $240 million to Melrose.
IFC’s financing will support the development of domestic gas reserves in Bulgaria and Egypt, helping meet growing demand, bolster employment, and create supply opportunities for local providers of goods and services. Melrose is an important player in the natural gas sectors of both countries and procures about 70 percent of its purchases locally. It also offers significant employment opportunities in both countries.
The financing in Egypt is a revolving credit facility to support exploration and development in the El Mansoura, Southeast El Mansoura, and Qantara concessions in the onshore Nile Delta.
In Egypt’s El Mansoura area, recent oil and gas discoveries are being brought into production, and further appraisal and exploration is ongoing. IFC works with private companies in critical sectors of Egypt’s economy. The hydrocarbon sector is a strong source of foreign investment for the country and an important contributor to its gross domestic product.
APACHE ANNOUNCES FURTHER SUCCESS IN EGYPT'S WESTERN DESERT Source: OilVoice, February 8, 2007
Apache Corporation (link here) has announced that its Syrah 5X appraisal well in Egypt's Western Desert test-flowed 47.6 million cubic feet (MMcf) of natural gas per day from the Jurassic Lower Safa sand, extending the Syrah Field, located on the company's Khalda Concession to the northwest. The discovery well, the Syrah 1X, tested 46.5 MMcf per day from a correlative zone in March 2005.
The Syrah Field lies four miles north of the Qasr Field, Apache's largest discovery, which is currently producing 340 MMcf of natural gas and 15,800 barrels of condensate per day from the Lower Safa sand. The Qasr Field, discovered in 2003, contains proved reserves of 2.1 trillion cubic feet of natural gas and 64.5 million barrels of condensate in the Lower Safa. The Qasr Field also is producing 11,800 barrels of oil per day from the Cretaceous Alem el Bueib (AEB), a shallower formation overlying the deeper Lower Safa.
The success of the Syrah Field and newly acquired 3-D seismic creates the potential for additional exploration on Apache's acreage to the north in the Matruh Concession, where five Jurassic/AEB exploratory tests are planned for 2007. Apache also is evaluating the Jurassic/AEB potential in the four-mile stretch between the Syrah and Qasr fields.Production from the Syrah field will commence in the third quarter of 2008 upon completion of ongoing infrastructure expansion in the greater Khalda.
DANA GAS 6TH HIGHEST GAS PRODUCER IN EGYPT Source: AMEINFO, February 13, 2007
Dana Gas (link here), the Middle East's first regional private-sector natural gas company, has become the sixth highest gas producer in Egypt, through the activities of its exploration and production subsidiary, Centurion Energy.
The company is also among the nine highest producing companies by production of barrels of oil equivalent (boe), out of the 64 companies active in Egypt's oil & gas sector. Centurion Energy (link here) was acquired by Dana Gas in a $ 950 million deal that cements Dana Gas' important position in the upstream exploration and production sector for natural gas in the Middle East. Centurion ended 2006 with estimated gas reserves of approximately 100 million boe, gas production of over 31,000 boe/ day, and operating cash flows of approximately US $90 million. Dana Gas will also benefit from Centurion's further exploration potential of 26,300 square kilometers in the Nile Delta and Upper Egypt, and has been approached by several of the major international energy companies for potential collaboration in this area.
In addition, Centurion provides Dana Gas with access to a team of over 150 highly skilled multidisciplinary management and technical staff, plus over 80 operations staff, with a proven track record in finding, developing, and producing natural gas reserves in the Middle East region. Egypt's proven natural gas reserves have doubled in the last five years to 70 trillion cubic feet, with gas production in the country now exceeding its oil production. In a recent announcement, Egypt's Petroleum Ministry (link here) stated that in the past five years gross foreign direct investment (FDI) in oil, gas and petrochemicals amounted to US $9.5 billion. The Ministry added that the target for the next five years is to secure FDI of US $25 billion in petroleum projects. By 2010 annual exports, mainly of gas and petrochemicals, are set to reach US $10 billion.
Centurion Energy, now a wholly-owned subsidiary of Dana Gas and the company's upstream division, is currently actively engaged in exploration and production operations from 10 development leases and 4 exploration licenses in Egypt, Tunisia, and offshore West Africa, and has offices in Calgary, London, and Cairo.
BANQUE MISR TAKEOVER OF BANQUE DU CAIRE TO BE FINALIZED IN MID-FEB Source: MIST News, February 1, 2007
Banque Misr’s (AmCham Member) (link here) takeover of Banque du Caire will be finalized in mid-February, Banque Misr’s chairman Mohamed Barakat announced. The two state-owned banks expect first to announce their financial statements for 1H2006/07, which ended on 31 December, then hold their annual general meetings. Banque Misr intends to settle all its remaining non-performing loans (NPLs) in 2007, Barakat added. Over the last year, the government settled LE 5.6 billion in NPLs owed by state-owned companies. Banque du Caire’s NPLs are also expected to be settled during 2007.
GOVERNMENT ISSUES NEW BIDDING RULE TO PROTECT MINORITY INTERESTS Source: Al-Ahram, February 5, 2007
Under a new rule, an investor will not be able to buy more than a third of a company’s total capital or voting rights through the stock exchange or other market mechanisms, Minister of Investment Mahmoud Mohieldin announced. An investor seeking to increase his stake will be obliged to bid for all outstanding shares and convertible bonds should he seek to buy more than a one third of a company. The new rule was issued as an amendment to the executive regulations of the 1992 capital market law and is designed to reflect international standards. It aims to improve disclosure and bidding valuations and to protect minority shareholder rights. The investor must have an independent financial adviser if the bidding price is less than the average market price over the previous six months, if shares are swapped or if he buys from a shareholder who has holds more than 25% of the company’s capital.
ASSOCIATION TO PROVIDE FINANCE TO GUARANTEE LE 1 BILLION IN SMALL LOANS Source: Al-Ahram, February 5, 2007
The Association for Cooperative Insurance for SMEs will guarantee LE 1 billion in loans to small and micro enterprises to encourage banks to provide additional finance for projects funded by the state Social Fund for Development (AmCham Member) (link here) , said the association’s chairman, Milad Kamel. The finance is designed to encourage youth to establish small projects without demanding the collateral usually required by banks. Non-government organizations and businessmen associations involved in social activities will also provide guarantees for micro enterprises to help support poorer groups in society, Kamel added. The association also guarantees retail financing from banks and leasing companies to help their clients buy goods and services.
EGYPT CONSUMER CONFIDENCE SLIPS IN 1H2006 Source: Al-Ahram, February 8, 2007
Consumer confidence in Egypt slipped in the second half of 2006, but nevertheless remains high, according to an index for South Asian and African countries produced by MasterCard (link here). Egypt stood at 78.2 points on the index’s 100-point scale, down from 83 points in the first half of 2006, when it was at its highest since 2004. To construct its index, MasterCard asks a random sample of consumers to answer questions on five variables: unemployment, economic growth, income, the stock market and standard of living. Any score above 50 indicates positive consumer confidence. Egypt ranked fourth in the Middle East. The index, which has a standard of error of less than 3%, is used by international corporations, including MasterCard, when taking investment decisions in Egypt.
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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