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follow up
devaluation hits pet-food
imports
[“das float,” march 2003]
cairo’s pets have felt the pinch of the devaluation in their
food bowls over the past two months. following january’s devaluation,
a rise in the price of imports due to the weakening of the egyptian
pound prompted many suppliers to think twice before filling their
usual orders of dry and tinned cat food.
for a period of around a month following the january 29 devaluation,
imported cat food – and some brands of dog food – were
markedly absent from the pet food shelves of supermarkets.
an accountant and order taker at zamalek’s seoudi grocery
store, doaa farid, said the cat food shortage had been “a big
problem” for a couple of weeks in february, since most cat
owners, notably foreigners, “prefer imported pet food.”
egyptian-produced options are undesirable substitutes in most cases,
she said.
for several weeks, cat owners visiting most metro supermarkets
also left empty-handed. at a branch in pyramids road, the manager
said in early march that there had not been a shipment of cat food
in 20 days, as a direct result of the devaluation. “there have
been complaints,” the manager said. “what are our cats
supposed to eat? all of the cat owners say that.”
the frustrated shoppers were left to scramble for alternative nourishment
for their feline pets. some opted to feed their cats the locally
produced 7 lives dry cat food. some conscientious cat owners worried
about the dietary value of the brand, made in egypt by el kenana
arabian.
others were more creative. one foreigner living in a houseboat
in kit kat decided to feed his five cats puppy chow. “they
were hesitant the first time, but they are quite content with it
now,” he said.
he and other cat owners noted that imported pet foods had also
disappeared off supermarket shelves in previous years, always coinciding
with intense dollar shortages in the economy.
when new cat food shipments finally arrived in mid-march, the price
hikes were steep – around £e 5 and £e 15 a box
according to some store managers.
metro now has a sizeable selection of purina, 9 lives and whiskas
dry cat foods – including the bigger, 1.59 kilogram bags, which
cost £e 38. at seoudi, the price for the same-sized bags of
purina is a lower £e 34, while cans of wet food run up to
£e 5.50 each.
one metro store had a large, pyramid-shaped display of purina deli
cat, sold in large plastic jugs for £e 47.50 each – up
from around £e 40 before the shortage.
at carrefour in maadi, meanwhile, only 7 lives and some rather
old-looking bags of australian-made petchef were available as of
late march. the hypermarket’s suppliers remained unwilling
to import foreign brands, grocery section supervisor tamer assem
said. “there is no whiskas in all of egypt,” assem observed.
the alfa market on the corniche outside of maadi did, however,
boast a wide selection of whiskas dry food (£e 22 for a 1
kilogram bag), and individual tins (£e 3 each). alfa management
said the market had been able to maintain stocks due to a longstanding,
privileged relationship with suppliers. still, the whiskas products
were 15 to 20 percent more expensive than pre-devaluation.
ursula lindsey
top
fiscal reforms addressdeficit
burden
[“time runs out for merchants,” july 2001]
the government is undertaking fiscal reforms, intending to cope
with its massive budget deficit through stricter expenditure controls
and revenue-raising measures.
in april 2002, minister of finance medhat hassanein said that out
of the £e 141.6 billion budget for 2002/03, the net deficit
would be £e 17.2 billion, or 4.2 percent of gdp. the month
after, rating agency standard & poor’s (s&p) downgraded
egypt’s sovereign rating due to poor fiscal management.
despite a flurry of objections at the time, the government appears
to have taken s&p’s criticisms to heart. the recent, steep
devaluation of the egyptian pound, and the subsequent pressures
of inflation on staple foods, have increased the government’s
budgetary burden. but even before then, important fiscal reform
measures were being announced.
one relatively provocative move, announced in a government report
late last year, involves separating 45 state-owned public authorities
and enterprises from the state budget. the collective debt burden
of these entities is £e 42 billion.
on receiving fiscal independence, each authority would become responsible
for covering debt from its own income, the report said. furthermore,
the authorities would no longer be funded by the ministry of finance,
nor be obliged to provide the ministry with a portion of their revenues.
government officials praised the move as a way to promote fiscal
responsibility within the public entities and help slash the state
budget deficit.
the egyptian radio & television union (ertu) and the state’s
aviation, mail and cadastral authorities are supposed to be made
financially independent in the upcoming 2003/04 budget, while 41
more public entities are poised to undergo the change by june.
ertu officials held a meeting in mid-january to draw up a new,
independent financial plan. the plan centers on ways to enhance
revenue through marketing efforts outside egypt, rethinking the
budgets allocated to tv series and maximizing profits generated
from radio and television commercials.
a recent government study also suggested transferring financial
control of 30 profit-making economic authorities and three public
sector companies, worth an estimated £e 46 billion, to the
national investment bank. in return, the bank would trim down outstanding
treasury debts by the same amount. cabinet must still approve this
transfer.
in a speech following the prime minister’s “free float”
announcement in january, meanwhile, finance minister hassanein touched
on a proposal to replace the government’s current input-based
budget with a performance-based budget, with allocations being revised
based on how effectively funds are being used and how much return
on investment is being achieved.
ashraf al-sayed hamed, professor of public finance at tanta university,
speaking last year at a seminar on the state budget, asserted that
inefficient but deeply ingrained budgetary practices are the main
culprit behind the massive budget deficit. economists, including
hamed, say a performance-based budget could reduce redundancy and
prevent the misappropriation of funds.
hassanein, in his speech, also announced potential tax reforms,
including reducing corporate taxes from 40 percent of taxable income
to 30 percent, streamlining the tax filing process and penalizing
companies for tax evasion.
the tax cuts would be intended to stimulate economic growth and
generate greater long-term revenues. “this would provide greater
bottom-line profit and more cash for reinvestment in the economy,”
said one international economist.
khaled moussa al-omrani and glen
c. carey
top
ikea looks at egypt
[“little japan on the delta,” march 2002]
pleased with its results in the gulf, sweden’s famous furniture
giant is looking at opening up in egypt in the years ahead. ikea,
with almost 200 enormous showrooms around the world, is known on
several continents for offering modern scandinavian-style furniture
at reasonable prices.
no contract has been drafted yet, but meret jakobsen, an assistant
in ikea’s franchise department, located in the netherlands,
said the furniture multinational was “in negotiation with an
[undisclosed] partner” to open a franchise on egyptian soil.
“at some point in time, egypt would be a very good market,
but at this time we are just negotiating,” she said. “it
will be two to three years before there is any ikea store in egypt,”
an official at ikea’s information department in sweden said
a local store would have to be a franchise, because “the ikea
group itself is not opening in egypt.”
franchise licenses are issued to companies or individuals willing
to invest fully into the venture, and who then pay franchise fees
of 3 percent of annual profits. regionally, ikea franchises in saudi
arabia and the uae are “doing very well,” according to
jakobsen.
despite regional proximity, the egyptian market is a different
kettle of fish from the gulf. egyptian consumers’ spending
power is lower, and the local market is well served by local production.
“to make a go of it in this market, ikea might do well to consider
a local manufacturing operation,” suggested one cairo-based
economic analyst.
furniture making has historically been a well-respected craft in
egypt. the delta city of damietta is responsible for at least 90
percent of the wooden furniture made in egypt, much of which is
exported regionally, as well as to the united states, italy and
france.
meanwhile, many locals, particularly young engaged couples, continue
to travel to damietta to get their furniture designed, carved, painted
and upholstered by skilled artisans, whose specialty is handcrafted
reproductions of antique french-influenced furniture, intricately
carved and richly decorated with gold or silver.
a new generation of customers, however, increasingly favors the
simple, western-influenced designs available ready-made at modern
furniture showrooms. cairo showrooms typically feature an array
of classical, semi-classical and modern-style furniture.
but an ikea store is not just a furniture showroom. it is more
of a one-stop-shop for the home, selling pretty much everything
– furniture and accessories, ornaments, rugs, outdoor furniture,
gardening supplies, toys, cookware, textiles, curtains, blinds and
lighting – under one roof.
around the world, ikea’s brand remains firmly linked to its
swedish origins – from a blue-and-yellow corporate color scheme
to jars of pickled herring in the specialty foods
department.
daliah merzaban
top
arabic website gives science
tutorials
[“oh, the humanity,” february 2003]
hoping to promote modern methods in scientific learning in arab
schools, an education initiative supported by global oilfield technology
firm schlumberger last month launched an arabic-language version
of a multilingual science education website.
at the march 13 launch in luxor, minister of education hussein
kamel bahaa el-din said the schlumberger excellence in educational
development – or seed – initiative would help efforts
to sharpen the skills of schoolchildren in information technology
and science. “the country’s future development relies
on educating skilled and competent leaders and workers,” bahaa
el-din said.
seed spokesman hamza qarouni said that volunteers with a broad
range of scientific expertise had started the multi-lingual internet-based
learning center in 1998, aiming to address the information and communications
technology needs of developing countries.
the website – also available in english, french, portuguese,
spanish, russian and chinese – is geared towards 10 to 18 year-olds
around the world, qarouni added. students are encouraged to break
with traditional teaching methods, with heavy emphasis on memorization,
and instead expose themselves to the “real world” of science
through “teamwork, innovation, research and communication.”
a “science watch” link includes articles on various science
and engineering subcategories, while the “science lab”
link provides instructions for hands-on and virtual experiments
that put scientific theories into practice. the website also provides
information on careers in science and engineering, a journal where
young people can publish the results of their projects and a guide
for teachers to formulate interactive science courses.
but the site would not be of much use to students who lack online
access. recognizing the problem, schlumberger middle east chairman
mohamed awad said that seed provides “connectivity grants”
to address the widening global digital divide.
since 1998, the connectivity grants with two-year time frames have
covered the cost of computers and internet access at 104 “underprivileged”
schools in 27 developing countries. recipients have included 13
schools in egypt, yemen, oman and algeria.
a school in luxor was the latest to receive the grant. “we
donated 10 pcs and a printer to luxor secondary military school,
in addition to the required infrastructure and the connectivity
to the internet,” awad said.
in order to qualify for a grant, a school’s administration
must be open-minded, and the school itself must be strategically
located to benefit the community at large, said suzanne marzouk,
the ministry of education manager responsible for computer education.
“the internet-connected school... will be open for users from
the surrounding area and for the public of the village or area,
in return for a nominal fee,” marzouk said.
the seed website can be found at www.slb.com/seed.
hend abdel-fattah
top
hypermarket doing ok
[“french retailer, dubai developer aim for middle market,”
february, 2003]
carrefour officials dispelled rumors last month that the hypermarket
chain would be closing down in egypt. business at the french-designed
superstore in maadi has been “totally right with the forecasts,”
said company vice president jean richoux.
carrefour opened at the maadi city centre late last year, and started
an operation in alexandria in january.
the rumor may have started with a temporary closure in late january.
but this was standard procedure, according to richoux, who said
the chain has a policy of closing for two days, twice a year, to
conduct inventory. happily, there is “no theft problem in egypt
for the moment,” he added.
another factor, which has thrown off many companies’ forecasts,
is egypt’s recent bout of inflation.
prices of basic commodities at small and large vendors across
the city have increased sharply in the past two months. during “this
crisis period,” richoux conceded, families have become “more
careful about household purchases.”
the recent devaluation will lead to an increase in the price of
imported goods at carrefour, but not until new inventory is ordered,
he said. the prices of all goods purchased before the january 29
currency flotation have remained stable, he said.
“at carrefour, we don’t speculate,” he added. “we
do not make profits with the floating pound.”
the hypermarket company is not worried about profits, he said, because
its distributors are closely bound to the chain.
on a typical weekday in early march 4, cashiers at the maadi store
issued 7,000 receipts. “this is not bad,” richoux said.
daliah merzaban
top
drivers, passengers wait
for taxi meters
[“seatbelt law turns short-term profit,” february 2001]
in a couple of months’ time, fare meters – ones
that work, that is – are supposed to become the norm in
all of cairo’s taxis.
“it is now under study in the people’s assembly,”
said mahmoud yassin, deputy governor for western cairo, as quoted
in the january 25 edition of opposition daily al-wafd. “i think
this should be ready for application in a couple of months,”
he added.
regular taxi riders expressed support for the plan, saying there
was no reason taxi fares should be based on haggling with the driver.
“we aren’t talking about anything that radical,”
said mona, a university student. “every country in the whole
world goes with the meter system. we really need to make it work.”
the government decided to make meters obligatory back in 1994,
with every taxi expected to be fitted with one. at the behest of
drivers, the fare officially started at 60 piastres, rather than
25 piastres, as had been the case previously.
but following a jump in oil prices, taxi drivers complained again,
and most reverted to ignoring their meters in favor of a fare mutually
agreed upon by driver and passenger. “i personally don’t
use my meters until i am in front of a policeman,” confessed
mostafa, a 32-year-old taxi driver. “only then will i turn
it on as if i am actually using it.”
while orally-agreed pricing has since become customary, it hardly
works out to everybody’s satisfaction. “this wastes a
lot of time,” complained magda, a working mother looking for
a ride from nasr city. “i’ve been waiting now for more
than 10 minutes – not because there is no taxi, but because
they want 10 pounds to go downtown. if they made their meters work,
they would only make four or five pounds,” she said.
taxi drivers themselves fear that the heralded meter system will
end up working in riders’ favor. “the government never
takes us into consideration. they only care about the passengers,”
said alaa, a 40-year-old taxi driver. “is it fair to take someone
downtown from nasr city for only five pounds like the meter says?
everything else is getting more expensive, so why shouldn’t
taxi fares go up?”
according to magdy salah, professor of planning and traffic engineering
at cairo university, the government needs to come up with a compromise
to satisfy both drivers and passengers. “whether taxi drivers
like it or not, there has to be a system,” he said. “but
the government should be reasonable to both the client and the driver
in order to solve this problem.”
mohamed abdel moneim, head of the taxi drivers syndicate, agreed
that any new system had to take drivers’ complaints into account.
“we are not against a new organized system, but the government
has to consider that there are about 50,000 taxi drivers in cairo,”
he said.
moreover, he added, 90 percent of the city’s taxi drivers
don’t own their taxis, and take home “only a small percentage
of the fares they earn.”
but whatever compromise is struck, the point is moot without enforcement.
“otherwise,” said salah, “the rules will simply be
neglected, as they are currently.”
berween shoreh
top
apartments for 300 students
[“results from mortgage law eagerly awaited,” january
2003]
in march, the first batch of students received apartments under
an “apartment for every student” program initiated in
1988. a joint venture between the ministry of education and the
ministry of housing, the project encourages primary school students
to begin investing in real estate while they are at a young age.
the scheme allows students in 19 governorates to put £e 10
per month into a fund administered by the housing & development
bank. eventually, upon graduation, each student who participates
can expect to receive an apartment, on which the £e 10 payments
must continue until its costs are covered.
minister of education hussein kamel bahaa el din announced in march
that the first 300 students in the program – who first signed
up 15 years ago – had received their apartments. costing £e
100,000 each, the apartments are located in new cities on the outskirts
of greater cairo, such as 10th of ramadan city and 6th of october
city, and come with full furnishings and even computers.
bahaa el din said the project was successful because it engages
the public. more than 26,000 students have joined to date, depositing
a total of £e 21 million into the fund.
housing & development bank chairman fathy el-sebaei explained
that the project “does not aim at making a profit.” rather,
its goal is to “educate schoolchildren about the value of saving
and teach them how to deal with commercial institutions – invaluable
skills for the new generation,” he said.
officials said the scheme would help resolve the country’s
massive housing problem.
recently, the education ministry also established an incentive
system for schools, whereby savings deposits can be used for computers
and other educational necessities.
mohamed mursi
top
gov’t to maintain
baladi subsidy
[“gov’t juggles prices, politics,” february 2003]
the devaluation of the egyptian pound by more than 20 percent since
the end of january has increased the cost of subsidizing wheat,
sugar, rice and other strategic commodities, intensifying the fiscal
burden of maintaining egypt’s comprehensive basic subsidy system.
but many of the price increases on the ground have been unwarranted,
government officials pronounced last month.
merchants have overly inflated prices on many items, minister of
supply & internal trade hassan khedr said a month after the
devaluation announcement. he demanded that price manipulation stop,
and threatened to intervene by fixing the prices of “major
goods” if merchants did not return them to their pre-devaluation
levels. he did not say what those goods were.
following egypt’s march 3 request to the world bank and african
development bank for quick-disbursement loans, president hosni mubarak
reiterated that retail prices of 15 key commodities would be kept
stable.
inflation of food prices has been particularly difficult for those
with fixed salaries, including pensioners.
since imports account for only around 15 percent of the gross domestic
product, the long-term inflationary effect should not be severe,
according to ahmed galal, executive director of the egyptian center
for economic studies (eces), an independent think tank. people will
shift to consuming domestic products, and domestic producers “will
not try to increase prices to fully compensate for the price of
imported goods,” he said.
but essam khalifa, of the national company for investment funds,
said the psychological uncertainty that following the “flotation”
of the pound led many merchants to increase commodity prices “unethically,”
due to “greed” and the hope of “increasing their
profit margins” on the backs of unassuming customers.
khalifa said that the government must take a hard-line approach
with merchants to restore prices.
minister of industry ali el-saeidi appeared to agree, saying that
any future changes in commodity prices must first receive the approval
of the chambers of commerce and the ministry of supply & internal
trade.
many of the observed price rises must have been arbitrary, since
the imported content in egyptian agricultural products is minimal,
noted mohamed mahmoud sami, professor of agricultural economics
in the center for desert research. sami added, however, that the
main obstacle to egyptian agricultural exports is quality, not price.
for some types of agricultural goods, meanwhile, egypt remains
dependent on imports. the country is among the world’s largest
importers of wheat and a big importer of sugar and rice – all
purchased at world market prices. with a less-expensive pound, the
cost of importing these basic commodities has mushroomed.
yet with higher inflation added to the hardships of an economic
slowdown, the availability of cheap baladi bread (five piastres
a portion) remains a politically and socially sensitive issue. government
officials have promised that the prices of most subsidized goods
will remain unchanged.
increasing subsidies, however, places a further strain on an already
high budget deficit. according to last year’s budget, the government
pays a hefty £e 2,083 per capita to keep the subsidies system
afloat. each individual contributes £e 175 per year, out of
average taxes of £e 600.
to deal with added foreign-currency exposure, the ministry of supply
has been seeking barter arrangements with wheat-exporting countries,
based on exchanging egyptian agricultural exports for wheat shipments.
abdalla f. hassan and khaled
moussa al-omrani
top
billion-dollar loan announcement
buoys egyptian pound
[“loans postponed as tourist numbers rise,” november 2002]
on march 2, black market traders were selling us dollars for an
unprecedented £e 7 each. but the stars shifted the next day,
when the government accepted a $1 billion loan from the world bank
– a loan that had been promised more than a year ago, only
to be quietly shelved a few months later.
the dollar’s value fell swiftly to £e 6.20 before sunset
on march 4. on march 5, black market rates were knocked down further
to £e 5.80 or £e 5.90, almost in line with the £e
5.60 average bank rate.
within hours of the loan request, the central bank of egypt convened
a meeting between government and donor-agency officials. the two
sides agreed that the loans would be used to support banks, allowing
them to provide hard-currency credit for importers of basic goods
in serious demand.
the world bank and the african development bank had first promised
egypt the $1 billion quick-disbursement loan at a donor meeting
in sharm al sheikh in february 2002, to assist egypt in its economic
recovery after september 11, 2001. but with the world bank pressuring
egypt over monetary policy, egyptian officials decided in october
2002 to postpone the loan, citing a narrowed balance-of-payments
deficit due to a rise in tourist numbers and a drop in imports.
but early this year, with the war on iraq already anticipated,
the need for the money was felt again. the january 29 flotation
announcement led to rising inflation, but also – as a liberalization
measure – cleared the way for egypt to collect the loans promised
at sharm al sheikh.
the heads of the four big state-run banks confidently asserted
that the timing for the loans was perfect. injecting foreign currency
into the market, they contended, would end speculation on the egyptian
pound and eradicate dollarization – which occurs when people
hold on to their dollars, in deposits or cash, in expectation of
further devaluations.
farouk el-okdah, chairman of the national bank of egypt, said his
bank was meeting all customer demands for foreign exchange, most
notably for traders who needed hard currency to import commodities.
banque misr president mohamed barakat declared that us-dollar account
holders continued to enjoy full freedom to withdraw or deposit funds
at any time.
but the scenes at retail bank counters told a different story.
even after the $1 billion loan announcement, customers complained
about a $10,000 daily limit that had been placed on withdrawals
from local dollar accounts starting in february. travelers hoping
to buy dollars, meanwhile, were confined to a measly $200.
khaled abu ismail, president of the union of chambers of commerce,
argued that the situation would improve thanks to a proposed “exporters
initiative.” the plan called for exporters to sell all their
foreign-currency proceeds to banks, with the banks, in return, agreeing
to sell us dollars back to the exporters as needed.
abu ismail, who is also a major importer, said annual export receipts
are valued at $5 billion. exporters taking part in the initiative
would transfer $500 million in receipts every month to egyptian
banks, he said. this initiative helped to stabilize foreign exchange
within days, he said, noting that exporters view the initiative
to be in the national interest, and they are submitting to it with
no government pressure.
the council for ready-made garments – representing an export-intensive
industry – announced in a meeting with minister of foreign
trade youssef boutros-ghali in march that its members would submit
their export receipts to banks. officials said, however, that companies
might withhold some dollars needed for the purchase of raw materials.
boutros-ghali affirmed that he would intervene personally if exporters
had difficulty opening hard-currency credit accounts at any bank.
khaled moussa al-omrani
top
exporters pressured to
convert hard currency
[“countdown to compliance,” june 2002]
exporters were outraged in early february on hearing of government
plans to force them to convert all their hard-currency earnings
into egyptian pounds at local banks, at official rates, and then
buy back dollars from the banking system as needed in order to acquire
their imported components.
the government’s idea was to make tax rebates for exporters
– such as the 8- to 10-percent rebates on which egypt’s
textile industry has depended for survival in the face of rising
foreign competition – contingent on the funneling of all profits
through the banking system, with hard-currency earnings thereby
turned into local tender.
exporters argued that such a move would undermine the credibility
of the new, floating foreign-exchange system, and that the competitiveness
of egyptian exports would be hurt.
public sector bankers were dismissive, saying that the government
and banks had been “helping out” exporters, so exporters
should now “help out” the official banking system at this
critical time. to do otherwise would be to engage in the dubious
and unpatriotic activity of “currency speculation,” the
chairman of one state-owned bank suggested.
while the bank chairman characterized the tax rebates as a “subsidy,”
this description was vigorously denied by one textile exporter.
“a subsidy would be illegal under the wto,” the exporter
said, adding that his business was subject to an extraordinarily
high level of taxes even after the rebates.
a short-sighted grab for dollars could endanger the government’s
wider reform policies. “forcing exporters to exchange their
proceeds into local currency totally conflicts with export promotion,”
agreed a cairo-based economic analyst. “compelling exporters
to exchange their proceeds – and then buy back foreign currency
at higher prices – will lead to an increase of costs, which
will reduce the competitiveness of egyptian products abroad.”
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