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hajj prices up this year
["tourism branches out," november 1998]

before modern transportation, the hajj journey from egypt took months to complete. pilgrims endured grueling conditions as they traversed land and sea. today, the journey, though less time-consuming and physically stressful, offers new challenges to both pilgrims and the tour companies that facilitate their journey.

"the most important thing is that it’s a spiritual journey. it doesn’t matter how much it costs," said maha alaam, a doctor from ismailiya.

alaam has spent the past two years saving her money and researching the most affordable way to make her journey. the trip for her and her husband will cost approximately £e 30,000. this includes tickets at £e 10,000 each, with an additional £e 10,000 for expenses.

"it is very expensive, it is exaggerated, i think it costs more to travel on hajj from egypt than from anywhere else in the world," she said. of course, egypt is not actually the most expensive place in the world to make the pilgrimage from, but for her – like for many of the 66,000 allowed to make the trip this year – it is a lot of money.

as if the travel costs weren’t high enough, alaam said she thinks that prices for saudi riyals have been jacked-up by exploitative foreign-exchange offices. for much of the past six months, the riyal stood at about 1.3 to the pound, but shortly before the hajj season, rates rose as high as 1.10 to the pound.

however, exchange-shop owner mohamed khaloud, of khaloud exchange in mohandiseen, insisted that currency prices are basically set by the central bank, not by the exchanges. but there’s no question that the hajj season affects the currency market. "prices rise because there is such a demand for riyals. it happens every year," he said.

overall costs for making a pilgrimage have gone up this year too. according to general farouk rehim, vice president for government relations at emeco travel, there has been a sharp increase in trip prices this year, in part because the riyal has moved with the dollar while the pound hasn’t reacted the same way. "the difference between this year and last in trip prices is about 5 percent," he said. "this is not because of air-fares, which are paid in pounds, but because prices on the ground in saudi arabia have risen."

still, the journey is considered one of the essential acts of muslim devotion, and the 66,000 saudi visas issued to egyptians to go on hajj are easily sold every year. religious travel to saudi arabia also includes the umra, a shorter version of the hajj that can be made at any other time of year. according to the ministry of tourism, some 1 million egyptians make these trips to mecca and medina on a yearly basis.

with no more than 660 travel companies permitted by the ministry to sell the pilgrimage trips in the egyptian market, competition among them is fierce to provide the best service to secure their reputations. emeco, for example, offers hajj packages ranging from £e 10,000 to £e 34,000, with differences in price corresponding with the extent and quality of services offered. a trip like the one alaam is taking will last for up to a month and may not include air-conditioned tents and buses. for those who can afford them, these amenities can be had with a whirlwind trip lasting only 10 days.

according to hassan gamal al din, undersecretary of the minister of tourism, 25,000 visas are distributed to companies according to their level of pilgrimage experience. in the first rank, companies with a minimum of nine years in the field are eligible 50 visas each, while the second tier, with six to eight years, gets 34, and the final level, at five years or less, gets 25.

"companies in the tourism sector find the hajj a blessing from the money they make," said gamal al din. "they make a profit of about 15 percent of the total costs involved."

the ministry of interior receives another 25,000 visas, the majority of which are distributed in a lottery system to lower-income groups. the remainder go to the ministry of social affairs, which passes them on to religious or other non-governmental organizations.

m.scott bortot

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gas giant looks downstream
["with all that gas, don’t forget the wind," august 2000]

shell egypt officials say they see good potential in local gas distribution, now that the government is allowing private investment in natural-gas distributorships. in recent weeks, shell finalized agreements to invest in 18 percent of natgas in cairo, alexandria and parts of the delta, and to take over a concession to run fayoum gas, which operates about 50 kilometers southwest of cairo.

shell representatives would not disclose the size of the investment in natgas, but industry sources valued it at £e 114 million, or about $29 million. shell’s move to acquire a 100-percent stake in fayoum gas, meanwhile, required no up-front investment, because this was a new distribution concession, awarded to shell by the egyptian general petroleum corp., shell egypt chairman roger patey said. arab international contractors, the infrastructure builder at fayoum, is now out of the venture.

the government has authorized six new private, regional natural-gas distribution companies – including natgas and fayoum gas – since 1997, when egypt began a shift towards more domestic use of natural gas. the bulk of distribution in cairo, however, still remains in government hands.

the deal with natgas puts shell in partnership for the first time with egypt-kuwait holding co., a powerful egyptian investment company with diverse holdings. egypt-kuwait holding is majority owner of natgas, which trades on the cairo and alexandria stock exchanges. the holding company’s chairman, nasser kharafi, called the joint venture "a first step in the cooperation between ek holding and shell to develop other investments in the gas and energy business in egypt."

patey said there were no specific plans yet, but added that shell had invested more than $3 billion in upstream ventures in egypt in the past 10 years. the investments in natgas and fayoum gas represent "our first downstream investment in egypt," he said. "but we’ve been investing in egypt for a long time, and we are here for the long term."

natgas could potentially serve about 1 million customers, while fayoum gas has the potential to reach 85,000 to 100,000 customers, he said.

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after a rocky year 2000, the stock-market fortunes of private sector construction giant aic took a brief turn for the better. on january 23, the firm signed a $94 million contract, to be paid over 15 months, to build a gas-powered electricity plant in the kamel area of northern oman.

aic shares rose 10 percent in the two days following the announcement, as stock prices hit the five-percent daily limit twice consecutively. the share’s value reached £e 4.48, and buying rose to 700,000 per day while selling fell off dramatically.

this was good news for the company, which, last summer, was embroiled in egypt’s first well-publicized insider trading scandal. in june, aic issued a profit warning advising that year-2000 revenues would be only £e 7 million – substantially below the rosy £e 48 million projected at the start of the year. company officials blamed the shortfall on "clients’ cash-flow problems and possible payment default," a charge that implicitly included government clients.

but aic’s investor-relations department mistakenly issued the profit warning in english only, leading the capital markets authority (cma) to freeze all trades of the stock for 48 hours, and to cancel all transactions made in the brief window between the warning and the freeze. but the real bomb came a few days later, when stock market officials pointed to an "abnormal" pattern of trading in the week before the profit warning, with aic shares being dumped in large volumes. an agreement reached with the cma forced the company to buy back 1.5 million shares.

aic shares plunged to a low of around £e 4 in july, after trading between £e 10 and 17 in the first half of the year. aic had been expanding its operations around the middle east and, after the scandal, metwalli suggested that the company would pursue a strategy of diversifying its contracts, as proof against bad economies in certain countries or non-payment by particular clients.

"the gulf right now is a good place to be," said hassan h. badrawi, a senior research analyst at efg-hermes. "cash flows have been rejuvenated by higher oil prices, which trickle down quite nicely to construction projects. it’s one of the better construction markets in the region."

an infusion of gulf money "will certainly bode well for the company’s balance sheet," another analyst said. "fundamentally though, there are still big questions about how sound an investment aic is."

aic’s home market, egypt, remains difficult for construction companies. "the sector as a whole has been going notoriously badly, especially with the mortgage law being delayed," the analyst said. "if the sector as a whole gets going, this cash will make all the difference and could turn aic into a real leader. if not, it will not be sufficient to bring the company out of the water entirely, although it will put aic ahead of other companies that are still struggling in a dormant sector."

after two years of stagnation at home, can foreign deals bring salvation? "of course the deal will reflect positively on egypt’s reputation in construction," said badrawi. "but it won’t effect the local market here that much. there’s a big opportunity for egyptian construction companies in the gulf, but they’re going to compete with the big multinationals coming from asia."

aic’s expansion plans look especially risky given the still-precarious nature of its balance sheet. a london-based analyst suggested that the company is severely overstretched, despite management claims to the contrary.

with capital of £e 100 million, of which nearly half is floated, aic is one of the largest construction companies on the cairo & alexandria stock exchanges. the company has 20 million shares, with nominal shares valued at £e 5.

aic had a happy valentine’s day as investors reacted favorably to the publication of its earnings for the nine months ended september 30 of last year. net profit for those first three quarters of 2000 amounted to £e 7.6 million, beating the revised full-year profit projection given in the infamous june profit warning.

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