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| ROUND UP: The month at a glance |
BANKS TAXED:
The People's Assembly passed Law 5 of 1998 in late January, changing
the tax code to eliminate a loophole that companies primarily banks
had exploited to pay virtually no tax. The revision prevents companies
from deducting from their taxes the cost of funds used to buy tax-free
treasuries, bonds and time-deposit certificates. After digesting
the revision for about a week, investors punished shares in banks
and EFIC, a fertilizer producer considered vulnerable to the change,
and continued to drive shares down as the Ministry of Finance failed
to make clear its position on how the new law would be implemented.
(See page 34).
EGYPTAIR CRACKS:
The Ministry of Transport broke the national carrier Egypt Air's
monopoly on domestic service when it licensed for the first time
since the 1952 Revolution two private airlines, AMC and Shorouk,
to fly scheduled domestic routes to and from Cairo. (See page 35).
BIG BET ON GSM:
Two consortiums of international and local companies submitted bids
for Egypt's second GSM license. The group, led by Voda-phone of
the U.K., offered a breath-taking $516 million as a one-time royalty
payment, due within 30 days of the award of the license. The second
group, led by France Telecom Mobile International, offered $370
million. Meanwhile, the public subscription for the company that
will take the nation's existing GSM network private opened Feb.
15.
POWER AWARD:
The Egyptian Electricity Authority awarded Inter-gen, the private-power
arm of Bechtel, the $400 million BOOT contract to build the 650
megawatt Sidi Krir power plant, which will be Egypt's first to have
a private operator. Intergen was the lowest bidder.
SURPLUS SOUGHT: The Cabinet of Ministers opened talks on the FY
1998/99 budget, pledging to achieve a surplus while maintaining
social spending without raising taxes. The trick? Increasing efficiency
and re-doubling efforts to collect unpaid taxes. Egypt's existing
budget deficit is under 1 percent of GDP.
INFLATION SINKS:
Egypt announced that annualized monthly inflation for December came
in at 3.96 percent, leaving Egypt with an annualized inflation rate
of 4 percent for the first half of FY 1997/98. That's down from
7.1 percent from the corresponding period the year before, and 6.2
percent for the last fiscal year.
BUT UNEMPLOYMENT?: Prime Minister Kamal El Ganzouri reported that
Egypt's official unemployment rate had fallen below 8 percent, leaving
it lower than that of any country in Europe. Analysts didn't much
believe the figure, not that anyone had any real numbers to hold
up. Unemployment in Egypt is extremely difficult to calculate given
the massive informal component of the nation's economy.
AIRPORT DEAL:
The Cabinet approved the nation's first BOT-type contract, a $35
million deal granting a subsidiary of Kuwait's El Kharafy Group
a concession to build and operate the airport at Marsa Allam. The
contract with EMAK Marsa Allam for Operation & Administration
of Air-ports was the first of three awarded BOT airport deals to
reach the stage of Cabinet approval. Construction will begin in
1999, and the airport is expected to open in 2002. EMAK's concession
period is 36 years.
EU DEAL SOON?:
Egypt and the European Union will resolve their policy disputes
and sign a free-trade agreement before July 1, European Commission
President Jacques Santer said in Cairo. But such announcements have
been made before in the thus far fruitless three-year struggle to
resolve the knotty issue of increasing the quota of Egypt's agricultural
ex-ports to the EU's heavily protected markets. An EC official said
the optimism reflects new commitments at the highest levels to get
something signed. New talks were to run from late February through
the summer.
TUSHKA AWARD:
A consortium led by Kvaerner Construction of the U.K. won a £E
1.48 billion contract to build the pump station for the giant desert
reclamation scheme in the south of the country. Kvaerner's partners
are Hitachi, of Japan, and Arabian Inter-national Construction,
of Egypt.
A PORT, A STORM:
Government plans to build a port near the canal city of Suez to
serve an area industrial zone miffed investors in tourist projects
at nearby Ain El Sukhna, who said their sites would be ruined. The
Arabic business daily Al Alam Al Youm put their existing investments
at £E 2 billion. The government said alternate sites would
be made available to those whose investments were damaged by the
port.
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