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Russian industrial zone planned

Rachid Mohamed Rachid, minister of trade and industry, signed a memorandum of understanding (MoU) with Viktor Khristenko, Russia’s minister of industry and energy, to establish a Russian industrial zone in Egypt. The zone will be located on 1 million square meters in Borg Al Arab industrial city and will focus on the manufacture of automotive, aircraft and engineering products.

The Ministry of Trade & Industry (MTI) expects the new zone to attract $550 million in investment from the Russian private sector as well as members of Egyptian industry doing business in Russia. It also predicts the zone will generate up to $700 million in exports within its first five years.

A joint Egyptian-Russian working group will oversee the implementation of the MoU. Establishing the Russian industrial zone is seen as a step towards formal negotiations of a Russian-Egyptian free trade agreement (FTA). No date has been given for when the zone will open.

Russian investments in Egypt stood at $45 million in 2006, with Egyptian investments in Russia estimated at $7.5 million. Egypt’s main imports from Russia, valued at $1.1 billion, include wheat, machinery, steel, wood, iron and fertilizers. Exports are valued at $100 million, and include agricultural products, cereals, oils, herbs and spices, as well as carpets and home furnishings.

Third mobile operator delays launch

Etisalat, the holder of Egypt’s third mobile license, has pushed back the start of commercial operations in Egypt, originally scheduled for February, until mid-May. The company’s CEO said the delay stems from extra time needed to test the system, rather than any problems signing interconnection agreements with Egypt’s two incumbent operators, Vodafone Egypt and Mobinil. The company has also faced difficulties in installing its network towers due to the resistance of residents in surrounding areas.

The National Telecommunication Regulatory Authority (NTRA) said it would not levy monetary penalties on Etisalat for failing to initiate its services by the original launch date. NTRA head Amr Badawy cited circumstances beyond Etisalat’s control. However, if the new operator fails to launch by May 21, Vodafone has stated that it will launch its 3G service.

Court strikes down tax law provision

Tax Authority officials have indicated they will comply with a Constitutional Court ruling that a provision of the income tax law is unconstitutional and should be abolished.

Article 96 allows for profits from commercial or industrial activities to be used as a tax base. The court found this provision unconstitutional because profits are already subject to direct taxation, and because the provision therefore conflicts with the constitutional protection of the right of ownership. It was also deemed to negatively impact investment, saving and labor prospects in Egypt.

Emaar takes control of subsidiary

Emaar Properties has acquired full ownership of its Egyptian subsidiary, Emaar Misr, at a cost of LE 809 million. The deal resolves a highly publicized dispute between Dubai-based real estate giant Emaar and its former Egyptian partners, ARTOC Group and its chairman Shafik Gabr, which together held a 60-percent stake in Emaar Misr.

That relationship turned acrimonious after Emaar purchased a 6.2-million-square-meter plot in Sidi Abdel Rahman for LE 1.2 billion from the Egyptian government to build an integrated resort community. In January, the two sides accused each other of not living up to their financial commitments and entered into negotiations to resolve the crisis.

Emaar officials insist their ongoing projects in Egypt – Uptown Cairo and Marassi – will still be completed on schedule. The company also announced two new mixed-use projects, a LE 5.75 billion upscale residential community in the Al Tagamoa Al Khamis district of New Cairo and a $700 million residential and commercial development on the Cairo-Alexandria Desert Road.

Loans inject capital into state banks

The Ministry of Investment has said it will use $1 billion in loans from the World Bank and the African Development Bank to raise the capital of the two biggest state-owned banks, National Bank of Egypt (NBE) and Banque Misr. NBE, the country’s largest commercial bank, has a paid-in capital of LE 2.25 billion, while Banque Misr’s paid-in capital was LE 1.8 billion in mid-2005.

The African Development Bank loan of $500 million must be repaid over 20 years, with a six-year grace period. The World Bank loan is for the same amount over eight years. The ministry’s statement did not mention interest rates.

Bird flu costs rise

The government has allocated LE 240 million to combat bird flu. The new budget will be used to improve veterinary laboratories, provide the necessary equipment and preparation for immunizing birds, and train 1,200 veterinarians.

Bird flu has cost the poultry industry nearly LE 1 billion since the H5N1 bird flu virus first appeared in Egyptian poultry in February 2006, according to a Council of Ministers’ report. More than 34 million birds have been culled in an effort to stem the spread of the virus. The Ministry of Health has reported 34 human cases of bird flu, 14 of which have been fatal.

Remote viewing satellite launched

A Dnepr carrier rocket launched from Kazakhstan on April 17 carried the EgyptSat-1 satellite into orbit. The satellite, built in Ukraine for Egypt, will conduct scientific research and photography to support development in the fields of construction, cultivation and efforts to combat desertification.

Officials deny pipeline dispute

Jordan and Egypt dismissed a local news report that the Arab gas pipeline project was “suspended” over differences between the two countries. The report claimed that Egyptian gas flow to Jordan was suspended after the supplier reneged on a pricing agreement.

Amman and Cairo signed an agreement in 2003 to build a 360-kilometer pipeline from Al Arish through Sinai to Aqaba and northwards to the Syrian border to carry Egyptian gas to Jordan and later to Syria, Lebanon and Turkey. Egypt agreed to supply Jordan with 2.3 billion cubic meters of gas a year at preferential prices for 15 years.

Single bid for NBD

The sale of National Bank for Development (NBD) has attracted just one bidder. A consortium including Abu Dhabi Islamic Bank and Emirates International Investment is reported to have bid LE 11 per share, which would value the bid at LE 310 million. This would put the bid at one-third the bank’s market share price, and below its year low of LE 13.14 per share.

The consortium’s offer will be put before the bank’s shareholders, who must decide whether or not to accept the bid.

Cabinet approves budget spending increases

The cabinet has approved the FY 2007-08 budget, authorizing a 14-percent increase in spending over the previous year. The cabinet allocated LE 241 billion in expenditures against a forecast LE 185 billion in revenues.

The budget calls for lowering the deficit to between 6.7 and 6.9 percent of gross domestic product (GDP), and reducing public debt to 80 percent of GDP. By comparison, the FY 2006-07 budget calls for the deficit to reach 8 percent of GDP, while the public debt is projected to reach 90 percent of GDP.

The government has struggled to contain the public debt amidst inflationary pressure and increased subsidies, particularly of energy. A record LE 53 million was allocated in the FY 2006-07 budget to energy subsidies. Inflation exceeded 12 percent in December 2006.

Canal fees hiked

The Suez Canal Authority (SCA) raised Suez Canal transit fees by an average of 2.8 percent, effective April 1. Fees rose 3.5 percent for cargo ships, 3.73 percent for oil tankers and 1.14 percent for passenger liners. Other types of ships, including naval vessels, had a 2.84-percent increase.

The SCA previously raised fees by 3 percent in March 2006, which contributed to the canal’s $3.82 billion in revenues in 2006, up from $3.4 billion the previous year. The latest increase, which aims to capitalize on growing Asia-Europe sea traffic, is expected to boost revenues by $150 million this year.

About 8.2 percent of global sea trade passes through the canal.

Living standard improves

Contrary to the popular perception that the poor are getting poorer, a new report indicates that the standard of living in Egypt is improving. A study by the cabinet’s Information & Decision Support Center (IDSC) notes that in the decade between 1995 and 2005 the percentage of Egyptian households with television sets rose from 14 to 92. Homes with refrigerators and washing machines increased by 30 and 19 percent respectively during the period.

The report showed improved access and commitment to education. It noted that 35 percent of males were attending full-time secondary education in 2005, compared to 24 percent in 1995. For women, the increase was even more significant, climbing from 10 percent in 1995 to reach 28 percent in 2005.

Health indicators also showed signs of improvement. The number of households with access to clean drinking water climbed from 73 percent in 1995 to 89 percent in 2005, while 99 percent of households had electricity in 2005, an increase of 4 percent over 1995.

UN agency warns of wheat fungus

Egypt is the potential next stop for wheat stem rust, a highly destructive strain of fungus capable of destroying entire wheat fields, the UN’s Food & Agriculture Organization (FAO) has warned. The agency confirmed that a new strain has affected wheat fields in Yemen, after first emerging in Uganda in 1999, and then spreading to Kenya and Ethiopia. Wind currents could carry spores from Yemen to Egypt, it warned.

The FAO is working with the Canadian International Development Agency (CIDA) to develop a protection plan for countries likely to be affected by the fungus.

Fires claims lives

A fire broke out on April 15 at an oil storage facility in the Fayoum Oasis south of Cairo, killing four people and injuring four. Two days later, a fire fanned by a fierce sandstorm set some 50 homes ablaze in a village in Menofiya governorate, killing two people.

Population growth cools

Egypt’s population growth is slowing, according to the 2006 census, released last month. The census figures put the country’s population at 72.6 million in December 2006, with an average annual growth rate of 2 percent between 1996 and 2006, slightly down from 2.1 percent during the previous decade. The census results also revealed that large-scale urban migration has largely ended.

Factory workers blocked from protest

A delegation of 100 textile factory workers from the Delta town of Mahalla was barred from holding a demonstration at the headquarters of the General Federation of Trade Unions on April 15 in downtown Cairo to demand the removal of their local union officials. The workers charge their union leaders with corruption, and say they have been co-opted by the management of their state-owned factory. State security personnel prevented the delegation from leaving Mahalla.

IDA opens new one-stop shop

The Industrial Development Authority (IDA) established a new branch in Alexandria last month to create a one-stop shop for investors serving the industrial areas of Ameriya, New Nubariya, Beheira and some areas of Marsa Matrouh governorate. The new branch will help investors and SMEs establish businesses in these areas.

IDA head Amr Assal noted that the Alexandria branch will provide investors and SMEs with information to help them start up their business.

Budget cut threatens Alam Simsim

Ten years since it was first introduced to Egyptian children, the cast of Alam Simsim – Egypt’s version of Sesame Street – is facing an uncertain future. The affable and exuberant puppets Nimnim, Khokha and Filfil could be left homeless unless new funding is found for the educational children’s program, which is watched by up to one million children, and adults, every day.

USAID allocated $8 million over 10 years to create Alam Simsim through a girls’ education initiative, but with the end of this grant, the program will need to find new sponsors if it is to continue. Al Karma Edutainment, the Egyptian producer of Alam Simsim, is approaching potential corporate sponsors for the half-hour episodes. USAID has indicated that it is willing to bridge the funding gap until new sponsors can be found.

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