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Suez Canal fees raised

The Suez Canal Authority has raised transit fees by an average of 7.1 percent, effective April 1. The increases ranged between 4.2 percent and 14.1 percent, depending on vessel and cargo type.

Suez Canal revenue is Egypt’s third largest source of foreign currency, reaching $4.6 billion in 2007, up from $3.8 billion the previous year.

Number portability launched

Mobile number portability, a service allowing mobile phone subscribers to switch operators while keeping their numbers, began April 7. Under the guidelines, established by the National Telecommunication Regulatory Authority, users must stay with their original network operator for at least one year to be eligible for the service, which costs LE 75.

Number portability was supposed to be in place over a year ago, but faced delays due to complications in compiling the required database for the service. With mobile penetration rates in Egypt already low by international standards, analysts expect operators to compete for customers on the basis of service quality and coverage.

Egypt has 31.4 million mobile subscribers, according to government figures.

Subsidy bill to rise

Finance minister Youssef Boutros-Ghali has said the cost of food and energy subsidies will rise in fiscal year 2008-09. Food subsidies will increase to LE 20 billion, from LE 15 billion, while energy subsidies will reach LE 60 billion, from LE 57 billion. Despite the higher subsidies, Boutros-Ghali expects the budget deficit to remain the same over the next fiscal year, at 6.9 percent of GDP.

He also said last month that the government might raise existing taxes or levy new ones to boost revenue. He added that the corporate tax rate, which was halved to 20 percent in 2004, would not change.

Gov’t introduces new measures to combat inflation

The government has announced export restrictions on certain strategic commodities and dropped tariffs on over 100 basic goods in an attempt to reel in spiraling consumer prices.

On March 27, the Ministry of Trade & Industry (MTI) announced a temporary export ban on rice and cement to boost local supply. The export ban, effective from April until the end of September, follows an earlier attempt to contain rising domestic prices of the two commodities by imposing export restrictions. The government slapped an export tax of LE 65 per ton on cement in February 2007, which it raised to LE 85 per ton in August. Similarly, an export duty of LE 200 per ton was levied on rice last September.

Less than a week after the export ban, a presidential decree on April 2 reduced or eliminated customs duties on 111 basic goods. The decree made rice, edible oil, baby milk, some dairy products, cement and steel exempt from import duties. For other goods, such as home appliances and medical supplies, tariffs were reduced by between 2 and 30 percent.

The measures were intended to ease inflation, which rebounded at the beginning of the year after cooling in the second half of 2007. Price increases persisted during the first three months of 2008, with the annual inflation rate gaining 10.5 percent, 12.1 percent and 14.4 percent, respectively.

Inflation hits three-year high

The annual inflation rate rose 14.4 percent in March, the highest rate since December 2004, the Central Agency for Public Mobilization & Statistics (CAPMAS) said. It was the third consecutive month that the rate increased, after decelerating over the second half of 2007. It was the highest rate since December 2004, when inflation hit 17.3 percent.

The main cause of inflation has been food prices, CAPMAS said. In March, bread and grain prices were 48.1 percent higher than a year earlier, while fruit and vegetable prices were up more than 20 percent, and edible oils were 45.2 percent more expensive

Governors shuffled, new governorates created

A presidential decree on April 17 established two more governorates and replaced 12 governors with new ones. Helwan and Sixth of October City, formerly part of Cairo and Giza governorates, respectively, were made into governorates, increasing the country’s total to 28.

The addition of two governorates near Cairo could mean less red tape to get investments approved, and therefore spur more business, experts say. Helwan has a population of over 643,000, and Sixth of October City about half a million.

The presidential decree also sparked a protest in Bahariya, the Western Desert oasis town. About 2,000 people demonstrated against the decision to switch the town’s jurisdiction from Giza to Minya. They argued that this will mean traveling up to 600 kilometers to obtain government and administrative services, twice the distance to Giza. The government quickly amended the decision and made Bahariya part of Sixth of October governorate.

The presidential decree appointed new governors in Helwan and Sixth of October and replaced those in Minya, Gharbiya, Daqahliya, North Sinai, Matrouh, Aswan, Port Said, Giza, Menoufiya, Kafr Al Sheikh, Fayyoum and Beni Suef.

Steel hoarders risk stiff penalties

The Ministry of Trade & Industry (MTI) passed new resolutions in late March to penalize steel producers who freeze steel production and supply to domestic markets. Violators face a fine and executives could see jail sentences from one to five years for violating the law.

The new legislation may not matter, analysts say, because factories are already operating at full capacity. The bottleneck is with wholesalers who are withholding steel from the market to keep prices high. Wholesalers are not subject to penalty under the resolutions.

To reduce the unpredictability of steel prices, MTI announced in April that all steel companies must determine a price ceiling for factory prices, plus any applicable transportation costs and taxes. Al Ezz Steel Rebars, the largest local producer, announced on April 1 that it had raised its factory price of rebar steel by 10 percent to LE 5,080 per ton, inclusive of taxes.

Energy prices to increase ahead of schedule

Gas and electricity prices charged to energy-intensive industries will be raised in July, two months ahead of schedule, to reduce strain on the government’s budget deficit, the independent daily Al-Mal reported, citing an unnamed government official.

The paper said the price of natural gas will be raised to $2.22 per million BTUs in July, from $1.85 per million BTUs. A further price hike to $2.65 per million BTUs, originally planned for late 2009, is now scheduled for January 2009. Electricity rates will increase 20 percent in July.

The increase is part of the government’s policy to gradually eliminate energy subsidies to energy-intensive industries such as fertilizers, steel and cement by 2009. Energy intensive industries are defined as consuming at least 66 million cubic meters of gas, or using 50 million kilowatt hours of electricity, per year.

Capital’s cargo limits rile truckers

Truck drivers are furious over a decision by the Cairo governor banning them from driving downtown during daytime hours. A new decree prohibits trucks carrying cargo of more than 2 tons from traveling on most Cairo streets between 8am and 8pm. On March 31, the day the ban came into effect, about 300 truck drivers held a sit-in at the Cairo governor’s office to protest the ban’s implementation.

The truck drivers argued that the ban will hurt their business. But Cairo governor Abdel Azim Wazir, who issued the decree, says regulating the movement of large trucks is necessary to relieve traffic congestion in the capital. About 2 million cars travel daily on city streets, which were designed to accommodate the movement of about a quarter million, he said.

Some truckers claimed they were caught by surprise when the ban went into effect, though traffic department officials insist the new decree was discussed in the media weeks earlier. Traffic police also installed road signs and handed out fliers to truck drivers during the last week of March to inform them about alternate routes.

India eyed for trade, investment

Minister of Trade and Industry Rachid Mohamed Rachid headed a 35-member delegation to India in April to discuss ways of boosting economic cooperation. The two sides aim to double bilateral trade to over $5 billion within three years.

Rachid met with his counterpart, Kamal Nath, India’s minister of commerce and industry. They discussed a possible free trade agreement, and the more immediate goal of a framework agreement in trade and investment.

India also welcomed an Egyptian initiative to establish an Indian industrial zone in Egypt. Rachid said that Indian companies, such as Tata and Essar, have expressed interest in the country’s steel sector. The two sides explored other areas for investment, including the automotive, oil and gas, mining and textile sectors.

Bilateral trade between Egypt and India was $1.96 billion in FY 2006-07, with Egypt holding a surplus of $1.1 billion. Egypt’s main exports to India are oil and gas, cotton and marble. Indian exports are mostly heavy machinery, such as diesel engines, pumps and automobiles.

India is the 12th largest foreign investor in Egypt, with a total investment of about $400 million in 40 projects, including fertilizers, tourism and natural gas.

Labor strike turns violent

Two days of violent clashes between police and demonstrators in the Delta city of Mahalla Al Kubra left at least three dead and scores injured. The clashes erupted after police attempted to disperse workers gathering for a sit-in at the Misr Spinning & Weaving factory, the city’s largest textile plant, on April 6. The planned strike was part of a nationwide call by opposition groups and activists to protest rising food costs and deteriorating working conditions.

Plainclothes officers entered the factory in a pre-emptive move to squash the strike, while security forces used tear gas, batons and rubber bullets to disperse crowds that had gathered in the streets. Three people were confirmed dead as a result of injuries sustained during two days of rioting, including a 15-year-old boy shot while standing on the balcony of his family’s apartment, and at least 100 others were injured. Police also arrested hundreds of workers and their representatives, opposition figures and journalists.

The police crackdown was the most heavy-handed response to labor protests in the industrial city since they began there over a year ago. Following the clashes, Prime Minister Ahmed Nazif went to Mahalla Al Kubra to address disgruntled factory workers. He promised that the workers would receive a bonus equivalent to 30 days’ pay, and that their wages would outpace inflation. He also pledged to double the amount of subsidized bread available to workers through the factory and to improve medical facilities there.

New asset-backed bonds issued

A local leasing and asset finance company issued the country’s first asset-backed securities last month. Corporate Leasing Company (CORPLEASE) issued bonds for LE 360 million, backed by a portfolio of 516 lease contracts.

The bonds, rated “AA” by Moody’s credit rating agency, were oversubscribed 4.6 times, with a total subscription of LE 1.65 billion.

Gas pricing revised for Jordan deal

Egypt has signed an agreement with Jordan to supply its neighbor with additional exports of natural gas at a price of $4.5 per million BTUs. The new price is 200 percent greater than the price Egypt currently charges Jordan under a 2005 agreement to export 2.3 billion cubic meters of gas a year for 15 years.

The 2005 deal, however, excluded providing gas to Jordanian industries. As a result, Egypt agreed last year to supply the industrial sector with an additional 550 million cubic meters of gas a year to generate electricity. The new agreement formalizes this arrangement.

According to the protocol, shipments will begin at the end of 2008. Egypt also has the right to review the price every three years to ensure that it reflects international levels.

CBE sees high growth, high inflation

The economy is strong but inflation is a problem, the Central Bank of Egypt (CBE) said in a report issued last month. The report was positive about the health of the economy, citing a pick-up in the economic growth rate, foreign reserves and trade. Reserves increased by 11 percent to $32.9 billion between January and July 2007. The balance of payments registered an improvement during the first half of the 2007-08 fiscal year with a surplus of $3.1 billion, up from $2.9 billion.

On the downside, the report stated that Egypt was suffering from persistent high inflation, driven by international food prices and rising external debt. The debt increased $2.9 billion to $32.8 billion in 2007, due to net disbursements of $1.5 billion of loans and the US dollar’s depreciation against most currencies.

Charges in tainted blood case dropped

A Cairo criminal court has dropped all charges against a parliamentarian and six others who were on trial for allegedly supplying hospitals with substandard blood bags. The judge in the case ordered the defendants’ release, without stating the reasons for dropping charges.

Hani Sorour, an MP and owner of Haidyelina for Advanced Medical Industries, was at the center of a scandal that erupted in early January 2007 after a health ministry employee filed a complaint, alleging that Haidylena had supplied blood bags that did not meet regulation standards. The ministry recalled more than 263,000 bags of blood, which government labs found to be substandard.

Electrical glitch closes Al Azhar tunnel

Cairo’s Al Azhar tunnel was forced to close unexpectedly on April 22 due to an electrical failure, according to the Ministry of Interior. The morning closure forced thousands of commuters onto the Sixth of October bridge, causing considerable delays.

Food poisoning sends students home ill

Two outbreaks of food poisoning at an Alexandria school were cause for concern, but did not lead to evidence of a widespread problem with the public school’s food supply, health minister Hatem El Gabali has said.

Some 30 students at Othman Bin Affan School became ill after eating biscuits in their school meals. The students were treated with first aid and recovered.

An earlier case of food poisoning at the school was also linked to bad biscuits, the minister said, yet samples of milk used to make the biscuits for school districts across Egypt did not reveal any harmful substances.

Construction halted on fertilizer plant

A $1.4 billion nitrogen factory being built by EAgrium near Damietta faces an uncertain future after the government forced construction to stop last month, claiming the project lacked the requisite construction permits. The stop order follows a grassroots campaign by the area’s residents, environmental groups and small business owners to have the factory relocated, citing its potential environmental damage.

EAgrium, the local subsidiary of Canadian fertilizer maker Agrium, responded to the allegations, saying the project would meet “the highest environmental standards.” The plant will consist of two ammonia and urea trains with a combined capacity of 1.3 million tons of urea and 100,000 tons of ammonia per year. The factory is scheduled for completion by 2010.

The Ministry of Housing issued an order on April 21 to halt work at the site, charging that EAgrium did not have the required licenses for laying cement at some of its facilities. Agrium claims it has already sunk $500 million into the project. The company has sent representatives from Canada to discuss the situation with Prime Minister Ahmed Nazif. It also issued a statement saying that it would work to forge a consensus within the community on issues related to the factory.

Steelmaker refutes critics

Al Ezz Steel Rebars, Egypt’s biggest steel producer, shot back last month at critics who allege high steel prices are to blame for soaring construction costs. The steel company posted the 2007 financial statement of property developer Talaat Moustafa Group (TMG) on its website, apparently to draw attention to TMG’s annual sales growth last year, which it claims was higher than its own.

TMG chairman Talaat Moustafa has stated before that cement and steel producers are responsible for high property prices, a charge which Al Ezz Steel denies. Moustafa replied in a letter that the growth figure Al Ezz Steel had published, 70.9 percent, was wrong, and that doing so was illegal under the country’s capital market law.

Moreover, Moustafa said that TMG’s actual annual sales growth was 14.2 percent, compared to Al Ezz Steel’s 14.6-percent growth rate. Both companies recorded profits in 2007. Al Ezz saw annual profits of LE 3.87 billion, a 29-percent gain, while TMG netted LE 850.2 million, 45.2 percent higher, he added.

Parliament to rule on tighter traffic control

The People’s Assembly is set to vote on amendments to the country’s traffic law (66/1973) that have already been passed by a legislative committee. The amendments are an attempt to streamline traffic and reduce the number of accidents.

The new measures include doubling fines for speeding to LE 1,000, criminalizing driving while intoxicated, regulating three-wheeled motorcycles (tuk tuks), prohibiting tractor trailers after a grace period of three years, and prohibiting the licensing of taxis more than 10 years old.

About 6,000 people are killed and 30,000 injured on Egypt’s roads every year due to traffic accidents.

Wheat supply is secure, assures minister

Egypt will have enough wheat to meet demand until mid-August without purchasing additional imports, Minister of Social Solidarity Ali Moselhi has said. The country’s supply includes 2.3 million tons of wheat in reserve, 3.5 million tons of domestic wheat grown, and an unspecified amount of imports that has already been contracted, he said.

With international wheat prices soaring, Egypt’s import bill has been growing. The General Authority for Supply Commodities (GASC), which purchases wheat used for subsidized bread, has already bought 6 million tons of wheat from foreign suppliers in the 2007-08 fiscal year, which ends in June, compared to 3 million tons for the entire 2006-07 fiscal year.

General strike fizzles under security pressure

A call for nationwide action on April 6 to protest rising food costs and deteriorating working conditions fizzled under security pressure. Declarations carried by fliers, text messages and Internet postings urged citizens to stay indoors on that day as a silent form of protest. Opposition groups and professional syndicates also called for rallies in public squares.

The government issued a warning on the eve of the planned strike that the police would take firm measures against any attempt to “disrupt public order and jeopardize national interests.” The warning, and scores of anti-riot police positioned in public squares, thwarted most attempts to organize rallies. However, thousands of Egyptians were reported to have skipped school and work, and traffic was lighter than usual.

Food sellers cited for health violations

The Ministry of Health has launched a crackdown on restaurants, factories, stores and wholesalers suspected of violating food safety regulations. Health inspectors took samples from over 450 establishments in Cairo and 11 other governorates last month and submitted them to government labs for testing. Over 1,000 health violations were cited, mostly related to improper storage. Inspectors destroyed over 3,800 kilograms of food deemed unfit for human consumption.

Bird flu continues deadly path

Two Egyptians died after contracting the H5N1 strain of avian flu last month, bringing the total number of deaths in Egypt to 22 since the disease was first reported in the country in February 2006. Mohamed Idris, a 19-year-old from Beheira governorate who was exposed to infected poultry at home, died on April 5 after checking into a hospital in Alexandria. On April 11, Walaa Abdel Jalil, a 30-year-old woman reportedly died after contracting the virus. Both victims took the anti-viral drug Tamiflu but did not respond to the treatment. On April 17, a two-year-old boy became the 50th confirmed human case of bird flu in Egypt. He was admitted to a Cairo hospital, and was reported to be in stable condition.

Survey reveals rampant broadband sharing

An independent study suggests that government statistics on the number of broadband Internet users in Egypt are grossly understated. Arab Advisors Group, an Amman-based market research firm, found that a typical Egyptian household with a broadband account shares the Internet with another two households. The group’s study concluded that there were 956,000 ADSL lines in Egypt, more than double the official figure, 427,085, provided by the Ministry of Communications & Information Technology.

The findings, published in “Egypt Households: Telecoms and Media Survey Report 2008,” were based on in-person interviews conducted in March and April 2007 with 700 respondents above 15 years of age from Cairo, Alexandria, Daqahliya, Gharbiya, Sohag and Minya.

REGION NOTES

Steelmaker freezes prices

State-owned Qatar Steel, one of the largest steelmakers in the Middle East, has announced a freeze on its retail steel prices for the duration of Q2 2008. Prices will be kept between 3,250 and 3,300 Qatari riyals per ton (around $900) through June, the company said.

Steel prices have escalated in recent months as rapid development in China, India and the Gulf area has increased demand for construction materials. Qatar Steel’s decision is an attempt to help curb high inflation, which reached 13.7 percent in Q4 2007, the company said.

Proposal to outsource wheat cultivation

Egypt has proposed to cultivate wheat on Sudanese soil to help reduce its import bill. Under the proposal, 5,000 Egyptian farmers would be sent to Sudan to cultivate wheat on up to 4 million acres with most of the harvest sent home. International wheat prices have skyrocketed over recent months due to a number of factors, including increased competition for land from crops for biofuels.

Egypt is the world’s largest wheat importer, purchasing over 6 million tons of wheat in 2007. Its proposal is now being considered by the Sudanese government, which says it is considering similar offers from several Gulf countries.

UAE firms cited for labor violations

Companies operating in the UAE were forced to pay a total of 52 million UAE dirhams ($14.2 million) in unpaid wages in 2007, while 545 firms had their activities suspended for withholding wages, a report by the UAE labor ministry stated. It added that some 50,000 firms were fined a total of 300 million UAE dirhams ($81.7 million) last year for delays in issuing or renewing contracts and work permits.

WiMax network deal signed

Alcatel-Lucent has secured a contract for 70 million Libyan dinars ($59.68 million) to build a WiMax network in Libya to provide wireless Internet in towns and cities throughout the country, the company has announced. The French IT firm aims to launch service to 300,000 users in early 2009.

Labor minister criticizes job seekers

Saudi labor minister Ghazi Al Qusaibi has accused the private sector and Saudi job seekers of contributing to the kingdom’s unemployment problem. He faulted private companies for preferring to hire non-Saudi workers to save money, while he castigated Saudis for refusing to accept lower-level positions in the job market. The Saudi government has encouraged its nationals to accept lower-level jobs to help reduce the unemployment rate, estimated at over 10 percent.

Trade deficit widens

Tunisia’s trade deficit grew by 31 percent to reach 1 billion dinars ($869.8 million) in the first quarter of the year, according to government figures. Total imports went up 23 percent in Q1 2008, driven by the increased cost of oil imports, which went up 98 percent.

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