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follow up summer’s end brings
wealth of unexpected visitors july and august were blockbuster months for the tourism industry, which witnessed record highs despite regional tensions related to the ongoing occupation of iraq. the ministry of tourism announced in september that august saw 743,300 tourists arrive in egypt, a 29-percent year-on-year increase. to put these numbers in perspective, august 2002 had been celebrated as the best month ever in egypt’s tourism history, when 574,000 visitors spent their vacations in the country. tourist visits in july, meanwhile, were up 26 percent, at 623,000, and tourist nights were up an amazing 78.7 percent over 2002, at 4.9 million. the tourism sector had been shaking in its boots during the run-up to the us-led assault on iraq in march, with local hotels and travel agencies bracing for a major decline in earnings. their anxieties were hardly misplaced: tens of thousands of europeans canceled trips during the march and april peak season, leading tourist arrivals to decline by 22.4 percent in march alone. and when the war finally began in earnest, hotels reported 50-percent drops in occupancy rates, despite the offer of huge discounts. rumors of the imminent layoff of hundreds of thousands of employees in the tourism industry – and in related sectors – topped off the dismal predictions. but – like what happened following the 1997 luxor massacre and the attacks of september 11, 2001 – tourism rebounded more quickly than analysts expected. according to industry insiders, a number of helpful factors contributed to the rapid recovery: the swiftness of the war; the relative stability in egypt despite obvious regional tension; the less competitive currency; and events such as the tourism and shopping festival. now, the tourism ministry is expecting another 5 million or more tourist arrivals by year-end, which could very well make 2003 egypt’s best year ever for tourism. “the second half of the year will be better than the first,” minister of tourism mamdouh el beltagui predicted in a recent press conference. “this huge increase in the number of international visitors highlights egypt’s ability to handle any crisis,” he added. ministry statistics show that, for the first time, saudis topped the list of foreigners visiting egypt in july, with 64,725 arrivals that month, followed by italians and germans. “the stability in egypt attracted more tourists, especially from the arab countries, including saudi arabia, kuwait and the uae,” observed farida mansour, public relations manager at the nile hilton. hotels across egypt, which have already raised rates back up to normal levels, therefore, reaped significant summertime sales. chairman of the board of directors of the three corners hotel chain in hurghada, mohamed abdel maqsoud, said all of the chain’s 1,625 rooms – which range in price from $50 to $100 per night – were at “110 percent occupancy” in july and august. “it was the best season for us in hurghada,” he affirmed. abdel maqsoud, like others in the industry, is crossing his fingers that the upward trend will continue into the winter high season, which promises to bring in lucrative – and badly needed – foreign cash.
decree 506 yields unexpected
contradiction the six-month-old decree 506 – which calls on all businesses to convert 75 percent of their foreign-currency income into egyptian pounds – is entering a period of stricter enforcement. “the decree is much stronger now than it used to be,” said alaa abu allam, a cairo-based financial economist and exchange-rate specialist. “the government is serious about this.” targeting key foreign-currency earners such as net exporters and tourist establishments, the decree aims at making hard currency available to importers of vital raw materials, in an attempt to woo them away from the black market. banks, in return, are expected to provide companies with adequate foreign currency to finance the import of those raw materials that are, in turn, essential to producing exportable goods. according to trade industry officials, most exporters are, for the most part, complying with the unpopular regulation, while banks, too, appear to be keeping their side of the bargain. according to salwa mansour, senior manager and board member at the majority state-owned export development bank of egypt, letters of credit are being extended to importers with little or no delay. “our clients are respecting what the government is asking them to do, and when they need foreign currency, we’re giving them foreign currency,” she said. alaa ezz, chief adviser to the chairman of the federation of egyptian industries, agreed, noting that most import-dependent industries are currently having their foreign currency requirements met by the banking sector. from the start, the decree has been seen largely as a stopgap measure aimed at easing the liquidity crisis, to be removed once official currency rates and black market rates converged. but while the decree’s ultimate goal may have been a noble one, it has so far failed to destroy the resilient parallel market, leading some observers to conclude that exporters haven’t yet given up their predilection for under-the-table means of meeting their currency needs. taking part in illegal currency trading, though, has become riskier than ever. traditionally, if authorities intercepted an illegal transaction, only the seller would be liable. now, however, the crime sections of local newspapers are filled with reports of company managers being sent to jail for buying dollars on the black market. this, according to ezz, has dissuaded many companies from taking part in such transactions. but while the scheme may work in theory, it has, in practice, run into an unexpected dilemma in its application to the forex-heavy tourism industry. when prime minister atef ebeid announced the decree in march, he called on different ministers to issue rules on how 506 would be implemented under their respective jurisdictions. minister of tourism mamdouh el beltagui, therefore, issued decree 79, which demands that hotels receive payment only in foreign currency. hotels are then expected to exchange 75 percent of those proceeds into egyptian pounds through the official banking sector. unlike decree 506, though, decree 79 excludes tour operators and travel agents from the rule. according to ahmed mohamed el-khadem, director general of the egyptian federation of chambers of tourism, banks generally insist on implementing decree 506, but not decree 79 – although he admitted the latter is “the more rational of the two.” travel agencies, as a result, have not been able to retain enough foreign currency in their accounts to pay for hotel bookings, while hotels – in compliance with decree 79 – must receive payment only in foreign exchange. “it’s a very, very awkward situation,” el-khadem said. the tourism minister and the prime minister have yet to reconcile the two decrees.
unpaid bills hurt state
electric company the state-run greater cairo company for electricity distribution (gcced), which usually boasts some of the highest revenues in the public sector, is now facing losses due to a marked increase in unpaid electricity bills. according to recent company statistics, 25 percent of subscribers in greater cairo (comprised of the cairo, giza and kalioubiya governorates) – some 1.25 million households – aren’t paying their bills. additionally, there are a number of municipal departments and authorities that have yet to pay up. “the money owed the company is now about £e 3.5 billion,” said gcced chairman hegazi eid. a major obstacle facing the company is the difficulty its employees encounter in accessing subscribers’ apartments in order to read electricity meters. this is especially true during the summer, when many cairo residents leave the capital for milder climates. in an attempt to make the process easier, therefore, the company tried asking subscribers to call in and verbally report their meter readings, or drop them off at gcced headquarters. but according to eid, the public was generally uncooperative. “consequently, the company will implement a new system in which all subscribers will have new electric meters installed outside, rather than inside, their apartments,” he said. “these will make it easier for us to read the meters every month.” and this time, it’s personal: if subscribers refuse installation of new meters, they’ll have their electricity cut off after three months. the company has already installed 115,000 meters this year, eid added. but why the sudden mass failure to pay the bills? while it’s true that a significant segment of the population leaves the capital at the height of summer, this appears to be only part of the reason for the increase in non-payment. to talk to most subscribers, it’s a price issue. “the company is making excuses,” said hassan farouk, an abbasiya resident. “subscribers don’t pay because of the high bills, which many feel are unjustifiable.” he added that the addition of garbage collection fees to the electricity bill – a practice launched in march in the cairo and giza governorates – has only contributed to a general reluctance to pay up. in fact, on september 3, the gcced announced that a full 50 percent of their subscribers had refused to pay the additional garbage fees. according to a source at the gcced, “when the company refused to take the electricity consumption fees alone, many subscribers said that they simply wouldn’t pay the bills at all.” he added that, at present, the company cannot take any action against those refusing to pay garbage fees, as there is nothing in company-client contracts referring to garbage collection. “we’re still waiting for the government to decide how we’re going to deal with the problem,” the source said.
baghdad bourse picks up
pieces as allied forces launched their invasion of iraq in march, then iraqi president saddam hussein ordered that all trading on the baghdad stock exchange (bse) cease. now, the vacant building that once housed the exchange has become little more than a refuge for homeless iraqi families. recognizing every sovereign nation’s need for a working stock market, therefore, the us-headed coalition provisional authority (cpa) – along with the recently appointed iraqi governing council – is planning to build a new bourse from scratch. in the meantime, a parallel exchange has come into existence, with shares changing hands at prices much higher than those seen on that last fateful trading session in march. but plans for the new exchange are still in the preliminary stages. speaking at the baghdad conference center in september, thomas wriges, an american broker working for the cpa, told some 40 local brokers that the new bse wouldn’t be operational until next year. moreover, in a drive to boost transparency, all listed companies and brokerage firms would need to be audited first, he said. when trading began on the bse in 1992, following the first gulf war, 64 companies were listed on the exchange, trading for one session a week. by 2002, iraqi investors were actively trading the shares of 120 different local companies – mainly state-owned – during three weekly sessions, with trade volume usually ranging between $100,000 and $150,000 per session. interestingly, while international exchanges hit bearish lows during the run-up to the us-led invasion, the bse witnessed a rally, with some stocks jumping as much as 56 percent. local investors, expecting a swift war, were betting the economy would quickly bounce back once the 12-year-old sanctions regime was lifted. hospitality stocks – such as the sheraton hotels in baghdad and basra – rose on the expectation that foreigners would pour into iraq once the regime fell. fearful, at the time, of angering the government, bse head subhi al-awazi had attributed the curious rally to “the confidence of iraqis that they would win the war,” while former director of trading abbas fadhil had announced that the boom reflected “the good reputation of iraqi companies and good policies of the government.” while the pre-war traders may have gotten a little ahead of themselves, recent talk of rising foreign investment and coming privatization is promising to bolster the iraqi economy – once considered the region’s powerhouse. currently, bse rules bar non-iraqis from buying stocks. according to wriges, this regulation will remain in effect during the first phase of the bourse’s restructuring, expected to last for two years. afterwards, though, international investors will be encouraged to come and trade. wriges, for one, thinks iraq could eventually become the fourth largest capital market in the world. iraqi brokers, too, envisage significant gains. “it will be one of the best stock exchanges in the middle east,” predicted walid al-sadoon, an iraqi broker attending the meeting. “there will be a lot of investors: iraqis, arabs, foreigners. as privatization of state companies goes ahead... there will be huge business.”
new radio stations take
a bite out of cassette sales since the official launch last july of egypt’s first two private radio stations, negoum fm and nile fm, producers of music cassettes have been complaining of a noticeable drop in sales. “any intelligent producer can feel the threat of this station [negoum],” said record industry titan mohsen gaber, who owns alam el phan, a major local record label under the umbrella of cairo-based media conglomerate founoon. “that’s why i asked the station to stop playing the songs i produce – in order to save my sales profits,” he added. recently, alam el phan – which produces the pop hits of superstars amr diab, warda, hisham abbas and samira saeed – began printing warning labels on its releases stating, “these songs are not allowed to be played on any radio station.” tareq abdalla, owner of high quality cassette company, agreed. “the station could make people stop buying albums and that would lead us to bankruptcy,” he stressed. the two make a reasonable point. after all, “you now have the opportunity to ask for your favorite song, then record it without paying for the whole album,” said amin shawki, an avid negoum fan.
“instead of spending hundreds of thousands of pounds shooting a video for a song, you can give us the cd and we’ll play the songs for free,” he said. “by doing this, producers can guarantee that thousands of listeners will buy the album.” simon ramsden, director of nile fm, agreed that radio can make or break a hit tune. “we... can make songs hits by playing them a lot,” he said. the two stations are owned and managed by the recently established nile production company, the main shareholder of which is the editor-in-chief of financial daily al alam al youm emad adib. despite the fact that egyptian law prohibits private ownership of radio stations, nile production company succeeded in obtaining a license to broadcast after three years of lobbying the government. at first, the company only had permission to air for an experimental trial period, after which it was allowed to introduce talk shows and advertisements. the two stations currently cover the greater cairo area, but plans for expansion are under way. “one of the company’s major plans is to expand the two stations to cover the arab world, and then the rest of the world,” said a source at the company, “but only if we manage to get the licensing from the egyptian radio & television union.” good for the cause of private media, not so good, perhaps, for the region’s vendors of recorded music.
imbaba airport to close
due to urban sprawl the project to convert the ill-fated imbaba airport into an international botanical garden is set to begin this month. built in 1947, on 208 feddans (one feddan equals approximately one acre), the airport was shut down in august 2001 due to safety concerns regarding the rapid encroachment of residential buildings and schools in recent years. in 1999, the civil aviation authority built a £e 2 million fence around the airport in order to prevent public intrusion. nevertheless, local children quickly managed to breach the three-meter-high fence, turning the runway into an ad hoc football field. shortly afterward, 12-year-old mohamed abdel rahman was killed when he was hit by the wing of a training aircraft. “the airport was surrounded by chaos and accidents all the time,” said imbaba resident ahmed saleh. “children used the airport as a playground, which allowed for many accidents.” in december 2000, an investigation by the government found that aircraft could not safely execute takeoffs and landings due to the airport’s awkward location. therefore, chairman of the egyptian airports company mohammed fathalla refat announced that the facility would be handed over to the giza governorate once all aviation training operations had been transferred to the new airport near sixth of october city. by presidential decree, the land on which the imbaba airport is currently situated will be used to build an international botanical garden; a stadium; 15 playgrounds; a theater; a swimming pool; and a gargantuan public library. according to giza governor mahmoud abul-lail, the £e 500 million project might also include a medical compound, a police station and an underground garage. “businessmen and investors would be given the opportunity to invest in these projects,” abul-lail added. the impact of “urban creep” on egypt’s airports is hardly unique to imbaba. according to some industry observers, the airports of alexandria and luxor are facing similar predicaments, while the new sixth of october airport is expected to suffer the same fate eventually.
zeal to export fertilizer
brings domestic shortage despite the fact that demand for nitrogen-based fertilizer usually falls following the summer harvest, local growers continue to complain of a shortage of locally produced fertilizer as well as price increases of as much as 150 percent. many of the country’s farmers accuse local fertilizer companies of ignoring the demands of the local market, choosing rather to export the bulk of their production for the more lucrative returns of the international market. the local price of fertilizer, meanwhile, has become noticeably more competitive since the devaluation of the currency in january. “all the factories that produce fertilizers... export all their production for the sake of profits and hard currency,” said mohamed yousri, a fertilizer merchant. yousri added that natural gas, a key raw material used in the production of fertilizer, costs £e 0.50 per cubic meter, although it should officially be fixed at £e 0.14 per cubic meter. he suggested that the lower price should be applied to fertilizers that will be used domestically, enticing producers to cater to the local market. “we are not against exporting, but there should be a balance between supply and demand,” he said. government officials have insisted that fertilizer companies give the home market priority. but according to sherif al gibali, chairman of the federation of egyptian industries’ chamber for chemical industries, the agriculture credit bank – which controls 70 percent of the fertilizer market – insists on encouraging exports, in line with the state’s current export promotion drive. the government, meanwhile, plans to build three new fertilizer production plants with a capacity to produce some 2 million tons of fertilizer per year, specifically for local consumption. according to chairman of the holding company for mineral industries adel al dinf, the establishment of the facilities – expected to cost approximately £e 3 billion – is critical, “in order that we don’t face a fertilizer crisis every year.” but the nation’s farmers shouldn’t expect any instant gratification – the factories will not be operational for at least another two years. in the interim, therefore, as long as local fertilizer manufacturers are seduced by the returns of the global market, local farmers expect to be handed the short end of the stick.
garbage collection controversy
endures in a setback to the notion of the international privatization of services, hundreds of giza residents have taken the governorate to court over the legality of its decision to unilaterally tack garbage collection fees onto citizens’ electricity bills. earlier this year, foreign companies took over municipal waste collection in the cairo and giza governorates. in march, the thorny problem of how to bill customers for the service was solved by simply adding garbage collection fees onto citizens’ electricity bills, prompting a number of electricity subscribers to refuse to pay the additional charge. in a bid to force compliance, the governorates quickly instituted a system of fines – between £e 500 and £e 20,000 – to be levied on those failing to pay up. now, hundreds of giza residents are alleging that the fines – based on an illegally imposed service charge – are in violation of the constitution, and are pressing the state to call off the whole project in favor of the city’s traditional waste collectors, known as zabbaleen. “we had to go to court after we were ignored three times by the governor’s cabinet,” said one of the plaintiffs. in an attempt to cool the situation, giza governor mahmoud abul-leil has since reduced garbage collection fees for households and stores by 35 percent. director general of the egyptian environmental affairs agency magdy allam, however, supports the fines, arguing that it is a governor’s prerogative to take measures ensuring compliance with new rules – especially to prevent “violations of environmental law.” other legal experts, though, maintain that, before imposing any fines, the governorates should have sought parliamentary approval. “egyptian law doesn’t allow a governorate to impose fines on citizens who fail to pay fees imposed only at the governorate level,” said essam al henawy, an adviser for the united nations environment program. hossam lotfy, a civil law professor at beni suef university’s law school, agreed. the fees, he said, are “like general taxes,” which must be approved by the people’s assembly. minister of electricity & energy hassan younis, meanwhile, said no citizen’s electricity had thus far been cut off for refusal to pay.
companies aim to tempt
clients with plastic increasingly, the banking sector is trying to lure egyptians towards a culture of plastic money through a number of initiatives. in september, the national bank of egypt (nbe) and the tamima appliance company launched a new mastercard, called the “tamima miza” credit card, which allows users to purchase tamima products in installments with no interest charges. according to company officials, customers will pay the same price in installments as they would if they paid with cash in full. “it’s the first time in egypt that a company is selling its products in installments without interest charges,” said tamima chairman hany mohamed fathy. “all our customers have to do is order merchandise by phone or online.” another innovative credit card is the recently launched citibank affinity mastercard, which aims to appeal to customers’ more philanthropic natures. holders of the card donate one percent of their credit card expenditures, at no cost to them, to fund the establishment of a local children’s cancer hospital. additionally, government employees in a number of ministries have begun accessing their salaries with visa salary cards at automated teller machines. the use of plastic is generally encouraged by most economists,
as it frees up cash for the banking system. according to atiyah
salem atiyah, an nbe general manager, weaning people off their dependence
on cash would help promote economic activity and “solve the
problem of stagnation.” to dispel fears and inform people about how the system works, fathy said, tamima would soon launch a series of ad campaigns in the major state newspapers.
oci overshoots foreign
revenue target, shares soar the cairo & alexandria stock exchanges (case) has been riding high ever since the rapid us victory in iraq in march. one of the companies fueling the ongoing rally is local construction giant orascom construction industries (oci), which saw its share price climb almost 20 percent on the heels of stellar first-half 2003 financials released in early september. oci’s consolidated revenues rose 74 percent over the first half of 2003, to £e 2.25 billion, compared to £e 1.29 billion in first-half 2002. the conglomerate – which includes construction, cement and building materials groups – set a “50-05 action plan” in 2002, under which it promised its shareholders to generate 50 percent of its revenue from sources abroad by 2005. a year later, the group has already exceeded its target: oci’s financials indicate that 54 percent of total revenues in the first six months of the year originated outside egypt. “it’s a strategy for hedging against the risk of a single sovereign, being dependent on a single country and satisfying our appetite for growth,” explained oci investor relations director hassan badrawi. for example, the construction group enjoyed a 135.7-percent rise in consolidated revenues in the first half of 2003 following a slew of construction contracts in regional neighbors, including qatar, algeria, bahrain, palestine, libya, kuwait and afghanistan. the construction group also has a backlog of extra-national work valued at £e 1.2 billion. fitch ratings’ most recent credit analysis of oci gave it
an a+, with a positive outlook, which it attributed to the company’s
dominant domestic position, commitment to high-quality projects,
highly skilled employees, and expansive knowledge of the domestic
and regional construction markets. badrawi noted that cement is “definitely the core of oci’s business right now,” and will offer enormous potential for growth once oci’s new wholly owned subsidiary in algeria – algerian cement company – starts production of its 2 million tons of cement per year in 2004. the domestic cement market, meanwhile, has been producing surpluses for years, but it wasn’t until january’s controlled currency flotation that the potential for lucrative cement export became feasible. egyptian cement prices, badrawi noted, are the lowest in the region, costing $34 for a ton of bagged cement, compared to $42 per ton in tunisia and $55 per ton in algeria.
‘strange bullishness’continues
to fuel case rally the local stock market witnessed steep gains at the close of the summer season, leading local indices to surpass previous highs for the year. on september 15, the broad-based hermes financial index was up almost 1,000 points on the month, closing at 9359.57 – a 10.75-percent jump from its august 14 close of 8451.35. the more exclusive large-cap efg index, meanwhile, sprung up 11.9 percent over the same period, closing at 4400.10 on september 15. both indices exceeded their two-year highs reached in july. according to sherif makram, institutional sales manager for sigma capital, there was a “strange bullishness” in september among retail investors, who accounted for between 70 and 80 percent of trading activity. typically, trading is evenly split between individuals and institutions. “retail investors have a very good appetite in the market. we never thought individuals could be that powerful,” makram said. much of the excitement was based on speculation that cairo-based mobile phone operator orascom telecom (ot) would secure one of three telecom licenses on offer in iraq. the names of the winners were expected to be released by mid-month, and many investors anticipated that ot would be among them. ot shares, therefore, saw a 31.02-percent climb in price from august 14 to september 15, when the stock closed up at £e 46.80, a performance not seen from ot since january 2001. to put it into perspective, the telecom company’s share price has leapt a whopping 588.28 percent since its all-time low last november, when it closed at £e 6.80. “we were expecting the market to go down a little as a correction, but many rumors have surfaced... everyone is speculating about so many things,” makram said. he also pointed to ongoing rumors that misr beni suef cement might soon be bought out by a foreign cement player, sending shares in that company up 17.68 percent from mid-august to mid-september. makram, nevertheless, expects that a market correction will soon check the current rally, noting that some stocks, in his opinion, have gotten ahead of themselves. “logically, there should be a correction coming up... when the market stays flat for two weeks,” he said. head of research at cairo-based brokerage firm efg-hermes philip khoury said that since hitting rock bottom last year, many stocks have been well below their fair values. according to efg-hermes estimates, for instance, the fair value of an ot share is over £e 50. some investors continue to shy away from the local market, however, dissuaded by an ongoing liquidity crisis and the future of hard currency in egypt. a high probability that corrections in international – especially us – stock exchanges are imminent could also sap cairo’s market gains before 2004. but robust macroeconomic indicators suggest that, brief corrections aside, the upward trend will continue into the long term – barring any unforeseen political upsets. in september, the central bank announced that egypt had posted its first balance of payments surplus since 1996/97, a factor sure to boost foreign confidence in the local bourse. “we feel that the market will remain strong in the coming months into 2004, conditional on global markets not being subjected to negative shocks,” khoury said. “afterwards, in order to see further market gains, we need to see evidence of more liberalization and structural reform.”
for savings accounts,
more citizens going postal a growing number of egyptians are turning to their local post offices to open savings accounts, according to recent postal authority statistics. the latest report by the national post organization (npo) indicates that £e 2.3 billion was deposited into accounts at the country’s more than 3,000 post offices in august, bringing the total for deposited funds to £e 22.8 billion. postal savings accounts – which can be opened with a deposit of £e 10 – have long been an attractive alternative to banks for low-income egyptians. npo officials predict that some £e 25 billion worth of savings
will be flowing through the postal system within four years –
making the npo, in effect, the largest bank in egypt, in terms of
deposits. local economists point out that many citizens don’t trust official banking channels, and laud the npo for giving clients 10.75 percent interest on deposits – one of the highest rates in the country. additionally, postal accounts help address the country’s liquidity problem by funneling deposits into the banking sector. each post office has its own account at the national investment bank, which, in turn, finances various national projects. the npo earns 0.75 percent interest on these accounts. in an effort to encourage more people to save at the post office, moselhi hopes to amend the 20-year-old npo savings accounts law, which currently prohibits citizens from opening more than one account at a time. moselhi added that postal account holders could always access their funds, provided they give 24 hours’ notice for large withdrawals.
rising wheat prices hurt
fino bread production in september, long lines formed outside neighborhood bakeries due to a shortage of the local staple fino bread. economists have attributed the shortage of the slender, baguette-like fino bread to a current dearth of flour, brought on by a below-average wheat harvest and the high cost of imported wheat. owners of private flour mills, meanwhile, say they have been forced to raise their prices due to an approximately 25-percent increase in the price of the american, french and russian wheat used in making flour. a recent report released by the chamber of grains & related products predicts that a serious bread shortage is expected due to the increase in wheat prices – from £e 1,350 to £e 1,700 a ton – in a matter of weeks. the report states, “230 factories are complaining about the bread shortage and are planning to raise the price of their products.” some cairenes, meanwhile, are calling on the government to subsidize fino, like it does its flat, baladi cousin, which has been fixed at £e 0.05 a loaf since 1988. at a september press conference, minister of supply & internal trade hassan khedr insisted the issue was being addressed. in an effort to meet demand, he said, the egyptian authority for food commodities was importing extra wheat to distribute to public and private bakeries. “from now on, we’ll import 120,000 tons of wheat to cover the needs of bakeries all over the country,” the minister promised. some critics, however, blame the ministry for not keeping substantial
wheat reserves at hand. cynical observers, meanwhile, will be quick to note that it was an increase in the price of fino bread that triggered the protests of 1977.
state retailer omar effendi
turns a profit department store chain omar effendi, long considered an archetypal state-owned loss maker, posted a net profit – for the first time in recent memory – in the 2002/03 fiscal year. for three years, parliament’s economic affairs committee has been discussing the privatization of 10 loss-making state-owned consumer-product retailers – including omar effendi – that suffer from mismanagement and have backlogs of unsold inventory. over the course of the last year, though, omar effendi – which sells a wide variety of ready-made garments, blankets, upholstery and household appliances – managed to reduce its unsold stock while achieving net profits of £e 7 million. “our profits increased 20 percent – an impressive increase compared to other public and private firms, which have recorded increases of no more than 5 percent,” said omar effendi managing director mohamed bahieddin al-hefnawy. the central auditing agency (caa) had previously attributed the chain’s perennial poor performance to its mass of unsold inventory, inadequate marketing strategy, overdraft borrowing from banks and steep administrative expenses. now, al-hefnawy stressed, many of these deficiencies have been addressed. the chain, he said, is improving its marketing strategy, lowering its expenses and applying private sector administrative principles to management practices. the chain has also managed to “strike a balance” between selling and purchasing. “we no longer have unsold stock, and, as a result, we’re no longer obliged to give discounts of 30 or 40 percent during summer and winter sales,” he explained. to deal with growing competition from the private sector, the department store chain has also begun allocating space in its outlets for private retailers to display and sell their wares in return for a share of the profits. so far, some 1,200 shops have taken advantage of the arrangement.
new authority to oversee
telecom law the passage of the 2002 telecommunications law was such a watershed event for the nation’s communications/information technology landscape that a new authority has been established by the state with the express mandate of ensuring the law’s faithful implementation. headed by communications and information technology (cit) minister ahmed nazif, the national communications authority (nca) is charged with overseeing the development of the cit sector, increasing corporate and public transparency, and institutionalizing competition safeguards within the industry. the new authority is also responsible for guaranteeing that the local it industry is in compliance with it-related agreements. “we need regulations to organize this growing sector,” said ahmed al sherbini, director of the national institute of communications and nca member. the legislation that the authority was created to execute, al sherbini added, “strives to protect consumers while giving several private companies a chance to compete in a transparent atmosphere.” the authority’s responsibilities include the issuing of it-related licenses to companies, revenue from which will be used to subsidize communications services and promote it services in rural governorates. the nca will also cooperate with telecom egypt (te) to reduce installation fees for landlines. “we plan to address the obstacles facing all of those who are on waiting lists for landlines,” al sherbini said. the telecom law, however, also stipulates an end to te’s legal landline monopoly by 2005, so the state operator is no doubt looking for ways to compensate for the looming revenue shortfall. as for te’s on-again, off-again plan to launch a third mobile phone network, al sherbini said, “the third operator is studying the market to understand its demands, and parliament will surely review the issue again if the company takes no action.”
japan grants loan for
zafarana wind station with all the wind in the air – winds of war, of change, etc. – over the last year, discussions of wind power come as a refreshing change. japan’s 13.5 billion yen soft loan to egypt to expand a wind-powered electricity generation project heralds not only a significant step forward in domestic efforts to exploit renewable energy sources, but also an opportunity for companies around the world to get involved in the sector. egypt’s new & renewable energy authority (nrea) will use the loan, announced late this summer, to expand the capacity of the zafarana wind power station on the gulf of suez by 120 megawatts. the project is expected to go to international tender next year and be in service by early 2005. work on the power station was begun in 2000, with assistance from the danish government and later by germany and spain. according to anwar haiba, deputy chairman for projects and operations at the nrea, the japanese contribution will increase the station’s capacity to 335 megawatts. currently, units with 145 megawatt-capacities have been built, and units with capacities of just over 60 megawatts are in service. although the amount of electricity generated by wind and solar projects is increasing in egypt, the goal set by the nrea – whereby 3-5 percent of electricity needs are to be met by such sources by the year 2007 – appears unlikely to be realized. currently, said haiba, wind power contributes less than one percent of annual domestic electricity consumption. while the country enjoys considerable wind power resources, the cost of harnessing it is more expensive than that for fossil fuels – so expensive, in fact, that taking loans at market rates is not economically viable. unlike earlier instances of cooperation on the zafarana project, in which the vast majority of monies came as “tied” aid (the danish part of the project drew on some locally manufactured materials), the japanese-funded portion will be open to international bidding. such generous terms are not particular to the project, but rather part of japan’s broader development assistance policy, said masa taka saburi, first secretary for economic affairs at the japanese embassy. when a loan request is made by a middle-income developing country for a particular project, as this one was during president hosni mubarak’s visit to japan in 1999, they are not tied to procurement through japanese firms. in the wake of the 1997 kyoto protocol for the reduction of greenhouse gases, those concerned about the environment were hopeful that aid would flow freely to developing countries for such projects. the protocol’s clean development mechanism (cmd) stipulates that industrialized countries can count emissions reductions achieved by such projects in developing countries against their own agreed targets. however, since implementation of the protocol hasn’t begun, donor nations cannot yet count any such emission reductions toward their goals. and as saburi pointed out, there is no stipulation that such credits are retroactive. japan has had its own wind power stations since 1980. the zafarana project is the first wind power scheme that it has undertaken in a developing country.
transport minister annuls
unpopular shipping decree the transport minister has officially canceled a decree that would have imposed a fixed minimum tariff on goods shipped in and out of egypt. following an uproar in the shipping community after decree no. 72 was announced in mid-april, transportation minister hamdy abdel salam el shayeb postponed implementation – originally scheduled for may 1 – until he could consult with shipping company owners, importers and exporters. while tariffs can be subject to maximum caps, they argued, the minimum rate should be left flexible. the argument was obviously persuasive enough: the decree was duly
canceled in august. some shipping officials, though, were disappointed by the upset. hatem al qady, head of the central chamber for naval transport, said that leaving tariff levels to the forces of supply and demand opens the system to abuses by private companies – which could serve to drive up shipping prices generally. “there should be a minimum and maximum tariff rate to protect exporters and importers,” al qady asserted. samy azab, chairman of the arab company for shipping, added that even the international maritime organization issues new minimum and maximum tariff rates on an annual basis. “putting a minimum rate for a shipping tariff isn’t a new thing,” azab said.
ot re-expands regional portfolio economic stats bode well for growth free float gives exporters a push govt. to introduce treasury bills, bonds
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