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current account deficit narrows
[“pound seen stable,” september 1999]
an improving balance of trade helped narrow egypt’s current
account deficit to $1.71 billion, or about 2 percent of gdp in the
fiscal year ended june from the $2.48 billion, or 3 percent of gdp,
deficit egypt reported the year before, according to figures released
by the central bank of egypt in september.
but economists said the improvement reflected import restrictions
and lucky developments with key sources of foreign exchange rather
than real change, and said the improved external position was unlikely
to relieve the dollar shortage that has put downward pressure on
the egyp-tian pound and frustrated investors all year.
“they’ve managed to improve their indicators,” said
ad-rian swinscoe, an economist at the egyptian center for economic
studies, a local think tank. “but they’ve done it by closing
up rather than opening up.”
nnthe narrowing of the current account deficit – which swinscoe
called “a major improvement on last year, and a surprise”
– came mainly on the strength of better than expected re-ceipts
from services.
nnin particular, tourism re-ceipts recovered faster in 1999 than
expected. accor-ding to the central bank report, egypt pulled in
$920 million in revenue from travel, a broad measure of tourism,
in the fourth quarter – the highest quarterly total in nearly
two years. the fourth-quarter results left egypt with $3.24 billion
in travel revenue on the year, up from $2.94 billion the year before
and approaching the $3.6 billion total from 1997.
suez canal receipts also were better than expected, coming in at
$1.8 billion, unchanged from the previous fiscal year. revenue from
exports of petroleum and petroleum products finally began to show
the effect of rising world prices for oil and came in at $321 million,
the best result in five quarters. with imports flat at $17.0 billion
– a result swinscoe attributed to import restrictions imposed
by the government in late 1998 and early 1999 – egypt managed
to narrow its goods and services trade deficit to $6.6 billion in
1999 from $7.1 billion in 1998.
non-oil exports remain the dark spot on egypt’s economic record.
even with the fourth quarter boost, the year’s petroleum revenues
came in at $1 billion, down from $1.73 billion the year before.
that decline was expected and unavoidable. but after a year of trade-deal
signing and goal setting, egypt’s non-oil exports came at $3.5
billion, a hardly noticeable improvement from 1998’s $3.4 billion.
and that result doesn’t factor in inflation.
“in real terms, it’s a contraction,” swinscoe said.
“there is no export development.”
meanwhile, the narrowing of the current account deficit seems to
have done little to reduce unmet demand for dollars. as we have
reported previously, most recently in sep-tember, the egyptian pound
came under pressure about a year ago after declining revenues from
oil and tourism coincided with a surge in imports. but the latest
spasm of the liquidity crunch came in august, well after the fiscal
year closed in june with its better numbers.
“this doesn’t actually change anything,” swinscoe
said. “it doesn’t detract from reality. the reality is
there is a liquidity problem, and people are fighting it on a daily
basis.”
according to the same report that shows the improvement in the current
account, egypt has spent about $2 billion of its foreign-exchange
reserves to meet demand for dollars. egypt’s net international
reserves stood at $18.07 billion at the end of june, their lowest
level in about three years, after having fallen every month since
september.
nevertheless, the government’s pound policy isn’t likely
to change soon. egypt’s reserves at the end of june were sufficient
to cover about 13 months worth of imports, and policymakers seemed
cheered by the current account figures. “the egyptian pound
survived the external pressure,” public enterprises minister
atef ebeid said in september. still, there are bills to pay.
“they have enough reserves to hold out for awhile, and they’re
quite comfortable doing it,” swinscoe said. but, he warned,
“it’s going to get progressively more expensive.”
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government balks at bids
for retailers
[“shelf space,” april 1999]
the ministry of public enterprise decided in mid-sep-tember to
postpone a decision on bids for a 76 percent stake in the five state-owned
retailers, which include the venerable department store chains omar
effendi and sed-nawy, by at least a month.
prospective investors, led by a consortium including mo-hamed farid
khamis, ahmad bahgat and commercial inter-national investment co.,
presented offers that reportedly fell as much as £e 288 million
short of the prices set during valuation of the companies, casting
doubt on the prospects for a sale any time in the immediate future.
“these offers aren’t even a basis for negotiation,”
said a public sector source close to the transaction. “in some
cases, they’re talking about numbers that wouldn’t even
get one branch, much less an entire chain.”
the consortium, egypt manufacturers, offered £e 338 million
for all five companies, with the egyptian-kuwaiti holding co. and
businessman mohamed geneidy submitting smaller bids for individual
companies, al alam al youm reported.
the gap between the offers and the prices fixed during valuation
of the companies was large enough that the ministry decided to delay
a decision long enough to give pros-pective buyers time to work
up presentations on their plans for developing and modernizing the
companies, the source said. “what purchasers do after the sale
is as important as the price,” the source said. “it’s
not just a matter of getting rid of the companies once and for all.”
mohamed hassouna, acting specialist at the public en-terprise office,
confirmed that evidence of investors’ intent to maintain and
develop the companies rather than unbundling their assets would
be central to any purchase agreement. “we’re selling off
these businesses as going concerns,” he said.
that strategy will likely mean lower selling prices, and it seems
he government is hoping to rescue the bids by ne-gotiating a better
price than those offered thus far. a 1998 amendment to law 3 allows
the general assemblies of the holding companies to order new valuations
or accept bids for less than the price arrived at during valuation.
it’s an option that’s been exercised before and one that
could help pave the way for a sale in this case, hassouna said.
bids for omar effendi and hannaux, he said, were not so far from
the valuation prices that a compromise was inconceivable. only the
oddly named egyptian products sales co. drew bids far below its
valuation.
the public sector source concurred: “if the consortium of investors
is serious, an agreement is definitely possible. if the two positions
can be brought together by say ten percent, there may be an agreement.”
a committee made up of representatives from the spin-ning, weaving
& ready-made clothes and the textile manufacturing & trade
holding companies is expected to complete its review of the bids
by november, hassouna said.
top
conclusion to eu trade pact
expected this month
[“eu trade deal nears,” july 1999]
egypt and the european union will likely initial the final draft
of a long-delayed free-trade agreement in october, egypt’s
lead negotiator on the pact said in mid-september.
“it should be done in october,” said gamal bayoumi, assistant
minister of foreign affairs. “nothing is holding the agreement.”
bayoumi said the euro-mediterranean association ag-reement was with
the cabinet and would be ready for initialing once the cabinet gave
its final approval. formal signing could come as early as november
or as late as january, depending on when the eu’s general affairs
council takes up the issue. but that step would only be ceremonial.
“initialing would do the job,” bayoumi said.
egyptian foreign minister amr moussa had said earlier that the pact
would be initialed within a few weeks.
egypt and the eu have been discussing the association agreement
for nearly four years. the trade-related provisions of the agreement
would generally grant egyptian manufactured products duty-free access
to eu markets and would require egypt in turn to phase out customs
duties on eu imports over a period of 12 years.
the sticking point had been the level of access to be granted to
egypt’s agricultural exports, a sector in which egypt feels
it has a competitive advantage. that dispute, however, was resolved
in june.
most of egypt’s industrial goods already have duty-free access
to the eu under a bilateral cooperation agreement signed in 1977.
but the agreement has been superseded by egypt’s entry into
the world trade organization and must be replaced.
the eu is egypt’s largest trade partner, accounting for $1.4
million of egypt’s exports and $7.2 billion of its im-ports
in the fiscal year ended june 30.
top
moussa confirms mena potential
[“another cairo mena,” august 1999]
egypt believes that there is a “good chance” a suspended
regional economic conference will be held next year and is willing
to host the event, foreign minister amr moussa said in mid-september.
moussa said the resumption of the mena series of regional economic
conferences, suspended last year due to deterioration in the peace
process the series was meant to support, had become more viable
following recent progress toward peace between palestinians and
israelis. moussa said the fate of the conference also depended on
the resumption of prog-ress on the syrian and lebanese tracks, but
said such progress appeared likely. “we hope that in the next
two months all tracks will be reactivated,” moussa said. “the
government of egypt believes that there is a good chance to convene
the mena conference in the first or second quarter next year.”
the first mena conference was held in 1994 in casablanca, opening
an initiative to support the then-nascent oslo peace process by
building economic ties between arabs and israelis. egypt hosted
the event in 1996, but boycotted the 1997 mena conference in qatar
to protest what it called israeli intransigence in negotiations
with the palestinians. egypt continues to premise a larger regional
economic role for israel on progress in negotiations, moussa said,
but is willing to host the conference again if circumstances justify
holding it. “we are open for hosting the next mena conference,”
he said.
top
traffic regulations stepped
up
[“government plans assault on traffic,” february 1999]
the cabinet announced a freeze on issuing new li-censes for taxis
and microbuses in late august as part of a series of measures aimed
at easing cairo’s chronic traffic problems. minister of cabinet
affairs & followup talaat hammad said there would be no new
li-censes issued to taxis or service taxis in greater cairo for
at least five months, and no licenses for semitrailers anywhere
in the country during the same period, according to the semiofficial
daily al akhbar.
as we reported last february, plans for dealing with the congestion
on the city’s roads have occupied the agendas of the cabinet,
people’s assembly and the cairo gov-ernorate for much of 1999.
following the submission of a new traffic law to people’s assembly
and cairo governor abdel rahim shehata’s declaration of a “traffic
emergen-cy,” enforcement of portions of law dealing with taxis
and microbuses was stepped up dramatically and additions to the
26th of july corridor and the sixth of october bridge were completed.
test runs of the new extensions in august, however, resulted in
lengthy delays at entrance and exit ramps and widespread discontent
among commuters from outlying areas of cairo, prompting the cabinet
to announce even sterner and more ambitious measures to regulate
the flow of the approximately 1.5 million vehicles on the city’s
streets. al akhbar quoted hammad as saying that taxis would not
be permitted to enter central cairo and that in-formal service-taxi
stands would no longer be tolerated. hammad’s office declined
to comment on details of the regulations.
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