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IN BRIEF
Shura Council approves multi-candidate elections
The Shura Council last month approved a draft presidential election
law that would enable voters to elect the president through direct
balloting. The draft law is to be referred to the People’s
Assembly for approval. If passed, the law will replace the referendum-based
system under which the parliament selects a sole presidential candidate
for a “yes” or “no” vote. The bill sets rules
for candidates’ registration and campaigning, and stipulates
the formation of a supreme electoral committee to supervise the
election. Voters approved an amendment to the constitution in a
controversial referendum held on May 25. The next presidential election
is expected to take place in September, although the exact date
has not yet been announced.
Gov’t promises more pocket change
The Ministry of Finance will issue new 50-piastre and £E 1
coins in July. The ministry will also replace the unpopular 5- and
10-piastre bills with new coins. Although the £E 1 coin, to
be minted with the face of Cleopatra on one side, is expected to
cost about 30 piastres to produce, it’s anticipated that it
will last at least five years. Bills, by comparison, only cost 4
piastres to produce, but have a useful life of nine months.
Tax law comes into effect
President Hosni Mubarak signed the final version of the new income
tax law last month after its ratification by the People’s Assembly,
which took 17 sessions to debate and approve the legislation. Effective
July 1, the new law raises the ceiling for tax exemptions for employees
making between £E 2,000 to £E 5,000 annually, while
a 10-percent tax will be levied on employees with annual incomes
ranging from £E 5,000 to £E 20,000. A 15-percent income
tax will be levied on employees making between £E 20,000 and
£E 40,000 annually.
An employee with an annual income of £E 13,000 will pay £E
275 in taxes instead of £E 1,114, while those with incomes
of £E 20,000 will pay £E 748 instead of £E 1,537.
Companies and cooperatives will be charged a unified 20-percent
tax instead of the much higher rate of 32, and sometimes 40 percent,
stipulated by the previous law.
Although the new law cuts taxes, it removes a number of tax exemptions
previously granted as incentives to investment, including the 10-year
tax exemption offered to new companies established in Egypt’s
new industrial zones.
The law also aims at improving the trust between taxpayers and the
Income Tax Authority, which previously treated tax payers as guilty
until proven otherwise.
IMF forecasts growth up, inflation down
In its annual review of the Egyptian economy, the International
Monetary Fund (IMF) notes that Egypt made impressive economic progress
during 2004 and Q1 of 2005, with the recovery expected to continue
into 2006. In its review, the IMF applauded Prime Minister Ahmed
Nazif’s economic priorities, including the revival of the privatization
program and moves to cut customs tariffs and taxes. The international
body’s forecast predicts Egypt’s economy will grow 5 percent
in real terms during FY 2005-06, which began July 1. In FY 2004-05,
the economy reportedly grew 4.8 percent.
The report added that the inflation rate is expected to drop to
8 percent during FY 2005-06 from 9.6 percent in FY 2004-05.
Visa requirements for Arab tourists eased
In an effort to attract more Arab tourists during the summer, Ahmed
Al Khadim, president of the General Authority for Tourism Promotion
(GATP), announced that Egypt will simplify tourist visa processes
for nationals of the Gulf Cooperation Council (GCC) and other Arab
countries. The proposed changes include offering tourist visas for
nationals of the selected countries at seaports and other entry
points upon arrival.
The new regulations will allow Arab visitors to stay in Egypt for
up to a year on renewable tourist visas. They will also be permitted
to keep vehicles in the country for up to six months upon paying
the required fees.
According to government statistics, 1.5 million Arab tourists visited
Egypt in 2004, of which 344,000 were Libyans and 309,000 were Saudi
nationals. During 2004, Arab tourists represented between 18 and
20 percent of tourist visits to Egypt, second only to Europeans.
MCIT reduces phone connection fees
The Ministry of Communications & Information Technology (MCIT)
has announced that it will reduce phone connection fees across the
country in a bid to increase communications in rural areas. Home
fixed-line installations will cost £E 300, down from £E
500, while business fixed-line installation will cost £E 500,
down from £E 1,000. The lower rates are expected to increase
fixed-line telephone
penetration.
Hefty investments to grease oil sector
The oil sector is getting an inflow of cash. The government anticipates
a total of $20 billion in investment in the oil and gas industry
over the next five years. Foreign investments in the sector are
expected to reach $16 billion in addition to $4 billion in local
investments divided equally between the public and private sectors.
Egyptian oil and petrochemical exports reached $5.5 billion during
2004 and the Ministry of Petroleum & Mineral Resources plans
to increase exports to $6.7 billion by 2006, and to more than $10
billion by 2010. The ministry is reportedly preparing to sign 39
agreements with foreign oil companies to search for oil and gas
and develop existing oil fields.
EU member states swap $1 billion debt for development projects
EU member states Italy, Germany and Switzerland have agreed to convert
$1 billion of Egypt’s debts into contributions to development
projects. Minister of State for International Cooperation Fayza
Aboulnaga announced the decision during a conference on EU mechanisms
for financing industry, trade and commerce, stating that the debt
swap will help finance a number of projects.
Since 1978, Egypt has received f2.8 billion in loans and grants
from the European Investment Bank (EIB), the EU’s investment
and development arm.
Mortgages made easier
The Ministry of Investment is launching a new initiative to help
in the effective implementation of the Mortgage Law. Minister of
Investment Mahmoud Mohieldin announced that the National Housing
Fund will provide citizens with non-refundable grants of up to £E
10,000 to be used as down payments on housing units. Citizens will
not be required to repay the grant as long as they make their monthly
mortgage payments on time.
Under Egypt’s mortgage law, homeowners are required to pay
a down payment on a unit before the mortgage is granted. The inability
to pay a large lump sum upfront has often been seen as a hindrance
to the utilization of the mortgage system. Mohieldin says these
grants would solve the problem while also encouraging people to
make their payments on schedule.
The mortgage law, which was passed four years ago, has proven difficult
to implement effectively. The People’s Assembly’s economic
committee has stipulated that in order to prevent the misuse of
the new system, grants cannot exceed 15 percent of the value of
the unit. The annual income of the individual must be £E 12,000
or less, and the annual income of the family cannot exceed £E
18,000.
The ministry is still working to address the biggest challenge hindering
the growth of the mortgage system at the moment, the inability to
verify the income of individuals working in the private sector to
determine the value of the monthly payments. It hopes the grant
initiative will increase the awareness of the mortgage law and its
benefits.
Rice lectures on democracy
US secretary of state Condoleezza Rice visited Egypt in mid-June.
While some had hoped that her visit would highlight the economic
growth and policy reforms that the Egyptian government had undertaken
over the past 12 months, Rice made it clear from the get-go that
her business here was politics – namely to apply pressure on
the Egyptian government to endorse “free and fair” elections.
Rice met President Hosni Mubarak in Sharm Al-Sheikh and nine members
of the opposition in Cairo as well as various members of civil society,
sending a clear message that while the US is not ready to withdraw
the support it has given the current Egyptian government, it will
continue to communicate with opposition leaders freely.
Some members of the opposition argued that Rice’s stand on
the issue of the elections did not necessarily translate into strong
US support of opposition candidates and parties. Officials within
the government, on the other hand, saw her stand as a reflection
of Washington’s understanding of the realities on the ground:
that rushing democracy might not yield the best results.
Egypt cited as transit point for human trafficking
The US State Department’s 2005 Trafficking in Persons Report
classified Egypt as a transit country for women trafficked from
Eastern Europe and Russia into Israel for sexual exploitation. The
annual report claimed that other victims, primarily from sub-Saharan
Africa, also transit Egypt en route to Europe.
According to Egyptian government statistics, 154 persons, including
93 women who entered Egypt in 2004 on tourist visas, remain unaccounted
for.
Although the US report states that Egypt does not fully comply with
the minimum standards for the elimination of trafficking, it points
out that the country is making significant efforts to address the
issue. In early 2005, the Ministry of Interior established an Office
of Organized Crime to serve as a coordinating body for narcotics
and human trafficking.
The report recommends that Egypt should enhance collaboration with
law enforcement agencies in source, destination and other transit
countries in order to identify and dismantle any trafficking networks
and prosecute the criminals involved.
Airliners converge on Alexandria
Two international carriers began operating direct flights to Alexandria
in June. Austrian Airlines commenced a scheduled service between
Vienna and Alexandria on June 6, operating flights four times a
week. Meanwhile, Qatar Airways launched a Doha-Alexandria service
on June 9, operating three non-stop flights a week. The commencement
of the two services follows closely the launch of daily Dubai-Alexandria
flights by Emirates Air in May.
Weather acquires majority stake in Wind
Weather Investment, a consortium led by telecom tycoon Naguib Sawiris,
has bought a controlling stake in Italy’s third-largest mobile
operator, Wind, for e12.1 billion. The buy-out is considered one
of the largest in European history.
Sawiris, owner of Orascom Telecom (OT), along with his partners
in Weather Investment, Wilbur Ross, an American, and Frenchman Philippe
Nguyen, acquired a 62.75-percent stake in Wind. The Italian company
currently has 12.6 million mobile subscribers and 2.3 million fixed-line
customers.
Weather Investment is only acquiring the mobile operation services,
with its e7 billion debt. The consortium also has the option of
buying the remainder of Wind by the end of the first half of 2006.
Should Weather acquire 100 percent of Wind, it is expected to launch
an initial public offering (IPO) by the end of 2006.
Railway reform on track
Minister of Transport Essam Sharaf unveiled a comprehensive strategy
for developing Egypt's railway sector in cooperation with the private
sector. Speaking during a workshop on railway reform, the minister
said the government has approved funds to upgrade railway stations,
and procure new locomotives and train carriages. He stressed that
the strategy would not require ticket fare increases, and that the
private sector would assist in managing rail services.
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