BUSINESS BAROMETER SIGNALS POSITIVE ECONOMIC OUTLOOK OVER NEXT SIX MONTHS Source: Al-Ahram, ECES Report, March 27, 2007
Manufacturing, tourism and construction companies held favorable outlooks for economic growth in 2H2006 and in 1H2007 according to a poll by the Egyptian Center for Economic Studies (ECES) (AmCham Member) (link here). Out of 320 large firms polled, 58% reported that their production, sales, investment and employment had risen in the past six months while 35% said they had remained stable. Manufacturers held the most favorable outlook. The outlook of tourism firms improved from that of the previous survey in July 2006, reflecting the sector’s recovery from a slowdown after the April 2006 bombings in the Sinai resort town of Dahab.
Most of the firms polled anticipated that production and domestic sales would increase in the first half of 2007, with the most optimistic outlook held by the construction sector. A majority also expected exports to increase. Half the companies believed their inventories would remain at the same level, while 96% expected their production capacity utilization would rise. The number of firms expecting that the prices of both inputs and outputs would rise increased from the previous poll. Some 70% believed wages would rise in 1H2007. Some 61% of the companies expected that their level of investment would increase while 53% planned to maintain their level of employment. Companies operating in the manufacturing and tourism sectors listed weak demand, insufficient skilled workforce and inadequate access to finance and imports as constraints to expanding operations, while companies in the construction sector said access to finance was their biggest impediment.
LE 2 BILLION TO DEVELOP EXPORTS Source: SIS, March 22, 2007
Egypt’s Export Development Fund board has agreed on increasing the fund's resources during the coming fiscal year 2007/2008 to reach LE 2 billion from the current level of LE 1.5 billion.
The fund also decided to continue export finance aid to a number of sectors including ready-made clothes, furniture, cars, and agriculture crops. The remarks came during the fund's board with ministers of finance, trade, industry and agriculture attending. Minister of Finance Youssef Botrous Ghali affirmed the government keenness on providing finance required for export sectors and exporters in order to increase their export capabilities.
FDI TO REACH LE8 BILLION IN FY2007/08, INFLATION TO HIT 10% IN 2007 Source: al-Ahram, al-Akhbar, March 21, 2007
Egypt attracted more than LE7.2 billion in foreign direct investment from July to December 2006, a figure that is expected to rise to LE8 billion when the current fiscal year ends in June, Investment Minister Mahmoud Mohieldin told a conference in New York. The conference, under the theme “Egypt Opens it’s Doors for Investment”, was organized by the American Chamber of Commerce in Cairo (AmCham) and the Bank of New York (link here). More than 200 participants from international financial and media institutions attended.
Egypt’s economy grew by 6.9% in FY2005/06. Net international reserves have reached USD26 billion, enough to cover Egypt’s import bill for 10 months. The Central Bank of Egypt (CBE) (link here) has eliminated the parallel market for foreign exchange, stabilized the LE and is now pursuing an inflation targeting monetary policy. The government, in coordination with the CBE, has implemented measures to curb inflation, which is expected to reach 10% by the end of 2007. The budget deficit in July-December dropped to 6.9% of GDP from 7.9% of GDP in the whole of FY2005/06. It is expected to fall to 5.7% by the end of the current fiscal year as the government generates more non-recurrent revenue. The deficit is expected to bounce back to 7.5% in FY2007/08, a level lower than that that registered in previous years, in line with the Ministry of Finance’s commitment to reduce the deficit by 1% each year.
IFC TO HELP EGYPT’S MINISTRY OF HOUSING STREAMLINE REGULATIONS Source: International Finance Corporation, March 17, 2007
The International Finance Corporation (IFC) (link here), the private sector arm of the World Bank Group, and Egypt’s Ministry of Housing have agreed to collaborate in streamlining the process of obtaining building licenses and permits and in reducing the cost and time involved in business start-up procedures. This work will be part of the Business Start-Up Simplification Project in Alexandria, a partnership between IFC, the General Authority for Investment and Free Zones, and the Governorate of Alexandria.
Managed by IFC PEP-MENA, IFC’s advisory services facility in the Middle East and North Africa, the project will involve the government and the private sector in identifying key issues that hinder the process of obtaining licenses and permits. All parties will recommend measures, which, if viable, will be included in the executive articles of the draft building law. In addition, the project will provide quantitative targets for reducing the number of procedures and the time they require, merging procedures, further delegating authority, and increasing transparency.
According to IFC and the World Bank’s Doing Business Report 2007, it takes over 200 days and 30 procedures to obtain business licenses in Egypt. Said Frank Sader, IFC’s Senior Operations Manager, “Creating business-friendly regulations means new enterprises and jobs that will benefit Egypt’s development. This project underpins the effective reforms undertaken by the government, because it will address high requirements for licensing, one of the greatest obstacles to business.” The objective is to improve the regulatory environment for businesses and encourage local and foreign investments. There are plans to replicate this pilot throughout Egypt.
FINANCE MINISTRY DRAFTING NEW PENSION LAW IN COORDINATION WITH WORLD BANK Source: Al-Ahram, Al-Akhbar, March 29, 2007
The Ministry of Finance, with help from the World Bank, is working to restructure Egypt's pension system, Finance Minister Youssef Boutros Ghali said at a meeting with the National Authority for Social Insurance. The meeting was called to discuss the FY2007/08 budget for public and private pension funds.
The restructuring involves amending the current pensions law to make it more balanced, to simplify procedures and to consolidate over 104 decrees into a single, simplified manual. A new law will also be written and sent to parliament during its next session. The new law is designed to run in parallel with the existing law until the last beneficiary of the current system exits the system. The World Bank is helping to draft the new pension law, and the Finance Ministry will contract a consultant to restructure the pension system. Under the new system, pension payments will be automated.
EGYPT: EU NEIGHBOURHOOD POLICY WILL INCREASE EXPORTS BY 40% Source: ANSAmed, March 26, 2007
The European Union neighborhood policy will increase Egyptian exports to the European market by 40% and European exports to the Egyptian market by 16%, Egyptian economic daily Al Alam el Yom quoted EU ambassador to Cairo Klaus Iberman as saying. Iberman added that the European investments in Egypt have already grown by 60% since the signing of the partnership agreement between the country and the EU. The EU will give Egypt 558 million euro in the form of aid and loans in the period between 2007 and 2010. The funding will be concentrated in the energy, environment, education and transport sectors, as well as in programmes for political and economic reforms.
Trade between Egypt and the EU has already been growing rapidly, with a 63% increase in trade since 2004 when the EU-Egypt Association Agreement was signed, according to new data released by the EC. They added that Egyptian exports to the EU member states grew by 45% and the EU export to Egypt grew by 6% in 2006 compared to 2004. The EU-27 is Egypt's biggest trade partner and the products that make most of the exchange between the two markets are chemical, agricultural, industrial machinery, metals and energy. Agriculture posted the largest gain, an 80% increase, thanks to the reduction of customs and an increase of export quotas. The trade deficit also showed a significant improvement, falling by 60% in the period 2004-2006.
EU investments in Egypt stood at 1.1 billion euro in the period 2002-2005, while the EU-27 invested 0.6 billion in Morocco, 0.3 billion in Israel and 0.6 billion in the rest of the Mediterranean countries. Britain, France and Germany are the biggest investors in Egypt. The Association Agreement between Egypt and the EU entered into force in June 2004 and contains the guidelines regarding the three pillars of Euro-Mediterranean partnership, political dialogue, economic and commercial integration and social and cultural cooperation.
In a related meeting, the Prime Minister created eight committees to facilitate the implementation of the EU accord. During the meeting, an agreement was reached on giving priority to the areas of agriculture, industry, IT, transport, the environment and energy with a view to ensuring good preparations ahead of meetings with the European side next summer, he said.
EGYPT EXPORTS $3.131 MLN WORTH OF COTTON TO 27 COUNTRIES Source: ANSAmed, March, 19, 2007
Cotton export contracts to 27 countries since the beginning of the cotton 2006/07 export season reached 1.52 million quintals, at $3.131 million. Mohamad Shiwi, Government Commissioner with the Cotton Export Federation and Director of the International Trade Point, said only last week, the 24th week of the export season, that 6,000 quintals were contracted for export at about $782,000.
He said Belgium was the latest importer of Egyptian cotton during this season. India continued to top the list of importers contracting for the import of 338,000 quintals, or 32.1% of total contracts, followed by Switzerland, taking up to 11.2% of the total exports. Pakistan, the UAE and Italy followed, taking up about 70% of the total contracts. So far, 596,000 quintals of cotton or 57.5% of total contracts were already shipped to their various destinations. (1 quintal = 100 kilograms).
WORLD BANK ARGUES FOR INCREASED TRADE BETWEEN GAZA AND EGYPT Source: Reuters, March 17, 2007
A recent World Bank (link here) report called for the opening of the Rafah crossing between the Gaza Strip and Egypt to exports and imports to try to stem the Palestinian territory's economic collapse. Palestinian exports have plummeted to their lowest levels since 1994 because of the Karni closures and a year-old Western ban on direct aid to the Hamas-led government, the World Bank report said.
The value of Palestinian exports in 2006 was nearly 30 per cent below the level 10 years ago. Under the World Bank proposal, Rafah could be quickly expanded to handle Palestinian exports and eventually imports. Egyptian sea ports and airports plus the Suez Canal would be used to move goods in and out. The report said European monitors at Rafah were prepared to oversee the movement of goods. The World Bank said increased trade was the key to reviving the Palestinian economy. Trade accounts for about 85 per cent to 90 per cent of the Palestinian gross domestic product.
STEEL PRODUCTION JUMPS BY 16,500 TONS; PRICES BY LE100 PER TON Source: Al-Ahram, March 25, 2007
Average cement prices on the retail market increased to between LE345 and LE360 per ton in the week of 15-21 March from between LE345 and LE350 per ton the week before, according to figures released by the Ministry of Trade and Industry. Cement traded as high as LE380 per ton and as low as LE330 per ton.
There has been no change in ex-factory prices for most producers since the government imposed a LE65 per ton duty on cement exports in late February in a move designed to dampen a rise in domestic retail cement prices. The Suez Cement group (AmCham Member), which includes Torah, Helwan and Suez, have kept their price at LE 312.5 per ton. Egyptian Cement has kept its prices at LE317.5 and National Cement and Misr Cement (link here) have kept theirs at LE300. Total cement production last week rose by 50,396 tons to 777,962 tons. Exports fell to 66,235 tons last week from 91,682 tons the week before. Egypt exported 75,000 tons the week after the duty was imposed and 114,800 tons in the week before it was imposed.
CEMENT PRICES RISE TO BETWEEN LE330 AND LE380 PER TON Source: Al-Alam al-Yom, March 26, 2007
The amount of steel produced in Egypt jumped by 16,500 tons to 113,045 tons in the second week after the government imposed an export duty, according to Ministry of Trade and Industry statistics. The price of steel rose by LE100 per ton to between LE3,400 and LE3,500 per ton, mainly because billet prices increased in the international market. The Trade and Industry Ministry on 27 February imposed duties on steel exports and cement exports to help stem a rise in the retail prices of the products on the domestic market. The export duty on direct reduced iron (DRI) and billet is now LE180 per ton.
FOUR BANKS TO LEND USD450 MILLION FOR PROPYLENE AND POLYPROPYLENE COMPLEX Source: Al-Alam Al-Yom, March 22, 2007
The Egyptian Company for Propylene and Polypropylene has raised USD450 million in a syndicated loan to build a 700,000 ton per year propylene and polypropylene complex at the industrial zone in Port Said. Four banks are participating in the loan, which will be signed today: Banque Misr (AmCham Member) (link here), Commercial International Bank (CIB) (AmCham Member) (link here), National Bank of Egypt (AmCham Member) (link here) and National Société Générale Bank (NSGB) (AmCham Member) (link here). The project, on 70 acres, will be Egypt’s largest propylene and polypropylene complex. To be completed in 30 months, half of its output will be propylene and half polypropylene.
LEBANON AND EGYPT TO DRAFT GAS IMPORTS AGREEMENT Source: ANSAmed, March 20, 2007
By the end of April, Lebanon will sign an agreement with Egypt for natural gas imports, Lebanese Energy Minister said yesterday during his visit to Cairo. The Egyptian authorities pledge to provide the quantity of gas stipulated in the agreement through the gas pipelines of Jordan and Syria starting from the beginning of 2008.
The project is part of a broader agreement between various Arab countries in the energy sector and will help halve the cost of energy in Lebanon by the end of 2007. On the occasion of the visit of the Lebanese delegation led by Safadi, Egypt donated $15.4 million for the immediate reconstruction of three tanks of the Jiyeh power plant destroyed during the war last July. Egypt will also carry out all additional works, financed by the Lebanese authorities, to rehabilitate the plant in Jiyeh located south of Beirut.
SIX SPINNING AND WEAVING PROJECTS STARTED IN KAFR EL-DAWAR Source: Ministry of Investment, March 18, 2007
The Minister of Investment, Dr. Mahmoud Mohieldin announced the beginning of six spinning and weaving projects in the new industrial zone in Kafr El-Dawar. The new establishments amounted to LE 297 million with targeted total annual production LE 1.2 billion and aiming to provide 5475 new jobs.
The plan is for Kafr El-Dawar to return to being an industrial center over the next 4-5 years. The Minister mentioned that that industrial growth increased from 2.3 per cent to 7 per cent in Q4 of the previous fiscal year. He added that industrial investments in Egypt increased to LE 18 billion in the first six months of the current fiscal year, compared to LE 7 billion in 2003/04 and expected to reach LE 25 billion by the end of the current year.
ORASCOM SIGNS FERTILIZER DEAL FOR $746 MILLION Source: ANSAmed, March 21, 2007
Orascom Construction Industries (AmCham Member) (link here) of the Egyptian magnate Naguib Sawiris and Algerian state energy firm Sonatrach (link here) have signed a deal to produce fertilizers for Algerian and foreign markets for $746 million, an Orascom report said.
The deal includes setting up a joint venture called Sorfert Algerie to build and develop an ammonia and urea plant, in which OCI has a 51% stake while Sonatrach owns the remaining 49%, with an annual capacity of one million tons of urea and 0.7 million tons of ammonia. OCI expects 70% of the total investment cost to be solicited from Algerian and international banks as project finance debt in a limited recourse structure. OCI announces that production will begin by 2010.
AVAYA PARTNERS WITH MIDEAST COMMUNICATION SYSTEMS Source: Al-Bawaba, March 21, 2007
Avaya Inc. (link here), a global leader in business communications systems, today announced the appointment of Mideast Communication Systems (MCS) as a distributor for Egypt for its IP telephony platform for small and medium businesses (SMBs) – IP Office. In addition to providing Egypt-based resellers with Avaya IP Office solutions, MCS will also provide value-add services including pre- and post-sales support, back-up support, marketing, and partner and customer education and guidance.
Avaya also announced the launch of a new all-in-one IP telephony platform – IP Office 500 – a solution specially designed for small and mid-size businesses (SMBs). The launch of Avaya IP Office 500 and appointment of MCS highlights the growing trend toward IP telephony adoption in Egypt and other MENA markets. In 2006, an Avaya survey of 1,400 decision-makers in the Middle East revealed that 71 percent are ready to deploy Internet protocol (IP) telephony solutions, including 55 percent who already have converged voice and data networks in place. Of those without a converged network, more than half plan to implement IP telephony within the next six to 12 months.
NEW HOTELS ON THE HORIZON Source: Arabianbusiness.com, March 28th, 2007
Egypt is set to witness more hotel growth when Baron Hotels and Resorts (AmCham Member) (link here) opens the Baron Palace Resort Sahl Hashish Egypt next year, and the Rezidor Hotel Group (link here) announced that the Radisson Hotel Alexandria is set to open its doors in the first quarter of 2009.
The Baron Palace resort, scheduled to open at the end of 2008, is expected to attract 20% business travellers, with the remaining 80% to be made up of leisure guests from Europe and Gulf tourists.
Compiled by: Business Studies & Analysis Center E-mail: Studies@amcham.org.eg If you want to receive this bulletin on a regular basis, fill out this form
Printable version
