EGYPT RANKED 85 AS PER THE INTERNATIONAL INDEX OF ECONOMIC FREEDOM Source: Cairo & Alexandria Stock Exchanges, July 17, 2008
Egypt moved forward to seize the 85th rank in the International Index of Economic Freedom that is released by Heritage Foundation (link here), for year 2008, after ranking the 127th last year. The Heritage report pointed out that this remarkable progress is due to the economic reform policies that the Egyptian government has recently adopted.
EGYPT CANAL REVENUES RISE TO RECORD $5.11 BLN Source: Reuters, July 16, 2008
Egypt's annual revenues from the Suez Canal climbed to a record $5.113 billion in the fiscal year to end-June, up around $945.6 million from the previous year. The number of vessels passing through the waterway rose to 21,080 ships from 19,479 the year before. The Suez Canal Authority (link here) raised ships' fees by an average of 2.8 percent in April 2006.
NO INCREASE IN PRICE OF 80-OCTANE GASOLINE Source: Al Ahram, July 29, 2008
The government will not increase the price of 80-octane gasoline, said Prime Minister Ahmed Nazif. Drivers have started buying 80-octane fuel after the government increased prices of other fuels on May 5, said the Prime Minister said. This created a shortage of the cheaper fuel. The domestic production capacity of the fuel is limited as it is almost non-existent in the international market and the government has maintained its subsidies for the fuel mainly to protect taxi drivers from rising prices, he added. Future consumption will rely on 90-octane and 92-octane gasoline and not only the 80-octane, he said.
The government increased the price of 90-octane gasoline by 35%, of 92-octane by 32% and of 95-octane by 57% on May 5. The prices of diesel and kerosene were raised by 47%. This was done to raise funds to finance a 30% increase in the annual bonus of government employees and to increase food subsidies in reaction to soaring inflation. The move was also part of the government's program to reduce inefficient fuel subsidies. The government maintained the price of the heavily subsidized 80-octane gasoline, which is widely used by lower-income segments of the population.
PENSION FUNDS TOTAL LE 30 BLN Source: Arab Finance, July 28, 2008
Minister of Finance Youssef Boutros Ghali said that the total pension funds and insurance benefits paid to beneficiaries during the current year would amount to LE 30 billion, 15 percent higher than the previous year. The minister said the number of pension beneficiaries would increase from 7.5 million at the end of fiscal year 2007/2006 to more than 8.5 million people this year. The minister said the increase during the last fiscal year to 21.5 million insured, compared with 18.9 million during fiscal year 2006/2005, reflected the increase in the number of persons entering the job market for the first time during the last two years, numbering about 2.2 million people.
ELECTRICITY AND NATURAL GAS PRICES TO BE INCLUDED IN AUGUST’S BILL Source: Beltone News, July 31, 2008
The new prices for electricity and natural gas will be included in August’s bill (for July consumption) for energy-intensive industries, including iron, cement, fertilizers, glass, ceramics, aluminum, copper and petrochemicals in accordance with the Prime Ministerial Decree No. 1795 (2008), issued June 30th. Energy-intensive industries are identified by the decree as those using over 50 million KW/Hr of electricity or 66 million cubic meters of gas annually. Industries for food processing, engineering, ready-made garments and pharmaceuticals will also be subject to the higher pricing. Producers in the above-mentioned industries, especially glass, plastics and textiles complained about the sudden implementation of the new prices, with exporters claiming there was no visibility regarding the timing of implementation and that they should be allowed to fulfill their existing export contracts before being charged higher prices. Producers warned of the inflationary impact the immediate implementation would have, as it coincides with the month of Ramadan, when prices naturally rise. A member of the Chemical Industries Export Council indicated council members requested an urgent meeting with the Minister of Trade and Industry to discuss implications of the sudden implementation on their operations.
OCI ESTABLISHES NEW CONSTRUCTION JV IN ABU DHABI Source: MarketWatch, July 16, 2008
Orascom Construction Industries (OCI) (AmCham member) (link here) announced today the establishment of a new construction joint venture, "Emirates Foundation" in Abu Dhabi, UAE. OCI will join together with Hydra Commercial Investments, Sorouh Real Estate and Capital Investment.
Emirates Foundation will specialize in geotechnical engineering and foundation works including piling, grouting and D-walls. The company will also perform substructure works up to ground level. Emirates Foundation is projected to have a capital expenditure of USD80 million to be financed by a combination of debt and equity. The Company will be registered in Abu Dhabi as a "Class A" specialized contractor. OCI will own a 50% stake while Sorouh Real Estate, Hydra Commercial Investments and Capital Investment are expected to support the newly established company through various foundation works on several of their large projects in the region. This will be done based on prevailing market pricing for similar work.
SODIC AWARDS EGP191 MILLION CONTRACT TO NATIONAL COMPANY Source: EFG-Hermes, July 16, 2008
Sixth of October Development Co. (SODIC) (AmCham member) (link here) awarded an EGP191 million contract to the National Company for Mechanical and Electrical Works Limited (National Company) to work on the infrastructure of the Allegria project. National Company is a subsidiary of Al Kharafi Group (link here) and is expected to finish the construction work in 19 months. Allegria is an upscale gated residential community project developed over 2.4 million sqm on the Cairo-Alexandria road and is comprised of 1,043 villas and townhouses. Some 80% of the units have been sold at a total value of EGP2.5 billion since the sales launch in April 2007. SODIC will begin delivery in 2010.
SAUDI EGYPTIAN DEVELOPMENT COMPANY TO INVEST EGP500 MILLION Source: Noozz Editorial, July 20, 2008
Saudi Egyptian Development Company (SEDC) plans to invest EGP500 million in a residential property project on land that it recently acquired in an auction from the National Bank of Egypt (NBE) (AmCham member) (link here) and Banque Misr (AmCham member) (link here), said the company’s managing director Darwish Ahmad. SEDC will decide next week on the six proposals it has received from consultancy firms to draw up master plans of the project. It will be located on 36 feddans of land and include 100 villas and an artificial lake extending over seven feddans. The construction work is expected to begin in early 2009 and completed in two years, Ahmad added.
NUCA TO OFFER LAND IN 18 NEW CITIES TO BUILD MIDDLE INCOME HOUSING UNITS Source: Al Mal, July 22, 2008
National Urban Communities Authority’s (NUCA) will offer land to small contractors and investors in 18 new cities to build middle-income housing units with a maximum area of 120 square meters (sqm) each. Land areas vary between 600sqm and 1,200sqm and the built-up area represents 50% of the total land area.
The booklet of conditions will be available starting Sunday, and the government will announce on September 24 the investors who purchased the booklet, said minister of housing Ahmed Al Maghraby. He added that the winners will pay 50% of the land value directly after they receive the land and the rest in two year installments, in addition to interest decided by the Central Bank of Egypt (link here). NUCA will buy 20% of the semi-finished units that will be built on these lands, and will receive them two years after offering the land to the investor.
EGYPT'S CIB GETS U.S. LOAN FOR MORTGAGE FINANCE Source: Reuters, July 28, 2008
Egypt's Commercial International Bank (CIB) (AmCham member) (link here) had received a 1.3 billion Egyptian pounds ($245 million) loan from the U.S. government to expand low- and middle-income mortgage lending in Egypt.CIB, Egypt's largest bank by market value, would loan over 1 billion pounds of the money from U.S. government agency Overseas Private Investment Corporation (OPIC) to other Egyptian lenders and would loan the rest directly to middle-income homeowners. "The household debt to GDP ratio in Egypt is less than 10 percent," said CIB’s managing director Hisham Ezz al-Arab. "The opportunity here is enormous to grow the wealth of the middle class." Loans could go to local lenders including the Housing and Development Bank (AmCham member) (link here), he said. He declined to give further details of the loan. According to U.S. embassy, some 80 percent of the proceeds of the loan will go toward low-income home buyers and the remaining 20 percent to middle-income customers. Low income loans will finance residences with values of less than $21,000.
MINISTRY OF INVESTMENT TO REVISE MORTGAGE SUBSIDIES Source: Daily News Egypt, July 21, 2008
The Ministry of Investment (link here) is considering redefining the low income group eligible for the subsidy provided by the mortgage subsidy and guarantee fund, due to rising inflation and construction costs. The ministry might raise the ceiling on the income level of those benefiting from the mortgage subsidies to LE30,000 for married individuals and LE21,000 for single beneficiaries. The subsidy provided to beneficiaries might itself be raised from LE10,000 to LE15,000.
Such amendments aim at expanding the base of beneficiaries from the mortgage system in Egypt, which has recently grown to reach LE2 billion worth of mortgages in March 2008. The mortgage finance law was issued earlier in the decade and started operating after 2004 when issues related to high registration fees and bureaucratic procedures were resolved and, recently, a number of local and foreign mortgage finance companies were established.
SEMBCORP MARINE WINS $220 MILLION RIG ORDER IN EGYPT Source: Bloomberg, July 21, 2008
Sembcorp Marine Ltd. (link here), the world's second-largest maker of oil rigs, won a $220 million contract from A.P. Moeller-Maersk A/S's Egyptian venture to build a jack- up rig to produce oil. Sembcorp Marine's PPL Shipyard unit will deliver the rig in mid-2010. Egyptian Drilling Co., controlled by Maersk and Egyptian General Petroleum Corp., operates in Egypt and Saudi Arabia.
Shipyards in Singapore and South Korea, the two biggest makers of offshore units, may win record orders for a sixth year on demand for rigs and floating platforms. Soaring oil prices are prompting companies such as Exxon Mobil Corp. (AmCham member) (link here) and Royal Dutch Shell Plc (AmCham member) (link here) to spend a record $98.7 billion on exploration and production this year.
Sembcorp Marine shares gained 2.4 percent, the most in more than two weeks, to S$4.22 in Singapore. The stock advanced 4.5 percent this year, compared with a 16 percent decline in the Straits Times Index. Producers in the Persian Gulf and Africa, including Saudi Arabia and Nigeria, are ramping up drilling efforts to slow or reverse declining output from reservoirs first tapped in the 1930s and 1940s. Crude oil climbed 51 percent this year to a record close of $145.29 a barrel on July 3.
EGYPT CRUDE OIL RESERVES HIT 4.2BILLION BARRELS Source: Egypt State Information Service, July 15, 2008
"Egypt's reserves of crude oil and natural gas hit records with the confirmed reserves of crude oil reaching an all-time record of 4.2 billion barrels, constituting an increase of 221 million barrels compared to the past fiscal year," according to a report by the Egyptian Higher Committee for Oil Wealth presented to Petroleum Minister Sameh Fahmi.
Also, Egypt's confirmed reserves of natural gas hit a new record reaching 76 trillion cubic feet with an increase of 3.7 trillion cubic feet from a year ago. The report underlined the importance of the increase of Egypt's reserves of fossil fuel which is the main source of energy in Egypt. The increases in Egypt's crude oil and natural gas reserves are direct results of intensifying exploration processes nationwide under agreements signed during the last few years. The development of existing oil and natural gas fields also contributed to the increases.
AL KHARAFI GROUP CANCELS A USD5 BILLION REFINERY Source: Al Alam Al Youm, July 24, 2008
Al Kharafi Group (link here) cancelled a USD5 billion petroleum and petrochemical refinery in Suez in reaction to the government abolishing the tax free status of energy-intensive industries operating in free zones. The burden of a 20% tax on profits, import duty on inputs of 7% and import duty on imported crude oil of 5% negatively impacted the feasibility of the project and drove the company to cancel it. The project had planned an annual production capacity of 4.7 million tons of diesel and butane. The government raised fuel prices and abolished a number of tax exemptions on May 5 to finance an increase in social spending as a result of soaring inflation.
EGYPT'S OT TO CREATE CANADIAN WIRELESS OPERATOR Source: The Globe and Mail, July 22, 2008
Egypt's Orascom Telecom (link here), one of the biggest mobile phone operators in the Middle East, said it was part of a consortium chosen to create a new Canadian wireless operator. "The new Canadian wireless operator has provisionally won AWS spectrum in Canada”.
OT, which joined forces with Globallive Communications in the bid, said the new wireless operator was the "highest bidder on spectrum across every region of Canada, with the exception of Quebec" with population coverage of 26 million.
The auction of airwaves over which wireless services are delivered raised C$4.25 billion ($4.25 billion) in 331 rounds and almost two months of bidding. The proceeds were more than twice the amount analysts had expected. Orascom Telecom said it was waiting for the final regulatory approval for the license.
OMANTEL SIGNS DEAL WITH EGYPT'S MENA Source: MENAFN, July 19, 2008
Omantel (link here) has signed an agreement with the Middle East and North Africa Company (MENA) of Egypt for laying a 8,000-km submarine fiber optics cable on the Omani coast to enhance international telecommunications traffic between the country and rest of the world. Omantel's Chief Executive Officer said that the total cost of the MENA cable project was about $400 million. The 8,000-kilometre-long cable, which would provide a total capacity of 5.7 terra bets, will reach Seeb during the third quarter of 2009.
The cable landing point will be created in the wilayat of Seeb, in the Muscat governorate, where the Omantel submarine cables centre is located. The centre is the main hub for submarine fibre optic cables landing in the country.
Omantel recently joined 15 international telecom companies in signing the Europe-India Gateway project for the building of an international broadband fibre optics submarine cable extending from the UK to India and passing through the Sultanate and some other countries.
RAPHA TO INVEST USD100 MILLION IN EGYPTIAN PHARMACEUTICAL INDUSTRY Source: Ministry of Investment, July 15, 2008
The Minister of Investment, Dr. Mahmoud Mohieldin held a meeting with representatives of the Korean Rapha Group operating in the field of production of pharmaceuticals, antibiotics and biotechnology. Vice chairman of the General Authority for Investment and Free Zones (GAFI) (link here), Dr. Mohamed Gad has attended the meeting.
Rapha’s chairman has reviewed the projects scheduled to be established in Egypt including the establishment of six plants in the field of producing medicines, antibiotics, vaccines, ampoules and medicinal bottles as well as anti-cancer medicaments. The company is one of the major world companies operating in the field of development of biotechnology and anti-cancer products. The project aims at investing nearly USD100 million thus creating 3000 job opportunities. It also aims at exporting nearly 60 percent of its production to the nearby markets.
EGYPT TO ISSUE MINING LICENSES THIS YEAR Source: Beltone News, July 27, 2008
The Egyptian Geological Survey and Mining Authority (EGSMA) (link here) will offer a number of mining licences before the end of the year, including eight licences for gold and two for silver. A number of new excavation contracts with the private sector will also be amended, following criticism from the foreign partners currently excavating for gold, as part of the legislative amendments of the mining industry. The government is currently negotiating with the World Bank (link here) to finance local or foreign partners interested in applying for the licenses, following the conclusion of a finance agreement with the International Finance Corporation. The eight new gold licences are expected to raise Egypt’s production of gold to 30 million ounces by the end of 2009, following a dormant period of 100 years, during which gold production in Egypt had stopped, due to the lack of available interested investors. The general rise in international energy and commodities prices has rendered the excavation of minerals in Egypt economically feasible, especially in the Sinai and desert areas.
EGYPT GASC BUYS 145,000 TONS OF UKRAINE, RUSSIA, CANADA AND US WHEAT Source: Dow Jones, July 19, 2008
Egypt's state-owned General Authority for Supply Commodities (GASC) said it bought 145,000 metric tons of Ukraine, Russian, U.S. soft red wheat and Canadian soft red wheat, on a cost and freight basis.
GASC purchased 25,000 tons of Ukraine wheat from Horus at the price of $321/ton and two cargoes each 30,000 tons of Russian wheat from Aston at $326/ton. GASC also purchased 60,000 tons of U.S. soft red wheat or Canadian soft red wheat at $337/ton from Venus International. The wheat is for shipment August 16-31
GASC said that the U.A.E. would pay for the 1 million tons bought in GASC tenders for wheat on a cost and freight basis. GASC has bought 180,000 tons of Russian wheat at $329/ton for shipment in July, in two separate tenders. It has also purchased 150,000 tons of optional origin wheat at $349.50/ton for shipment July 20-31. GASC usually holds its tenders for wheat to be purchased on a free-on-board basis.
EGYPT FOOD EXPORTS TO REACH USD2 BILLION IN 2008 Source: Al-Alam Al-Yom, July 22, 2008
Egypt’s food exports are expected to increase 33% to USD2.0 billion in 2008, from USD1.5 billion in 2007, according to the Export Council of Food Products. Egypt’s food exports reached USD862 million in the five months to end-May, representing 45% of the year’s target, despite lower milk exports due to higher raw milk prices.
CHINA AGRITECH DELIVERS FERTILIZER SHIPMENT TO EGYPT Source: PRNewswire, July 21, 2008
China Agritech, Inc (link here)., a leading liquid organic fertilizer manufacturer in China, announced that the Company successfully shipped its Green Vitality liquid fertilizer product to Egypt on July 18, 2008 as per its contract with Al-Waha Khdraa Co., a subsidiary of AL Ezz Group (AmCham member) (link here), a distributor of agricultural and fertilizer products to the Middle East and Africa.
This shipment of 10,000 liters of Green Vitality liquid fertilizer worth $75,000 to Egypt marks the first international transaction for China Agritech. The batch of goods will arrive at the Alexander port in Egypt in 60 days and will be settled in Cost, Insurance and Freight (''CIF'') terms, which means that the associated risk in shipping has been entirely transferred to the insurance company.
THE MINISTER OF TRADE AND INDUSTRY APPROVED THE COMPENSATION OF RICE EXPORTERS Source: Al Alam Al Youm, July 31, 2008
The Minister of Trade and Industry, Rachid Mohamed Rachid, approved the compensation of rice exporters negatively affected by the ban on rice exports. The previously exported quantities will be allocated to the General Authority for Supply and Commodities (GASC), roughly equivalent to the quantities that were exported, or around 82,000 tonnes of rice, announced the Chairman of the Rice Committee at the Agricultural Products Export Council. The Ministry had imposed an export duty last year of EGP200/tonne, which was later raised to EGP300/tonne, to curb price rises in rice, a basic staple, and help reduce food inflation. A ban on rice exports was imposed in April 2008 for six months and was to be possibly extended to April 2009, according to the Minister of Trade and Industry. The extension of the ban has not been confirmed, which led to a disturbance in the market as some traders hoarded rice in anticipation of a resumption of exports in October. The compensation that exporters had called for was approximately EGP85 million to cover their losses following the export ban.
GOVERNMENT CALLS FOR OIL AND GAS REGULATORY BODY Source: Beltone News, July 30, 2008
The Supreme Policies Committee at the ruling National Democratic Party (NDP) (link here) called for a revision of law 20 of 1976 governing the Egyptian General Petroleum Authority (EGPC) to maximize government proceeds from crude oil and natural gas produced from Egyptian wells, through the revision of agreements with foreign partners.
The committee also called for the issuance of new legislation creating a new regulatory body for oil and gas affairs to regulate, supervise and monitor all related operations to maximize benefits from Egyptian resources, coordinate implementation of government plans related to the development and consumption of energy in Egypt, and issue regulations that create a competitive environment and fairly price energy products in the domestic market.
The regulatory body would include all technical, financial, economic and legal expertise, under the authority of the Egyptian Ministry of Petroleum (link here), and would improve the tender system for excavation licenses in coordination with the foreign energy companies. The committee recommended the revision of the mining and quarries law in accordance with international developments and Egypt’s available resources.
GAFI TO ESTABLISH A NEW SYSTEM TO APPROVE PROJECTS UNDER THE FREE ZONE SYSTEM Source: Al Mal, July 30, 2008
The General Authority for Free Zones and Investments (GAFI) (link here) established a new system to approve projects that will be established under the free zone system in coordination with the customs and taxes authorities. Technical committees will be formed to review the new projects’ requests in light of the government’s May 5th decision prohibiting the establishment of energy-intensive projects with free zone status. The committee will meet every three days to consider the energy consumption of the new projects and their overall plans prior to their approval. GAFI and the tax authority are coordinating the review of free zone projects that are still under establishment to decide on the status of their operations following the May 5th decisions and their tax holidays under the income tax law.
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
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