EGYPT’S TRADE MISSION TO WASHINGTON AND CANADA CONCLUDED Source: Ministry of Communication and Information Technology Information Portal, June 19, 2007
Egyptian Minister of Communications and Information Technology Dr. Tarek Kamel was joined by a 76-member Egyptian delegation including several distinguished members of the American Chamber of Commerce in Egypt (link here) recently on a trade mission to Washington D.C. and Canada in order to promote awareness and involvement in Egypt’s burgeoning ICT sector. After eight days of extensive meetings and talks with key officials from the World Bank (link here), U.S. Department of Commerce (link here) and other major U.S. corporations on Egypt’s commitment to opening new markets in the field of ICT, sharpening its competitiveness and protecting Intellectual Property Rights, Egypt’s trade mission was concluded by a meeting in Virginia with the Egyptian expatriate community working in the field of Communications and Information.
Minister Kamel spelled out the country’s intention to benefit from U.S. advancement in the field of ICT and the need for agreements to be made with the US along those lines—agreements similar to those held between the US and other countries regarding ICT development and participation. Kamel also discussed the potential for bilateral collaborative venues between Egypt and the US, one hopeful example being collaboration between the Egyptian ICT workforce and American ICT firms operating in Egypt to create 25 thousand new jobs.
Mission meetings were highly centered around Egyptian and American firms with a history of cooperative effort, such as General Motors Corporation (link here), which has a long history of cooperation with the Cairo based Raya Holding (Amcham Member) (link here), a leading company that serves Egypt’s ICT industry.
The minister noted obstacles standing in the way of progress, particularly the need to intensify local efforts to confront technological pirating as Egypt moves toward a role of regional hub for ICT activities.
The Canadian leg of the mission was spread over five days of intensive talks and meetings with important Canadian officials and firm representatives.
The mission has been considered a success, particularly the inking of seven agreements in Canada and four in Washington. The mission concluded in Virginia with a meeting between the Egyptian delegation and Egyptian expatriates living in the US who are prominent in the field of ICT.
EGYPT AND U.S. SIGN COOPERATION PROTOCOL Source: Al Ahram, June 28, 2007
The American Chamber of Commerce in Egypt (link here) and the General Authority for Industrial Development (IDA) (link here) signed a Cooperation Protocol on June 18, 2007 as a strategy to consolidate cooperation between the two countries toward enhancing the competitiveness of Egyptian industries through industrial development, attracting higher levels of foreign investment and increasing the value of Egyptian exports from EGP 18 billion to EGP 42 billion.
The protocol aims to meet the development needs of Egypt’s export industries by providing technical, technological and field support as a way to assess the relevant competitive advantages required for their success.
A common committee shall be formed from both parties to implement the articles of the protocol, which are valid for two years from the date of signing. A unified industrial law is currently in the works and should be presented to the People’s Assembly for passage this year.
EGPC RESTRUCTURES BOARD TO INCLUDE MINISTERS Source: Al Ahram, EFG-Hermes, June 19, 2007
The Egyptian government has recently reorganized the Egyptian General Petroleum Corporation’s (EGPC) board of directors to include the ministers of Finance, Petroleum, Electricity, Trade and Industry, Investment and Local Development as well as a number of Petroleum Ministry experts. According to Prime Minister Nazif, the new board structure will be better equipped to increase investment incentives, with emphasis being given to petroleum production, exploration and development, petrochemical refining, liquefying natural gas, rig production and the building of pipelines.
Nazif also discussed a plan to turn Egypt into a global energy production center so as to exploit the country’s strategic location between African and Middle Eastern energy producers and European consumers.
DANA GAS ACQUIRES DANAGAZ BAHRAIN Source: ameinfo.com, June 25, 2007
The joint company will be owned 66 percent by Dana Gas (link here) and 34 percent by reputable Bahraini partners. Its first investment will come as leader of a consortium to build, own and operate the Gulf of Suez Gas Liquids Plant in Egypt.
The Gulf of Suez Gas Liquids Plant project involves the engineering, fabrication, installation and operation of a high-efficiency gas liquids extraction and manufacturing plant near Ras Shukheir, on the western shore of the Gulf of Suez.
The plant will be capable of processing approximately 55 billion cubic feet per year of natural gas and will produce approximately 120,000 metric tonnes per year of propane and butane in liquid form. The project will be executed by a joint venture company, Egyptian Bahraini Gas Derivative Company (EBGDCO), which will be owned 40 percent by Dana Gas (link here), 40 percent by state owned Egyptian Natural Gas Holding Company (EGAS) (link here), and 20 percent by the Arab Petroleum Investment Corporation (APICORP) (link here). The company will also undertake the export marketing of liquid products from the plant.
The agreements for completion of the project have already been finalized and signed, including a long-term contract for supply of natural gas from the Egyptian General Petroleum Corporation (EGPC), as well as the Land Agreement and Sea Berth Agreement for export of the products.
EBGDCO is to be incorporated as a 'Free Zone' company under the Egyptian Law on Investment Guarantees and Incentives, Law No. 88 of 1997. Implementation of the project will commence within the next months and is scheduled for completion within 18 months. Civil engineering and installation construction will be done by local contractors and the plant is expected to operate at highly efficient recovery rates, enabling recovery of 99 percent of the propane and 100 percent of the butane found in the gas stream. The project will manufacture approximately 110,000 tonnes per year of exportable internationally standardized propane, which will account for about 90 percent of the plant’s total liquid gas product.
Egypt is a net exporter of propane, and is a net importer of butane for domestic consumption.
The propane from this project will be exported by ship to European markets such as France, Spain, Italy and Turkey. Potentially higher margins lay in wait in various Indian Ocean markets. Approximately 10,000 metric tonnes of the butane produced each year will be sold through long-term contracts to the Egyptian General Petroleum Company (EGPC) in order to meet local demand.
Dana Gas is already the 6th largest producer of natural gas in Egypt, a country which has doubled its proven natural gas reserves in the last five years to 70 trillion cubic feet.
NEW INDUSTRIAL ENERGY PRICING POLICY NEARS Source: Al Ahram, Al Alam al Yom, EFG-Hermes, June 19, 2007
The Ministry of Trade and Industry (link here) and the Ministry of Petroleum (link here) have nearly completed a study on its new energy consumption and industrial energy pricing policies. As part of its plan to reform energy pricing policies at home, the government has taken steps to minimize the negative effects of energy reform, particularly for local industries. According to MTI officials, the ministry is developing new indicators which help to identify the links between energy consumption and job creation. The new methodology is intended to help policy-makers preserve the allocation of energy subsidies where they are most needed, including labor intensive industries and projects which help to alleviate other national problems such as unemployment.
In related news, the MTI has prepared amendments to streamline Egypt’s internal trade and market monitoring laws and will submit them to parliament at its next next session. One amendment would merge industrial, exporter and importer registries into a single commercial registry as a way to significantly simplify registration procedures. Another would eliminate any registration conditions not in line with the government’s reform program.
PARLIAMENT TO REVIEW FREEDOM OF INFORMATION LAW Source: Al Ahram, EFG-Hermes, June 19,2007
According to the Ministry of Investment (MOI) (link here) a new freedom of information law will soon be submitted to Parliament for review. The new law, to be Egypt’s first law to protect the right of citizens to obtain information, was announced at a recent International Conference on Transparency and Disclosure.
Also announced at the conference were the Capital Market Authority (CMA) (link here) and the national stock exchange’s plan to develop a set of regulatory rules and procedures for the small- and medium-sized enterprise (SME) stock exchange soon to open. The regulations are set to include obligatory transparency and disclosure procedures for companies seeking to obtain credit, and more efficient protocol for interactions between local companies and non-financial institutions such as the General Authority for Free Zones and Investment (GAFI) (link here), the CMA, the Insurance Monitoring Authority and the Mortgage Authority.
CMA APPROVES NEW REGULATIONS FOR INVESTMENT FUNDS Source: Al Ahram, June 25, 2007
The CMA’s board of directors has approved amendments to the capital market law’s executive regulations that will revise the legal, regulatory and monitoring framework for setting up and managing investment funds. The amendments, having been forwarded to the Ministry of Investment (MOI) (link here) for review, are scheduled to be issued as a ministerial decree in the near future.
The new amendments are designed to protect shareholders, including the stipulation that any board of directors overseeing the various investment funds must include a majority of independent members. The amendments also raise the minimum amount of securities to be issued by an investment fund to 200 times its capital requirement, up from the current minimum of 10 times the capital requirement.
Reforms are set to include an upgrade of monitoring mechanisms for the various types of funds, to allow real estate funds and holding funds for the first time. Investment limits in various areas will be expanded according to their level of risk and brokerage houses will be given a greater role in trading fund securities, a change designed to increase activity in securities trade. Excess liquidity investments in low risk and liquid investment channels will be allowed as an alternative to cash holding, which is the current requirement on funds.
Technical management of the funds will be overseen by a newly established company.
Borrowing against assets as a way to meet the demands of shareholders wanting to withdraw will be more restricted for the majority of funds, with only real estate investment funds being allowed to borrow up to 50 percent of their asset value. The amendments will also reform regulations regarding the marketing of initial public offerings, the valuation of securities and the procedures for returning securities to protect other shareholders.
EL SEWEDY TO ESTABLISH PLANT IN TENTH OF RAMADAN Source: EFG-Hermes, June 19, 2007
El Sewedy Cables Company (Amcham Member) (link here) is set to establish a state-of-the-art facility for the production of power and dry type transformers in Tenth of Ramadan City, the first of its kind in the MENA region. Transformers will be produced under license from TBEA (link here), China’s leading manufacturer of transformers and one of the most recognized brands worldwide.
The plant, which will enjoy a ten-year tax exemption from the start of production, will span 260,000 square meters, cost USD 50 million and employ about 800 workers. It is scheduled to have an initial annual production capacity of 600 dry type transformers, each powered by 22 kilovolts, and 105 power transformers ranging from 66 to 220 kilovolts. Dry type transformer production is scheduled for April 2008, while the production of power transformers is scheduled for the first fiscal quarter of 2009.
The dry type transformers are made from cast resin, are non-flammable and self-distinguishing. They are mainly used to service chemical plants, oil and gas refineries, utilities and power plants, hospitals, hotels, schools, airport terminals, water treatment plants and paper and steel mills. Power transformers, which use an oil immersed technology, are used mainly in utilities, power plants and subway and rapid transmission projects. By offering both types of transformers, El Sewedy will be able to expand its share of the electrical products market and to diversify its customer base in the Egyptian, Middle East and African markets.
El Sewedy Cables has also recently obtained approval to establish a copper smelter and refinery under the name of Red Sea Copper in a free zone in Ain Sokhna. El Sewedy Cables will own 74 percent of the smelter and Swiss-based Glencore International AG (link here) the remaining 26 percent. Operating 17 industrial plants in 12 countries, Glencore is one of the world’s largest suppliers of metals and minerals, crude oil and oil products, coal and agricultural products. It has customers in various industries such as automotive, power generation, steel production and food processing.
El Sewedy signed a memorandum of understanding (MoU) with Glencore in March 2006 and has been conducting feasibility studies since. Canadian-based consulting firm Hatch (link here) has completed a preliminary study on the project’s viability, and SNC Lavalin (link here), also of Canada, expects to conduct a more detailed study in early 2008. Construction of the project is expected to take 30 months once the final study has been approved by El Sewedy and Glencore.
El Sewedy Cables has purchased 1.7 million square meters of land near Ain Sokhna port for the project, which is expected to cost about USD 850 million and to have a production capacity of 300,000 tons of copper cathodes. The copper will be sold through long-term off-take agreements between Red Sea Copper, El Sewedy Cables and Glencore. Glencore is also expected to provide one million tons of copper concentrates to Red Sea Copper under a long-term supply agreement.
The ideal location of the plant is expected to ensure valuable links in the production chain by providing excellent access for both imports and exports in addition to access to high quality road transport links.
HIKMA PHARMACEUTICALS TO ENTER EGYPTIAN MARKET Source: Al Alam al Youm, EFG-Hermes, June 19, 2007
UK-based Hikma Pharmaceuticals Company (link here) has recently announced its plans to enter the Egyptian market, but not its strategy for doing so. The company will, no doubt, rely heavily on consumer familiarity with the Hikma brand name and its reputation for high quality pharmaceutical products. Hikma is a leading manufacturer of generic pharmaceuticals, selling to over 40 markets in the MENA region, the United States and Europe combined. In the early 1990s Hikma made its mark as the first company with Arab origins to obtain a license from US Food and Drug Administration (FDA) (link here).
BALTRANS BEGINS OPERATIONS IN EGYPT Source: ArabianBusiness.com, June 21 2007
Premier BALtrans (link here) continued its Middle East expansion this month by commencing its operations in Egypt. The international logistics company has formed a partnership with Rockit Transport Services (link here), a local freight forwarder with years of experience in Egypt’s logistics market, to provide Premier BALtrans with immediate access to six offices throughout the country.
EGYPT RESUMES GOLD PRODUCTION Source: Reuters, Al Ahram, alzawya.com, June 13, 2007
Official government sources have recently announced plans to offer eight new gold mining concessions around the country as part of a national scheme to revive Egypt’s precious metal industry.
The Arab world's most populous country, which once considered gold the skin of the gods, Egypt is revisiting ancient deposits of the metal, some of which have not been worked for 2000 years. This July, Egypt will regain its status as a commercial gold producer after a 50-year hiatus. It has already produced a first sample gold bullion bar in April. Output is expected to reach 14,000 ounces this year and eight tonnes by 2008, more than its total production in the last century.
The new offer follows a previous round in November, when Egypt awarded eight concessions to five companies from Canada, Australia, Europe and the UAE.
Plans to revive the gold industry were set in motion in January when the country signed a memorandum of understanding (MoU) with the International Finance Corporation (IFC) (link here), the private sector lender of the World Bank (link here), to replace antiquated mining laws.
Egypt's old regulations, based on profit-sharing, made it virtually impossible for foreign mining firms to participate in building a lucrative national industry, while local companies lacked the capital or expertise to sufficiently exploit reserves on their own. For that reason, gold production came to a halt in 1958 as the volume mined was considered too small to be profitable. Up until 1958, however, Egypt produced 7.4 million tonnes—a testament to the potential for a revived industry.
The International Finance Corporation (IFC) also caught the attention of local news lately for its agreement to lend Omar Effendi USD 40 million to help the recently privatized department store chain modernize its nationwide outlets and enhance employee training. Changes are set to include the automation of store procedures, upgrade of warehouse facilities and air conditioning for store facilities. The deal comes just six months after the retailer’s controversial sale to the Saudi Anwal (link here) group.
One exception to the upgrade will be the downtown Abdel-Aziz location, whose exterior will be preserved as is in tribute to the location’s historical importance. Omar Effendi will, however, be inviting bids to renew the location’s interior in the coming months.
In addition to the an eight-year loan with a two-year grace period, the IFC will take a 5 percent equity stake in the company worth USD 5.7 million. Omar Effendi has begun renovating seven of its 82 branches, with the renovation cost of each branch estimated from EGP 250 million to EGP 350 million. Saudi-based Anwal bought 90 percent of the company in September of 2006 for EGP 589 million, with the remaining 10 percent held by the state Holding Company for Trade. The IFC hopes the loan will enhance Egypt’s retail sector and drive economic growth by increasing the sales of local textiles and other merchandise.
FITCH UPGRADES EGYPT’S OUTLOOK TO POSITIVE Source: Ameinfo.com, June 18, 2007
Fitch Ratings (link here) has recently upgraded Egypt’s issuer default rating (IDR) on long-term foreign currency from stable to positive with a rating of BB+.
The agency has also affirmed Egypt’s long-term local currency IDR at BBB with a stable outlook, its short-term foreign currency IDR at B and its country ceiling at a rate of BB+.
The agency credits Egypt's ongoing economic reforms for the upgrade, reforms which are gradually addressing the obstacles standing in the way of a confident financial market. According to Fitch analysts, Egypt’s budget deficit and debt ratio are expected to fall appreciably this year, indicative of a new trend. Moreover, banking system restructuring inches closer to completion; and further reforms aimed to improve the business environment are taking shape. Growing confidence in the policy framework has brought increased investment and accelerated economic growth, as reflected in a current account surplus, strong capital inflows, and increased reserves. Such improvements are the reason Egypt was able to attain a net external creditor status last year, a status unusual for countries in the 'BB' rating category and a testament to Egypt’s real potential for progress.
CMA APPROVES MORTGAGE-BACKED SECURITIES OFFERING Source: Al Ahram, EFG-Hermes, June 26, 2007
The Capital Market Authority (CMA) has recently approved a public offering of EGP 750 million in callable, non-convertible mortgage-backed securities (MBS) by the state-owned Egyptian Arab Land Bank (link here). The bank will offer the 10-year securities at a face value of EGP 1000. They will be backed by mortgage loans worth EGP 893 million and will be guaranteed by the Ministry of Finance (MOF) (link here).
The securitized debt has been assigned an AA credit rating by an unknown agency due to the government’s guarantee and the securities are expected to be tradable on the Cairo and Alexandria Stock Exchanges.
The securities will pay a quarterly coupon based on floating rates.
The issuing of mortgage-backed debt is expected to support the growth of the mortgage market and to help supply the long-term financing needed to support it. The issue will also support the financial restructuring of the Egyptian Arab Land Bank and enable it to meet the minimum capital adequacy ratio set by the revised international capital framework, known as Basel II.
In anticipation of the offering, the CMA is developing its human resources through a training program that has been initiated recently in coordination with the US Securities and Exchange Commission (link here). The Central Bank of Egypt (link here) earlier this year allowed the Egyptian Arab Land Bank, which specializes in real estate and mortgage financing, to resume operations after having suspended it for almost six years. It also granted the bank an EGP 1 billion supporting loan to aid its mortgage financing activities.
ABRAAJ BUYS STAKE IN EGYPTIAN SUGAR Source: Reuters, ArabianBusiness.com, June 24 2007
UAE private equity firm Abraaj Capital (link here) announced its purchase of stake in Al Nouran Holding (Amcham Member) the Egyptian sugar refining company.
Abraaj, which did not provide the value of the deal, said its investment would help Al Nouran build a beet-sugar mill and a raw sugar refinery with a total annual production capacity of 514,000 tonnes.
Earlier this month Abraaj bought the Egyptian Fertilizers Company (EFC) for USD 1.41 billion, an indication of the firm’s growing prowess in the region.
DUPONT TO SHOWCASE AT INTER BUILD EGYPT 2007 Source: Ameinfo.com, June 22, 2007
DuPont (link here), the internationally-renowned science company, is participating for the first time in Inter Build Egypt 2007, Egypt's largest building and construction event. Inter-Build was held June 21-25 at the Cairo International Convention Centre (link here).
At the event, DuPont showcased a number of its construction innovations to savvy entrepreneurs from Egypt’s burgeoning construction industry.
Inter Build, the international exhibition and conference for building and construction, has been taking place in Egypt since 1993. Over the years, Inter Build Egypt has had a notable impact on the country's infrastructural development by exposing local marketeers to the latest product and service innovations of international construction and infrastructural firms.
QATARI DIAR TO BUILD RED SEA RESORT Source: Reuters, Gulf Times, June 27, 2007
The firm Qatari Diar Real Estate & Investment Company (link here) is set to develop a resort on Egypt’s Red Sea coast in a deal valued at EGP 10 billion. The resort, yet to be named, will stretch across 35 square kilometers of prime coastline in the Sharm Al Arab and Sharm Al Naka areas.
Qatari Diar has signed an agreement with Egypt’s Tourism Development Company to develop the resort and will conduct a year-long consultancy before construction begins. Qatari Diar is already developing an elaborate tourist destination in Sharm El Sheikh, set to include a hotel, villas and an aquatic park: a project valued at USD 250 million
Qatari Diar, which currently operates in 32 countries with investments of near USD 32 billion, is one of the vehicles used by the Qatar government to invest windfall revenues from energy exports.
EGYPT AIR LAUNCHES A NEW LINE BETWEEN AMMAN AND SHARM EL-SHEIKH Source: elmasla.com, June 24, 2007
Beginning October 1, 2007, Egypt Air (link here), the national airline, will offer new flights from Sharm el Sheikh to Amman, Jordan, scheduled to run once Sundays through Wednesdays and twice daily Thursday through Saturday. The new flight is intended to accommodate the high volume of passengers traveling between the two destinations, which is thought to have increased 30 percent since 2006. Jordanian Royal Airlines (link here) is the only passenger airline servicing flights between these two destinations, currently running ten flights each week along the route.
Egypt Air currently offers 12 direct flights between Cairo and Amman each week, which was upped from 7 to accommodate the traffic, but concluded it was missing an important market between Amman and Sharm el Sheikh which has so far been dominated by Jordanian Royal Airlines.
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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