MOODY’S DOWNGRADES EGYPT’S RATING OUTLOOK TO NEGATIVE Source: EFG-Hermes, June 24, 2008
Moody’s (link here) downgraded its Egypt rating outlook for foreign currency government bonds to Negative from Stable on June 23 as well as its outlook for the country ceiling on bonds and bank deposits. It also downgraded the government’s local currency bond rating to Ba1 while maintaining its Negative outlook. Moody’s statement makes it clear that the downgrade is primarily a response to high levels of inflation, though Moody’s also points to constraints on public finances.
APPOINTING HESHAM RAMEZ AS DEPUTY GOVERNOR OF CBE AND TAREK AMER AS MEMBER OF THE BOARD Source: Beltone News, June 29, 2008
Two presidential decrees were issued appointing Hesham Ramez, the previous Managing Director of Suez Canal Bank (AmCham member), as the Deputy governor of the Central Bank of Egypt (CBE) for the term of the current CBE board, ending in November 2011, and appointing Tarek Amer, the current Chairman of National Bank of Egypt (AmCham member) and former Deputy Governor of the CBE, as member of the CBE board. The board includes heads of several public and private banks in addition to economic experts. With the appointment of Ramez, the CBE Governor currently has two deputies, with the previous appointment of Tarek Kandil at the end of 2007. Ramez and Kandil have also been included in the Monetary Policy Coordinating Council headed by the Prime Minister, coordinating monetary, fiscal and economic policies between the CBE and the government.
CUSTOMS SERVICE SYSTEM COMPLETED Source: Daily News Egypt, June 22, 2008
Minister of Finance Youssef Boutros Ghaly announced that the Ministry of Finance (link here) has completed an automated customs service system which will aid the expedited release of goods. The system, which links Alexandria, Dekheila, Suez, Port Said, Ain Sokhna and Cairo ports, is part of an overall effort to reform custom systems and administration. These initiatives follow from the September 2004 cuts in customs duties. In addition, a new customs law is being drafted and will be referred to the Parliament in November 2008.
BISCO MISR TO SIGN 18 MONTHS CONTRACT WITH THREE FRENCH COMPANIES Source: Beltone News, June 29, 2008
Bisco Misr (link here) signed an 18 months contract last week with three French companies to re-brand and improve the company’s products to meet the exportation requirements set by the European Union. The French companies will help Bisco Misr improve its R&D labs and personnel, quality control, in addition to importing the latest technology required for the process.
THE MINISTRY OF TELECOMMUNICATIONS MODIFIES FIXED LINE RATES AND SUBSCRIPTION FEES Source: Beltone News, June 26, 2008
The Ministry of Telecommunications and Information Technology (link here) confirmed that the modifications in fixed-line rates and subscription fees were to be effective starting July 2008. Modifications include increasing monthly domestic fixed-line subscription by 20% from EGP10 to EGP12, while increasing monthly commercial fixed-line subscription by 50% from EGP16 to EGP24. Local fixed line rates will rise by 50% from EGP0.02 to EGP0.03 per minute, while fixed-to-mobile rates will decline by 50% from EGP0.45 to EGP0.30 per minute. Domestic and commercial fixed-line installation fees will be reduced by 50%, from EGP500 to EGP250, and from EGP1000 to EGP500, respectively. "Inter-province" fixed line rates will drop 20%, to EGP0.16 for distances longer than 60 km, and to EGP0.08 for distances less than 60 km. Initiation of any fixed-to-fixed line call will rise 25% from EGP0.04 to EGP0.05. Internet rates are to remain the same.
OCI WINS TWO CONSTRUCTION CONTRACTS FOR SKIKDA LNG PROJECT Source: Forbes, June 24, 2008
Orascom Construction Industries (AmCham member) (link here) has received two construction contracts from Kellogg, Brown & Root International Inc. for the civil works and piling installation of a new LNG train in Skikda, Algeria. Orascom and Trevi SpA joint venture will carry out the installation which is expected to be complete in about 10 months. Civil-works construction contract for the LNG train, being developed by state-owned Sonatrach (link here), is expected to be complete in about 14 months. These contracts represent some of the first packages of the $3 billion Skikda LNG program in Algeria.
THE SALE OF THE STATE-OWNED BANQUE DU CAIRE DID NOT GO THROUGH Source: Beltone News, June 25, 2008
The long-awaited sale of the state-owned Banque du Caire did not go through. National Bank of Greece SA was the highest bidder, valuing the bank at USD2.025 billion. The National Bank of Greece’s offer has been rejected by the government.
The final contenders short-listed for the Banque du Caire deal included:
-London-based Standard Chartered Plc (link here),
-Saudi Arabia's Samba Financial Group,
-National Bank of Greece SA (link here),
-Dubai's Mashreq Bank (link here), and
-A consortium of Saudi Arabia's Arab National Bank (link here) and its Jordanian affiliate Arab Bank Group (AmCham member) (link here)
London-based Standard Chartered Plc and Saudi Arabia's Samba Financial Group have been disqualified from bidding.
CBE TO ABSORB MORE LIQUIDITY Source: Daily News Egypt, June 19, 2008
The Central Bank of Egypt (CBE) (link here) increased the amount of liquidity it absorbs through deposit auctions, accepting LE32 billion over the past two days, the biggest amount in such a short period. The auctions were for seven-day and 11-day deposits at the amounts of LE20 billion and LE11.7 billion at average rates of 10.27 percent and 10.3 percent, respectively.
NEW INDEX FOR THE EGYPTIAN STOCK EXCHANGE Source: Beltone News, June 18, 2008
A new Index for the Cairo & Alexandria stock Exchanges (CASE) (AmCham member) (link here) will be launched in March 2009 incorporating companies’ commitment to implement corporate governance, said Minister of Investment, Mahmoud Mohieldin. The Index is being prepared by the Egyptian Stock Exchange and Standards and Poor’s (link here), and a guide for corporate governance regulations will be issued within the coming few weeks, added the Minister.
NBE TO SET UP EGP5 BILLION HOLDING COMPANY TO MANAGE ITS INVESTMENTS Source: Al-Alam al-Yom, June 30, 2008
State-owned National Bank of Egypt (NBE) (AmCham member) (link here) will set up a new holding company with a paid-in capital of EGP5 billion and an authorized capital of EGP40 billion to manage its investments. The company, to be called “National Capital Holding”, will manage investments with a total market value of around EGP15 billion, distributed mainly among the industrial, tourism, and financial sectors. The bank has received approval from the Capital Market Authority (link here) for the new company, which will be chaired by NBE chairman Tarek Amer. The company is expected to participate in setting up new companies and to acquire companies being sold by the state.
CIB ACQUIRES REMAINING 50% SHARES OF CI CAPITAL Source: EFG-Hermes, June 30, 2008
CIB (AmCham member) (link here) is acquiring the remaining 50% of the shares it does not own in its investment banking arm CI Capital (AmCham member) pending final regulatory approvals. Egyptian businessman Naguib Sawiris, who is selling his 16% stake in CI Capital, has already used the proceeds to purchase shares in CIB. He will remain a member of CI Capital’s board and will be a shareholder in CIB’s upcoming Algerian banking venture, for which CIB expects to get the final regulatory approvals from the Algerian authorities by the end of the year. CIB said it is funding the acquisition of 50% of CI Capital with internal sources. CI Capital’s contribution to CIB’s consolidated earnings was around EGP55 million, or 5% of consolidated net profit, in 2007.
CENTRAL BANK HIKES INTEREST RATES BY 50 BASIS POINTS AS INFLATION ACCELERATES Source: EFG-Hermes, June 29, 2008
The Central Bank of Egypt's (CBE) Monetary Policy Committee (MPC) raised its policy rates by 50 basis points at its meeting on June 26, bringing the CBE overnight deposit rate to 10.5% and the overnight lending rate 12.5%. The MPC statement said that the broad-based adjustments to regulated prices further accelerated food price inflation and that its spillover to non-food inflation remained strong. The government increased the price of fuel by as much as 57% on May 5 as oil prices reached record levels. The statement also cited a possible deepening of the international food price shock due to concerns over grain crops in light of adverse weather conditions. The balance of risks to the inflation outlook remains on the upside, the statement said.
GOVERNMENT TO RE-NEGOTIATE NATURAL GAS PRICES WITH GAS DE FRANCE Source: Al Mal, June 19, 2008
The Egyptian Ministry of Petroleum (link here) will begin negotiating with Gas de France (link here) to raise the price of the natural gas it supplies to the company by 50% to USD6 per mbtu. British Gas (AmCham member) (link here), which together with Gas de France is a main shareholder in the LNG liquefaction plant in Idko, will also take part in the negotiations. The Idko plant sells around 3.6 million tons of natural gas each year to the French company. The ministry will also seek to increase its spot cargos to benefit from their higher prices compared to long-term contracts.
GOVERNMENT TO RAISE ELECTRICITY PRICES TO INDUSTRIAL USERS Source: Al Mal, June 30, 2008
The government will increase electricity prices for energy-intensive industrial users starting July 2, Minister of Trade and Industry Rachid Mohamed Rachid said. The price for the extra high voltage users will increase 22% to EGP0.217 kilowatt per hour (kwh), for high voltage consumers 18% to EGP0.255 per kwh and for medium users 13% to EGP0.334 per kwh. The ministry defined energy-intensive industries as those who consume more than 50 million kwh per hour or 66 cubic meters of natural gas annually and operate in fertilizers, steel, cement, aluminum and ceramics manufacturing.
EGYPT'S GHABBOUR IN $70 MLN BUS ASSEMBLY VENTURE Source: Beltone News, June 29, 2008
Ghabbour Auto (GB Auto) (link here) announced that it has agreed with Brazil’s Marcopolo to set up a bus body assembly/manufacturing facility in Suez, Egypt. The joint venture will operate through its existing subsidiary, GB Buses (GBB), to be owned by GB Auto (51%) and Marcopolo (49%). The cost of the project, including initial working capital requirements, is expected to be USD70 million. The new venture will target both the local and export markets. Production is expected to start in 2009 targeting a capacity of 1,500 units, which is expected to reach about 8,000 units a year by 2014.
AL FUTTAIM BEGINS CAIRO PROJECT WORK Source: Gulf News, June 19, 2008
Al Futtaim Group (link here) began construction of the Festival Centre, 184,000 square meters retail and entertainment facility at the Cairo Festival City in Egypt. Al Futtaim Carillion (link here) and Orascom Construction Industries (OCI) (AmCham member) (link here) have been selected by Al Futtaim Group Real Estate to construct the Festival Centre. Al Futtaim Carillion is a leading construction contractor in the Gulf and Orascom is Egypt's leading construction company. Cairo Festival City covers three million square meters of land and is located on the Ring Road, 20 km southeast of Greater Cairo and only 15 minutes from the international airport.
PARLIAMENT APPROVES PROPERTY TAX LAW Source: Al Ahram, June 18, 2008
The Egyptian Parliament approved a new property tax law that will tax properties at 10% of their rental value. The rental value is calculated as 1.8% of the property's total value for units that are worth up to EGP5.5 million and 2.4% for units above that value, according to the law's draft. The law in its final draft exempts properties worth less than EGP500,000 (USD104,000). A maintenance cost of 30% for residential properties and 32% commercial units will be subtracted from the rental value of the unit. The law also exempts hospitals, government offices, political party headquarters and educational buildings. Minister of Finance Youssef Boutros-Ghali said that the government, after doing social research, will the pay the tax for any citizen unable to pay. He added that the law will apply to only 2.1% of the population.
The tax authorities will calculate the property tax by estimating the rental value of each unit and subtracting a maintenance cost as a percentage of the rental value (30% for residential units and 32% for commercial units). In other words, the tax rate for residential properties will be 7% of their rental value and for commercial units 6.8% of their rental value. The assessed rental value of the units can not increase by more than 30% for residential properties and 45% for non-residential properties during the assessment process, which will take place once every five years.
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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