GDP GROWS BY 7.2% Source: Al Ahram, EFG-Hermes, May 25, 2007
GDP grew 7.2 percent in the third quarter of FY 2006/07, up from 6.9 percent in the same quarter of last year. Nominal GDP during the first quarter of FY 2007/08 was EGP 170.5 billion and is expected to reach EGP 183 billion by the year’s fourth quarter.
The GDP growth rate is expected to level about 7.2 percent, but officials hope to push that figure closer to 9 percent toward the end of the year as part of the targeted five year plan to increase overall growth.
Suez Canal earnings grew 20.7 percent to USD 1.28 billion in the third quarter of FY 2006/07 and tourism grew 18.5 percent to USD 1.9 billion. Total investments climbed 42 percent of which 72 percent was contributed by the private sector.
Unemployment is thought to have declined from 11.6 percent in March 2006 to 9 percent in March 2007.
GOVERNMENT ISSUES AND AUDITS TAX REFORMS Source: Al-Ahram, EFG-Hermes, May 20, 2007
Back in 2005, the Egyptian government implemented a new system in which taxpayers declared their own tax liabilities. According to the Ministry of Finance (MOF) (link here), the government will now audit a sample of taxpayers to make sure they have abided by the regulations.
In addition to a random sample of taxpayers, the audit will include taxpayers with commercial or professional activities who do not have regular accounts. The MOF will also begin to gradually widen the tax base this year with a goal to increase the number of taxpayers from 5.6 million to 15 million in three years.
The government will try to achieve this goal without increasing tax rates, said Minister of Finance Youssef Boutros-Ghali. Under the new plan, the government hopes to increase the national budget through tax revenues to EGP 184.7 billion in FY2007/08—an increase of 12.7 percent.
FIVE YEAR PLAN: 9% GROWTH THROUGH PRIVATE INVESTMENT Source: Al-Ahram, EFG-Hermes, May 22, 2007
Egypt hopes to increase annual economic growth to 9 percent by the end of its new five-year plan beginning this July, said Minister of Economic Development Othman Mohamed Othman. The plan aims for growth of 7.2 percent in the first year, to be followed by an average annual growth of 8 percent through 2012.
The government is relying upon the private sector to provide 68 percent to 70 percent of its targeted EGP 1,295 billion investment which will be required to inspire sufficient growth.
Last year in FY2006/07, the private sector invested EGP 100 billion in the Egyptian economy, exceeding expected levels by EGP 25 billion. This year, private investment is expected to rise to EGP 115 billion. Public investments were also above expectations by approximately EGP 5 billion in FY2006/07, totaling EGP 25.5 billion.
The government ultimately hopes to achieve its goals through support of export sectors. As a move toward its goal, the government has recently increased an export development subsidy from EGP 400 million to EGP 2 billion, Othman added.
FDI RISES TO USD9 BILLION Source: Al-Alam al-Yom, EFG-Hermes, May 31, 2007
According to the Central Bank of Egypt (CBE) (link here), net inflows of foreign direct investment (FDI) rose from USD 4.6 billion to about USD 9 billion in Q3 FY2006/07 from the same period a year earlier.
The balance of payments (BOP) surplus for the same period slipped to USD 3.1 billion from USD 3.3 billion, which still indicated an increase in foreign reserves.
The trade deficit increased, with exports growing 18.1 percent year-on-year to reach USD 15.9 billion while imports increased 21 percent to USD 26.3 billion. Export growth was driven mainly by non-oil exports, which increased 42.4 percent, while non-oil imports increased 30.3 percent and oil-imports declined by 23.7 percent.
The services account surplus increased by about USD 8.6 billion year-on-year, led by an 11.1 percent increase in tourism revenue valued at USD 6.2 billion and an increase in Suez Canal revenue by 16.3 percent valued at USD 3.1 billion.
22% INCREASE IN TEXTILE EXPORTS IN 3 MONTHS Source: ANSAmed, May 29, 2007
Egyptian exports of clothing and textiles to the US rose by 21.9 percent in the first three months of 2007, according to a report by the Egyptian embassy in Washington. Clothes and textiles exported to US between January and March this year were valued at USD 222.8 million, up from 182.8 million for the same period in 2006.
According to US figures reported in Al Ahram newspaper, Egypt ranks 25th of all clothing and textile exporters to the US market. A majority of the textile exports come to the US within the framework of the Qualifying Industrial Zones (QIZs) (link here) Protocol, signed in December 2004 by Egypt, US and Israel.
According to the original QIZ Protocol, Egyptian imports to US were to include 11.7 percent Israeli components in order to enter the US duty free. Just this year, the Israeli component was reduced to 10.7 percent.
OVL TO ACQUIRE SHELL'S 33% STAKE IN EGYPT GAS FIELD Source: India Daily, May 28, 2007
India’s ONGC Videsh Limited (OVL), the overseas arm of state-run Oil and Natural Gas Corp (ONGC), is negotiating to acquire Royal Dutch/Shell's 33 percent stake in a deep sea gas field off Egypt for USD160 million and bring the fuel in liquefied form (LNG) to India. The North East Mediterranean Deepwater Concession operating the Egyptian Mediterranean Sea is entirely financed by Shell and is estimated to hold close to 10 trillion cubic feet of gas reserves. OVL plans to pay USD 140 million and a maximum of USD 40 million as its share of exploration costs for 2007 activities, an OVL executive said.
21 AGREEMENTS ON MINERAL RESOURCES RATIFIED Source: ANSAmed, May 23, 2007
The Egyptian Shura Council (Parliamentary Upper House) has ratified 21 agreements worth a total USD 1.5 billion concerning extraction activities of gold, oil and gas in different areas of the country. Six of the ratified agreements were signed by the Egyptian Mineral Resources Authority with Canadian, Russian and Cypriot companies for the search of gold mines and other minerals in the desert areas of the country.
The Egyptian Natural Gas Company (Amcham Member) (link here) has signed another nine deals with Italian, Indian, Thai, Austrian, German and other international firms operating in the sector. Egypt, one of the world’s top ten exporters of liquefied natural gas, doubled its reserves of natural gas in the past five years. Egyptian Oil Minister Sameh Fahmi recently declared that the country will aim to increase oil production to 800,000 barrels per day by 2008.
SINO-EGYPTIAN JOINT OIL RIGS PLANT SET UP IN EGYPT Source: People’s Daily online, May 31, 2007
A joint oil rig plant shared by Chinese firm Honghua Petroleum Equipment Co., Ltd and three Egyptian firms was set up Wednesday in Suez northwestern industrial zone, about 120km east of Cairo. According to the deal which was signed in December 2006, each country invests USD 15 million to facilitate three oil drills by the end of this year and 53 more by 2011.
This is the first land-based oil rig plant in the Middle East region.
Egyptian Minister of Petroleum Sameh Fahmi called the joint project a success story. He also pointed to expectations of greater Chinese investments in Egypt’s oil sector as bilateral relations between the two countries gain momentum. The expectations are somewhat realistic it seems, as Chinese investments in Egypt are currently valued at USD 300 million, primarily in the oil and communications sectors, and bilateral trade is at an all-time high of USD 3.19 billion in FY 2006/07, up 48.8 percent year-on-year.
Minister Fahmi also expressed his nation’s interest in Chinese technology as a way to further boost Egypt's social and economic progress.
JORDANIAN INDUSTRIAL PARK ESTABLISHED IN EGYPT Source: ANSAmed, May 21, 2007
A new industrial estate will be established in Egypt by the Tajamouat Investment Company, a Jordanian public shareholding company overseen by the Jordanian Specialized Investment Compounds Co. (SPIC). Halim Salfiti, board chairman of the SPIC, said during a press conference that the project will be valued at approximately EGP100 million (USD 17 million).
The industrial estate, which will be constructed over a total area of one million square meters, will include industrial buildings and facilities, necessary infrastructure and supportive services units, Salfiti told reporters. The estate will be constructed over a five-year period, and will facilitate handicraft and commercial industries as well as warehouses and residential compounds for its workers, added Salfiti.
The project is expected to attract some USD 850 millions in investments and to create some 100,000 job opportunities for the local economy. Investors will have the option to rent or own their facilities, he said, and special incentives will be given to those who support new textile and garment facilities.
SPIC’s already up and running industrial city in Jordan began operations in 1995. It was quickly designated as a Jordanian qualifying industrial zone in October 1999, and currently houses 42 factories from 11 countries.
OT SEEKS TO BUILD SUBMARINE CABLE FROM EGYPT TO ITALY Source: Al Mal, May 21, 2007
Orascom Telecom (OT) (link here) has presented an offer to the National Telecommunications Regulatory Authority (NTRA) (link here) to build and develop a submarine cable from Alexandria to Italy via Greece, Al Mal reported, without citing its source. The cable, Egypt’s second, would also extend east to Karachi, Pakistan. OT’s sister company Wind has operations in both Italy and Greece. The NTRA in September 2006 awarded a license to an Arab-Egyptian consortium to build and operate a USD300 million submarine cable, Egypt’s first. The consortium has spent USD120 million on the first phase.
INDIA EYES EGYPTIAN OIL AND STEEL INDUSTRIES Source: Reuters, May 17, 2007
India's Essar Global is considering building a steel plant in Egypt that will bring investments of USD 590 million, an Egyptian government official said. The group told an Egyptian delegation in India earlier this month that it was seriously interested in establishing a steel plant in Egypt with an estimated investment of USD 590 million.
The group also plans to set up three steel plants elsewhere in the Middle East, including a joint venture to build a 1.5 million ton-per-year plant in Iran. Essar, with interests from telecom to construction, last year made an unsuccessful bid for Egypt's Suez Steel.
Beyond its steel visions, Essar also has its sights set on Egyptian oil. Essar has proposed investments of USD 3.4 billion for a 300,000 barrels per day (bpd) oil refinery in northern Egypt, an Egyptian government official said. The planned refinery, scheduled to come on stream by 2010, is finding favor with Egyptian government officials as a way to increase oil output to 800,000 bpd.
The new refinery falls in line with Essar's plans for a bigger presence in the Middle East, where oil fuelled growth and a construction boom have boosted domestic consumption and strained supplies to Europe and Asia.
Still, the Egyptian government is hesitant to privatize its petroleum industry completely, as evidenced last month when plans to privatize a 100,000 bpd Middle East Oil Refinery (Midor) in Alexandria were stalled indefinitely on account of plant’s strategic significance. A source at the ministry said a similar fate may befall the Essar refinery. "There are some talks at the moment that some refineries should be joint ventures between the foreign companies and the government due to their importance," the source said.
Another Indian steel making giant, Tata Steel Ltd, is also examining the possibility of building a steel plant in Egypt at an estimated cost of up to $900 million. If Tata's plant is established, it would be the company's second major venture in Africa after a ferrochrome unit in Richards Bay, South Africa, which is still under construction.
UHDE FERTILIZER COMPLEX ON THE WAY Source: Chemie.DE Information Service, May 31, 2007
The Egyptian Agrium Nitrogen Products Company (EAgrium) has commissioned German engineering giant Uhde to build a turnkey fertilizer complex in Damietta, some 160 kilometers north-east of Cairo. The plant is scheduled for operation in 2010. EAgrium is investing some USD 1.2 billion in the new fertilizer complex, which will comprise two 1,200 ton-per-day (tpd) ammonia plants and two urea plants with respective production capacities of 1,925 tpd. The plant complex will also include various offsite and related utility systems, product handling and storage facilities.
The ammonia plants will be based on Uhde’s proprietary ammonia process while the urea plants will use Netherlands-based Stamicarbon’s process. All selected processes are particularly environment-friendly and comply with the stringent Egyptian and European standards.
EGYPT TO BE OUTSOURCING “INDIA” OF MIDDLE EAST Source: ANSAmed, May 25, 2007
Egypt is poised to become the India of the Middle East as it seeks to ramp up its share of the global outsourcing market, according to analysts. A report by independent technology research and consulting firm Yankee Group points out that India currently holds a 60 percent global outsourcing market share, but companies such as Cisco, Google, IBM, Microsoft, Oracle and Orange Business Services are starting to exploit Egypt’s IT talent pool.
The government has responded ambitiously to signs of potential growth in the IT outsourcing service sector, setting an ambitious target of USD 1.1 billion of the global outsourcing market for Egypt by 2010.
Such growth would mean a quadrupling of the nation’s 2005 revenue.
According to the Yankee Group report, rapidly growing interest in Egypt as a location for outsourcing services is still hampered by structural and perceptual problems for investors. These are problems the government must actively address in order to facilitate the ascendance of this market.
ETISALAT, MOBINIL AND VODAFONE TO SIGN AGREEMENT Source: National Telecommunication Regulatory Authority, May 31, 2007
Etisalat Misr (Amcham Member) (link here), the most recent mobile operator on the market, signed a much awaited interconnection agreement with both Mobinil (Amcham Member) (link here), and Vodafone Egypt (Amcham Member) (link here), on May 7, 2007 at the National Telecommunication Regulatory Authority (NTRA) (link here) headquarters in the Smart Village (link here). The agreement lays out what are to be the technical, regulatory and commercial boundaries and interactions between the three operators. The agreement also empowers the NTRA to oversee dispute settlements between them.
Mobinil and Vodafone had a previous agreement, signed on September 24, 2001, which was later amended in 2005. The 2007 agreement with Etisalat, however, will trump them both.
According to article 28 of the Telecom Law No. 10 of 2003, telecom service providers are required to sign an interconnection agreement.
ETISALAT NOT GRANTED SALES TAX EXEMPTION Source: Al Alam al Yom, EFG-Hermes, May 22, 2007
The Egyptian Tax Authority has not granted Etisalat Misr (Amcham Member) (link here) Egypt’s third mobile operator, exemption from sales taxes on its prepaid cards, contrary to what may have been implied in the company’s advertisements, said Hazem Metwally, head of the company’s commercial affairs.
Metwally was responding to a complaint by the president of the Egyptian Tax Authority, Mahmoud Aly, saying the Tax Authority, not companies, has the power to eliminate sales taxes. According to Metwally, Etisalat has now made it clear that it plans to pay the tax on behalf of its customers, a position the company has clarified in recent advertisements and at a press conference held in early May held to launch its services.
VISA SEES GOOD GROWTH IN EGYPT Source: TradeArabia, May 17, 2007
Statistics from Visa International indicate that Egypt is actively embracing the shift to a cashless society. Egyptian consumers are using their Visa debit, prepaid, and credit cards to make both everyday purchases, such as groceries and clothing, and those less frequent including air travel and accommodations, the company said.
Since 2005, Visa has seen a 30.8 percent increase in the value of retail transactions in Egypt and 31.8 per cent growth in the volume of transactions. In the past year Visa has noted a 24.8 percent increase in the number of Visa cards issued, 18 per cent growth in the number of sales transactions and a 19.3 percent rise in the value of those transactions.
In 2006, grocery stores and supermarkets account for the largest share of total expenditures with USD 56.2 million in purchases, an increase of 48.5 percent over 2005.
Lodging and telecommunication equipment rank second and third each with total sales of USD 24.2 million and USD 22.2 million, respectively, while family clothing stores and electronics stores accounted for USD 19.6 million and USD 16.4 million to round out the top five largest consumer spending categories.
Other notable expenditures include restaurant and jewelry purchases, each totaling approximately USD 13 million. Statistics also revealed that consumers are using their Visa cards to pay for medical-related expenses including services, drug store purchases and pharmacies, together accounting for USD 13.0 million or 3.5 percent of total receipts.
BANK LENDING FOR NATURAL GAS AND REAL ESTATE RISES Source: Al-Alam al-Yom, EFG-Hermes, May 20, 2007
Egyptian and foreign banks have recently extended a number of large loans for natural gas and real estate projects.
The National Bank of Egypt (Amcham Member) (link here) lent EGP 1.124 billion to EgyGas to finance a network for transporting natural gas to the south of Egypt, which includes EGP 390 million for the project’s first phase and USD 61 million to finance a foreign component.
A number of banks, including CIB (Amcham Member) (link here), put together a USD 490 million syndicated loan to finance a petrochemical project being built by the Egyptian Methanex Methanol Company (EMethanex) (Amcham Member) (link here). Foreign banks, including Calyon and Standard Chartered, will provide USD 222 million of the loan. Egypt’s United Bank has provided mortgages worth EGP 340 million which it plans to contribute to the project.
CEMENT EXPORT DUTIES RECONSIDERED Source: Al Ahram, EFG-Hermes, May 17, 2007
Just months after heightening export duties on steel and cement, the Minister of Trade, Rashid Mohamed Rashid, announced that the government may lower those same duties by the end of the year if domestic prices align with international cement and steel prices as expected. Egypt imposed an export duty of EGP 65 per ton on steel and EGP 185 per ton on cement in late February in an attempt to lower domestic prices. A special case was made for white cement just days after the tariff hikes were issued. According to Minister Rachid, government studies have shown that white cement exports do not affect prices on the local market and that removing the tariffs will not negatively impact the Ministry’s goals. Tariffs on grey cement and clinker exports, however, will remain escalated until further notice.
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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