QIZ PARTIES AGREE TO DECREASE ISRAELI COMPONENT NEEDED IN EGYPTIAN GOODS Source: EFG-Hermes; Al Mal, February 18, 2007
The United States, Egypt and Israel agreed to reduce the Israeli component Egyptian manufacturers need to gain duty-free access to the US market under the Qualifying Industrial Zone (QIZ) protocol. Effective from 1 April, Egyptian exports produced in special qualifying zones will only need 10.8% Israeli content, down from 11.7%.
Companies operating under the protocol have been officially notified of the change. Egyptian manufacturers had originally asked that the required Israeli component be reduced to 8% in line with a similar QIZ agreement that Jordan has with the US and Israel. The QIZ agreement helped increase Egypt’s exports to the US to $2.4 billion in 2006 from $1.3 billion in 2004, according to US trade figures. Trade experts expect the figure could rise to $4 billion in four years.
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FRANCE EARMARKS 40 MILLION EURO TO FIGHT POLLUTION IN EGYPT Source: ANSAmed, Al Alam Al Yom, February 20, 2007
The French Development Agency AFD (link here) has earmarked 40 million euros to reduce industrial pollution in Egypt, the French Ambassador in Cairo, Philippe Coste announced recently.
Coste said that ADF, which now has an office in Cairo, will also finance projects relating, for example, to irrigation and water distribution methods. He added that Egypt will adhere to the United program, launched by French President Jacques Chirac in July 2006, according to which a surcharge on airplane tickets will fund projects in developing countries, particularly in Africa. The Ambassador also mentioned that 18 countries announced their intention to join the program during the France-Africa conference, held last week in Cannes.
RESERVES RISE TO $28 BILLION, UNEMPLOYMENT FALLS TO 8.5% Source: EFG-Hermes, Al Ahram
Foreign reserves at the Central Bank of Egypt (CBE) (link here) have climbed to $28 billion and unemployment has dropped to 8.5%, Minister of Finance Youssef Boutros-Ghali said at the opening of an information systems conference. Egypt had foreign reserves of $26.09 billion as of end-January, according to CBE statistics, while unemployment stood at 10% as of 30 June 2006.
EU TO GRANT EGYPT EUR120 MILLION TO PROMOTE COOPERATION Source: Bloomberg, February 27, 2007
The EU (link here) has agreed to give Egypt EUR120 million to finance a plan to promote education, enhance cooperation in energy and the environment and increase trade between Egypt and EU states, EU Commissioner for External Relations Benita Ferrero Waldner announced after meeting with President Hosni Mubarak.
The agreement, to be signed in Brussels on 6 March, is part of EUR558 million aid package to Egypt planned over the next four years as part of the EU’s European Neighborhood Policy. Under the plan, Egypt can also borrow an additional EUR300 million from the European Investment bank. The European Neighborhood Policy is designed to strengthen ties with the 16 countries that lie on the EU’s southern and eastern borders by promoting political, economic and social reform. The European Union, which provided EUR1.1 billion in aid from 1996 to 2006, is Egypt’s second largest donor, after the US.
EGYPT BANS DUCKLING IMPORTS TO KEEP OUT BIRD FLU Source: Reuters; MENA News Agency, February 25, 2007
Egyptian Agriculture Minister Amin Abaza banned on Sunday, February 25, imports of ducklings as a precaution against the spread of bird flu, which has killed 13 Egyptians since it hit the country a year ago. An animal disease expert said that ducks had featured in about 95% of more than 100 recent outbreaks of the disease among flocks of domestic poultry.
GOVERNMENT TO SELL 20% OF STATE-OWNED EGYPTAIR TO PRIVATE SECTOR Source: EFG-Hermes; Al Masry Al Yom, February 27, 2007
The government will sell 20% of state carrier EgyptAir (AmCham Member) (link here) to the private sector to finance the purchase next year of 12 airliners worth LE5 billion, Minister of Civil Aviation Ahmed Mohamed Shafik said. The partnering with the private sector will enhance transparency, he added.
EGYPT KEEN ON LURING INVESTMENTS Source: ANSAmed, MENA News Agency, February 19, 2007
The Egyptian government is keen on fighting bureaucracy and attracting more local and foreign investments, Trade and Industry Minister Rachid Mohammed Rachid says. Rachid's declaration came on Sunday, February 18, during the laying of the foundation stone of an Egyptian-Turkish bus-manufacturing project in the 10th of Ramadan City.
There are about 1,206 industrial installations in the 10th of Ramadan City at a value of LE 41 billion and at an investment cost of L.E 24 billion, he said adding they provided 150,426 job opportunities. Commercial exchange between the two countries registered about $650 million in the first 9 months in 2006, while in 2005 it was about $1 billion.
ETISALAT MISR TO BORROW $1.75 BILLION Source: AMEinfo, February 21, 2007
Etisalat Misr (AmCham Member) plans to borrow $1.75 billion for its Egyptian operations after winning Egypt's third mobile licence in 2006. The long-term syndicated loan would be in a range of currencies including Egyptian pounds. Etisalat raised its first $3 billion syndicated loan in July 2006.
EGYPT AND CANADA ASSESS WATER COOPERATION PROJECTS Source: ANSAmed, February 19, 2007
Egyptian Minister of Irrigation and Water Resources Mahmoud Abu Zeid and Canadian Ambassador Philip MacKinnon will review a final report on joint projects for improving water quality. The Canadian government has offered a $20.5 million grant for the projects aiming to boost water quality. A workshop will soon be organized by the Egyptian National Water Research Center (link here), Canadian Ministry of Agriculture (link here) and the Canadian International Development Agency (link here).
UAE'S DANA GAS TO DRILL 15 NEW WELLS IN EGYPT Source: ANSAmed, February 20, 2007
Dana Gas (link here), the Middle East's first regional private-sector natural gas company, has announced an active drilling program for 15 wells in Egypt in 2007 by its exploration and production subsidiary, Centurion Energy (link here).
Ten exploration and five development wells are planned, with target depths ranging from 1,000-4,000 meters. The company is currently the sixth highest gas producer in Egypt, and among the nine highest producing companies by production of barrels of oil equivalent, out of the 64 companies that are active in Egypt's oil and gas sector.
CONSTRUCTION OF ASHKELON NATURAL GAS PIPELINE TO START NEXT MONTH Source: EFG-Hermes; Al Mal, February 18, 2007
Petroleum services company Petrojet (AmCham Member) (link here) will begin building a natural gas pipeline to Ashkelon in Israel for Eastern Mediterranean Gas company (EMG) early next month. The 100 km offshore pipeline, from Al Sheikh Zowayed in Northern Sinai, is projected to cost $20 billion.
EMG has a $2.5 billion contract to supply Egyptian natural gas over 20 years to Israel’s Dorad Energy Co. (link here), which will use the gas to generate electricity. The entire project is expected to cost $60 billion. Petrojet finished technical studies for the pipeline and is expected to start tests for natural gas injection in July 2007.
CBE GOVERNOR SIGNS PROTOCOLS TO RAISE LE12 BILLION FOR HOUSING PROGRAM Source: EFG-Hermes, Al Alam Al Yom, February 22, 2007
The Central Bank of Egypt (link here) Governor Farouk El-Okda signed protocols to finance a LE12 billion program to build 500,000 residential units in a national housing program.
The protocols were with various Egyptian governorates, the National Bank of Egypt (AmCham Member) (link here), Banque Misr (AmCham Member) (link here) and the Housing and Development Bank (AmCham Member) (link here).
BANKS TO PROVIDE CLIENT CREDIT DETAILS TO CENTRAL BANK BY END-MARCH Source: EFG-Hermes; Al Mal, Al Alam Al Yom, February 28, 2006
Banks are required to provide the Central Bank of Egypt (CBE) (link here) with details on their credit exposure to each of their clients by the end of March, part of a new plan to reduce credit risk and to bring Egyptian banks up to Basel II standards. The CBE hopes to decrease the level of credit provided per client to 25% of a bank’s capital base by end-2007 and to 20% by end-2008 from the current 30%.
It hopes to decrease total credit per client and associated parties to 27% of a bank’s capital by end-2007 and 25% by end-2008 from the current 30%. The maximum credit ceiling for public joint stock companies is 5%, with a 10% cap on all bank credit to joint stock companies, while for closed joint stock companies the ceiling is 2%, with a general cap on the bank’s exposure to all similar companies of 5% of the bank’s capital. The CBE has given banks three years to reconcile their existing credit lines with the regulations, while demanding they apply them immediately to new credit lines. Although the new regulations are considered restrictive where big clients are concerned, it showed some degree of flexibility in some cases such as allowing banks to increase lending to clients to up to 25% instead of 20% by the end of the third year or increasing lending to clients to up to 30% if the loan is in line with a credit policy adopted by the bank and approved by the CBE.
EGYPT TO LICENSE 3 MORE MORTGAGE FINANCE COMPANIES Source: Al Alam Al Yom, February 27, 2007
The government will license three new mortgage financing companies in 2007, increasing the total to seven, said Mortgage Finance Authority (MFA) (link here) chairman Osama Saleh. The MFA expects total outstanding mortgages to increase to LE2.5 billion as of end-2007 from LE1 billion as of end-2006.
The MFA is studying the development of a social fund to help low- and middle-income households get mortgages. The MFA has so far delivered 305 units through its low- and middle-income lending program, in addition to 3,700 units that the New Urban Communities Authority, will supply. The government has eased real estate registration procedures and put into place a program to register all housing units in Egypt over the next seven years. It has also established a mortgage refinance company, which has begun providing long-term funding to mortgage providers.
SHURA APPROVES GOVERNMENT’S REQUEST FOR $1 BILLION LOANS Source: NOOZZ, February 20, 2007
The Financial and Economic Committee at the Shura Council has approved a permission for the government to borrow $1 billion from the World Bank (AmCham Member) (link here) and the African Development Bank (link here) to finance the restructuring efforts at state-owned insurance companies and banks. Khallaf Abul Gaber, head of the Shura Council’s Financial Committee, said the value would be borrowed from both banks on equal basis.
He pointed out that more than 95% of the funds would be used to finance reforms in the nation’s financial sector. The funds will be specially directed to financial and management reforms at the National Bank of Egypt (AmCham Member) (link here) and Banque Misr (AmCham Member) (link here) as well as restructuring efforts at state-owned insurance companies to encourage partnerships with the private sector.
During a recent visit to Cairo, officials from the World Bank had expressed the bank’s approval to lend Egypt the funds required to finance the reforms.
ASEC OFFERS 300.6 MILLION EURO FOR QENA CEMENT Source: ANSAmed, February 19, 2007
The Arab Swiss Engineering Company (ASEC) (AmCham Member) (link here) has submitted an offer to acquire 100% of Misr Cement Qena (MCQ) at LE 75 per share, or a total deal value of LE 2.25 billion. ASEC’s offer comes hot on the heels of last week's offer by Cimpor Inversiones SA to acquire MCQ.
In August 2005, a 67% stake ofASEC was acquired by Suez Cement (AmCham Member), subsidiary of Cementi Italy, helping Suez increase its market share to nearly 35%. The Ministry of Investment (link here) issued a statement one day after the Cimpor offer was made, declaring the government has no intentions to sell public company shares in cement producers at the current time, yet the government is not the sole owner of the company to decide the submission of the offer or not, as some experts say. MCQ is one of the last lucrative partially-public cement producers with 1.7 million tons of annual production capacity. According to its final 2006 figures, the company reported net income up 90% to LE 236 million on LE 522 million in revenues. MCQ enjoys a corporate tax exemption agreement with the government valid through 2012.
STATE-CONTROLLED COMPANIES REPORT PROFIT OF LE3 BILLION Source: EFG-Hermes, Al Akhbar, February 18, 2007
State holding companies and their affiliate companies in the public enterprise sector earned a profit of more than LE3 billion in the financial year ending 30 June, Investment Minister Mahmoud Mohieldin said. Of the 164 affiliated companies, 109 reported a net profit.
Another 55 reported a net loss of a combined LE2.9 billion. Public companies debt as of 30 June fell to below LE10 billion from LE31.5 billion a year earlier, thus saving LE2 billion in interest, Mohieldin added. The debt was reduced in two steps, the first with the settlement of LE7 billion that the state companies owed to Bank of Alexandria (AmCham Member) (link here) and the second with the settlement of LE9.2 billion that they owned to National Bank of Egypt (AmCham Member) (link here), Banque Misr (AmCham Member) (link here) and Banque du Caire (link here).
EGYPT’S TOURISM MINISTER TO VISIT INDIA IN APRIL Source: Financial Times, February 16, 2007
In a bid to enhance trade and economic ties between India and Egypt, a high-level delegation from Cairo will visit New Delhi in April. Egypt’s tourism minister Zohir Garana, accompanied by representatives of top tourism companies, will be visiting India to promote the country as a tourist destination. Since both countries have a large number of monuments, Egypt, with the know-how of preserving ancient structures, will offer to cooperate in preserving monuments in India, he said.
During talks with Indian counterpart Ambika Soni, the Minister will also discuss opening a new gate for tourism traffic, besides economic and trade cooperation.
Last year, 70,000 Indians visited Egypt. Several tourism companies are planning to set up their offices in India and will focus on the traffic going not only to Cairo but also to other parts of Egypt.
Besides having increased the number of flights between the two countries, Egypt Air (AmCham Member) (link here), the national flag carrier, will now fly all seven days from the current twice-a-week, he said.
EGYPT TO SET UP UNIT TO ATTRACT SAUDI INVESTMENTS Source: Al Alam Al Yom, MENA News Agency, February 19, 2007
The Egyptian Government will set up an operational unit in Saudi Arabia to promote Saudi investments in the Egyptian market. Saudi Arabia ranks at the top of the list among Arab investors and second among foreign investors in Egypt.
Saudi companies in Egypt currently total 1,260, of which 36% operate in the industrial sector and 28% in the financial services sector. The Saudi Arabian presence in the Egyptian agriculture and tourism sectors is also strong. Egypt's Investments Minister Mahmoud Moheiddin said that Saudi investments in Egypt lately registered a considerable increase, particularly in the land reclamation sector, and added that one of the most important contracts for the reclamation of the Southern Valley will be signed in the near future, along with new construction contracts.
GOVERNMENT TO REVIEW 100% REQUIREMENT FOR LETTERS OF CREDIT Source: EFG-Hermes; Al Ahram, February 22, 2007
Central Bank of Egypt (link here) Governor Farouk Al-Okdah and Minister of Trade and Industry Rachid Mohamed Rachid will soon review the condition that companies obtain letters of credit (LC) with 100% coverage to import goods, Rachid told members of the American Chamber of Commerce in Egypt (link here) and Chamber of Arab-German Trade and Industry (link here).
The government imposed the condition, which businessmen consider an unnecessary burden, during a currency crisis in 1999 to limit demand for foreign exchange. Before it was imposed, importers could put up as little as 10% of the value of an LC. The review comes as Egypt’s foreign reserves reach an all-time high, Rachid said.
EGYPT IMPOSES EXPORT DUTY ON CEMENT, STEEL TO KEEP LOCAL PRICES LOW Source: EFG-Hermes, Al Alam Al Yom, February 28, 2007
Egypt imposed duties on cement and steel product exports to dampen rising domestic prices and to prevent foreign buyers from benefiting from domestic subsidies, Minister of Trade and Industry Rachid Mohamded Rachid said.
The new export duty on cement is LE65 per ton, and the duty on steel rebar and plate steel is LE160 a ton. Steel producers and traders are obliged to submit weekly data on prices, quantities produced and exported, inventories and the name of the dealers each Thursday, Rachid added. Inputs for producing steel have surged in the last few months: The price of imported billet from Turkey jumped to $520 a ton in February 2007 from $420 in August, while the price of billet imported from the Black Sea increased to $450 a ton from $410 a ton, according to the Ministry of Industry and Trade (link here). Prices of local cement inputs have also risen, pushing up costs and in turn retail prices.
GOVERNMENT PLANS NEW LAW TO UNIFY INDUSTRIAL LEGISLATION Source: EFG-Hermes, Al Ahram, February 18, 2007
The government is planning to draft a new law that would combine all legislation regulating industrial activity in Egypt, said Minister of Trade and Industry Rachid Mohamed Rachid. The new law would remove obstacles to investment and streamline regulations. Business organizations, industrial unions and investors will take part in the drafting with concerned ministries, he added.
Some 26 laws, eight presidential decrees, 12 decrees from the prime minister, 19 decrees from the Minister of industry and 11 international agreements now govern industrial activity, said the head of the Industrial Development Authority (link here), Amr Assal. These would be merged under the new unified law, he added. The government has been working to unify legislation in a number of areas to facilitate economic development.
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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