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Drug prices raised
The Ministry of Health & Population hiked the retail prices of 265 pharmaceutical drugs by an average of 8 percent last month. Health minister Hatem El Gabaly, speaking before the People’s Assembly in late December, said the price hike was necessary due to higher raw material costs.
It was the first time prices on many of these drugs were adjusted in a decade, according to El Gabaly. He said local and international pharmaceutical companies could be spurred on by the price increase, and ramp up production.
In December 2006, the government raised retail prices on over 100 drugs by an average of 30 percent. The government does not subsidize medicine, though it does set the prices of some 6,500 registered medicines, reviewing these prices every 10 years. Pharmaceutical companies have complained that the government’s price list is set too low, and has not kept pace with inflation.
Performance evaluation irks Nazif government
A stormy debate erupted in the People’s Assembly last month after Gawdat El Malt, chairman of the Central Auditing Agency (CAA), presented a report evaluating the cabinet’s performance to date. The findings cited the Nazif government for failing to curtail domestic debt, inflation and the trade deficit, which has reached LE 15.8 billion.
The report detailed some accomplishments, such as high GDP growth and a surge in foreign investment. But the tone was mostly critical, leading to a fiery exchange on the parliament floor between El Malt and finance minister Youssef Boutros-Ghali, who defended the government’s economic policy.
The CAA is a government watchdog that reports to the Office of the President. The agency submits occasional reports to the lower house.
Cement case referred to court
The public prosecutor’s office has referred 20 executives of local cement firms to a criminal court for conspiring to fix prices. The move follows a 14-month investigation initiated by the Ministry of Trade & Industry to determine whether cement companies were in violation of Egypt’s antitrust legislation.
The public prosecutor alleges that the firms conspired to fix prices and market share for Portland cement between May 16, 2005 and the end of 2006. The public prosecutor’s statement noted that the price of cement has reached LE 400 per metric ton, 30 percent more than two years ago. The companies face fines of between LE 30,000 and LE 10 million. A trial date has not been set.
Fuel oil prices hiked for industries
The government doubled the cost of mazot (fuel oil) for industrial users effective January 1, in line with its decision in August 2007 to remove energy subsidies for industries by 2009. Egypt uses 8.5 million tons of mazot a year, of which 3 million tons go to electricity generation. Despite the price increase to LE 1,000 per ton, the domestic price of mazot is still much lower than the international price.
Large industries are particularly hard hit by the decision. The prices of both cement and bricks, the production of which relies heavily on mazot, have already risen.
Bottled water maker sues government
A local bottled water manufacturer has filed a lawsuit against the Ministry of Trade & Industry (MTI) in response to a government study citing the company for health violations. Al Fardous was one of four companies MTI referred to prosecutors in January after inspectors deemed samples of its water did not meet health standards. The four companies named were Al Fardous, Aqua Luxor, Aqua Siwa and Fudata.
Al Fardous’ chairman noted that a report by the Consumer Protection Authority (CPA) singles out only the company’s rarely produced 19-liter bottle. He also distanced the company from responsibility, arguing that any non-compliance with standards would be the fault of the plastics company that manufactured the bottle.
Last December, the CPA, under the supervision of MTI, announced the results of a two-month study of 21 brands of bottled water sold in the Egyptian market. The consumer watchdog found only 13 companies in full compliance with set standards.
Six companies were cited for violations that included a high percentage of bacteria and incorrect labeling of composition tables. The report also noted that bottles labeled “mineral water” were misleading because the bottled water comes from natural wells that lack the appropriate depth and environment for this term.
T-bill yields fall to new lows
Yields on Egyptian T-bills fell to record lows in January. Foreign participation in T-bill auctions was light as the Egyptian pound weakened last month, analysts said. However, a cut in US dollar deposits at local banks may have pumped liquidity into the system, driving yields down in the process.
At an auction on January 27 of 91-day T-bills, yields fell to 5.993 percent – the lowest rate in three years, and down from 6.336 percent a week earlier. A day later, the yield on 182-day T-bills fell to 6.009 percent, compared to 6.860 percent a week earlier. Earlier in the month, the average yield on Egyptian 364-day Treasury bills fell to 7.003 percent, from 7.423 a week earlier.
Border breach leads to shopping spree
Palestinians streamed into Egypt from Gaza after Hamas militants blew holes in the border wall on January 23. Hundreds of thousands of Palestinians went on a shopping spree in Rafah, an Egyptian town on the Gaza border, stocking up on food and basic goods in short supply. Israel had recently closed all border crossings to Egypt, in response to what it says were cross-border attacks.
A bazaar-like atmosphere quickly formed, as Palestinians spent tens of millions of pounds over the course of a few days. Many Egyptians flocked to border towns to become street vendors or moneychangers.
Egyptian security forces tried sealing gaps in the border after two days. The effort failed as Hamas militants breached the border by bulldozing new openings.
Within five days, store shelves were empty or bare, and thousands of Palestinians returned to Gaza. By January 28, many stores had closed and local Bedouin were complaining of food shortages and price rises. The border remained open, but the Egyptian military was repairing sections of its border with Gaza, and stringing barbed wire to seal some of the breaches.
Court sentences 18 to jail over migrant deaths
A Fayoum court has convicted 18 men for their role in an illegal operation to transport Egyptian immigrants to Italy in November. The men were convicted on several counts of manslaughter and accessory to manslaughter.
Twenty-one people drowned off the Italian coast in two separate incidents, the first on October 27, when 12 people drowned, and the second on October 28, when nine people drowned.
Zakaria Hussein Mohamed, who organized the crossing, was convicted of manslaughter and sentenced to five years in jail and a LE 5,000 fine. The owner of the boats, Metwalli Ali Mohamed, was convicted on the same charges and handed the same sentence. Two other men were convicted of accessory to manslaughter for organizing trips without a license. Four crew members of the sunken vessels received three-year prison terms and were fined LE 5,000 each for accessory to manslaughter, and another four received jail terms of between three and five years. Six men were also convicted in absentia and sentenced to three to five years in prison.
Train conductors reject tougher fines
Some 200 train conductors staged a two-hour protest at Cairo’s Ramses station on January 28 in response to the raising of fines for passengers caught riding without a ticket. The conductors said levying the higher fine would put them in danger of being assaulted by angry passengers.
The Egyptian Railway Authority (ERA) had increased fines from 50 piastres to LE 10 for passengers traveling in third class, LE 3 to LE 15 in second class, and from LE 6 to LE 20 for first, but reversed its decision after the conductors’ protest.
Canal fees to rise
Transit rates for the Suez Canal will increase by an average of 7.1 percent starting in April, the Suez Canal Authority (SCA) announced in late December. The rate increase will vary according to the category of ship: 10.5 percent for liquefied natural gas tankers, 7.3 percent for oil tankers, 5.7 percent for container ships, 10 percent for naval ships, 5.2 percent for passenger vessels and 5 percent for all other varieties of ships.
Egypt hopes to capitalize on the growing volume of trade between Asia and Europe, which has increased overall container tonnage. When time and fuel costs are factored in, the Suez Canal is the cheapest and fastest passage for sea traffic between Europe and Asia, bypassing the more circuitous journey around the Cape of Good Hope. The SCA also hopes to draw shipments from Asian ports to the eastern US seaboard as its rival, the Panama Canal, undergoes expansion expected to last through 2014 that is causing delays.
This year’s average rate increase is higher than in previous years. In April 2006 and April 2007, Suez Canal transit rates went up by 3.0 percent and 2.8 percent, respectively.
New steel licenses issued
The Industrial Development Authority (IDA) has issued licenses to four local companies to build new steel plants. Applications were assessed based on the ability of each individual applicant to set up a new production facility. The initial call for tenders included several conditions to ensure that the bulk of the output of these new facilities would end up on the domestic steel market.
Al-Ezz Steel Rebars, which controls approximately 65 percent of the Egyptian steel market, secured one of the four new licenses. Suez Steel, Egyptian Sponge Iron & Steel and Tibah for Iron & Steel secured the other three licenses. A fifth license is expected to be auctioned off this month to a foreign steel producer, which would become the first foreign entrant to the market.
Egypt produces an estimated 5.4 million tons of steel a year.
Turkish industrial park launched
Turkish president Abdullah Gul inaugurated Egypt’s first private industrial park, a joint venture between the two countries, during a visit last month. The 2-million-square-meter project, called Polaris International Industrial Park, is located in Sixth of October City.
The park is expected to draw 300 companies and $4 billion in investments over the next four years. Turkish companies will come from the textile, ready-made garments, furniture, automotive, glass and food processing sectors. The industrial zone will also provide administrative support, such as arranging permits.
The joint venture is between Turkish textile firm Polaris Textiles, Egypt’s SIAC Industrial Construction & Engineering and Egyptian textile sourcing firm World Trading Company. The companies hold 50-, 45- and 5-percent stakes, respectively.
Egypt and Turkey signed a free trade agreement (FTA) in December 2005 that came into effect in March 2007. The FTA was expected to boost bilateral trade, which increased in 2007 by over 32 percent to $1.5 billion. Policymakers say this amount could double by 2011.
Health officials close border to camels
Egyptian health authorities have banned the crossing of some 20,000 camels from Sudan into Egypt, over concerns that the animals might be carrying Rift Valley fever. The World Health Organization (WHO) has warned that the fever has spread in Sudan, killing an estimated 218 people and infecting 613 since an outbreak in October.
The virus can be transmitted to humans during slaughtering and in veterinary procedures. Sudanese officials claim their livestock is not infected, and that the unfounded concerns have caused $1 billion in damage to their economy.
EU-bound textile exports face stiffer competition
Egyptian textile exporters are concerned about the implications of the end of the quota system that imposed a 10-percent tariff on Chinese textiles entering the 27-member European Union. The expiration of the EU-China quota agreement at the end of 2007 has placed Egyptian textile exports, which currently enter the EU duty free, in greater competition with Chinese exports. Egyptian exports make up around 2 percent of the EU’s total textile imports.
GASC makes wheat purchase
The government’s main wheat buyer purchased 490,000 tons of wheat from Kazakhstan, the US and Russia in late January after canceling a tender earlier in the month. The General Authority for Supply Commodities (GASC), the government agency responsible for buying wheat to produce subsidized baladi bread, had canceled the earlier tender due to unusually high prices on the international wheat market.
Since the beginning of the fiscal year in July 2007, GASC has purchased most of its wheat from Russia and the US, with a little from Canada. This is the first purchase of Kazakh wheat in this fiscal year.
Egypt is second only to Brazil as the world’s largest importer of wheat, importing 7.26 million tons in FY 2006-07.
Banks lower deposit rates
Many Egyptian banks have lowered their rates on term deposits in local currency and US dollars in response to lower interest rates overseas. According to the independent daily Al-Alam Al-Youm, an examination of 24 Egyptian banks found the average rates offered were 5.7 percent, 6.3 percent, 6.5 percent and 6.8 percent for one-month, three-month, six-month and 12-month deposits, respectively. Several banks recently lowered their rates by 25 basis points, while some had lowered their long-term deposit rates by up to 50 basis points.
Many banks also cut interest rates on US-denominated deposits in response to the US Federal Reserve’s decision on January 22 to lower its benchmark rate by 75 basis points to 3.5 percent. Some Egyptian banks reacted by sharply reducing interest rates on US-denominated deposits, some to as low as 2.5 percent.
NGO calls for rice export ban
The Agricultural Commodity Council, a local agro-business NGO, called last month for rice farmers to stop exports in an attempt to stabilize the local market after rice reached LE 4 per kilogram, a 30-percent mark-up on the average price compared to the last year.
Egypt is a major exporter of medium- and short-grain rice with annual exports in 2006 of 1.8 million tons, mostly to Middle Eastern countries. Policymakers hope that the ban will prompt traders to sell rice on the local market, thereby pushing down prices.
Egyptian farmers had been taking advantage of high international rice prices, analysts said. A deadly cyclone in Bangladesh last November wiped out $291 million of its winter crop, leading to a 20-percent price bump in export markets.
Egypt and EU at odds over report
Egypt has canceled talks with EU officials in protest of a resolution issued by the EU Parliament in January criticizing the country’s human rights record, citing in particular the status of religious minorities, alleged torture practices and the decades-old emergency law.
The People’s Assembly has threatened to cut ties with the EU Parliament and the Euro-Mediterranean Council if the resolution is not annulled. The Egyptian foreign ministry also filed a written complained stating that the resolution was direct interference in the country’s domestic affairs.
The EU is Egypt’s biggest trading partner, accounting for 43 percent of the country’s imports and 31 percent of its exports. Egypt is also a major recipient of European aid. The EU has pledged E558 million to help Egypt complete its European Neighborhood Policy plan from 2007 through 2010. Analysts, however, do not expect the row to cause any long-term harm to bilateral or economic relations.
Bird flu thwarts containment efforts
The government has stepped up its bird flu public awareness campaign in response to the recent resurgence of the H5N1 avian flu virus. Health officials culled 1,600 infected birds at the end of December and have redoubled efforts to vaccinate poultry against the disease. New outbreaks, and four human fatalities in the span of a week in late December, marked the resurgence of the disease in Egypt. Experts say the virus tends to emerge in stronger force during the winter months due to bird migratory patterns.
Nazif accused of neglecting poor
Lawmakers questioned Prime Minister Ahmed Nazif about the government’s economic policy during a session of the People’s Assembly. Opposition and independent MPs said the government’s economic policy was to blame for rising poverty in Egypt.
In a speech delivered earlier, Nazif outlined his government’s recent achievements, such as GDP growth, record inflows of foreign investment and healthy foreign reserves. But he said the focus is now ensuring that these benefits reach the poor and middle class.
The prime minister acknowledged that recent price hikes had made the situation dire for poor citizens, though he attributed inflation to rising international prices. The prime minister vowed that food subsidies would not be eliminated, and said that the government would allocate an additional 10.5 million ration cards to those on limited incomes, allowing them to get basic foodstuffs at subsidized prices.
He also said that the government would adjust salaries above the inflation rate, and that privatization proceeds and receipts from the sale of a third mobile network had been earmarked for upgrading railway services and the provision of potable water.
Number portability to launch soon
Mobile number portability is expected to be available to all clients by the first week of February, said Amr Badawi, chairman of the National Telecommunication Regulatory Authority (NTRA).
Number portability was supposed to be in place before Etisalat’s launch on May 1, 2007 according to the terms of the third mobile license agreement. However, the service was delayed due to complications in compiling the required database for the service, according to Badawi.
Once available, mobile customers will be able to switch from one provider to another without giving up their original number, for a fee of LE 75.
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