By Jessica Gray, Passant Rabie, Dina Basiony, Lamia Hassan, Osama Diab, Sarah Mishkin
The Central Bank of Egypt (CBE) dropped its overnight deposit and loan rates by 50 base points to 10% and 12%, respectively. The decision, effective March 29, was made at the CBE's Monetary Policy Committee meeting on March 26. The drop in rates comes in the wake of slowing inflation, according to a statement made by the bank.
Urban inflation dropped to 13.5% in February, down from 14.3% in January, despite a rise in food prices possibly attributable to seasonal harvests. Food prices, a large part of the information used to calculate inflation, grew 2.4% in urban areas with the greatest cost increase in fruits and vegetables. According to the bank, inflation has fallen cumulatively by 10.1% in the last six months. CBE experts forecast that inflation will decrease to a point below 10% by mid-2009.
In related news, the CBE said the nation's GDP growth in 2Q2008/09 fell to 4.1% compared to 5.8% in 1Q2008/09. The bank blames the slowing growth on the global financial crisis negatively affecting the nation's manufacturing sector, Suez Canal traffic and exports. The CBE predicts that growth will continue to decline as the effects of the slowdown exert more pressure on Egypt's economy.
Cairo Among the Worst Places to Work
Cairo has been ranked the eighteenth worst place in the world to work by the New York-based human resources company ORC Worldwide. ORC compiled a ranking of 'hardship posts' to help western multinationals that are expanding in developing countries decide how much extra to pay their workers for taking posts considered to be exceptionally tough. The list of 55 posts outside of the US, Canada and Western Europe does not include obvious war-torn or isolated areas such as Baghdad, Harare and Pyongyang. Business Week magazine published the ranking in March.
Lagos, Nigeria, tops the list at number one, defined as a 'very high risk location.' Cairo was ranked eighteenth after Bangalore, India (17) and before Kiev, Ukraine's capital (19). Cairo was defined as a 'medium risk location,' with no severe problems; however, the level of pollution in the city was cited as a major problem, while other less serious problems include disease and sanitation, condition of medical facilities, infrastructure, political violence and repression.
"The biggest challenges for foreigners living in Cairo are the pollution and the sanitary conditions," reads the Business Week article. "Another big concern in a country where terrorists over the years have targeted foreigners and where one man has ruled for almost three decades is 'the potential for political violence.'"
Cairo is the most populous city in Africa and the Middle East and the sixteenth most populous metropolitan area in the world.
Suez Economic Zone to be Complete by 2018
The Suez Bay Northwest Economic Area is set to be completed by 2018, according to a story published April 20 by Asia Pulse Businesswire. The zone is being developed as part of the Forum on China-Africa Cooperation with the goal of facilitating development projects in Africa between Chinese and African companies.
So far, the General Authority for Investment and Free Zones has accepted only 11 companies of the 29 that submitted tenders to take part in the economic zone. Chinese-Egyptian firm Egypt Teda, the company also responsible for construction and administration of the zone, is at the top of that list and plans to invest an initial $270 million (LE 1.5 billion) to secure basic services, infrastructure and utilities 6km square of the zone.
Yang Zhiqiang, president of the Tianjin Economic & Technological Development Area Suez International Cooperation Company and a shareholder in Egypt Teda, said the zone's financial goal was to attract 2 billion yen (LE 1.6 billion) over the next year from about 50 companies. The first phase is slated to finish in 2011, providing 10,000 jobs, the majority of which will likely go to Egyptian workers in the region, he said. When completed, the zone will support 150 projects run by small and medium-sized enterprises. The zone is one of seven projects that China is in the process of developing across Africa, which include ventures in Zambia, Nigeria and Ethiopia.
Investors Regain Faith in EGX
More than half the traders surveyed by Pharos Holding for Financial Investment said they expected the EGX 30 index to jump to more than 6,500 points by the end of the year; 27% expected the year to end with the index between 5,000 and 6,500 points.
EGX 30 closed at 4,193 points at the end of March and 4,987 points during the last week of April. The survey that included 300 investors had 82% of the investors saying that current prices are encouraging them to buy, while 65% said they are now actively trading.
Orascom Telecom was voted the stock most likely to rise in 2009 with 16% of the vote; second place went to Telecom Egypt with 10% of the vote. Talaat Moustafa Group and Orascom Construction Industries shared the third place with 8%. EFG-Hermes came fourth winning the trust of 4% of the voters.
EGX 30 (formerly named CASE 30) index saw a huge decline during the past 12 months. Last year during the same period the CASE 30 index had reached a high of almost 1,2000 points, falling to less than 4,000 points in just a few months.
Suez Canal's Income Drops 21% in March
March revenue for the Suez Canal dropped 21% compared to the same period last year, totaling only $327 million (LE 1.8 billion), according to government figures published in the Egyptian Gazette on April 13. Though lower than March 2007, the number is still 26% higher than February's total of $301 million (LE 1.6 billion). Over 1,400 ships used the waterway connecting Europe to Asia in March.
The canal is one of Egypt's biggest moneymakers, alongside tourism and remittances from expatriate workers. Experts predict the number of ships using the passage will drop by approximately 7% overall this year, despite port authorities' decision to freeze transit fees in January. Major contributors to the slump in revenue are piracy in the Gulf of Aden and the global financial crisis, which has caused exports to drop for Asian powerhouses such as China. Falling oil and gas prices have also prompted ships to bypass the route in favor of sailing around the African continent.
Food Prices Going Down
The Consumer Protection Agency recently released a report showing a significant drop in the price of food commodities between March and April.
According to the report, commodities that saw a dramatic decrease in prices included beef, which had fallen 13.25% from LE 38 per kilogram to LE 33, and fuul beans, which also fell by 13.25%, from to LE 5.75 per kilogram to LE 5. The price of eggs has dropped to LE 5.26 per kilogram, down from LE 7.80, while rice fell by 3.20%, from LE 3.80 to LE 3.75 per kilogram.
Food commodity prices have been on the decline since February, when the financial crisis began to effect international food prices. In turn, these decreases have tamped down the inflation seen towardsthe end of 2008.
Japanese Government Helps Egyptian Microenterprises
The economic committee of the Shura Council has approved a loan agreement between the Japanese and the Egyptian governments worth JPY 3 billion (LE 39 million) aimed at funding microenterprises in Egypt. The Social Fund for Development (SFD), which focuses on sustainable development projects, will manage the funds.
The SFD works with more than 30 donors, including the Japan International Cooperation Agency (JICA). The Japanese agency has lent JPY 3 billion through the SFD, with an interest rate of 0.65% to be paid over 40 years, to contribute to the funding of Egyptian microenterprises. Loans given by SFD to microenterprises come with interest rates between 2% and 11% for more profitable businesses. Businesses with less than LE 50,000 of capital, as well as rural area enterprises in the fields of agriculture, dairy and medical supplies, are eligible for the loans.
Hany Seif El Nasr, general secretary of SFD, told independent daily Al-Masry Al-Youm that the organization was able to create 350,000 jobs at a cost of LE 1.5 billion during FY2008, while also partnering with the Ministry of Solidarity to teach 8,600 people how to read and write the fund gives loan priority to applicants who have become literate as adults. This project has been implemented in the Menoufia, Fayoum and Sharqiyya governorates, but it will soon be expanded to all governorates.
Pensions Now Available Electronically
Major changes to Egypt's pension system continued in April as part of efforts to make the system more responsive to the needs of the over 3 million retirees who receive monthly government pensions. The overhaul is part of a larger effort by the government to implement electronic payment services in its programs.
Beginning in mid-March, the Ministry of Finance has been issuing pensions electronically to 277 people through the use of electronic payment cards.
Within the current system, pensioners are forced to fight long lines at a few locations, during limited hours; the new electronic options will streamline the process.
The Ministry of Finance is collaborating with E-finance Company to run the electronic pension system. The E-finance Company is a joint endeavor of the National Investment Bank, the National Bank, Misr Bank, and Egypt Banks Company.
The electronic system also includes payments and proceeds of the Ministry of Finance, payment of pensions and salaries, and the collection of taxes and custom duties.
In April and May 20, 103 electronic cards will be given to pensioners in 15 outlets, 30,117 cards in June in 32 outlets, and 40,486 in July in 45 outlets.
A group of pensioners also made a request to the People's Assembly to establish their own union. The union will offer services to its members like syndicates do and will be open for 8.5 million pensioners to join.
The Ministry of Finance also announced that the first call center for pensioners' complaints will be opened this month.
Egypt Post Bids for Jordan Post
Egypt Post was one of four companies to qualify for the last round of bidding to acquire Jordan Post, the national Jordanian postal service last month. Egypt National Post Organization (ENPO) is competing with La Poste France, Aramex Jordan and British Consultative Post Services. Each of the four companies will be asked to present their technical and financial proposals, with the winning bid to be chosen in June.
A committee consisting of representatives from Egypt Post, EFG-Hermes and Jordanian Riyada Ventures was formed to evaluate the potential project before developing a suitable proposal that would add economic value to Egypt Post.
Ahmed Qadri, Vice Chairman for Services Development Affairs, told independent daily Al-Masry Al-Youm that Egypt Post is focusing on expanding its services into regional markets. He explained that Jordan is ideal for this kind of investment, due to the large number of Egyptian laborers based there and a growing preference for privatizing public and governmental institutions.
The Jordanian Ministry of Information and Communication Technology said that it is looking forward to finding a strategic partner to buy a stake in its national post company that doesn't exceed 74%, under the condition that the new partner would retain Jordan Post staff for at least two years.
Alaa Fahmy, Chairman of ENPO, said that the company would announce details of its proposal by the end of April, but no word had been given as of press time. He added that due to ENPO's lack of past experience in acquiring entities outside of Egypt, the company prefers to find a foreign partner for the proposal.
Orascom Entrusts Hermes to Sell LINKdotNET
Orascom Telecom Chairman, Naguib Sawiris, announced April 14 that the company has entrusted EFG-Hermes to sell internet operator LINKdotNET. The company will go to the highest bidder.
Sawiris added that Orascom Telecom encouraged Mobinil to present a bid on the company and Mobinil's administration referred the issue to France Telecom a month and a half ago, but the French telecommunications giant has yet to respond. Orascom Telecom was supposed to sell its stake in Mobinil April 10, but negotiations between the two companies have not concluded, according to Al-Masry Al-Youm.
The International Court of Arbitration ordered Orascom to sell its stake in Mobinil to France Telecom after a dispute brought in 2007. France Telecom said the order did not cover a 20% stake held directly by Orascom in mobile operator ECMS, which operates its services under the Mobinil brand, and which Mobinil Telecommunications controls with a 51% stake.
Orascom, subsequently, entrusted Hermes with selling the division. The nation's mobile companies have been involved in fierce competition during the past few years on offering internet services. Etisalat Misr has acquired both Egynet and Nile online companies, while Vodafone acquired Etisalat Raya.
Lakah Reaches Settlement with Bank Misr
Ramy Lakah, the fugitive Egyptian businessman, told the press on April 14 that his lawyer has presented a request to the attorney general to approve and acknowledge the final settlement and reconciliation between Lakah and Bank Misr. This would settle Lakah's LE 1.2 billion debt, LE 160 million of which will be paid in cash.
Lakah told Al-Masry Al-Youm that this is only the first step in reconciliation, which will be followed by the payment of LE 160 million in cash immediately and installments totalling LE 480 million over five years. The settlement also included the sale of assets from the Lakah family, including Midwest for Air Transport, owned by Michelle Lakah, Ramy's brother.
The 49-year-old businessman fled Egypt in August 2000 after he failed to reach an agreement with the banks he is indebted to. Lakah had escaped to London in June the same year, but an official in Egypt convinced him to return to the country and try to reach a settlement with the banks. When he came back, the banks refused to compromise with him or cut down the amount of his debt or interests, so he fled again to the UK. Lakah was the second well-known businessman to flee the country to avoid debts, following Mostafa Al Beledidy, who owed LE 140 million to Egyptian banks.
Al Masry Al Yom also reported that the National Bank is in the process of reaching a final settlement regarding Lakah's debt, and therefore he could be expected to return to Egypt next year to finalize the agreements.
WB Lends $270 million for Railway Project
The World Bank recently agreed to loan Egypt $270 million (LE 1.5 billion) to improve the nation's railways. The loan, announced March 17, will help the Egyptian National Railways improve its safety and efficiency through upgrades to signalling equipment and track quality throughout the country.
The project will sponsor modernization of signals on the Arab El-Raml-Alexandria line, as well as the implementation of a computerized central traffic control system to be installed along the Cairo-Banha line. The project will also upgrade 200km of track along four sections of the Cairo-Aswan line. The remainder of the funding will go toward improving Egyptian National Railways' management structure and operations.
Emmanuel Mbi, the World Bank country director for Egypt, Yemen and Djibouti, said in a press statement that the project would increase rail safety and allow for faster, more reliable service throughout Egypt, enabling rail to become a more viable alternative shipping method for businesses. Despite some outmoded technology, rail in Egypt is already a highly popular mode of travel and shipping the nation's volume of passengers and total freight in Egypt is larger than the railway traffic in Algeria, Iran, Morocco, Tunisia and Turkey combined, according to the bank's statistics.
LE 325 million to go into Yarn and Textiles Industry
In a statement released on April 5, the Ministry of Trade and Industry announced its plans to work with the Ministry of Finance and allocate LE 325 million of aid to the yarn and textiles industry. The money, to be dispersed over one year, is aimed at protecting investments in the industry.
The Ministry of Trade and Industry will also be executing an integrated plan to aid the yarn and textiles industry by luring foreign investment into Egypt from countries such as Italy and Switzerland. The aim is to generate more manufacturing of products that use Egyptian cotton and take advantage of new trade agreements to increase exports of Egyptian goods.
Additionally, the ministry will combat smuggling in the market and will use its industrial modernization center to train technical laborers, which will increase the industry's competitiveness. Currently, 6,481 factories in the industry are responsible for producing LE 42 billion worth of products and employ around 450,00 workers.
Finally, the ministry plans to establish a council focused on yarn and textiles that will develop optimal policies and strategies for the industry. The council will be headed by Rachid Mohamed Rachid, minister of Trade and Industry, and will be comprised of 11 other members including experts in the field and representatives from other ministries.
Bulgaria Wants Gas
Bulgaria is looking toward Egypt as a possible source of natural gas imports as the Eastern European nation seeks to lessen its reliance on Russian gas.
In January, conflict between Russia and Ukraine over gas prices led to a two-week suspension of gas delivery to Bulgaria and other European countries and shocked many of those countries into diversifying the source of their energy imports. As part of that strategy, the Bulgarian minister for economy and energy, signed a memorandum of understanding on energy cooperation with Egypt's Oil Minister Sameh Fahmy at the end of April.
A number of customers are waiting to purchase liquefied natural gas from Egypt, and Egyptian officials say that Bulgaria would be given priority, although the two nations still need to settle the quantity of gas to be purchased and the timeframe of delivery.
Also to be determined is how Bulgaria would import Egyptian gas. According to Bulgarian officials quoted by a Reuters report, Bulgaria is discussing the construction of a new terminal in Greece, which could be used for Egyptian imports but could also benefit from a pipeline project linking Egypt and Turkey. According to Reuters, Bulgaria has previously stated that it wanted to import 1 billion cubic meters of Egyptian natural gas per year beginning in 2011 or 2012.
Cement Dealers Convicted of Gouging Prices
During the second week of April, the Internal Trade Sector within the Ministry of Trade and Industry found 47 cement companies and dealers guilty of selling cement higher than market value, as well as failing to publicly announce their prices and issue bills recording the amount of cement they sold. Officials took into custody 2,767 tons of cement, worth around LE 1.3 million.
The dealers were caught as a result of an intensive campaign launched by the ministry in the beginning of April to track the movements of the cement market following the issuing of the new pricing law.
The new law, issued by the Ministry of Trade and Industry, states that cement factories are obliged to announce to dealers the maximum price set for various distribution venues, including consumers, and to notify the internal trade sector of the prices during the third week of every month. Additionally, cement dealers are forbidden to sell at a higher price and the factories are obliged to discontinue dealing with them if they should do so.
While the cases have not yet been resolved, the punishment for violating this law varies from one to five years in prison, in addition to a fine that ranges from LE 300 to LE 1,000.
Following the campaign, cement prices fell to LE 540 in most governorates on April 14 after reaching LE 650 in February.
© Business Today Egypt 2009
