Hijack flight passengers, crew arrive home safely

TL;DR

Man hijacks EgyptAir plane, possibly to send a message to his ex-wife; world loses its collective mind. (Speed Round)

EGP dips below 10 to the USD. (Speed Round)

Mall retail space in Cairo up 20% y-o-y to over 1 mn sqm in 2015, CBRE says. (Speed Round)

EBRD invests USD 100 mn in Savola subsidiary United Sugar Company of Egypt. (Speed Round)

Banking system will face its own Uber, Careem -Ezz Al-Arab. (Speed Round)

Swiss, German delegation interested in solar plant, photovoltaic cell factory. (Diplomacy + Foreign Trade)

Schneider Egypt looking to partner with Rosatom in Daba’a project. (Energy)

Electricity Ministry to sign EUR 200 mn contract with Alstom for five substations. (Energy)

Orange Egypt awarded EGP 285.19 mn from Etisalat in arbitration. (Telecoms + ICT)

By the Numbers

WHAT WE’RE TRACKING TODAY

An EgyptAir flight was hijacked yesterday. The national flag carrier handled it near-perfectly, from the actions of the pilot and crew to the airline’s approach to crisis communications. The Ismail government’s crisis control was exactly on point: Civil Aviation Minister Sherif Fathy and Cabinet Spokesman Hossam El Qaweesh handled the media with aplomb, and the Interior Ministry managed to find and disseminate tape of the alleged hijacker going through a full security screening. Nobody died, and a man (possibly mentally disturbed, who appears to have gone through appropriate security screening, and who wasn’t carrying a real bomb) has been arrested. And yet all the international tourist is going to remember is “hijacking” and “Egypt.” We can’t even muster the energy to make a joke about hijacking being totally retro — a hipster-terrorist throwback to the 1970s and 1980s; the days of the PFLP, Black September and Abu Nidal. Instead, we will just lament that the news cycle for the next 24 hours will be about “The plane, the plane.”

“An otherwise quiet day for Egypt in the international press,” we said at 6:05am yesterday. What the [redacted] do we know?

WHAT WE’RE TRACKING THIS WEEK

Ashraf El-Sharkawy, minister of the newly created Ministry of Public Enterprise, and CBE Governor Tarek Amer are expected to meet “within days” to talk about rescheduling debt worth EGP 40 bn owed by state-owned enterprises, a ministry source tells DNE. The minister is also expected to request that Amer launch an initiative to “halt the collection of loan instalments from the holding companies until they are restructured,” the source said, adding that during this period, interests would not be calculated on premiums.

ON THE HORIZON

Next week looks set to be busy on the policy front, with CBE Governor Tarek Amer due to on Sunday, 3 April, with all the heads of banks operating in Egypt, their number twos, and other senior bank staff. It will be the first meeting since Amer imposed nine-year term limits for bank MDs. Saudi Arabia’s King Salman will be in Cairo the next day for talks with senior Egyptian officials including President Abdel Fattah El Sisi

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SPEED ROUND

Man hijacks an EgyptAir flight, all on board freed unharmed, Egypt turns in textbook-perfect crisis management performance: A man identified as Seif El Din Mustafa by Ittihadiya spokesman Alaa Youssef hijacked domestic flight MS181 heading from Alexandria to Cairo and diverted the plane to Larnaca, Cyprus. Mustafa reportedly claimed to be wearing a suicide bombers’ vest. Following the landing, negotiations began and everyone on board was freed except for three passengers and four crew members, who later made their way out of the aircraft (one, rather dramatically, through a cockpit window). None of the passengers were harmed and Mustafa eventually surrendered to the authorities. The flight was carrying 56 passengers from Alexandria to Cairo, of whom 26 were foreign nationals, along with six crew, and an air marshal.

Lovejacking? Throughout the ordeal, there were rumours that the motive was “romantic,” with Mustafa claimed to be looking for a chance to address an ex-wife. Asked by a female reporter “Please confirm if everything was about a woman?”, Cypriot President Nicos Anastasiades replied “always there is a woman involved” to the laughter of those assembled at the press conference, (Watch, running time: 11 seconds). We can only say: Thank God a Cypriot said it, and not an Egyptian. We’d never have heard the end of it.  

The comments about Mustafa’s ex-wife factoring in motivation were made on the record, but the backstory was never confirmed. The New York Times quotes Cypriot state media as reporting that the ex-wife was brought in for negotiations. The hijacker had also apparently requested asylum in Cyprus, according to Vice News, which was denied, with Al Mal reporting that authorities agreed to extradite him back to Egypt at the request of Egypt’s Prosecutor General. “As he talked with officials, he added to his confusing list of demands, but was increasingly incoherent,” according to Cypriot Foreign Minister Ioannis Kasoulides.

It’s fairly clear the incident wasn’t terrorism, and while it later tried to walk back the remarks, an Egyptian Foreign Ministry spokesman wins Quote of the Day from us for telling the Guardian’s Ruth Michaelson: “He’s not a terrorist, he’s an idiot. Terrorists are crazy but they aren’t stupid. This guy is.”

While his motives remain unclear, Mustafa claimed to be wearing an explosives belt and ordered the plane’s pilot, Amr Al Gammal, to divert the flight. Civil Aviation Minister Sherif Fathi, who throughout the crisis gave clear, sensible, and reassuring statements to the media, said the authorities suspected the belt was not genuine but treated the incident as serious to ensure the safety of all those on board. Prime Minister Sherif Ismail said Mustafa, who Cypriot foreign ministry official Alexandros Zinon described as “unstable,” at some moments “asked to meet with a representative of the European Union and at other points he asked to go to another airport but there was nothing specific.” The belt turned out to be fake, and the hijacker was arrested, with Zinon saying Cyprus would levy charges against him. The Interior Ministry says Mustafa had a previous crime record of forgery, burglary, drug dealing, and impersonation.

On the ground, there is no indication that there was a security lapse; Mustafa had no weapons or explosives on him as he cleared airport security on camera, but international outlets including CNN, Bloomberg, and Reuters are trying to make the incident a “blow” to Egyptian tourism and aviation. Borg Al Arab Airport officials had provided photo evidence that he was subject to all security protocols, including being patted down, according to Al Borsa. Investigations of Borg El Arab’s security measures prompted by the hijacking had concluded, but the results have yet to be announced, Al Mal reports.

Meanwhile, all the Egyptian hostages returned safely to Egypt yesterday evening where they were greeted at the airport by Prime Minister Sherif Ismail, Al Masry Al Youm reports. Egypt’s President Abdel Fattah El Sisi personally thanked his Cypriot counterpart for his handling of the situation, according to AMAY. (EgyptAir posted a couple of great homecoming photos on its Twitter feed. The national flag carrier did a fantastic job on the social media front all day long, including a very early confirmation that the flight had been hijacked and the dissemination of emergency contact information.)

Impact on tourism — Russian posturing: Russian authorities are unsure how yesterday’s events would impact resuming flights to Egypt, with the Kremlin’s spokesperson Dimitry Peskov stating that a full investigation into the events must be made before determining whether to restore or hold-off on regular flights, RT Arabic reports. The hijacking must be taken into account when determining whether to restore flights, said Oleg Safonov, head of the Federal Agency for Tourism of the Russian Federation. His remarks came after the spokesperson for the Russian Federation of Tourism pointed out that contrary to previous reports, there had been no concrete decision to resume flights anyway. The Tourism Federation spokesperson said that even if there had been plans for Russian jets to return to Egypt, yesterday’s events would result in a delay.

Russian parliamentarian Franz Klintsevich, the deputy head of the Duma’s Defense and Security Committee, said talks must be put on hold in light of the hijacking, as Egyptians are not ready to ensure the security of Russian tourists, RT reports. As we noted on Sunday, Russian deputy foreign minister Mikhail Bogdanov expressed hopes that flights to Egypt will be restored by the beginning of summer, according to state news agency TASS. The posturing may be a result of Egyptian Airports Company’s rejection of a Russian request to station its own security presence at Egyptian airports on Sunday. The head of Egypt’s Tourism Development Authority denied “media reports” that Moscow was backing out of resuming flights as a result of the incident, telling Al Mal that they received no official information on the matter.

…JWT has concluded that the whole affair would not impact Egypt’s tourism promotional campaign abroad, after its chairman Hany Shokry spoke with executives from Burson Musteller, the campaign’s PR firm in London and Dubai, Al Mal reports.

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The CBE kept the exchange rate fixed at EGP 8.78 to USD 1 in yesterday’s FX auction, selling USD 120 mn “to cover multinational companies’ needs to clear payment backlogs for the import of staples and pharmaceutical goods,” Reuters said.

… the parallel market did not care, with 1 USD going for above EGP 10 yesterday. Bloomberg said the average exchange rate it was quoted on the parallel market was EGP 10.036 per USD 1. CI Capital economist Hany Farahat says “the parallel market is piggybacking on the notion of a more flexible exchange rate going forward, betting on more weakness in the currency … [and] is also pricing in the risk of more shutdowns of currency-exchange businesses,” noting that this would have an impact on the supply of USD.

Meanwhile, Capital Economics says the devaluation has “raised hopes of an improvement in the country’s balance of payments position and faster growth, resulting in a jump in the local equity index and a decline in [USD],” according to a report published on Tuesday. While they expect there’s still a ways to go, anticipating the official rate to hit EGP 9.5 by the end of the year, “the bulk of the necessary devaluation has now happened.” The move has had several ripple effects, including a more than 20% surge in local equities, according to the report.

Egypt’s banking system could be faced with its own “Uber and Careem,” warns CIB Chairman Hisham Ezz Al-Arab. The banking sector and its regulations have not adapted to the most recent developments in the field, and the regulations specifically remain outdated and arcane, Ezz Al-Arab says. Shadow banking could impact the sector if it is not prepared to handle new innovations, according to Al Mal. “If we don’t develop ourselves, we will be trapped in the past,” Ezz Al-Arab warned Egyptian banking professionals.

Lawyer Ibrahim El Salamony filed a court case calling for an injunction against CBE Governor Tarek Amer’s decision to limit tenures for bank managing directors to nine years. El Salamony said the decree infringes on his rights as a shareholder in multiple banks, Al Borsa reports.

The total stock of regional and super-regional shopping mall retail space in Cairo grew 20% y-o-y, surpassing 1 mn sqm in 2015, according to CBRE’s 4Q2015 Cairo MarketView. “Retail is viewed as a key growth sector, with significant future expansion potential, with demand driven by a large youth population,” CBRE’s Middle East head of research said. In the residential market, CBRE estimates the shortage between supply and demand in 2015 to be approximately 125k units, particularly for lower income groups, which account for 51% of the demand. Looking at a possible real estate investment? There’s a pretty stark disparity in rental values between east and west Cairo: The report says the average two-bedroom apartment rent in New Cairo went for around USD 1,225 per month compared to USD 715 per month in Sixth of October in 2016.

EBRD invests in Egypt subsidiary of Saudi Savola: The European Bank for Reconstruction and Development (EBRD) will invest USD 100 mn in one of Saudi Arabian food product company Savola Group’s subsidiaries in Egypt, according to the EBRD. The bank will convert an existing USD 50 mn loan to United Sugar Company of Egypt (USCE) into equity along with an additional USD 50 mn in share capital. “By converting the EBRD’s original loan into equity, USCE will strengthen its balance sheet and reduce its exposure to foreign currency-denominated debt,” according to the statement. Under the agreement, USCE’s shares will be increased and new shares will be issued to the EBRD. Afterwards, Savola’s share in USCE will be reduced to 10.3% from 19.32%. The ownership of United Sugar Company, which is also an indirect subsidiary of Savola, in USCE will be cut to 30.42% from 56.65%, according to a Savola statement. EBRD will hold 46.32% of USCE, the statement said.

Bel-Cap — remember that (really bad) name: If Beltone Financial’s acquisition of CI Capital goes through, a new entity called Bel-Cap will be created, CI Capital’s Deputy CEO Hazem Badran told Al Mal. Bel-Cap would be led by CI Capital’s CEO and Deputy Chairman Mahmoud Attalla, with Badran and Beltone CEO Bassem Azab as his deputies. Y’all are a smart bunch of people — you can do better than that on the naming front.

The government is looking to hike the percentage of locally sourced components required in locally manufactured and assembled cars in its current reevaluation of the automotive directive, said Industrial Development Authority chief Ismail Gaber. The government wants to bring these rates up in line with international practices, he told Al Mal. As it stands, 45% of a passenger car assembled in Egypt must be locally sourced to be eligible for benefits, a rate deemed too high by domestic auto component makers. The catch: A car is deemed locally assembled if it includes 45% domestic content — and the domestic content is deemed domestic if it, too, is 45% made-in-Egypt. That puts the actual percentage of locally manufactured components in cars at 20-25%, prompting the reevaluation.

ERC swings to profitability on strong sales performance: Egyptian Resorts Company (ERC) recorded a net profit after tax of EGP 217.5 mn in FY2015 compared to a loss of EGP 47.2 mn last year. Net revenues also increased to EGP 400.4 mn in FY2015, up from EGP 51.3 mn the year before. The results reflect ERC’s “transformation strategy” it adopted to “build a team of serious talent to propel Sahl Hasheesh to its position as the Red Sea’s most sought-after destination by both tourists and Egyptian nationals.”

THE MACRO PICTURE

Yellen spells it out: In one of her most detailed policy speeches of the year, Federal Reserve Chair Janet Yellen laid it all out on the table, telling us that interest rates would be raised at a cautious pace, and giving investors a literal list of what they need to watch out for, Bloomberg reports. While foreign economies and their financial markets must stabilize, the USD has no more room to appreciate, as it would dampen inflation and exports, straining US manufacturing. But it’s not just the USD: Commodity prices need to put the brakes on to help foreign producers grow. The housing sector also needs to take a bigger chunk out of US output. Yellen added that inflation is a two-sided risk, skeptical that the recent rise in core inflation “will prove durable.” Her take-no-prisoners, straightforward approach was largely well accepted, with Allianz’s Mohamed El-Erian writing that Yellen’s stress on “careful policy gradualism” and an overall cautious approach was “music to the ears of markets that have been conditioned to depend on the Fed to suppress financial volatility and push asset prices higher.”

Barclays is cautioning that commodities, including copper and oil, are at risk for a sharp drop, as investors clamouring for the exits could send prices on their way down. Copper may slump to the low USD 4,000s per metric ton while oil could make its way back down to the low USD 30s a barrel, analyst Kevin Norrish said in a note. Bloomberg writes that investors have already grown wary of both the copper and oil rallies, with Norrish saying that “in the absence of any concerted fundamental improvements, [commodity] returns are unlikely to be repeated in the second quarter, making commodities vulnerable to a wave of investor liquidation.”

EGYPT IN THE NEWS

Everything was about the [redacted] plane. You’re not missing anything.

WORTH READING

If only for the comparative irony, check out the New York Times’ “Why Airline Hijackings Became Relatively Rare” then mosey on over to Bloomberg’s “Egypt Hijacking Without Passenger Deaths Fits Post-9/11 Pattern.”

IMAGES OF THE DAY

Global internet infrastructure nearly collapsed yesterday under the strain of the number of jokes and memes circulating about the lovejacking. First, we have this crowd-pleaser: (View image, caption: Egyptian hostages’ reactions when they learned the hijacked plane was landing outside of Egypt).

But that’s just the runner-up. The award for best photograph of 2016 is this selfie taken by 26-year old British hostage Ben Innes with hijacker Seif El Din Mustafa. (View selfie via Daily Mail)

WORTH WATCHING

Dedicated to the world’s first lovejacking of a plane, the boombox serenade from the 1989 John Cusack film Say Anything. (Watch, running time: 1:50)

DIPLOMACY + FOREIGN TRADE

Representatives from around 50 American companies met with business leaders and Egyptian state officials on March 29 to talk Egypt’s “global economic competitiveness” and look into ways of expanding operations in Egypt, according to a statement from the US Embassy. The meetings were held under the first Egyptian Competitiveness Forum organized by the Business Council for International Understanding (BCIU) along with the US Embassy in Cairo.

A Swiss and German delegation interested in developing a solar power plant and a photovoltaic cell factory met with Red Sea Governor Secretary Moustafa Sedky on Tuesday to discuss the project. The delegation also discussed the possibility of opening a solar panel factory and an electrical transformer plant in the governorate, in addition to forming a CSR fund to help train local youths and invest in SMEs, Al Masry Al Youm reports.

Hamas nearing reconciliation? Hamas’ shuttle diplomacy between Qatar and Cairo may be nearing an end as the deputy chief of its political bureau, Moussa Abu Marzouk, arrived in Cairo Tuesday evening to hammer out a reconciliation agreement. Hamas is ready to accept all of Egypt’s demands, said its spokesperson. These include redoubling efforts to ensure smuggling from Gaza to Sinai is halted, Al Masry Al Youm reports.

ENERGY

Gallant FSRU in maintenance, will resume operations in April
The Hoegh Gallant floating storage and regasification unit (FSRU) is undergoing maintenance at the moment, an EGAS official told Al Borsa. The FSRU will resume operations gradually in April and will be running at its full capacity of 500 mcf per day in the summer months. The EGAS official expects Egypt to continue importing the same amounts of LNG next year, even though some phases of production from the North Alexandria fields are expected to come onstream. (Read in Arabic)

Schneider Egypt looking to partner with Rosatom in Daba’a project
Schneider Electric Egypt is in talks with Russia’s Rosatom to partner with it on the nuclear power station project in Daba’a, the company’s VP Khaled Kamel told Al Mal. Schneider Electric has a track record in partnering in nuclear projects in China and Iran, he explained, saying that a nuclear power station would diversify Egypt’s energy mix. Kamel added that Schneider Electric is looking to expand its operations in Egypt by 15% y-o-y in 2016 to EUR 70 mn and seeks involvement in Suez Canal area development projects. (Read in Arabic)

Bapteco running maintenance operation for 60 wells, drills 32 new ones in 2016
Bapteco, a Shell JV in Egypt, will run maintenance operations on 60 active wells in 2016, sources told Youm7. The company also plans to drill 32 development wells during the year in its four concessions in Egypt, the paper reports. (Read in Arabic)

Electricity Ministry to sign EUR 200 mn contract with Alstom for five substations
The Egyptian Electricity Transmission Company plans to sign a EUR 200 mn contract with Alstom in the coming days to build five electrical substations, according to Electricity Ministry sources. Two 500 kV substations will be built in two months as part of the emergency electricity plan, while three 220 kVs will be built within six months from the signing, the source adds. (Read in Arabic)

Tanmia, Enppi tasked with running program to refine associated petroleum gas
Tanmia Petroleum Company and Enppi have been tasked by Petroleum Minister Tarek El Molla with capturing and refining associated petroleum gas to butane and condensates instead of wasting it, said the minister. Enppi will handle engineering work for the project while Tanmia will manage it. (Read in Arabic)

INFRASTRUCTURE

Egyco wins EGP 90 mn contract to develop Phase 2 of Tenth of Ramadan sewage plant
Nasr Company for Buildings and Construction (Egyco) won a EGP 90 mn contract to develop Phase 2 of the three-tier sewage treatment plant in Tenth of Ramadan, Al Borsa reports. Egyco beat out five competitors for the contract, including Arab Contractors, to develop a sewage treatment system capable of processing 120k cubic meters of sewage per day. (Read in Arabic)

BASIC MATERIALS + COMMODITIES

Agriculture Minister discussing funding 500k feddan farming upgrade project with IFAD
Agriculture Minister Essam El Fayed met with the head of the International Fund for Agricultural Development’s (IFAD) Egypt bureau Abdel Haq Hanafi to discuss financing a project to upgrade farming techniques over 500k feddans in Wadi El Gideed and Siwa. The project hopes to reduce water wastage in agriculture and reclamation projects in the areas, said the minister, but did not disclose the amount of funding he was seeking. IFAD’s financing for Egypt reached USD 95 mn, according to the minister. (Read in Arabic)

HEALTH + EDUCATION

Hep-C treatment raw materials blocked in ports due to USD shortage
Raw materials for hepatitis-C treatments Sovaldi and Harvoni have been blocked in ports “since days” due the USD shortage, sources told Al Mal. The held amounts, which still await clearances, are being blocked because banks have not approved related FX transactions and conversions of the shipment value from EGP to USD. Related parties are saying the shipments are strategic priorities nationally and are calling on assistance from Egyptian authorities to help resolve the issues. (Read in Arabic)

TELECOMS + ICT

Orange Egypt awarded EGP 285.19 mn from Etisalat in arbitration
Orange Egypt said it was awarded EGP 285.19 mn from Etisalat Misr in arbitration relating to an interconnection dispute, Reuters reports. The ruling also requires Etisalat to pay fines and the arbitration costs. Reuters could not get a comment from either party regarding the ruling, and it is unclear whether or not it is final. (Read in Arabic)

BANKING + FINANCE

Banque Misr opens new branch in Dubai
Banque Misr chairman Mohamed Al-Etreby inaugurated the bank’s new branch in Dubai on Tuesday as part of its regional expansion, Al Shorouk reports. The new branch becomes the bank’s regional headquarters in the UAE. (Read in Arabic)

ON YOUR WAY OUT

National Bank of Kuwait-Egypt reported a 2015 net profit of EGP 575.6 mn, up 53.3% on the previous year’s EGP 375.5 mn, according to an emailed statement. Deposits grew 36.3% y-o-y to EGP 30.4 bn while loans and advances reached EGP 13.8 bn, up 37.4% y-o-y.

International Cooperation Minister Sahar Nasr signed a USD 5 mn grant from the World Bank along with a cooperation agreement with the Trade and Industry Ministry, GAFI, and the Industrial Development Authority. The funds will be utilized by these government bodies to “help better the investment climate in Egypt by expediting the issuance of permits,” said Nasr. She also mentioned that she is in talks with the African Development Bank for an undisclosed sum to help develop the investment climate, and a USD 500 mn loan from the World Bank to fund building industrial zones in Upper Egypt, according to Al Ahram.

An Algerian military helicopter crashed in the southern Algerian region of Tamanrasset, killing 12 soldiers on board, BBC reports. Egypt’s Foreign Affairs Ministry expressed its condolences to Algeria.

Giulio Regeni’s family is pressing Rome for a firm response to Egypt if authorities continue to dither on answers in the investigation into the student’s murder, Reuters reports. Giulio’s mother Paola Regeni said she would release a photograph of her son’s body if his murderers are not revealed. “I only recognized him because of the tip of his nose. As for everything else, it was no longer him.”

CALENDAR

29-31 March 2016 (Tuesday-Thursday): Future Rail and Metro Egypt, Cairo.

04 April 2016: Saudi Arabia’s King Salman visits Cairo.

07-10 April 2016 (Thursday-Sunday): Cityscape Egypt Conference, Cairo International Convention Centre, Cairo

13-16 April 2016 (Wednesday-Saturday): Cafex, Cairo.

17 April 2016: German economic delegation visits Cairo.

25 April 2016 (Monday): Sinai Liberation Day (national holiday)

26-28 April (Tuesday-Thursday): Arabian Hotel Investment Conference, The Madinat Jumeirah, Dubai.

01 May (Sunday): Easter Holiday / Labour Day (national holiday)

02 May (Monday): Sham El Nessim (national holiday)

02-03 May (Monday-Tuesday): The Middle East Investment Summit 2016, Ritz-Carlton DIFC, Dubai.

10 May (Tuesday): Business News Foundation’s Third Annual Energy Conference: Energy and Sustainable Development, InterContinental Hotel Citystars Cairo. Register here.

16-17 May (Monday-Tuesday): Egyptian-Bahraini committee meets, Cairo.

25-26 May (Wednesday-Thursday): The Middle East and North Africa Solar Conference and Expo MENASOL 2016, Hyatt Regency, Dubai.

06 October (Thursday): Armed Forces Day (national holiday)

27 November 2016 (Sunday): 2016 Cairo ICT Conference Group

04-06 December 2016 (Sunday-Tuesday): Solar-Tec Conference, Cairo International Convention Centre, Cairo