FX WATCH

The Egyptian pound held steady at the CBE dollar sale yesterday, but strengthened on the parallel market after the government established a fourth weekly dollar auction. In the unofficial market, the pound was trading at about 7.70 to the dollar on Sunday, stronger than Saturday’s rate of EGP 7.73 quoted to Enterprise.

WHAT WE’RE TRACKING TODAY

President Abdelfattah El-Sisi is pressing Cabinet on plans for the Sharm mega projects, it seems, having held meetings on Saturday with the ministers of planning, administrative reform, housing and infrastructure, supply, finance, transportation, and investment to review progress on multiple projects, among them the logistics center for grains and foodstuffs in Damietta.

That meet leaves us slightly more optimistic we may see movement on the agenda, invite list, et cetera, for Sharm — and leaves us particularly interested in learning more about a press conference slated for tomorrow morning to announce the launch of an “investment and development company” called “Aiady.” PM Ibrahim Mehleb and no less than six ministers are expected to attend, per an invite Enterprise received late yesterday. No further details were given.

LAST NIGHT’S TALK SHOWS

Lamees El Hadidy interviewed Mikhail Orloff, head of the Russian-Egyptian Business Council.

“Egypt is a very important market for us, with a population of 90 million we believe there is huge potential to expand the size of our trade beyond the current USD 2-3 billion,” said Orloff. “We are currently looking to expand our investments in a number of sectors including tourism, energy and pharmaceuticals.”

The discussion about the Council and its effort to develop economic and trade relations between Egypt and Russia was not the most interesting part of the segment. The second half of the interview focused on Orloff’s personal background. As it happens, he is the son of the late Princess Fadia, the youngest daughter of King Farouk, and her Russian husband Pierre Alexievitch Orloff, a descendant of the Russian royal family.

“I was very close to my grandmother, Queen Farida, and what she loved more than anything was Egypt and the Egyptian people,” said Orloff, whose Arabic name is Shamel. “Working in Egypt is a personal dream of mine.”

A wave of nostalgia took over as El Hadidy displayed black and white photos of Orloff’s mother as a child with King Farouk and Queen Farida and video footage of his parents at their 1965 wedding in London. The royal couple met while studying in Switzerland, where both of their families were exiled.

A number of talk shows have turned their attention to the Parliamentary elections that will allegedly take place before the end of March. El Hadidy probed guestsEmad Gad, a political analyst and member of the Free Egyptians Party, and Anwar El Sadat, Chairman of the Liberal Reform and Development party, on what Egypt’s next Parliament will look like.

According to El Sadat, approximately one-third of the seats will be won by former members of the NDP running under the banners of a number of liberal parties. A maximum of 10-15% of the seats will go to Islamists, and the rest will be divided between other parties. Gad agreed without a doubt that the largest parliamentary bloc will be made up of former NDP members.

“We need not be alarmed,” said Gad. “Keep in mind that they will be representing different parties who do not necessarily have the same interests. At the end of the day, what’s important is that they will be representing liberal parties.”

El Sadat questioned the ‘Ganzouri Electoral List.’ “We have nothing against Ganzouri as a person, but in his current capacity as an advisor to the President, we feel that there is a conflict of interest.”

“Is Ganzouri playing the role that Kamal El Shazly used to play?” asked El Hadidy.

Although uncomfortable with Ganzouri’s role, El Sadat didn’t take his accusations quite that far: “In any case, we can’t wait for the next parliament to be elected so that they can monitor the performance of the government because, quite honestly, we [the media] are tired. We have to take a back seat, monitoring the government is not really our job,” said El Hadidy.

SPEED ROUND

The EGX30 fell 5.23% yesterday to 8,715 points on turnover of approximately EGP 730 mn, about 7% above the daily average. The index fell to its lowest point in the past 45 days. The fall merited attention in the international press, with the AP quoting EFG Hermes Head of Research Wael Ziada:

“Wael Ziada, head of research at EFG Hermes, said the drop is a knock-on effect caused by the steep decline in oil prices, which have decreased by nearly half since late June. ‘These markets are correlated in terms of their performance because the investor base intersects.

“‘Going forward, the impact of declining oil prices on Egypt’s economy is less clear. Egypt is a net importer of oil, therefore “we should benefit from the decline in oil prices,’ said Ziada.

“However, Egypt relies heavily on aid from Gulf countries to buoy its economy. Any net benefit from the decline in oil prices is ‘assuming that whatever aid plans from the GCC market will flow uninterrupted, but this is one thing that you don’t know for a fact,’ Ziada added.” (Read)

Regional markets continued the plunge begun on Thursday: The DFM was down 7.6%, Qatar by 5.9%, Kuwait was off 3.7%, ADX down 3.6%, KSA’s Tadawul shed 3.3%, and the MSM dropped 3.2%.

Punters are betting the EGP will slide c. 18% against USD in next 12 months: Bloomberg’s Ahmed Namatalla tags a piece yesterday afternoon about the CBE’s decision to add an extra dollar auction with this piece of sharp analysis: “One-year non-deliverable pound forwards traded at 8.75 per dollar on Dec. 12, the highest level since July 2013 and up from 7.89 a month earlier, according to prices compiled by Bloomberg. That signals investors are speculating that the currency will weaken 18 percent over the duration of the contracts.” (Read)

Are the UK, Canadian embassies closed because of ABM threats? While popular wisdom in the capital city is that the Garden City embassies of the UK and Canada are closed because of a court order to enforce a ruling removing blast barricades and opening streets to traffic, Canada’s National Post is claiming today that the closure was due to threats from Ansar Beit El-Maqdis (or whatever they’re calling themselves these days). (Read)

EFSA unfroze the Saudi Egyptian Investment Company and Adham Inc’sholdings of Arab Dairy shares, according to Al Mal. (Read in Arabic)

Saudi shouldn’t get all the blame / credit for falling oil prices, argues the WSJ in a well-thought-through look at the factors behind the current slide in prices: “…the reality is more complex, involving Libyan rebels and Indonesian cabdrivers as well as Texas roughnecks and Middle Eastern oil ministers. It reflects both the surging supply of crude and the crumbling demand for oil.” (Read)

Oil-happy Texas has quietly set a new a record for itself, generating over 26% of its total energy supply from wind. The State of Texas website explains it best: “For many years, federal, state and local governments have provided subsidies to energy producers and purchasers to encourage the development and production of various fuel sources. As early as 1916, the federal government instituted income tax incentives to encourage individuals and corporations to drill for oil. During the 1930s, federally financed dams created hydroelectric power. From the 1950s onward, the federal government financed research into nuclear power. More recently, the federal government has provided research funding and other financing to expand the availability of renewable energy sources. Virtually all U.S. energy resources have received or currently receive subsidies.” (Read in Clean Technica and the State of Texas website)

Hostage situation unfolding in Sydney, Australia, possible Daesh involvement: BBC News was reporting early this morning that several people are being held hostage in a Sydney cafe, with reports that Australian television is showing that a black flag with Arabic writing is visible from the window. (Follow the news in the Sydney Morning Herald)

EGYPT IN THE NEWS

The EGX’s nosedive yesterday vied with ongoing coverage of the ban on Michelle Dunne’s entry to Egypt for domination of international headlines about Egypt. On the EGX story, most international outlets picked up the AP story (noted above) in one form or another. A sampling:

• Egypt Stock Market Loses USD 3 bn Amid Oil Plunge (ABC News, carrying the AP story)
• Egypt shares slip on sliding oil prices (Al Jazeera, with files from AP)
• Egypt stock market loses USD 3 billion in single day (Arab News carrying the AP story)
• Egypt stock market loses USD 3 billion (Sky News truncated version of AP story)

Israel’s Gas Offers Lifeline for Peace: A New York Times article suggests that the Obama administration is to thank for the possibility of new energy agreements between Egypt, Israel and Jordan. If the Obama administration has played a role in assisting the newest deal, then Egypt owes the American president its gratitude. However, energy deals between the three countries are nothing new, and pipelines pumping gas the other way around were in place around the same time that Obama was being inaugurated for his first term. So, uh, thanks a lot Obama. For, um… (Read)

So, it seems likely Egypt isn’t always playing well in German: Deutsche Welle editor Naser Schruf has an opinion piece out claiming, in part: “Egypt has, unfortunately, turned back into being a full-fledged police state. But the miserable economic and human rights situation, shrinking tourism, the dependence of the country on Gulf states’ money and, last but not least, the combined solidarity of the Islamic, left and liberal groups will eventually boil over into massive protests. It’s only a matter of time until Egypt’s next revolution.”

Enterprise Notes: لا.

Wall Street Journal, picking up an AP story: “Egypt Sends 439 to Military Trials Over Violence; American Scholar Michele Dunne Barred From Entering Cairo” (Read)

The energy crisis: It’s time for Egypt to diversify its energy resources.(Khaleej Times)
The author, deputy editor of Al-Ahram Al-Massa’i argues for a diversification of Egypt’s energy sources and for the need to embrace nuclear energy. The article offers no insights or new / interesting information. (Read)

The Carnegie Endowment for Peace issued a press release on Saturday regarding U.S. scholar Michele Dunne being barred entry from Egypt: Carnegie Scholar Denied Entry into Egypt

Implied by a tweet by Arianna Huffington, a new media outlet named Huffington Post Arabic is soon to launch, to be run by former Al Jazeera Network head Wadah Khanfar, who resigned in September 2011. (Read)

Mohamed Morsi’s lawyer, the ever-present Islamist Montaser El-Zayat,has asked to hear the testimony of EU foreign policy chief Catherine Ashton, who had visited Morsi while he was being detained incommunicado. The lawyer is aiming for a dismissal of charges against Morsi on the basis that Morsi’s detention was illegal. (Read in Ahram Online)

Equal parts non-offensive and non-informative, Osman Mirghani writes:Opinion: Egypt faces a war on several fronts, in which he essentially summarizes the headlines of the past few months in prose form. (Read, or don’t)

Rami G. Khouri of The Daily Star writes in the vanity publishing outlet The Cairo Review an incredibly condescending and tone-deaf op-ed: Egypt is sad, but still hard to read. (Read, or ignore)

KUDOS

Al-Masry Al-Youm wins “Best Website” at the Arab Online Journalism Forum 2014. Judges assessed top regional news sites on the basis of their “professionalism, influence, readership and interactivity,” among other criteria, per a press released we received overnight from the Egyptian Online Journalism Syndicate. The top 10 sites included:

1. Al-Masry Al-Youm (Egypt)
2. Sabq (Saudi Arabia)
3. El-Watan (Egypt)
4. Masrawy (Egypt)
5. Hespress (Morocco)
6. Echorouk (Algeria)
7. Emirates24/7 (Emirates)
8. Elaph (Saudi Arabia)
9. Moheet (Egypt)
10. Al-Nahar (Lebanon)

WORTH READING

Harvard’s Larry Summers and Lant Pritchett dispel the notion that nations can be stuck in a “middle-income trap” noting that it is just growth rates reverting back to their means. The two make it clear that “…rapid growth is not something that can be taken for granted, even for those who have enjoyed it for a long time. Its continuation requires the constant renewal of good policy along with good luck. This is the challenging reality for all countries, not just those who have been deemed to have middle incomes.”

WORTH WATCHING

Everyone, whether they realize it or not, knows Marwa from AUC.Running time: 4:21, languages: Arabic, Egyptian-English dialect (Watch)

OIL & GAS

Total is committed to the Egyptian market; completes feasibility studies for new investment
Al Borsa and Daily News Egypt | 14 Dec 2014
Thomas Rebeyrol, Total Egypt’s Managing Director, reiterated Total’s commitment to Egypt during the Egypt Automotive conference. Since acquiring Shell and Caltex’s downstream business, Total now runs 235 gas stations in Egypt and has built a USD 25 mn processing facility in Borg El Arab. Egypt’s main attraction, according to Rebeyrol, is a market growing at around 5% annually when compared to Europe, which is shrinking by 3% each year. Total Egypt is also planning on investing in a new plant in Alexandria in 2015 Rebeyrol says, noting that feasibility studies for the project have already been completed and that construction is expected to begin within two years. He suggests the ticket size could be in the USD 25 mn range. (Read in Arabic in Al Borsa and read in Daily News Egypt)

Refinery output to increase to 85,000 tons / day by 2020 – Ministry of Petroleum
Amwal Al Ghad | 13 Dec 2014
Egypt’s petroleum sector is adopting measures to increase refinery output from 62,000 tons / day at present to 85,000 tons / day by 2020, according to Oil Minister Sherif Ismail. He noted that refineries are now operating at only 55% capacity and stressed the importance of ensuring that refineries are maintained and refurbished to ensure optimal performance. The Ministry will also build new refineries to cope with imported crude, according to the Minister. (Read in Arabic)

BASIC MATERIALS & COMMODITIES

Oil Ministry pledges to supply fertilizer plants with 80% of their natural gas needs
Al Mal | 13 Dec 2014
Egypt’s oil ministry pledged it will supply fertilizer plants with 80% of their natural gas needs to ensure delivery of fertilizers to Egypt’s agricultural sector during the winter and summer seasons. Oil Minister Sherif Ismail agreed with Agriculture Minister Adel El-Beltagy on the supply promise. The guaranteed flows will primarily benefit Helwan, Abu Qir, MOPCO and Alexandria plants meet their contractual obligations, Al-Mal says. (Read in Arabic)

MANUFACTURING

Al Ahram Beverages considers building EUR 10 mn malt processing plant in Cairo
Al Mal | 14 Dec 2014
Al Ahram Beverages Company (a subsidiary of Heineken International) is currently assessing plans to build a new malt processing plant in Sixth of October City, Al-Mal reports. The plant, expected to occupy an area of c. 4,200 sqm,  is part of the company’s growth plans and would cost c. EUR 10 mn to develop, the paper says. The decision on going forward with the plant is contingent on assessing demand domestically as well as the ability to increase exports. (Read in Arabic)

AUTOMOTIVE

Roundup of Egypt Automotive Summit Coverage
Daily News Egypt | 14-15 Dec 2014
The Daily News carries coverage today of quality specifications for locally assembled vehicles and CBU imports; the reported need for standard quality certifications for used vehicles; and interest in the sector on the part of Egyptian banks. None of the stories are particularly well-put-together, but if you need a roundup, each story covers in passing detail a bit more than its headline would suggest.

REAL ESTATE

Orascom Development submits documents for c. EGP 500 mn share issuance
Al Mal | 14 Dec 2014
Orascom Development Holding submitted documents to the Egyptian Exchange (EGX) and the Egyptian Financial Supervisory Authority (EFSA) related to selling 10-15% of company shares, Al-Mal quotes Investor Relations Director Sara El Gawahergy as saying. El Gawahergy said the company’s Board of Directors (BoD) established a selling price of EGP 15.2 per share, which is lower than the fair market value determined by Fincorp Investment Holding. She explained that the BoD agreed to lower the selling price to attract new investors. In the event that the selling price is EGP 15.20 for 15% of the company, the deal would be valued at EGP 506 mn.

BANKING & FINANCE

OCI in Negotiations for USD 700 mn Loan
Al Mal News | 14 December 2014
Orascom Construction Industries has entered talks with a number of local banks including Al Ahly for a USD 700 mn medium-term facility. The move comes as part of its megaproject collaboration with its consortium partner GE to install eight power stations for the Ministry of Electricity, which is expected to add up to 1,000 MW of electricity to the national power grid. The Ministry’s megaproject aims to add an overall total of 3,400 MW, and it has contracted a number of major consortiums to fulfill that by May 2015, including one led by Siemens-El Sewedy. (Read in Arabic)

TRANSPORTATION

France extends EUR 344 mn in financing for Cairo Metro expansion
Al-Shorouk | 14 Dec 2014
French officials and Egypt’s Minister of International Cooperation signed an agreement yesterday that will see France lend Egypt EUR 344 mn to finance the completion of phase III of the Cairo metro. EUR 172 mn of the loan will be provided by the French treasury at 0.1% interest over 53 years and a grace period of 20 years. The other half of the loan will be provided via credit guarantees through Coface. The preliminary agreement was first announced during President El Sisi’s visit to Paris. While Shorouk says the deal is for line, Ahram Online adds that the financing will benefit both lines three and four and will fund the purchase of some 64 trains. (Read in Arabic in Shorouk or in English on Ahram Online)

High-speed train negotiations with China aim to link Alex with Aswan; Chinese firms to ink contract to provide trams for Cairo suburbs
Al-Ahram, Al-Borsa | 14 Dec 2014
Egypt is in negotiations with several Chinese companies to build a high-speed train between Alexandria and Aswan, according to remarks from Transportation Minister Hany Dahy carried by Al-Ahram. Dahy added that several Chinese firms have expressed interest in the project, which is expected to result in significant economic development across various sectors. Meanwhile, a recent visit by a ministerial delegation revealed strong interest by Chinese firms to participate in developing various projects in Egypt, especially in the electricity sector, according to Industry and Trade Minister Mounir Fakhry Abdel Nour. Meanwhile, Al-Borsareports that President Abdelfattah El-Sisi will ink an EGP 1.5 bn contract with the Aviation Industry Corporation of China (AVIC) to supply electric trams for new lines in the Cairo suburbs of Shorouk, Badr, and Obour.

EGYPT POLITICS + ECONOMICS

4.3% GDP growth rate in 2015-16 — Ministry of Finance target
Ministry of Finance Statement, Reuters | 14 Dec 2014
The preliminary draft budget for 2015-16 has been approved by the Minister of Finance Hany Dimian, targeting GDP growth of 4.3%, a budget deficit between 9.5-10% and a debt-to-GDP ratio of 91-92%. The draft budget has been sent to state institutions to use it as a guideline in the preparation of their own budgets. (Read the Ministry of Finance statement in Arabic or check out Reuters inEnglish)

Egypt is aiming for USD 15 billion in FDI in the next four years:
Al Masry Al Youm | 14 December 2014
Minister of Investment Ashraf Salman at the Auto Industry Summit said the Sisi administration is aiming to attract EGP 600 bn in investments that will pour directly into the Egyptian economy, of which the private sector owns 70%, while at the same time he added the government is shooting for USD 15 bn in FDI. He also added that the government is targeting USD 10 billion in FDI for the fiscal year of 2014-2015, as well as EGP 340 billion in domestic investment during the same period, which support overall growth of 3.8%. Salman mentioned that investments in the auto assembly industry this year totaled USD 2 billion, which is divided between 17 companies, and the 565 that feed into that industry’s day-to-day work.
Speaking alongside the minister, Dr. Atef Yacoub, head of the Egyptian Consumer Protection Bureau, said the number of complaints the Bureau received this year rose by 17% to 1,090. (Read in Arabic)

Large-scale terror attack thwarted in north Sinai
Al-Masry Al-Youm | 14 Dec 2014
Security forces thwarted a major terror attack in the north Sinai last Wednesday, according to Al-Masry Al-Youm. Security forces learned of a plot to use fake police vehicles to carry out attacks on security installations. Knowledge of the plan was uncovered during a raid on a terror camp in a village south of Sheikh Zuweid, where cars with fake police license plates were found. Meanwhile, an attempt to blow up a police checkpoint was aborted, resulting in the death of the driver and another terrorist. A different raid in Sheikh Zuweid resulted in the killing of 6 terrorists and the destruction of a house full of ammunition and explosives. Security forces also killed two terrorists on Thursday and destroyed 12 terror camps which had been used to launch terror attacks on police and military installations. (Read in Arabic)

Bomb explodes in El Arish
Al-Ahram | 14 December 2014
There were no casualties as a device exploded near a police station in El Arish city, according to an Interior Minister source, who added that earlier on Sunday two officers were gunned down in attack by unknown perpetrators who fled the scene in a Hyundai Verna. One of the officers died at the scene, while the other is being treated at El Arish Central Hospital. (Read in Arabic)

Egypt is more stable now than at any time in the past four years
El-Shorouk | 14 December 2014
Egypt is more stable today than at any time in the past four years, Major General Hani Abdel Latif, spokesman for the Ministry of Interior, told CBC Extra. He said recent embassy closures in the capital city were due only to the global security climate and not domestic security issues. (Read in Arabic)

German Arab Chamber of Industry and Commerce inks training aid agreements
Al Mal | 11 Dec 2014
Minister of Investment Ashraf Salman witnessed the signing of cooperation agreements that will result in the training of some 13,000 Egyptian workers under programs administered by the German Arab Chamber of Industry and Commerce’s Leadership & Management Development Center. The year-long contract is worth EGP 10 mn. (Read in Arabic)

Sudan livestock, farming agreements to boost Egyptian meat supply
Al Mal | 13 Dec 2014
The Sisi administration is exploring a range of options including the promotion of investment in Sudanese livestock growers to increase the supply of meat in Egypt. (Read in Arabic)

REGIONAL

Potentially large gas field discovered off the coast of Israel
Al Arabiya | 14 Dec 2014
3D seismic surveys show there may be 3.2 tcf of gas at the Royee prospect which is located in Mediterranean about 150 km off the coast of Israel. The estimates of the reserves range from 1.9 to 5 tcf and drilling is expected to begin in December 2015. (Read)

Libya imposes force majeure on 2 oil ports after clashes
Bloomberg | 14 Dec 2014
Libya’s National Oil Corp. declared force majeure at the ports of Es Sider and Ras Lanuf and will cease output at some oil fields because of fighting. Force majeure is in place at Es Sider and Ras Lanuf, Libya’s largest and third-largest oil ports, with a combined capacity of 560,000 bbl / day. National Oil, known as NOC, didn’t identify the fields to be halted. (Read)

Black Sunday: The day Turkey detained its prominent journalists
Zaman | 14 Dec 2014
Turkish twitter user @fuatavnifuaat had warned on Saturday of an impending crackdown on Turkish media by the Erdogan government, which as he/she expected unfolded on Sunday:  Dawn raids on Turkey’s largest newspaper Zaman and national TV network Samanyolu TV led to the detention of top managers at the media outlets. Ekrem Dumanlı, editor-in-chief of Zaman, and Samanyolu Broadcasting Group General Manager Hidayet Karaca are currently detained. “Federica Mogherini, High Representative for Foreign affairs and Security Policy and Johannes Hahn, Commissioner for European Neighborhood Policy and Enlargement Negotiations, said in a joint statement on Sunday that the police raids and arrests of a number of journalists and media representatives in Turkey are an unacceptable attack against freedom of media, which is a core principle in any real democracy.” (Read about the raid here and the EU’s response here, both in Zaman; check out the WSJ’s coverage or get more from the NY Times)

Kuwait may cut spending next fiscal year — parliament
Reuters | 14 Dec 2014
Kuwait may cut planned state spending next fiscal year as lower oil prices put pressure on its finances, according to a parliamentary official quoting preliminary estimates on Sunday to Reuters. Adnan Abdulsamad, head of the parliamentary committee for budgets, said in a document obtained by Reuters that Ministry of Finance officials were estimating budget spending at KWD 19 bn dinars (USD 65.2 bn) starting next April. Planned spending for the current fiscal year is KWD 23.2 bn dinars, according to the document. (Read)

ON YOUR WAY OUT

Egypt should be able to save EGP 30 bn off its budget due to the recent drop in oil prices, according to experts speaking to Al Mal.

EGAS denied rumors that Egypt has signed a final agreement to import natural gas from Cyprus. (Read in Arabic)

At least 11 fishermen are dead and 23 more missing after a cargo ship rammed a passing fishing vessel yesterday in the Gulf of Suez. (Read)

Authorities have closed an “atheist café” in Downtown Cairo: “it was a resort for atheists and Satanists who were spreading wrong ideas about religion.” (Read)

The armed forces of Egypt and the UAE concluded their third round of joint military exercises this year, Siham Al Haq, in the Emirates. (Read)

Tribes are now in complete control of southwest Libya according to theCarnegie Endowment’s Sada, and the northward smuggling of fighters and weapons from extremist groups south of Libya is now an existential threat to the region as a result. The EU banned Libyan airlines from using its skies on safety concerns. The ban covers Afriqiyah Airways, Air Libya, Buraq Air, Ghadames Air Transport, Global Aviation and Services, Libyan Airlines, and Petro Air. (Read)