TL;DR

El Sisi warns against calls for protests, urges renewed religious discourse (Speed Round)

Central bank sends a message one day before it meets to consider interest rates (Speed Round)

Beltone Capital to IPO in 1H2016, change name to Avaris Holding (Speed Round)

Sharkawy & Sarhan advises on local aspects of GE’s USD 9.5 bn Alstom acquisition (Speed Round)

Oil Ministry will get USD 200 mn from World Bank loan to make payments to international oil companies (Speed Round)

By the Numbers

WHAT WE’RE TRACKING TODAY

Today is a national holiday in observance of the Prophet Mohammed’s birthday (Mouled El Naby). Banks and the stock market are closed for the day and will reopen tomorrow. And tomorrow is Christmas Eve, so you can expect a slowdown in Western markets starting about … last week. Kolo sanna w entom tayebeen and Merry Christmas to you all.

Enterprise is off tomorrow: As we noted a couple of weeks back, we’re taking a long weekend to recharge and spend some time with family. We’ll be back on Sunday.

WHAT WE’RE TRACKING THIS WEEK

The CBE’s Monetary Policy Committee meets tomorrow to discuss interest rates after having not reached a decision on interest rates last week. In the time since: The committee has had more than  week to digest the U.S. Fed’s interest rate hike and the global response to it — and, more to the point, to reflect on how much aid and investment International Cooperation Minister Sahar Nasr has brought home.

ON THE HORIZON

Brace yourselves, folks: The House of Representatives will convene on 28 December, according to Lamis El Hadidi, speaking last night on her talk show.

The guy who is making Microsoft cool again is coming to Cairo: Microsoft CEO Satya Nadella is the special keynote speaker at the Microsoft Developers Conference in less than two weeks time at the Nile Ritz Carlton Hotel, Cairo on 5 January, 2016. Register online here. Or check out this WSJ video of Nadella on “How I work,” an interview with The Verge, or CNN’s take on the man’s performance here.

Prime Minister Sherif Ismail will travel to Saudi Arabia on 5 January to attend the third meeting of the Egyptian Saudi Coordination Council. During the meeting, Egypt and Saudi Arabia will agree on how to supply Egypt with five years needs of petroleum products.

LAST NIGHT’S TALK SHOWS

It was a busy night for Lamis El Hadidy who started her show Hona El Assema last night with the Central Bank of Egypt’s decision to impose new curbs on imports, a decision we covered yesterday. “The reason behind those new regulations is to make importing unnecessary goods more expensive.” El Hadidy said in her famous lecturing tone. “Are we in a state of war or in a state of caviar imports? We need to decide.”

The anchor went on to claim Egypt spent USD 34 bn on imports during the first six months of 2015. El Hadidy added that last year we spent USD 530 mn on tuna fish, USD 400 mn on caviar and shrimp, USD 398 mn on fresh apples, and USD 228 on lingerie. “Why are we spending all this money on apples and lingerie? We are in a state of war. Are we suffering an economic hardship? Egyptians, we need to decide.”

Cue the flood of call-ins. Pharos Head of Research Hany Genena called to explain his take on the decision. “The CBE is making it harder and more expensive for the importers,” Genena said. “This is not the first time this happens, it happened in Egypt in 1999 and lasted for three years back then.” Genena added that he believes the central bank’s next move should be a gradual devaluation of the EGP.

Ahmed Shiha, the Head of Importers division at the Cairo Chamber of Commerce, came on air to say that the decision is damaging for hundreds if not thousands of importers. “Why would we pay 100% in advance of a shipment that will be delivered after four months?”

El Hadidy interrupted him: “Because we don’t want those goods anymore.”

Tourism Minister Hisham Zaazou also rang up El Hadidy to talk about the tourism and civil aviation ministries’ agreement with UK-based security firm Control Risks to beef-up airport security. “The company will assess the security procedures and train our personnel on carrying sound security measures.” Zaazou said. “The deal focuses on Cairo and Sharm airports only. Then we can expand to other airports.”

El Hadidy announced that her main segment would be an interview with Osama El Ghazaly Harb, honorary chair of the Free Egyptians Party, who announced his resignation from the party few days ago. Before the start of the segment, party founder Naguib Sawiris called in and announced that Dr. Emad Gad — who resigned yesterday on air during an interview with El Hadidy — retracted his resignation after Sawiris intervened. The businessman said there were some misunderstanding and he pitched in to set things straight.

Harb’s interview was brief and focused on his experience with FEP. He said that he left because he had been marginalized. He also added the same narrative about the so-called Support Egypt coalition: “It is the making of security agencies, who want to take us to the pre-25 January era.”

Also last night: El Hadidy announced that the House of Representatives will convene for the first time on 28 December and also said the gag order regarding the Dabaa nuclear station (which we noted yesterday) was communicated verbally by the Prosecutor General’s Office.

Ibrahim Eissa on Al Kahera Wal Nas focused his lengthy introduction on President Abdel Fattah El Sisi’s speech yesterday at Al Azhar’s celebration of the Prophet Muhammad’s birthday. He then discussed the strange announcement made today by the Ministry of Transportation Saad El Gioushy. The ministry decided to stop the train between Ismailia and Suez after few unknown individuals threw stones at the train and broke its windows. The Minister ordered that ticket prices should be increased on this train to pay for the repairs, which he said should be in part the responsibility of passengers.

Eissa lost his mind: “Who are you punishing, Mr. Minister? The people? What did you expected them to do?” Eissa shouted to the minister picture on a projector inside his studio. “Did you expected them to stand up for the thugs and jeopardize their own lives? What kind of decision is this?”

Over on OSN, Al Qahera Al Youm Amr Adeeb and his co-host Rania Badawy dedicated the first fifty minutes of the show to talk about El Sisi speech. Adeeb believes that the president’s offer to step down if the Egyptian people wants him to is a bad signal to business. “What will the investors think if they hear the speech? They will think that this is an unstable country. No. We can’t allow this to happen,” Adeeb said. “If the president wants to leave, he can do so in the coming election.”

Adeeb then changed gears to speak about tourism, claiming that Dubai now receives one plane full of tourists every minute. “I want to invite all our Arab brothers to come and visit Egypt.” Adeeb said. “We are as safe as Paris and California, but we have great weather and the best hotels. Come and spend your time in Egypt.”

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SPEED ROUND

Central bank sending a message ahead of tomorrow’s Monetary Policy Committee Meeting? The Central Bank of Egypt says it has sold USD 7.6 bn in FX in recent weeks, Reuters reports, citing a statement by an unnamed central bank official to state news agency MENA. The sum was deployed to “make it easier for importers to pay for goods … [and] to pay off foreign investors in USD.” The newswire notes that, “In rare comments, the unnamed central bank official, said Egypt’s foreign reserves were ‘safe’ and that Egypt was committed to repaying its foreign debts on time, including a USD 1 bn  payment to Qatar in January 2016 and USD 700 mn  owed to the Paris Club. He said the bank does not plan to issue new foreign currency-denominated bills, only roll-overs.

Yes, please: Al Masry Al Youm reported that the CBE is close to hiring a full-time spokesperson. Sources said the appointment comes as part of the CBE’s attempts to improve its communication strategy and transparency.
No more phony invoices: The central bank’s latest bid to tighten control of FX will stop what Customs Authority head Magdy Abdel Aziz called “the smuggling of foreign currency,” Al Masry Al Youm reports. The CBE earlier this week instructed banks to raise the required EGP deposits to cover letters of credit to 100% of the payment amount in USD from its current 50%, as we reported yesterday. Abdel Aziz complained that some importers forge import documents or try to move foreign currency abroad with travelling employees. Moreover, the Customs Authority is imposing new rules that limit the clearing of consumer goods imports to the port of arrival, a move meant to back the central bank’s clampdown on importers using dodgy and inflated invoices as ruses through which to get hard currency out of the country. As it stands, imports of consumer goods can be cleared at ports other than the port of arrival, which leaves the payment of duties open to manipulation, according to Abdel Aziz. He added that these regulations will not be imposed on production inputs, Al Borsa reports.

Egyptian law firm Sharkawy & Sarhan advised GE on USD 9.5 bn Alstom acquisition: Sharkawy & Sarhan advised GE on “the Egyptian law aspects” of the acquisition of Alstom’s Power Business. “The role of Sharkawy & Sarhan included advising on and undertaking the local procedures for the assets transfer, as well as advising on and undertaking post-acquisition arrangements for the acquired Egyptian subsidiaries,” according to the law firm. The transaction was completed in November.

Beltone Capital to IPO in 1H2016, change name to Avaris Holding: Private equity firm Beltone Capital (not the investment bank recently acquired by OTMT) has pushed its target for listing on the EGX to 1H2016 from 4Q2015. Beltone Capital aims to raise EGP 1 bn in the sale. “The time is not right now to issue in the market,” Chairman Hazem Barakat told Reuters. The company’s board had agreed to on a share fair value of EGP 27.28 per share, but Reuters says it is likely that shares will be sold at a discount. The company is also changing its name to Avaris Holding for Financial Investments. The name refers to a capital of ancient Egypt, but bears an unfortunate similarity to “avarice.” (Read)

The Oil Ministry will get USD 200 mn from the recently signed World Bank loan to pay international oil companies, a source told Al Mal. In total, Egypt owes IOCs USD 2.9 bn of which USD 1.2 bn – the single largest amount — is owed to BG Group alone. In contrast, BP, which was owed USD 2.2 bn three years ago, only has USD 50 mn in receivables right now. One problem, according to the source, is that EGPC says it agreed with BG to pay it USD 80 mn under the condition it begins the development of its Phase 9B wells in its West Delta Deep Marine concession — the project which BG announced it postponed because of the increased debt levels.

Will the issuance of business permits be outsourced? The cabinet economic group is considering outsourcing the issuing of business permits and licenses to the private sector, said Trade and Industry Minister Tarek Kabil. The current system, the minister said, “is scaring off investment,” echoing the sentiments of a letter sent to President El Sisi by the FEI requesting the repeal of the Investment Law in its current incarnation. Kabil noted that investors can wait as long as 634 days to receive permits for new projects due to the competing bureaucracies at the ministries of investment, housing, trade and local development. The economic group also discussed a “unified industrial act,” but Al Masry Al Youm says Kabil gave no further detail of that piece of legislation.

The prolonged delay in implementing the VAT was in part an attempt to get a consensus on the law from the business community, said Tax Authority head Abdel Moneim Mattar at a forum on taxation organized by Al Borsa last week. This is the first comment we have heard from Mattar on the delay in the VAT since earlier this fall, when he described the timeline for its implementation as “a political matter.” Mattar also said the VAT legislation would apply a 3% surtax on top of the VAT on value chain sales to manufacturers and traders not registered for the VAT in a bid to integrate elements of the informal economy into the tax system. Registration for the VAT is mandatory if a business makes EGP 500K or more in annual earnings. Transactions with businesses not registered for the VAT that do not include receipts will also be subject to the 3% surtax, said Mattar. The authority is also considering setting up a special tax system for SMEs, Mattar added.

El Sisi warns against protests, calls for renewed religious discourse at Al Azhar’s Moulid celebrations: President Abdel Fattah El Sisi said yesterday that efforts to “renew” discourse within Islam and disseminate its fundamental “values of tolerance and acceptance” must continue. In remarks at Al Azhar on the eve of the Prophet Muhammad’s birthday. El Sisi addressed the majority of the audience, who were religious scholars: “Christian holidays are coming. I don’t want you to say it’s forbidden to greet our brothers. We all greet them and wish them happy holidays.” El Sisi also highlighted the importance of cooperation between the executive, legislative and judicial authorities after the completion of the political road map, according to a statement from Ittihadiya. The president also addressed calls for protests on 25 January, asking those who want to demonstrate that day whether they want to destroy the country. El Sisi went on to say: “I came to my position by the will of the Egyptian people, and if the Egyptian people want me to leave, I will leave. But it has to be their choice.” Tap here to watch the speech in full (run time: 35:37).

Picking up where we left off yesterday: Cabinet has signed off on the appointment of global consultancy firm Control Risks to conduct assessment of national airport security, according to Reuters. As part of the wider effort to “restore confidence and revive tourism,” the London-based firm will be initially used in Cairo and Sharm El Sheikh but would “also review security at other Egyptian airports.” CEO Andreas Carleton Smith said reviews of both Cairo and Sharm El Sheikh airports will take two-and-a-half to three months.

Speaking of cabinet: The Ismail government held its weekly meeting on Tuesday, where discussions focused on the government’s agenda, which ministers are constitutionally required to present to the House of Representatives when it convenes — a development that could apparently come as early as next week. The government will push forward with a reform agenda that aims to improve government services, curb inflation and slash the budget deficit, read a statement from the cabinet. Specific policies highlighted by the statement include implementing the VAT, and instituting executive regulations for the new national resources law. Major social policies the cabinet plans to enact include the Universal Health insurance Act. Most of the cabinet’s decisions at the meeting involved approving land transfers of state property to a number of different government bodies for specific projects. In addition to approving the Control Risks appointment (see above), cabinet also signed off on an EUR 50 mn loan agreement with the African Development Bank to fund a project to treat irrigation water.

Taking stock: 2015 was a year “marred by high inflation, stagnant growth and several unexpected disasters that have wreaked havoc on the Egyptian economy” but, despite best intentions, the government “has so far been unable to pull the country out of five years of malaise since the 2011 uprising,” veteran business journalist Patrick Werr writes for The National. For Werr, the theme of the year was the search for USD, with the inauguration of the new Suez Canal as the main event.

Libya’s Tripoli-based National Oil Corporation (NOC) said it will take legal action against any unauthorised fuel sales, according to a statement most likely directed at the state oil company of Libya’s “internationally recognized” eastern government. The eastern government’s oil company announced it signed a deal to sell 2 mn bbl of crude to Egypt on Sunday, as we reported. Bloomberg said EGPC Chairman Mohamed El Masry confirmed the signing of an MoU with the company and the eastern government’s oil company is already representing Libya in matters relating to oil including OPEC. Still, the NOC said “any operations that are conducted outside the legal validity represented in the National Oil Corporation whose headquarters are located in Bashir Sadawai Street in Tripoli are considered an explicit breach of the law.” However, the eastern government’s oil company is already representing Libya in matters relating to oil including OPEC.

Abraaj and Proparco divest 83% of their combined stake in Tunisian pharmaceutical company Unimed: Abraaj and development finance institution Proparco exited 83% of their combined stake in Tunisian pharmaceutical firm Unimed to SQM, Blakeney Asset Management, the Tunisian-Kuwaiti Consortium of Development (CTKD) and two unnamed Tunisian investors, according to a statement issued by Abraaj on Tuesday. Abraaj invested in Unimed through one of its funds in 2011. The high-flying private equity shop has invested USD 1 bn globally in healthcare since 2003 in opportunities including the North Africa Hospital Holdings Group, which aims to “enhance the quality and accessibility of healthcare in Egypt and Tunisia,” according to the statement.

Qatar National Bank (QNB) is buying Turkey’s Finansbank for USD 3 bn in cash, Bloomberg reported. Finansbank is 99.8% owned by National Bank of Greece (NBG) and QNB is also acquiring a 29.9% stake in Finans Leasing. QNB is also taking on USD 910 mn in subordinated debt as part of the acquisition. The agreement “has been approved by the board of directors of both banks and the General Council of the Hellenic Financial Stability Fund,” Bloomberg says, but it still awaits regulatory approvals. The NBG was required to sell its stake in Finansbank under the conditions of the EU bailout, Bloomberg’s Isobel Finkel and Arif Sharif note. They also note the expansionary QNB had previously attempted to enter the Turkish banking sector in 2012, losing out on an acquisition of Denizbank to Russia’s Sberbank. QNB has operations in 27 countries, according to their latest investor presentation from September 2015 (pdf), of which they are well represented in at least 13 countries throughout the region. QNB’s other recent acquisitions include their 2013 purchase of Egypt’s NSGB, (currently QNB Al Ahli), and the 2014 purchase of a 20% stake in Togo’s Ecobank.

Qatar rejects renewed criticism of labor practices on World Cup facilities: Qatar rejected as “groundless“ a recent International Trade Union Confederation (ITUC) report reiterating condemnation of Qatar’s labor practices. says in their statement “It is estimated that more than 40 percent of the world’s top 250 international construction contractors are participating in projects in Qatar. Shareholders with investments in fourteen different stock exchanges are exposed to the profits using modern day slavery under the kafala system,” Burrow continued in the release accompanying the report, saying that nothing has changed for the better since their last report on labor practices in Qatar released in 2014.

The New York Times issued its 2015 Year in Pictures, calling it “the year of the great unraveling, with international orders and borders challenged or broken, with thousands of deaths, vast flows of migrants and terrorist attacks on some of the most cherished symbols of civilization, both Western and Muslim.” Bloomberg also published is top news photos of 2015 marking events that defined the year and will continue to shape our world into 2016.

David Gardner serves an insipid broth with half-cooked chunks of stereotype in “Unrealised business potential of Arab world,” his opener to a special package of stories in the Financial Times on “Doing Business in the Arab World.” The package includes stories on the Suez Canal (below), the impact of low oil prices on KSA, young business women in the Kingdom, and the tech industry in Jordan, among a couple of others.

EGYPT IN THE NEWS

The Financial Times’ Heba Saleh says it’s “Choppy waters for Egypt’s Suez Canal expansion“ (paywall) noting there “is still no certainty about the economic feasibility of the project in which Abdel Fattah al-Sisi, the country’s president, appears to have invested as much nationalist prestige as economic hope.” The canal’s receipts have dipped slowly but steadily since the new waterway was opened, she notes, adding that shipping experts say “the improvements to the infrastructure of the canal should attract some additional traffic, but ultimately the number of ships will depend on global trade.”

Meanwhile, Maggie Fick writes for the FT (paywall) on the practice — standard the world over, we would argue — of Egypt’s doormen acting as informants for the security apparatus.

Egypt’s Parliamentary Election Ends On An Undemocratic Note: Law professor and congressional observer Charles Tiefer criticizes Egypt’s recently concluded parliamentary elections as unrepresentative, saying “It is, unfortunately, a legislature of, by, and for President Abdel Fattah al-Sisi.”

DIPLOMACY + FOREIGN TRADE

President El Sisi pledges support to South Sudan peace process through UN Security Council
President El Sisi met with the African Union’s High Representative for South Sudan and former President of Mali, Alpha Oumar Konaré, yesterday to discuss ongoing efforts to reach a peace agreement in South Sudan. President El Sisi pledged Egypt’s support to Konaré’s mission, in light of its upcoming membership in the UN Security Council, according to a statement from Itihadiya.

ENERGY

EETC signs substation agreement with Siemens and El Sewedy
A consortium comprising Siemens and El Sewedy Electric signed a contract with the Egyptian Electricity Transmission Company (EETC) for the construction of six 500/220 kV substations. The substations will transmit power generated by the Beni Suef and Burullus plants and will be located at El Minia, El Beheira, Qalyubia, Assiut, and Kafr El Zayat governorates. Amwal Al Ghad says the contract is worth EUR 238 mn and that three stations will be delivered before September 2016 and the other three within 18 months. The contract also includes providing training for 20 engineers.

MANUFACTURING

Siemens to begin building rotor blade factory in January
Siemens announced its intentions to begin building a plant to manufacture rotor blades for wind turbines in January, Al Borsa reported. The project was announced at the EEDC and will be used to supply Siemens’ plans to build 12 wind farms, holding 600 wind turbines in total, and generate 2,000 MW of electricity. (Read in Arabic)

TOURISM

Egypt is safe, provides high quality of service, ATO President says
Egypt’s tourism sector provides quality service and the country is safe and secure for tourism, Bandar bin Fahad Al Fahaid, president of the Arab Tourism Organization (ATO), said. The remarks, covered by Saudi Gazette, were made at the conference to launch the This is Egypt promotional campaign. During the conference, Tourism Minister Hisham Zaazou emphasized the importance of attracting Arab tourist, particularly Saudis who spend 20 nights on average on their visits to Egypt, double the time spent by Europeans, and spend more per night. (Read)

South Sinai Investors say little progress made on debt relief
The South Sinai Investors Association are saying that little progress was made on measures to address outstanding loans and the need to interject new capital into the flagging market. Even though banks have already agreed to postpone payments on outstanding loans to the sector by six month, the Association’s head, Atef Abdel Latif, said the action is insufficient considering the severity of the situation. “There is a need to support the establishment of a fund to support and modernise the tourism sector with a capital investment of EGP 2 bn,” he said. Abdel Latif also called on the government to increase spending on tourism promotion beyond the allotted USD 68 mn. (Read)

TELECOMS + ICT

Telecom Egypt projects 7-9% revenue growth in 2016
Telecom Egypt announced it is expecting its revenue to grow by 7-9% in 2016, according to Reuters. The company projected a profit margin before interest, tax and depreciation of 20-30%, it added. (Read)

EGYPT POLITICS + ECONOMICS

EU is negotiating financial assistance programme to Egypt, source says
The EU is currently assessing a financial assistance programme to Egypt that extends until 2020, a source told Al Mal. The source said the EU could grant Egypt EUR 300 mn in budgetary support for FY2015-16. The source added that the EU is prioritising financing water treatment, sewage, and electricity projects because of Egypt’s larger demand for them. (Read in Arabic)

Investment climate not conducive to large-scale investments, says Heikal
Ahmed Heikal Chairman of Qalaa Holdings blamed an investment climate marked by red tape, indecisive bureaucrats, and shrinking capital for hampering progress on major investment projects, Al Borsa reports, citing remarks the Qalaa founder made at a gathering organized by Cairo University. This environment is the reason why local banks hesitate to finance projects costing more EGP 200 mn, forcing larger investors to turn to foreign banks. These factors played a role in hindering Qalaa’s stalled USD 3.7 bn refinery project in Mostorod. The company went through a bureaucratic nightmare just to get permits to build infrastructure for the project. (Read in Arabic)

CBE’s new regulations hurting importers
The CBEs new import regulations were not met well by some importers speaking to Al Borsa. Khaled Sabry, head of shipping company First Group, warned that the move will not only impact shipping but the retail sector and consumer markets. These import restrictions must be balanced with measures to help increase exports and the tourism sector. Steel importer Waleed Suleiman states that the raising the required EGP deposits to cover letters of credit to 100% of the payment amount in USD from its current 50%, will achieve its intended purpose of limiting imports. This however, will bring inflation and the proliferation of inferior quality steel to the market, as imported steel is cheaper and of a higher quality. (Read in Arabic)

NATIONAL SECURITY

The Brotherhood’s Supreme Guide Mohamed Badie received a 10-year prison sentence for taking part in clashes in Suez following the forced dispersal of Rabaa, as found by a court ruling on Tuesday, according to judicial officials speaking to the AFP.  Badie has already received 5 life sentences and the death penalty in other cases.

ON YOUR WAY OUT

Hold on to your EGP 1 banknotes, they could be worth more soon. Sources told Al Ahram that the government will not print any more banknotes denominated EGP 1 or less, denying rumours that bringing back the EGP 1 note was being considered. Although in all seriousness, the only thing the EGP 1 note is good for these days is to serve as the unofficial currency of the Republic of Gouna.

SpaceX released a brief but clearer video of the Falcon 9 rocket landing from the vantage point of a nearby helicopter. (Watch, running time: 12 seconds)