Spending on fuel subsidies down 29% in 1Q14-15 • Lazard tapped for Sharm summit • Tax Authority reportedly mulling OCI verdict appeal • Salman: No current need for IMF borrowing • Egypt looks to host 2017 African Cup • Hokair looks to USD 2 bn malls IPO

FX WATCH

The USD sold for EGP 7.1401 at yesterday’s CBE dollar auction, unchanged from Thursday, while the day’s parallel market rate stood at c. EGP 7.67.

WHAT WE’RE WATCHING TODAY

According to a report in Al-Borsa, Tax Authority officials are preparing a memo for the State Lawsuits Authority in which they outline their original reasons for slapping Nassef Sawiris with an EGP 7.1 bn tax bill. Their fear: That they may be held liable in future for squandering public funds if they don’t appeal the recent court ruling voiding the tax settlement to which OCI had acquiesced last year during the darkest days of the Morsi interregnum. The report brings into sharp light calls from business leaders including Nassef Sawiris and Ahmed Heikal to enact a shield law that would protect government officials from prosecution and lawsuits for decisions taken honestly and while in full possession of the facts. We hope we’re making much ado out of nothing in highlighting this story, but… (More below)

Ashraf Salman has tapped Lazard to market the project book for the upcoming Sharm El-Sheikh conference.

LAST NIGHT’S TALK SHOWS

A disgruntled Tahany El Gebaly, the former Supreme Court Judge, made an appearance on Mohamed Sherdy’s show last night.

“We have the patriotic president that we wanted and we have no doubt about his ability tackle national security issues, but what is next?” asked El Gebaly. “I don’t think that we have the second-tier leadership that this population deserves after two revolutions,” she adds.

“I believe that the next Parliament will be a temporary one because we don’t have the proper infrastructure to carry out a fair election. We won’t have proper political representation because the political parties are, unfortunately, very weak,” said El Gebaly.  

Youssef El Housseiny continued his attack on the governor of Ismailia,Ahmed El Kasas, who has been under fire since last week for “general misconduct” (as the host put it) and the use of obscene language and hand gestures during a recent press conference. After digging up even more trash on the governor, El Houssieny urged the citizens of Ismailia to continue with their mini-revolution, claiming that Kasas’ time will be up very soon.

Al-Nahar’s Khaled Mahmoud interviewed Ashraf Thabet, the deputy head of the Nour Party, who defended his party against accusations that it was established on religious grounds.

“We are not a religious-based party,” said Thabet. Baffled at this declaration, Mahmoud, pointed out that El-Nour is a party that considers it haram to wish Christians well on their religious holidays. Also on the list of Nour no-nos: Singing the Egyptian national anthem and pledging allegiance to the Egyptian flag.

“Just because some of our members have made these claims, it doesn’t mean that this is the official party position. We don’t use religious slogans in our campaigns,” said Thabet.

Lamees El Hadidy put the spotlight on diabetes in honor of World Diabetes Day, which took place on 14 November, with interviews with doctors and medical researchers who work on the disease in Egypt.

(Editor’s Note: Egypt has one of the region’s highest incidences of diabetes, the largest absolute number of cases in MENA — and among the lowest rates of healthcare spending per diabetes patient, per a Nature report we picked up in Sunday’s edition.)

SPEED ROUND

The EGX30 lost 1.2% on Monday to close at 9,122 points with turnover of c. EGP 554 mn, about 22% below the 90-day average. The DFM and ADX were down 1.64% and 1.09%, respectively. The Qatar Stock Exchange was up slightly by 0.13% while the Saudi Tadawul was down 2.77%.

In the US, Dow Jones and S&P 500 were both up 0.07% to start the week, while the NASDAQ dropped 0.37%. Across the pond, the FTSE closed up0.25% on comments by European Central Bank President Mario Draghi yesterday in which he indicated that measures including government-bond buying could be used to stimulate eurozone economy. (Read a transcript of Draghi’s speech from the ECB).

The Nikkei 225 index posted its biggest one-day drop since August on Monday on the back of unexpected news that Japan is now in recession, while Hong Kong’s Hang Seng Index fell 1%, attributed to increased trade toward the Shanghai Composite (SHCOMP), which closed down 0.199%.

Egypt has retained Lazard Group LLC to help plan projects for the March 2015 Sharm El-Sheikh investor summit, Investment Minister Ashraf Salman announced yesterday.

European tour operators and industry figures met as planned with President Abdelfattah El-Sisi. The group discussed the importance of tourism industry and aims to have a closer working relationship with Egyptian tourism officials to increase tourist arrival figures.

Egypt is 1 of 4 candidates to host the 2017 African Cup of Nations. Also in the running are Algeria, Gabon and Ghana, according to a statement by the Confederation of African Football (Read in Sport24)

Quartz has a pessimistic take on opacity and endemic fraud in China’s Shanghai Stock Exchange Composite and its newly inaugurated Shanghai-Hong Kong Stock Connect: Now absolutely everyone can invest in China’s risky, fraud-ridden stock market. Within the Quartz piece is a link to a 71-page HSBC research report with a slightly more bullish outlook: Shanghai-Hong Kong Stock Connect | A big step towards greater market convergence(Download the pdf)

It seems almost everyone in the Arab world wants to buy Arab Dairy these days. The company is the producer of Panda Cheese, and its breakthrough ad campaign “Never say no to Panda” by Advantage Marketing and Advertising has amassed 31.4 million views on YouTube. GIFs captured from the commercials were first popularized as a meme a few years back and remain popular to this day: “some of the most memorable freakouts in the commercials continue to circulate in GIF form on Tumblr under the tag: Never Say No to Panda.”

See also: You’re a meme, ma’am.

EGYPT IN THE NEWS

The NY Times’ David Kirkpatrick is back in Cairo and serves-up this morning a piece headlined “From an Egyptian-American Prisoner on Hunger Strike in Cairo, a Letter Home,” which reproduces in full a letter “smuggled to his family and provided to The New York Times” by Egyptian-American Mohamed Soltan. The 27-year-old, the son of a leading Ikhwan figure, celebrated his birthday in prison on Sunday, having earlier recovered from the coma into which he was reported to have lapsed as a result of his 296-day hunger strike. (Read)

Mona ElTahawy writes for the New York Times a straightforward piece on the need to end FGM in Egypt: Fighting Female Genital Mutilation (Read)

Amy Hawthorne, Resident Senior Fellow with the Rafik Hariri Center for the Middle East at the Atlantic Council, has published an 11-page report on the future of America’s Foreign Military Financing (FMF) for Egypt (Download the pdf — or just read the final sentence of the report instead: “Continuing support from the defense industry and Egypt’s influential allies, as well as the sheer power of the status quo in a decades-long, deeply entrenched military aid relationship, portend incremental changes to the FMF program, rather than a dramatic overhaul.”)

ICYMI

Whether you personally think the World Bank should take performance onhuman rights issues into account or not, the movement to have it do so is afoot — and Egypt could well wind up being a high-profile test case. While Omm El-Donia is not mentioned (no country is, by name), a high-profile op-ed in the Washington Post recently called on the international community to make World Bank assistance contingent on a country’s human rights record. Of note here: The author is special rapporteur on extreme poverty and human rights at the UN Human Rights Council, and the piece has been re-tweeted by Kenneth Roth, Executive Director of Human Rights Watch. Read: The two words that scare the World Bank.

What else has Roth been tweeting about in the last few hours? “Egypt: Unprecedented Expansion of Military Courts“ on his very own HRW blog, a Reuters piece headlined “Egypt to try five students in military court on riot charges“ and Mona ElTahawy’s NY Times piece on FGM (noted above).

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Expenditure on fuel subsidy decreases by 29% in 1Q14
Reuters | 17 Nov 2014
Total state spending on fuel subsidies fell 29% year-on-year to c. EGP 22 bn in the first half of the government’s 2014-15 fiscal year, with the total outlay tumbling on the back of subsidy cuts enacted by the Sisi administration in July. Egypt’s subsidy spending for 1Q13 stood at EGP 31 billion, with the government targeting total fuel subsidy spending at EGP 100.3 billion during FY14/15. The move comes at the backdrop of government efforts to slowly fully eliminate fuel subsidy over a 3-5 year period. (Read in Arabic)

Note from Enterprise: At the start of FY 14/15 the government initiated a more active policy to reduce fuel subsidies by increasing the price of 95 and 92 grade octane, diesel, and natural gas. While the state’s fuel subsidy expenditures were expected to be reduced because of those actions, the potential for more significant savings remains tenable once the smart card system for selling and distributing fuel is implemented fully. However, the scope for further cuts without implementing the smart card system remains possible.

Gov’t prepares third “crash” plan to add 3 GW of electricity generation capacity
Al Borsa | 16 Nov 2014
Egypt’s electricity ministry received five bids from local and global companies to start building electricity projects related to a third contingency plan to deal with next summer’s power demands. The new plan calls for several power stations adding a total of 3,000 megawatts at a total cost of USD 2.3 billion. Sources told Al Borsa that the companies include El Sewedy, General Electric, Ansaldo of France, Siemens and Mitsubishi. The Ministry of Electricity had previously cancelled plans for a third contingency plan, but reversed its decision on fears of severe power outages next summer. Electricity Minister Shaker had previously said demand is expected to reach a peak of 30,950 megawatts in the summer of 2015, while current production capacity is only 24,500 megawatts. Shaker added that several power projects with a capacity of 3,500 megawatts, plus an additional 1,000 megawatts from increased efficiencies at existing power plants, will result in a total production capacity of 28,850 megawatts, still leaving a deficit of 1,950 megawatts for next summer. (Read in Arabic)

Ministry of education to collect the first solar power invoice from ministry of electricity
Al Masry Al Youm | 17 Nov 2014
Dr. Mahmoud Abul-Nasr, Minister of Education, says his ministry collected EGP 2,581 from the Ministry of electricity for solar power generated and sold to the national electricity grid. Abul-Nasr said solar panels are installed on the roof of one school in Alexandria, and that the ministry plans to expand these activities in the future on the back of the newly announced feed-in tariffs. (Read in Arabic)

OIL & GAS

Oil ministers from Egypt, Greece and Cyprus to meet next week to discuss natural gas cooperation
Al Ahram | 17 Nov 2014
The ambassador of Cyprus in Egypt Sotos Liassides, announced that a meeting between the oil ministers of Egypt, Greece and Cyprus will take place on 23 November in the Cypriot capital. The ministers will discuss ways to cooperate in the area of natural gas exploration and production, said Liassides. The ambassador also said that cooperation among the three countries was not a political alliance and was not directed against other countries.

TELECOMS

29% of Egyptian mobile phone owners use apps — Survey
Press Release | 16 Nov 2014
A survey conducted by Arab Advisors Group found, unsurprisingly, that 75% of mobile application users in Egypt are 34 years old or younger and that 30% of all mobile phone users are not aware of the software running their smartphones. The survey also found that mobile application users make up 29% of all Egyptian mobile phone users. (Read)

BANKING & FINANCE

NBK-Egypt reports EGP 273.5m in net profits in 9M 2014, up 5.6% y-o-y
Press Release | 17 Nov 2014
National Bank of Kuwait-Egypt, the subsidiary of National Bank of Kuwait Group (NBK) in Egypt, reported net profits of EGP 273.5m in the first nine months of 2014 compared with EGP 259mn in the same period last year, an increase of 5.6% yoy. As of end of September 2014, NBK-Egypt total assets increased by 29.4% y-o-y to EGP 22.9bn. Customers’ deposits grew 32.0 percent y-o-y to EGP 19.8bn. (Read)

MERGERS & ACQUISITIONS

Dubai-based EIIB-Rasmala announces full acquisition of Egyptian asset management business
CPI Financial | 17 Nov 2014
EIIB-Rasmala announced yesterday its full acquisition of Rasmala Egypt Asset Management S.A.E (REAM). The Group has increased its shareholding in REAM from 51 per cent to 100 per cent, following the acquisition of the remaining 49 per cent previously held by other shareholders. The firm’s equity composite average return consistently outperformed the market recording 31% in 2013 versus 24% for the EGX 30 and 21% for average equity funds in Egypt. According to performance rankings issued by the Egyptian Investment Management Association, REAM’s ABC Equity Fund was the best performing equity fund in Egypt in the last 12 months ended 30 September 2014. (Read)

OTHER BUSINESS NEWS OF NOTE

Tax Authority covering itself as officials mull appeal of OCI tax verdict out of fear of future lawsuit
Al Borsa | 16 Nov 2014
Officials at the Egyptian Tax Authority are in the process of preparing a legal memo for review by the State Lawsuit Authority regarding a recent decision to exempt Orascom Construction (OCI) from paying taxes on profits realized from the sale of its cement business to Lafarge. According to government sources, Tax Authority officials are worried they may be held accountable for squandering public funds if they do not appeal the decision, especially since the Tax Authority itself previously ordered OC to pay EGP 7.1 bn on capital gains from the sale. Further, the latest tax exemption seems to contradict a decision last month by the Administrative Court, which acquitted several Tax Authority officials of charges they had effectively coerced Nassef Sawiris into writing a check for EGP 7.1 bn in taxes. Government officials said the Tax Authority is concerned because court decisions often supercede decisions by government agencies. (Read in Arabic)

EK Holding (EKHO on the EGX) released its 9M consolidated results to the EGX yesterday, posting net income of USD 70 mn against USD 106 million a year ago. (Read the release in English).

EGYPT POLITICS + ECONOMICS

Ashraf Salman: No current intention on borrowing from the IMF
Al Masry Al Youm | 17 Nov 2014
Egypt’s Minister of Investment Ashraf Salman was quoted on Al Masry Al Youm denying any current government intentions on borrowing from the International Monetary Fund (IMF). The minister further stated that the current visit by the IMF delegation is for the purpose of reviewing the government’s recent economic reforms with the aim of issuing the Article IV consultation that the government hopes would serve as a seal of confidence in the Egyptian economy.  The current delegation is presently holding meetings with several ministers and as of yet issued no comments or recommendations. (Read in Arabic)

Qatar to participate in Cairo’s Arab Investor Conference on 22-23 November
Al Mal | 17 Nov 2014
Egypt’s Minister of Investment, Ashraf Salman, confirmed that a Qatari delegation will participate in the 16th annual Arabic Investor Conference, which will be hosted in Cairo during 22-23 November 2014. According to Ahmed El-Wakeel, Head of Chambers of Commerce Federation, the Qatari delegation will be headed by Sheikh Khalifa Al-thani, Head of Qatar Chamber of Commerce. (Read in Arabic).

Egypt to extend buffer zone with Gaza after finding longer tunnels of up to 1 km
Reuters | 17 Nov 2014
Egypt will double to one kilometre the depth of a security buffer zone it is clearing on its border with the Gaza Strip. “A decision was taken to increase the buffer zone along the border in Rafah to one kilometre. The decision … came after the discovery of underground tunnels with a total length of 800 to 1,000 metres,” the state MENA news agency said. (Read in Reuters)

Egypt welcomes UAE listing of MB as terrorist organization
Egypt State Information Service | 17 Nov 2014
Egypt welcomed the UAE’s decision on Sunday 16 November to add a number of organizations, including the Muslim Brotherhood, on its list of terrorist organizations. Spokesman for the Ministry of Foreign Affairs Ambassador Badr Abdel Aati said Egypt welcomes the UAE’s decision, referring to distinctive cooperation and coordination between the two countries in all fields including combating terrorism. He stressed the importance of intensifying efforts by all countries of the region to cooperate to confront terrorism, which has turned into a world phenomenon that threatens security and stability all over the world. (Read)

REGIONAL

Saudi Arabia’s Alhokair plans to raise USD 2bn from IPO of Arabian Centres malls unit
Bloomberg | 17 Nov 2014
Fawaz Alhokair group is planning to list its Arabian Centres unit publicly, probably on the Saudi market, in an attempt to raise around USD 2bn. Arabian Centres currently owns one outlet in Egypt and 15 malls in Saudi Arabia with nine more under construction. “We’re still in the early stages of working on this and discussing with potential financial advisers… the offering will be similar to what Emaar Malls did, maybe a bit bigger” said Muhanad Awad, chief executive officer of FAS Capital, Alhokair’s financial and investment arm. (Read)

Morocco to host 5th Global Entrepreneurship Summit
Al Masry Al Youm | 17 Nov 2014
Under the patronage of his excellency the Kind of Morocco, Mohamed V, the Global Entrepreneurship Summit is set to take place in Marrakech, Morocco on 19-21 November. GES 2014 will bring together more than 3000 entrepreneurs, together with heads of state, high level government officials, small medium enterprises (SMEs), corporate leaders, and young entrepreneurs. There will also be an ‘Innovation Village’ where entrepreneurs and innovators from Africa and around the world will be able to promote their projects and share new ideas on myriad topics. (Read in Arabic)

INTERNATIONAL

Prior to OPEC’s meeting, WTI and Brent drop as Japan is officially in recession
Reuters and Bloomberg | 17 Nov 2014
Brent crude price dropped by more than USD1 to c. USD 78 / bbl and WTI fell by 1.2%. Signs of global demand recovery took another blow as Japan’s Q3 GDP growth fell by 1.6% yoy, marking Japan’s official return to a recession. Brent prices could be affected by the outcome of OPEC’s meeting next week. (Read inReuters and Bloomberg)

ON YOUR WAY OUT

In the largest takeover of a U.S. energy company in three years, Halliburton agreed to buy Baker Hughes for USD 34.6 bn. Financed by a combination of cash and debt, the acquisition entitles every Baker Hughes shareholder to 1.12 Halliburton shares plus USD 19 / share. However, the deal is expected to draw antitrust scrutiny. (Read)

Global economic optimism? Weren’t we anticipating the economic End Times last month? In a piece headlined “Mega-Mergers Popular Again on Wall Street, Fueled by Economic Optimism,” Dealbook uses the Halliburton-Baker Hughes and Allergan-Actavis deals to frame a discussion on optimism and the obstacles faced by M&A deals. The crux of it: “Five years after the end of the financial crisis that reshaped the economy, it appears that big companies are finally willing to make big bets again, especially in the health care, technology and media industries. The conditions are ideal, with borrowing costs low and share prices rising. And chief executives are no longer worried about a double-dip recession or another eurozone crisis. Instead, they are betting on growth in the years ahead.” (Read)

How have academics done in their real-time efforts to understand the Arab world during and after the “Arab Spring?” It’s a question that’s apparently in vogue in Western circles these days, and George Washington University’s Marc Lynch (best known to some of us as @abuaardvark on Twitter) has an interesting walk-through of the state of the debate in the Washington Post’s Monkey Cage blog. (Don’t let the soporific title turn you off.) (Read)

England’s Football Association (FA) should get behind the German push to force reforms from world ruling body FIFA and join its European counterpart UEFA in a boycott of the next World Cup if there is no change, the association’s former chief said yesterday. “I think England within UEFA undoubtedly have the power to influence FIFA, but to do so they would have to consider withdrawing from the World Cup, the next World Cup, unless proper reform — including Mr [Sepp] Blatter not standing [for a fifth term] — is carried out at FIFA … Qatar is clearly a totally unsuitable place to hold a World Cup.”  (Read in Sport24)

Get me the president of Africa on the phone right now! The Economist looks at how ignorance and Ebola are nuking the continent’s football and tourism industries. (Read)

It shouldn’t deserve comment, but it does say something about the state of civility in our political arena: Actor Khaled Aboul Naga, once the darling of the Tahrir set, is suffering through a fairly vicious attack on Twitter for having criticised the Sisi administration. The attackers’ weapon of choice: Questioning his sexual orientation. Worse, the story is being picked up by B-grade Western media outlets, raising the risk of it crossing over to mainstream media in the days ahead. cf: “Egypt’s Brad Pitt Sued for Criticising el-Sisi, Highlights Police State on Freedom of Speech“

ASCOM’s BoD has approved increasing the mining and quarrying services company’s capital to EGP 500 mn from EGP 350 mn through the issuance of new shares at book value.

Arabtec million-homes project may not be a dead letter. While we remain skeptics at Enterprise, Al-Mal is quoting Minister of Housing Moustafa Madbouli as saying the UAE will arrange financing for Arabtec’s mammoth undertaking. Arabtec is due to deliver c. 150,000 units within three years of the start of construction, the paper said, with units in the 90-120 sqm range.
Egypt and KSA will move ahead with a tender to connect the two countries’ electricity grids, Youm7 reports.

A 19-year-old woman who raised chickens at home is the second Egyptian to die of H5N1 bird flu so far this season, the AP reports.

Financial Times discovers clickbait: “It is a tale that could have come from the cold war. A mysterious object launched by the Russian military is being tracked by western space agencies, stoking fears over the revival of a defunct Kremlin project to destroy satellites.” Read “Space junk or Russian satellite killer?“

So does Ahram Online: Is the world running out of chocolate? “Chocolate industry leaders warn of ‘potential shortage’ within five years caused by Asian demand and climate change”