Sunday, 30 November 2014

Egypt repays Qatar • interest rates on hold • 11 mining concessions up for grabs • HSBC to refund excessive fees • Mubarak charges dismissed • Friday protests fizzle • AXA to enter via greenfield • BG + BP hit deal on Borollos • EGPC gets USD 1.5 bn for IOCs

FX WATCH

EGP steady on official, stronger on black market: Reuters reports Egypt’s pound held steady at a central bank dollar sale on Thursday but strengthened slightly on the unofficial market. The bank offered USD 40 million on Thursday and said it had sold USD 37.6 million at a cut-off price of 7.1401 pounds per dollar, unchanged from its last sale. In the unofficial market, the pound was trading at EGP 7.60 to the dollar, slightly stronger than Wednesday’s rate of EGP 7.63. (Read)

WHAT WE’RE TRACKING THIS WEEK

For the first Sunday in the 2+ months since we began this experiment called Enterprise, we have little clarity on the week ahead after headlines of the past seven days were dominated by three (and only three) topics: OPEC and oil prices; expectations of violence at Islamist protests this past Friday; and the Mubarak trial verdicts yesterday. Of the three stories, only oil prices will have legs beyond today.

Broadly speaking, we expect this week will set the agenda for the final month of the year as corporate execs put the finishing touches on their FY15 plans and all eyes turn toward the 3+ month march to the Sharm investment summit.

LAST NIGHT’S TALK SHOWS

The dismissal of charges that Hosni Mubarak had ordered the murder of protesters during the 25 January Revolution and his acquittal on unrelated corruption counts dominated last night’s talk shows.

Amr Adeeb, Mohamed Sherdy, Osama Kamal, Magdy El Gallad andLamees El Hadidy all devoted significant portions of their programs to commentary on the controversial verdicts from legal experts, political figures and Interior Ministry spokespeople. The majority were in support of the dismissal of the charges against the ousted president, his sons and his top security aides; the few callers who voiced an opinion against the rulings did not appear to be surprised by it.

The talk show hosts all appeared to be making a significant effort to calm public opinion by pointing out that Mubarak has been acquitted of criminal charges which is different from being acquitted of political crimes; the main message being “we need to calm down, the verdict is by no means a nullification of the January 25 Revolution.”

Intermittent reports of protests taking place near and around Abdel Moneim Riad Square were also featured last night, with hosts pointing out that the majority of the protesters were ikhwani.

“Some people are rejoicing, while some are devastated, but this is the decision of the court and we have to accept it. Mubarak has been in prison for more than three years now and he is 86 years old. Let’s not lose sight of that. Even though it’s a bit strange that Habib El Adly has been acquitted, it is what it is, said Lamees El Hadidy, who was a spokesperson for Mubarak’s 2005 presidential campaign. ”We have to abide by the law and we have to move forward. This verdict is by no means a judgment on the Mubarak era as a whole, but rather on the specific issues at hand. We are not justifying everything he did during his term as president.”

Youssef El Housseiny hosted Hany Sarie Eldin, head of Sarie-Eldin & Partners Legal Office, which is part of a group working to establish a general plan for the Suez Canal development project. Sarie Eldin spoke about the establishment of a new authority to facilitate investment procedures in the canal zone as well as the general investment climate in Egypt.

“We cannot blame the Ministry of Investment for the problems of investors because the majority of logistical issues that stand in the way of new investment is completely out of their hands. The delays are often the fault of the ministry of electricity, the ministry of petroleum, the ministry of housing, the ministry of agriculture — et cetera. Unless we give the Ministry of Investment real authority to act in behalf of the investor, it cannot be held responsible,” said Sarie Eldin.

Commenting on the upcoming Sharm investment summit Sarie Eldin said, “A lot of countries around the world want to help us. Even those who are criticizing us politically see that there is potential for growth and potential for investment. These are givens whether or not you like what we are doing politically. What this means is that there is always hope.”

MUST READ

Foreign Minister Sameh Shoukri has helped spearhead not only a turnaround of Egypt’s foreign policy, but has genuinely crafted a policy based rationality, the supremacy of the nation state, and economic cooperation as a basis for deepening (and, in some cases, rehabilitating) international ties. In this important interview with Asharq Al-Awsat newspaper, Shoukri speaks out on Qatar’s alleged promise to pursue reconciliation with its fellow Arab states, including Egypt. However, given that Qatar has made no obvious effort to change its ways, and that Al Jazeera English and Mubasher Misr have yet to display any change in their coverage of Egypt, FM Shoukri is absolutely correct to reiterate that the ball is in Qatar’s court. He also casually drops interesting bits of information, including the fact that General Haftar has been officially reinstated into the Libyan army. It seems Reuters has not yet caught on to this development; they always seemed to really enjoy calling Haftar a “rogue.” Read Foreign Minister Same Shoukri’s interview in English here.

SPEED ROUND

The EGX 30 rose 0.99% on Thursday to close at 9,325 points on EGP 686 mn in turnover, on par with the 90-day average. KSA’s Tadawul lost 0.3%, Kuwait dipped 0.5%, the ADX eased 0.5% and Qatar shed 1.4%. Only the DFM joined the EGX by closing the day in the black, up 1.2%.

The EGX 30 was up 0.55% last week and 37.49% year-to-date.

US markets were closed on Thursday for the Thanksgiving holiday and re-opened for a shortened session Friday in which the Dow Jones was flat, Nasdaq gained 0.09% and the S&P 500 shed 0.25%. Energy shares slumped with crude prices, netting off gains by retailers as investors looked to what they hope will be a strong holiday shopping season. Wal-Mart reported Friday that Thanksgiving Day was it’s best-ever day of online sales, topped only by Cyber Monday last year, MarketWatch reported.

Asian markets were mixed Friday, with the Nikkei in the green on falling oil prices and stronger exports thanks to a weaker yen. The Shanghai Composite was also up, while the Hang Seng and Korea’s Kospi were both down 0.07%, according to CNBC.

Brent crude marked it’s largest single-day slide in five years as OPEC moved to leave production ceilings unchanged. (See below for a special roundup)

CBE keeps key interest rates on hold: As we projected on Thursday morning, the CBE’s Monetary Policy Committee kept key interest rates unchanged. Overnight deposit rates were held at 9.25% and lending rates at 10.25%. The CBE cited “the balance of risks surrounding the inflation and GDP outlooks” as the main driver behind its decision. (Read in Reuters or check out the MPC press release here)

President El Sisi’s visit to France last week brought the signing of a number development agreements as well as the announcement that French insurance group AXA will going the greenfield route in Egypt, not acquiring an existing business as it did in Nigeria on Friday. Read our summary of this and the President’s other French meetings in our In Focus feature (following Egypt Economics + Politics, below).

Coming on the heels of Pioneers beginning its buy offer on Arab Dairy today as noted below in our Mergers & Acquisitions section, consumer industry site just-food writes on the increased M&A activity in the Egyptian food sector. While there’s not much new here for those in equity research, it’s a great primer for those unfamiliar with the sector’s drivers: Profiles: Egyptian takeover targets Arab Dairy and Bisco Misr.

The costs, benefits, and impact of Middle East energy subsidies are the subjects of a short (c. 10 min) World Bank video debate between the director of the Center for Strategic Studies at the University of Jordan and the World Bank MENA Chief Economist. Among the take-aways: “…the worst problem with the energy subsidies is that they discriminate against employment. And the reason is that most energy subsidies benefit energy intensive industries — well, it turns out that energy intensive industries are also capital intensive.” The video and accompanying transcript of the debate are both available here.

In good news for the climate and renewable energy, Engadget reports the world’s largest solar farm has been completed in California. Topaz is a 550MW plant consisting of 9 mn solar panels spanning 9.5 square miles and is set to power 160,000 households. (Read)

The European Parliament wants to break up Google and separate its search engine from the other commercial services. The Economist takes a fairly neutral stance on the issue but notes that governments shouldn’t be too active in breaking up a digital monopoly because the barriers to entry are low (Read). Bruegel’s analysis sides with Google and expects that a break-up, despite helping competitors, could end up leaving final users worse off (Read).

Barclays to launch video banking service. Barclays Premier customers will be able to ring-up their bankers for a video chat about their portfolios starting 8 December (in the UK, at least; there’s no clarity at the moment one when the service might roll out globally). The service, to be officially announced this week, will roll out to wealth management, business and mortgage clients next year, the FT reports, calling it the first service of its kind in Europe. The Telegraph points out that UK lender Nationwide introduced a video interview service for mortgage applicants this past spring. The move comes as European and North American banks look for ways to push traffic out of physical branches and onto the internet and telephone lines to reduce overheads. (Read in the Telegraph or in the FT or check out Nationwide’s press release)

PLANET ERDOGAN

Kurdish officials in Kobane, as well as a Britain-based monitor, said two suicide attacks by Daesh militants were launched on Saturday in the Mursitpinar border post from Turkish soil. Turkish military officials are denying the claims (Radio Free Europe)

Turkish Foreign Minister Davutoğlu is to visit Greece on 5-6 December amid the ongoing gas row in the east Mediterranean (Read)

EGYPT IN THE NEWS

The case against former president Hosni Mubarak, his interior minister and six aides for the deaths of protesters in January 2011 was dismissed on a technicality on Saturday, with the judge separately finding Mubarak and his sons not guilty of corruption. The prosecutor still has the opportunity to appeal. International coverage of the dismissal and acquittal focused on two aspects of the verdict: the ensuing protests outside the entrances of Tahrir which resulted in the death of one protester, as well as pointing to the current national context to explain both the decision and the muted reaction among many Egyptians.

Both the BBC and the WSJ featured either video or large photos of the protests on Saturday, while WaPo and the Atlantic both noted Mubarak’s brief call-in to Sada El Balad in which he insisted on his innocence: “I never did anything wrong, so I just waited for what the court would present, and I was declared innocent,” Mubarak said. You can also check out coverage in the Financial Times and theNew York Times.

Media outlets had earlier used the fizzling of Friday’s planned Islamist protests as springboards to discuss the clampdowns on dissent and Islamists in Egypt. The New York Times (“6 Are Killed in Egypt After a Call for Protests Rattles the Authorities“) joined USA Today (“Explosions rattle Egypt amid calls for Islamic uprising“) in giving the story the most prominence and the most sensationalist headlines of the mainstream press, while the FT and WSJ weighed in with more muted takes.

Meanwhile, as many of you have probably already heard, Rupert Murdoch really stepped into it on Twitter when he suddenly became possessed with the notion of commenting on the ethnic makeup of Egyptians:

@rupertmurdoch: Moses film attacked on Twitter for all white cast. Since when are Egyptians not white? All I know are.
2,135 Retweets

@rupertmurdoch: Everybody-attacks last tweet. Of course Egyptians are Middle Eastern, but far from black. They treated blacks as slaves
936 Retweets

@rupertmurdoch: Change the subject. What chance more decent jobs as Europe, Japan, Russia, India, China all start to head south? Dangerous time.
91 Retweets

@JeffreyGoldberg: The existence of Egyptian Jews of various hues would probably blow Rupert Murdoch’s mind.

Al Arabiya reports that American-Egyptian NBC correspondent Ayman Mohyeldin on Thursday won Esquire Magazine’s Journalist of the Yearaward. As noted by CNN Money, Mohyeldin was at the center of a controversy earlier this year when NBC decided to pull him out of Gaza, allegedly for his empathetic reporting on Palestinians, only to be met with outrage online that eventually led the network to reinstate him in his coverage.

Amnesty International issued a press release on Thursday urging the end of demolitions and evictions in Rafah in order to create a buffer zone with Gaza, while Human Rights Watch did the same with a long take on the steps Egypt needs to take to curb FGM after the nation’s first trial on the despicable practice ended in acquittals.

Ramy Essam cut the ponytail — finally. A Hero of Tahrir Square Comes to New York in The New Yorker.

Finally, the government’s drumbeat against terrorism continues: Prime MinisterIbrahim Mehleb, speaking La francophonie, an annual meeting of French-speaking countries held this year in Senegal on 29-30 November, said yesterday: “Terrorism has become a well-developed, well-organized industrywhose primary production input is ignorance.” Mehleb also noted Egypt’s long-standing ties to Francophone Africa (Boutros Boutros-Ghali was first secretary-general of La francophonie) and paid homage to former Senegalese leader and outgoing Francophonie sec-gen Abdou Diouf, who made headlines by both coming to power through peaceful succession and who left office willingly after losing his 2000 re-election bid. (More)

SPOTLIGHT ON — Oil prices

Saudi spurs OPEC to leave production unchanged, looks to drive stake in US production boom

  • Saudi Arabia trumped Iran, Algeria and Venezuela as KSA Oil Minister Ali Al-Naimi convinced the cartel to leave production ceilings unchanged.
  • The 30 mn bbl daily ceiling is at least 1 mn bbl per day higher than OPEC’s own projection for oil demand in 2015, Reuters reported.
  • Saudi’s target: Booming US and Canadian shale oil and gas projects. “Naimi spoke about market share rivalry with the United States. And those who wanted a cut understood that there was no option to achieve it because the Saudis want a market share battle,” Reuters said, quoting a source who had been briefed by a non-Gulf OPEC minister.
  • Brent hit four-year lows, touching USD 69.73 / bbl on Friday before settling at USD 70.15, dragged down by oversupply as well as sluggish growth in Europe and China. It was the biggest one-day drop in five-years, Reuters noted.
  • How low will it go? Most stories this weekend saw it settling in the USD 60-65 range.

EGPC expects fuel subsidy spending to come in 25% below budget in FY14-15: Egyptian General Petroleum Corporation chief Tarek El-Molla says falling oil prices will lower this year’s fuel subsidy bill by 25% to EGP 75 bn against the EGP 100 allocated in the current fiscal year’s budget. Notably, the fuel subsidy bill for the first quarter of FY14-15 declined to EGP 22 bn against EGP 31 bn in the same period of last year. (Read in Arabic)

Low oil prices could last up to two years: US crude (West Texas Intermediate, presumably) could hover around USD 70 / bbl for up to two years, says the Globe and Mail, quoting a Toronto analyst as noting: “From Saudi Arabia’s point of view, ‘You do not want any more US production coming on. That means a minimum of six months to two years of low, low prices.’”

Winners and losers
Canada’s Financial Post and the New York Times were among a number of outlets this weekend to look at who wins and who loses. Among them:

  • Winners: The Egyptian budget (see below)
  • Winners: Motorists and consumers in the US, Canada and Western Europe
  • Losers: Alberta oil sands producers, shale producers in the US and Canada, drillers deep offshore in the Gulf of Mexico
  • Losers: Vladimir Putin. Russia derives c. 50% of its state revenues from oil.
  • Losers: Venezuela. Declining production and declining prices do not a happy socialist nation make.
  • Losers: Iran — The country is reportedly “storing as much as 100,000 barrels a day on tankers because it is unable to find markets,” the NY Timesreports.
  • Mixed: Central bankers in Western Europe, Japan and even the US, where falling prices will make it more difficult to keep inflation up in the 2% band they’re all targeting.

Bahrain, KSA and Oman have fallen below fiscal break-even; UAE on the borderline
As we reported last Wednesday:

  • Bahrain, Saudi Arabia, Oman — all have fallen below fiscal break-even
  • UAE — on the borderline in the low USD 79 / bbl break-even
  • Qatar, Kuwait: Plenty of room yet to run with a fiscal break-evens at around USD 54 / bbl

Check out Table 6 of the IMF’s Regional Economic Outlook for the fiscal and external break-even points of the region’s oil producers (pdf download for theOctober 2014 update, or compare the figures to the earlier May 2014 edition).

Not a loser, whatever you might read: Renewable energy in the electricity sector. Nothing is going to stop the long-term march toward generating power from wind and sun. (The New Republic has an interesting look at how this plays out in the US, where oil is mostly a fuel / transportation play and not tied to electricity generation.)

Cheap energy is the new cheap labor (at least for now), the FT’s John Gapper tells us in a well-reasoned piece: “For two decades, the biggest driving force in industrial globalisation was the gap in the price of labour between the developed world and China. … Now, as the wage arbitrage between the north and south narrows, the energy gap is widening. … Although cheap fuel theoretically helps every energy-dependent country, the gains are distributed unevenly. The big beneficiary, thanks to shale natural gas, is the US. (Read)

How did EGPC get to its 25% forecast? Here’s our take: EGPC head Tarek El-Molla said that the drop in oil prices will be reflected in a 25% reduction of the fuel subsidy bill. In its FY14-15 budget, the Ministry of Finance projected oil prices at USD 105 / bbl, but the first five months of the fiscal year saw Brent crude averaging under USD 95.As long as the next seven months don’t see an average oil price of over USD 112 / bbl, the fuel subsidy cost will be reduced automatically. Alone, the price decrease doesn’t appear to account for the 25% reduction El-Molla is predicting, but with actual measures to reform the current subsidy regime and rising domestic fuel prices, it could be achieved.

Low oil prices provide the Sisi administration with a chance to enact even more aggressive economic reforms. The drop in international oil prices dampens the potential financial impact of reducing the energy subsidy, creating an opportunity to accelerate the reforms to fuel subsidy expenditures. This would mitigate the fiscal impact of the increased expenditure on unbudgeted projects and make it substantially easier for the administration to achieve its budget deficit target of 10.5% of GDP.

WHAT YOU CLICKED ON LAST WEEK

The five most-clicked links in the Enterprise Morning Meeting for the week of 23 November were:

1. IMF Staff Concludes 2014 Article IV Mission to Egypt (IMF press release)
2. The Future of Big Business in Egypt (Carnegie Middle East Center paper)
3. The power of the street (FT Data blog post) (tie)
3. What Hagel got right (Foreign Policy blog post) (tie)
4. MENA Capital Confidence Barometer: Smaller strategic deals lead market recovery (Ernst & Young) (pdf)
5. Global Petroleum Survey 2014 (Fraser Institute) (pdf)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Sources: 175 companies apply for renewable energy projects
Al Mal, Al Borsa, Ahram Online and Egypt Independent | 26 Nov 2014
According to the Ministry of Electricity and Energy, demand for establishing renewable projects by local and international companies have skyrocketed as a number of local and international companies have applied and submitted proposals for solar and wind energy production facilities. There seemed to be some confusion in the Egyptian press as to the number of bids offered: Al Mal reported 60, Al Borsa reported 150, while Ahram Online and Egypt Independent both reported 175 companies, with Ahram Online quoting state news agency MENA. Among the companies that the ministry disclosed as having applied were Neon, EDP Renewables, Solon, RTR, First Solar, and Sun Power. (Read in Arabic in Al Mal, or in English in Ahram Online and Egypt Independent)

OIL & GAS

BG, Petronas and Gaz De France to invest USD 700 mn in Egypt; BP and BG agree to share facilities at Burullus to develop North Alexandria Fields
Amwal Al Ghad and Al Borsa | 27 Nov 2014
Egypt’s Oil Minister Sherif Ismail witnessed a signing ceremony between the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding Company (EGAS) with BG, Malaysia’s Petronas, as well as Gaz de France (GDF) with a total investment value of USD 700 mn, as reported by Amwal Al Ghad. According to the minister, the new agreement aims to connect GDF’s West Borollos field in the Mediterranean Sea to its Processing Plant at a rate of 100 million cubic feet of gas per day. Al Borsa, meanwhile, reports BP and BG have agreed to share BG-owned production facilities at Burullus to help connect Phase 1 of the North Alexandria fields to the national gas network, to take effect from the first quarter of 2017 and will connect 600 mcf of gas per day, according to a senior official at EGAS. (Read in Arabic in Amwal Al Ghad and Al Borsa).

EGPC to borrow USD 1.5 bn to repay IOCs
Bloomberg | 28 Nov 2014
NBE, HSBC, and National Bank of Abu Dhabi will each lend EGPC USD 500 mn by next month. EGPC will use the loan to repay foreign partners, who are currently owed USD 4.9 bn by EGPC. (Read)

Dana Gas in talks with government to increase gas prices
Reuters | 27 Nov 2014
Dana Gas said it was in talks with the Egyptian government to secure a higher price for some of the natural gas it extracts. Dana Gas’ CEO, Patrick Allman-Ward explained that “[Dana Gas’s] existing concession agreements in relatively low-cost environments onshore don’t fall into that category, but we do have some shallow gas in our existing onshore assets which probably do fall into that category” noting a provision that allows for increases if the price was not commercially viable. Dana Gas is still owed USD 276 mn by the Egyptian government, of which USD 160 mn is overdue. (Read)

Egyptian refineries operating at 75% capacity; energy subsidy cuts leading to higher electricity generation costs
Afrigate, Petroleum Future | 26 Nov 2014
Amr Mustafa, the Vice-President of Operations of EGPC, has reportedly said Egypt’s refineries are operating at 75% of maximum capacity. According to Tamer Abu Bakr, the head of the Energy Committee at the Federation of Egyptian Industries, the government’s policy of phasing out petroleum subsidies have led to a 19.6% increase in costs of electricity generation, adding that the government must compensate by relying more on natural gas as a more economical feedstock, Afrigate quotes him as saying. In Petroleum Future, Abu Bakr is quoted as saying energy consumption is expected to rise 5-7% next year, with 40% of that consumption geared towards electricity production and 24% geared towards industry and manufacturing.

Delek Group posts 3Q14 results, continues negotiations with BG Egypt
CNN Money | 27 Nov 2014
Israel’s Delek reported a 103% y-o-y rise in 3Q14 net income to NIS 150 mn on increased contribution from of the oil and gas exploration and gas production operations segment as well as a contribution of the insurance and financial services segment and the automotive operations. Delek said they will continue their negotiations with BG International Ltd towards the signing of a Binding Agreement for the supply of natural gas to its existing liquefaction facilities in Egypt. (Read)

Egypt signed 34 exploration agreements during past six months
Al Mal | 27 Nov 2014
After a three-year halt in inking oil & gas exploration agreements, Egypt has signed a total of 34 contracts during the previous six months, according to Khaled Abdel Badie, Chairman of EGAS. Badie added that the new agreements are poised to boost energy production and are part of the government’s five parallel projects aimed at increasing production either through agreements with existing suppliers and producers or by expanding exploration. (Read in Arabic)

New bid for exploration of shale gas coming soon
Shale Gas International | 26 Nov 2014
An EGAS official said EGPC will hold a special bid for exploration and production of shale gas in four areas in the Western Desert. The new shale agreements will be for durations in excess of twenty years, with prices set depending on whether gas is produced from surface, deep water, or shallow waters. Jeroen Regtien, President of Shell Egypt, said that shale gas production trials will begin this month in the Apollonia area in the Western Desert with Apache.
Enterprise Notes: This is an international pickup of a nearly month-old story.

BASIC MATERIALS & COMMODITIES

Government to open international bidding on 11 mining concessions in Eastern Desert and Sinai
Al Mal News | 27 Nov 2014
The head of the Egyptian Mineral Resources Authority (EMRA), Omar Toema, announced that the authority has made preparations to open bidding on 11 concessions potentially containing deposits of lead, sulfur, carbonate and other strategic minerals located in the Eastern desert and a number of locations in Sinai. The concessions will be administered under laws governing concession rights by foreigners; the regulations include prohibiting export of mined material unless the ore extracted has been locally refined. The authority expects to launch tenders for 7-9 concessions annually starting next year and anticipates the issuance of a new national mining law before the end of December 2014. (Read in Arabic)

MANUFACTURING

Egyptian Iron and Steel loses EGP 50 mn in five days due to workers strike
Al Borsa | 27 Nov 2014
Egyptian Iron and Steel incurred a total of EGP 50 mn losses for five days due to workers’ strikes as workers requested payment of what they claim is 16 months of back-due wages amounting to EGP 146 mn. IRON’s losses reached EGP 1.3 bn in 2013 to 2014, as reported by Al Borsa. (Read in Arabic)

REAL ESTATE

GAFI figures show UAE preference for investments in tourism, real estate
Daily News Egypt | 29 Nov 2014
The UAE is the second-largest Arab investor in Egypt after KSA at USD 10 bn, per newly released figures from GAFI, with a preference for tourism (35% of total), real estate (30%), agriculture (10%) and telecommunications (10%), the Daily News reports. The figures appear to cover a 43-year period spanning January 1970 through 31 October 2013 and, rather oddly, rank Qalaa Holdings and ASEC Cement at 10 and 11, respectively, on the list of the “50 largest Emirati companies investing in Egypt.” Both are Egyptian companies with Emirati shareholders, and ASEC Cement is also listed as 19th on the list (Aramex is also listed twice). Other Egyptian companies making the list of top Emirati investors in Egypt include Techno Lease, Cairo Capital Group and Sarwa Capital. (Read)

Egypt Builders Forum 2014 wraps up
SIS release | 27 Nov 2014
Prime Minister Ibrahim Mehleb witnessed on Tuesday 25 November the signing of cooperation protocol between the public buildings and housing partnership and Emaar Misr in the field of training in construction sector. This came on the sidelines of Bonat Misr (Egypt Builders) Conference, which was opened by Mehleb. The conference was attended by a number of government ministers. Bonat Misr 2014 is a two-day event organized by the Egyptian Union for Construction Contractors. (Read)

TOURISM

Saudi tourism official arrives in Egypt; Kingdom pledges to bolster tourism ties with Egypt
Saudi Press Agency, SIS and Arab News | 27-28 Nov 2014
Prince Sultan bin Salman bin Abdulaziz, President of the Saudi Commission for Tourism and Antiquities, arrived in Cairo late last week to head the delegation of the Kingdom of Saudi Arabia to the seventeenth session of the Council of Arab Ministers of Tourism. Prince Sultan was received at Cairo International Airport by Egyptian Tourism Minister Hisham Zaazou and Saudi officials, where he spoke to reporters about the Kingdom’s relations with Egypt. “My visit here is to express our continuous support as Saudis for Egypt and its people, not only to attend the conference,” he said. The outcome of the meeting included Prince Sultan bin Salman saying that plans to boost tourism ties with the Arab world, particularly Egypt, as well as the Arab Tourism Ministerial Council’s approval of a plan to develop a comprehensive Arab tourism strategy. (Read the release from the SPA,SIS and Arab News)

TELECOMS

Ericsson to refurbish Mobinil’s networks
Zawya | 27 Nov 2014
Mobinil signed a five-year agreement with Ericsson to enhance its network and its ability to provide improved data services via Ericsson’s Packet Core solution. The agreement will also include Ericsson’s employees providing professional services such as design and integration of the various nodes of the Packet Core as well as data migration services. (Read)

BANKING & FINANCE

Is an uptick in state borrowing crowding out the private sector?
Al Ahram | 27 Nov 2014
Egypt’s Ministry of Finance has auctioned some EGP 7bn in treasury bills on Thursday with a further EGP 6 bn scheduled for today (Sunday), Al-Ahram reports. This brings the total issuance for November 2014 to EGP 67 bn with another EGP 83.5 bn planned for December. The uptick in borrowing aims to plug the budget deficit, which stood at EGP 65.7 bn during the first quarter of FY 2014/2015, up 9.9% over the same period last year. The increased borrowing, however, has raised concerns within the private sector on its effect on the banking system and the availability of credit. With yields as high as 12%, government paper is said to be crowding out private sector lending. Egyptian banks currently hold a portfolio of EGP 257 bn in T-bills, 51% of which is held by public sector banks. (Read in Arabic)

HSBC to refund Middle East, Africa customers for excessive fees
Reuters | 26 Nov 2014
HSBC will refund customers across five countries in the Middle East and North Africa for charging them excessive foreign currency fees on debit and credit card transactions, the lender confirmed to Reuters on Wednesday. “We found we could have better explained how we charged fees for foreign currency transactions, especially if more than one fee was applicable,” HSBC’s spokeswoman said. One customer told Reuters they had been informed by email that they would receive more than AED 3,000 dirhams (USD 817) in refunds dating back several years. Other customers were notified they would receive smaller amounts. TransferWise, a UK-based transfer provider, has helped organise an online petition — so far signed by more than 17,000 consumers — calling for British regulators to force banks to tell consumers how much they make on everyday foreign currency transactions. (Read)

MERGERS & ACQUISITIONS

Pioneers to start buy offer for Arab Dairy today, 30 November
Al Borsa, Ahram Online | 27 Nov 2014
Pioneers Holding will start buying the shares of Arab Dairy company at EGP 56 per share today, with the offer set to last 20 days, from Sunday, 30 November to Thursday, 25 December 2014. Pioneers Holding previously received approval for their mandatory purchase offer from the Egyptian Financial Supervisory Authority in order to acquire 3.61 mn shares of Arab Dairy. The company is locked in a battle for Arab Dairy with KSA’s Arrow and Europe’s Lactalis. (Read in Arabic or in English on Ahram Online).

OTHER BUSINESS NEWS OF NOTE

Qalaa Holdings to issue shares by May for swap, restructuring
Reuters | 27 Nov 2014
Egypt’s Qalaa Holding[s] will issue shares worth EGP 4 bn by May 2015 to advance a major restructuring, a company official told Reuters, which had reported last month that Qalaa was considering a swap of shares in the holding company for larger stakes in the subsidiaries in which Qalaa has invested. That should help streamline its structure, boosting efforts to tighten its focus around five key sectors (energy, transport, agrifood, mining and cement) and bring an end to years of losses. “The next capital increase is in April, May 2015 through a swap with more investors [from subsidiaries]” Amr El-Garhy, head of corporate finance and investment review. He said he expected the share sale to be launched “soon,” but provided no details. (Read)

EGYPT POLITICS + ECONOMICS

Egypt repays USD 2.5 bn to Qatar
Al-Masry Al-Youm, The National | 29 Nov 2014
A central bank official said that Egypt has repaid on Friday a USD 2.5 bn Qatari deposit as its tenor reached maturity. The official added that the repayment was financed from the CBE’s foreign currency reserves that stood at USD 16.9 bn at the end of October, noting that the repayment will have a direct effect on the reserve balance. Egypt had repaid a USD 500 mn deposit to Qatar in October, and after this weekend’s USD 2.5 bn payment, only USD 500 mn remain outstanding to the Gulf nation due for repayment during the second half of 2015. (Read in Arabic or in English).

Up to 40% of bridges in Egypt are overdue for maintenance
Ahram Online | 27 Nov 2014
Some 700 of Egypt’s 1,706 bridges have “exceeded their maintenance limit,” Ahram Online quotes General Authority for Roads, Bridges and Tunnels chief Saad El-Goyushi as saying. Moreover, c. 75% of the nation’s roads are “in urgent need of rehabilitation,” the story says. El-Goyushi said that the Ministry of Planning has agreed to divert funds allocated for new road and bridge construction to fund the maintenance of existing ones, although we’re unclear how the MoP would have the authority to green-light that given GARBT falls under the Ministry of Transport. GARBT manages about a third of Egypt’s roads and bridges, Ahram Online says, but none in Cairo with the exception of the Ring Road. (Read)

Qalyubia Governorate proposes EGP 2 bn resort project, refurb of irrigation infrastructure, river transport corridor
Al Mal News | 27 November 2014
According to Mohamed Abdul Zahir, the governor of Qalyubia, the local government in collaboration with the ministry of international cooperation have drawn up plans for projects aimed at revitalizing the province which will be unveiled at the economic summit in March. These projects include establishing and developing river transport infrastructure between Qalyubia and Upper Egypt and refurbishing water and irrigation infrastructure. Another plan seeks to develop a resort town on 70 feddans of land on the shores of lake Arab Alaleqat, a project expected to be worth EGP 2 bn. (Read in Arabic)

USD 10.3 bn total trade between Egypt and China
Al Masry Al Youm | 29 Nov 2014
Mohamed Dawood, the head of Egyptian Commercial Service, was quoted on Al Masry Al Youm saying that total trade between Egypt and China reached USD 10.3 bn during 2013, an 8.4% increase over the previous year. Dawood also added that total Egyptian exports to China stood at USD 1.9 bn, namely petroleum products, marble and granite, while Chinese exports to Egypt standing at USD 8.4 bn are mainly textiles, mobile phone and automobiles. (Read in Arabic)

Egyptian ambassador in Canada raises hope for release of dual citizen Al Jazeera journalist Mohamed Fahmy
Ottawa Citizen | 26 Nov 2014
The new Egyptian ambassador to Canada has said he’s still working on the case of Mohamed Fahmy, the Egyptian-Canadian Al Jazeera journalist who was sentenced to seven years in an Egyptian prison on terrorism charges. H.E. Ambassador Motaz Munir Zahran, who arrived in Ottawa in September, said in an interview this week that a recent decree issued by Egyptian President Abdelfattah El-Sisi allows Egypt to deport foreign prisoners, a move that might lead to Fahmy’s release to Canada. The remaining question, however, is whether dual citizens are eligible. “There’s always hope, and I think the families were gratified by this new decree,” Zahran said. “There’s one legal question that needs legal interpretation and this is what the executive branch is trying to determine.” (Read)

Clear economic vision is big challenge for Egypt in 2015: EFG-Hermes Head of Research
Daily News Egypt | 26 Nov 2014
Wael Ziada, Head of Research at EFG-Hermes, sat with Al-Borsa newspaper to outline the most pressing challenges hindering the growth of Egypt’s economy at the moment, covering a number of topics including the difficulty of articulating an economic vision for the country. Ziada identifies Egypt’s most pressing problem as the energy crisis, as no new investment will be made without a reliable power supply, and IOCs are unwilling to make further investments without first being paid back dues. (Read)

IN FOCUS: El-Sisi’s landmark visit to France

Office of the Presidency, SIS, Reuters and France 24 | 26-29 Nov 2014
President Abdel Fattah El Sisi met with France’s senior political, military and business leadership last week, including French President Francois Hollande. El Sisi arrived on Tuesday, 25 November, according to SIS, with the majority of his meetings taking place from 26-27 November.

Tuesday, 25 November: According to a SIS release, President El Sisi met with French insurance group AXA’s CEO, Henri de Castries, on Tuesday. Castries announced his intention to start business in Egypt. According to a statement by AXA deputy chief executive Denis Duverne toReuters, it was necessary to begin operations in Egypt from scratch, as opposed to AXA’s Nigerian acquisition announced on Friday, given that “The Egyptian market is not yet very structured and it didn’t seem to us that there was a company that would allow us to get going.”

Wednesday, 26 November: President El Sisi held closed session talks with President Hollande, along with the French prime minister and ministers of foreign affairs, finance and defense. He was joined by the Egyptian ministers of foreign affairs, trade and industry, supply and internal trade and investment. The two leaders spoke on a number of issues, including bilateral ties and the situation in the region, with the Presidency’s statement affirming the territorial integrity of Iraq, in an implicit rejection of Kurdish secession. The statement also affirms support for Libya’s elected parliament and national army, as well as the need to support cooperation between Mediterranean countries regarding terrorism, organized crime and illegal immigration. The statement also calls for backing sustainable development efforts in the south of the Mediterranean, which appears to be an implicit reference to the development of Cyprus’s EEZ natural gas fields.

The meeting concluded with President El Sisi inviting Hollande to attend the inauguration of the Suez corridor project, as well as the signing of three agreements:

  • EUR 70 million loan to support the national plan to develop the natural gas supply network;
  • EUR 80 million loan to support job creation and SMEs in informal communities;
  • Declaration of intent worth EUR 344 mn for the carriages that will be rolled out in phases 3 and 4 of the third line of the Cairo Metro.

Later on Wednesday, President El Sisi held a meeting at with French Foreign Minister Laurent Fabius, Egyptian FM Shoukri and Egyptian Ambassador to France Ihab Badawi. Along with discussions on regional terrorism, the meeting covered preparations for the March 2015 economic conference in Sharm El Sheikh.

This was followed by a meeting with French National Assembly’s Foreign Affairs Committee Élisabeth Guigou, who President El Sisi invited to Egypt following parliamentary elections in order to begin cooperation between the Egyptian and French parliaments. This was followed by closed session talks with French Minister of Defence Jean-Yves Le Drian on Wednesday evening at the French Ministry of Defence with an aim of bolstering military cooperation between Egypt and France. This follows the announcement made last July of the EUR 1 bn contract for France to supply Egypt with four naval frigates.

Also on Wednesday, the President met with leading representatives from the French travel industry and a number of major tour operating companies. President El Sisi stressed the importance Egypt places on tourism and promised to eliminate all obstacles that hinder the flow of French tourism to Egypt. Many representatives stressed the need to increase direct EgyptAir flights to a number of tourism destinations in Egypt, including Luxor and Marsa Alam.

Thursday 27 November: El-Sisi met President of the National Assembly of France Claude Bartolone at the National Assembly’s headquarters. Bartolone said that the French National Assembly was set to begin debate on Friday 30 November on the symbolic recognition of Palestine as a state and highlighted that his country greatly values Egypt’s role in realizing stability in the Middle East, particularly solving the Palestinian issue.  (Read the NYT’s brief takeon the vote, which notes that if the bill passes, it would make France the fourth European country to give symbolic recognition to the Palestinian state).

El-Sisi later met with members of the Egyptian-French Business Council and a number of chairmen of leading French companies at the headquarters of the Movement of the Enterprises of France (MEDEF), the largest business sector representative body in France. He invited the French business community to attend the March 2015 summit in Sharm El Sheikh.

The President also visited the French Senate and met with its President Gérard Larcher. President El Sisi later met with former French Prime Minister Jean-Pierre Raffarin, who is currently the chairman of the French Senate Committee on Foreign Affairs and Defence, and congratulated him for his party winning the majority of seats in the senate midterm elections.

The President sat down for an interview with French newspaper Le Figaro, in an article titled: Sissi: Jihadism is a global calamity (Read in French, registration required). In the interview, President El Sisi states that the Jihadi threat requires a unified front from Western and Muslim nations, and that Daesh has nothing to do with Islam.

Similar terror groups could be seen in Nigeria, Mali, Somalia, Egypt, Yemen and Pakistan, added the president. On Libya, El Sisi said Cairo would never get involved in a unilateral action in the North African country, reiterating commitment to international law and the integrity of Libya. He did say, however,if the United Nations shows desire to intervene in Libya, Egypt will spare no effort to help.

Note from Enterprise: The consistent message that President El Sisi delivered in his meetings in France and Italy is the insistence of fighting terrorism with all the means available at the international community’s disposal, beyond a sole focus on military solutions. This is most recently reflected domestically in Egypt with the recent announcement that Al Azhar will be hosting an international conference on 3-4 December 2014 titled Al Azhar Alsharif’s conference for fighting extremism and terrorism, which will feature participation of Muslim scholars from around the world.

INTERNATIONAL

UAE may create body to monitor FX peg, no policy change likely
Reuters | 27 Nov 2014
An advisory body to the United Arab Emirates government has suggested that the central bank review the country’s currency peg to the U.S. dollar, but local bankers said any change to the peg remained very unlikely for the foreseeable future. In the wake of this month’s drop of Brent crude oil below USD 80 a barrel, from around USD 115 as recently as June, some analysts think the dirham may be becoming too strong, since the UAE relies on oil for the vast bulk of its exports. Most of the UAE’s oil income is denominated in dollars, making it convenient to tie the local currency to the dollar. A new arrangement would immediately add a source of currency risk. Another issue, bankers said, is that the UAE central bank does not have the experience of managing a dirty float in modern financial conditions. So the process of changing the dollar peg would be risky – risk that authorities are unlikely to embrace. (Read)

Scandal and squeeze on fees sharpens funds’ focus on forex
Reuters | 28 Nov 2014
A currency-rigging scandal and an intensifying squeeze on their fees are driving fund managers to scrutinize how much they pay for the foreign exchange they need to buy overseas assets, as reported by Reuters. Concern over how much fund managers were paying for the FX component of their business was a prime driver behind a probe into the alleged manipulation of the London and ECB “fixes” that has so far led to banks being fined USD 4.3 bn. A fix is a benchmark rate set at a certain time of day that is used by passive managers in particular to ensure the fund’s returns match up with those of the market. But the rigging scandal has seen many asset managers move away from using it. “Clients want to be 100 percent sure that we’re not paying their money away in charges to a custodian, and that we’re managing our exposure to currency efficiently and without a cost burden,” said Lee Sanders, head of FX trading at AXA Investment Managers, a firm with over USD 700 bn under management. (Read)

ON YOUR WAY OUT

Al-Monitor asks: Will Nubian demands for return become calls for secession? While some Nubian factions had called outright for secession during the Morsi regime, activists confirm that now they are not so much concerned with secession as they are with the chance of returning to land from which they were displaced. (Read)

Unless you’ve been in carbonite freeze (i.e. Ganzouri), you’ve probably already seen the trailer for Star Wars: The Force Awakens, which you can view here for the hundredth time.

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