Alhokair to build mall at MNHD’s Teegan. Egypt’s eurobond roadshow kicks off on Thursday. EGPC wants to pay IOCs in EGP. Watch the world’s worst AGM. Federation of Industries wants 2x hike in export subsidies. Car sales drop in April.

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WHAT WE’RE TRACKING TODAY

Temperatures are set to soar above seasonal norms nationwide today, peaking at or above 45 C in the capital city. The Ministry of Electricity and Renewable Energy has declared a “state of emergency,” El Watanreports. The ministry is calling on citizens to ration their electricity consumption.

The National Bank of Abu Dhabi (NBAD)’s Egypt on the Rise — West-East Corridor Forum, takes places today at the JW Marriott, Cairo. Read more about the event and featured speakers Basil El-Baz (Carbon Holdings), Hisham El-Khazindar (Qalaa Holdings), Ahmed Badreldin (Abraaj Group) and Omar Mehanna (NBAD) here.

A delegation from the Federation of Egyptian Industries is visiting Switzerland today, Mohamed El Sewedy said. The visit, part of the FEI’s European tour, will focus on investment opportunities in Egypt.

WHAT WE’RE TRACKING THIS WEEK

Egypt’s Renewable Energy Summit, Cairo International Convention and Exhibition Centre. (Friday-Sunday)

ON THE HORIZON

The Fifth Annual EFG Hermes London MENA Conference, the largest MENA investor event in the UK, will take place 7-9 September. More than 200 fund managers and institutional investors with aggregate AUM in excess of USD 8 tn attended last year, meeting with 71 issuers from 12 countries across the region. Websitehere or contact londonmena@efg-hermes.com.

LAST NIGHT’S TALK SHOWS

Lamees El Hadidy discussed President Abdel Fattah El Sisi’s upcoming visit to Germany. She took a phone call from Mohamed Attia, an Egyptian community leader in Berlin who assured her that protests against the presidential visit would not be a problem. “I certainly hope so, because we all know that a large percentage of Egyptians in Germany are ikhwani or ikhwani sympathizers,” said El Hadidy. “I’ve been living in Germany for over 40 years and I assure you, the Ikhwan have never had any influence here,” said Attia.

El Hadidy commented on the news that the trial of Washington Post journalist Jason Rezaian who has been imprisoned in Iran for 10 months, has begun. “How come Obama isn’t taking issue with this? Why aren’t protesters taping their mouth shut in protest? That’s not to say that we approve of what happened toMohamed Fahmy and Peter Greste but there is definitely a double standard at play here.”

“If you have something that would like to say to President Abdel Fattah Al Sisi you can send him an email. That’s right, the Presidency has an email — media.office8@op.gov.eg — so go ahead tell him what’s on your mind,” said El Hadidy. “He may not be reading every email personally, but he definitely wants to hear from you.”

[The announcement of the email address has crossed over into the international press after a report by the AP.]

El Hadidy’s studio guest was Egyptian movie star Nadia El Guindy, who will be appearing on television screens this Ramadan after a long absence with her highly anticipated new series, “Secrets.”

“This presidential email is definitely a refreshing new idea for Egypt, but I will refrain from commenting on it because its success or failure will depend on how exactly it will be implemented,” said Khaled Abu Bakr. “Who will read these emails? Who will be filtering? Will they present the President with 50 emails a day and then have him decide which emails are worthy of his time?”

“Tomorrow will be the ultimate test for our electricity grid with temperatures nearing 50 degrees,” said Amr Adeeb. “All I hoped for was that we would be 50% better than we were last year. Again I want to congratulate the entire Egyptian administration from the president on down.”

Minister of Electricity Mohamed Shaker called in to directly receive the praise that Adeeb has been showering on him since the beginning of the week.

“Say what you will about the President — like maybe he forgot the Parliament — but what he has done to overhaul the country’s electricity sector will go down in history. He has broken a world record when it comes to speed of implementation in this regard. I honestly didn’t think it was possible,” said Adeeb.

“Moving on to more disturbing news, I came across a disturbing statistic: According to CAPMAS 4 mn people in Egypt are out of work. From 2010-2014 we have only managed to create 300,000 jobs in total from the public and private sectors. The president needs to sit with the cabinet and devise a plan on how we can create more jobs. He needs to set clear targets for job creation and monitor progress on a monthly basis. We can put some incentives in place like significant tax exemptions if you employ more than 1,000 workers in a factory, for example,” said Adeeb.

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SPEED ROUND

Fawaz Alhokair’s Egyptian Centers to build mall at MNHD’s Teegan: Madinet Nasr Housing and Development (MNHD) and Fawaz Alhokair Group’s Egyptian Centers unit have reached an agreement that will see Egyptian Centers build shopping mall on a 100,000 sqm plot in MNHD’s Teegan project. MNHD is providing the land on a right-to-use basis for 50 years; the mall will take approximately three years to build. On a net present value basis, MNHD’s share of the mall’s future revenues would translate into a current price per sqm of EGP 15,880. The as-yet unnamed mall will have a gross leasable area of c. 68,500 square meters. (Read the joint statement from MNHD and Al-Hokair as an English pdf or Al-Borsa’s coverage in Arabic)

Egypt’s eurobond roadshow kicks off on Thursday: The Finance Ministry will hit the road on Thursday for a seven-day roadshow in the UAE, London and the United States to drum-up interest in a eurobond issue expected to be in the USD 1.5 bn range. It’s the first time the nation has tapped global credit markets in about five years. BNP Paribas, Citigroup, JP Morgan, Morgan Stanley and Natixis will arrange the sit-downs, Reuters reports.

And you thought your AGM was bad? Watch what happens at what’s being represented as the annual meeting of Kuwait’s Al Ahlia Investments annual meeting after the board declared a loss. (running time: 0:54)

EGPC is in talks with IOCs on the possibility of repaying their dues in EGP and not in USD as contracted, according to El Watan, citing EGPC deputy chief Mohamed Taher. Taher said Egypt owes IOCs c. USD 3.5 bn. EGPC said the petroleum sector is keen on expanding production by tendering more areas for exploration.

Federation of Industries seeks export subsidy hike: If there’s one subsidy that stands a chance of rising in the coming period, it’s export subsidies: Egyptian Federation of Industries chief  Mohamed El Sewedy confirmed yesterday the EFI had asked Prime Minister Ibrahim Mahlab to hike export subsidies to EGP 5 bn over the next four years, a near doubling from an estimated EGP 2.6 bn today. (Read in Al-Borsa or Al-Mal)

Car sales have dropped for the first time in a year: Automobile sales fell 3% y-o-y in April to 21.7K units, down from 22.4K in April 2014. Financial daily Al Borsa says the CBE’s FX policies and Mercedes’ withdrawal from the market played in the contraction. Moreover, both Audi and Volkswagen have stopped submitting sales figures to AMIC, the industry body that compiles sales figures, affecting the data and analysis of the market.

The Council of Ministers met yesterday, a day earlier than is customary. Among the decisions taken:

• Approving 14 infrastructure-related decisions made by the Ministerial Engineering Committee during their meeting on May 6. These decisions included awarding phases 4A and 4B of Cairo Metro’s third line to France’s SYSTRA Consulting. (Read in Arabic)
• Approving the government’s budget for the National Plan to Fight the Spread of Drugs, as well forming a technical committee for its implementation. (Read in Arabic)
• Approving a resolution for the dispute between the Tourism Development Authority and the Golden Coast Hotels and Tourist Villages Company. (Read in Arabic)
• Approval on contracts for a USD 8.7 bn power generation and manufacturing deal with Siemens, previously announced at EEDC.

A number of MoUs and contracts are expected be signed during President Abdel Fattah El Sisi’s upcoming visit to Germany, Rainer Herret, the CEO of the German-Arab Chamber Of Commerce, said in an interview with Daily News Egypt. Herret said German companies in Egypt still face problems with acquiring hard currency and with profit repatriation.

The upgrading of the Cairo-Alexandria Desert Highway will be complete next month, Nasr General Contracting Company said. The project cost EGP 185 mn to complete and involved cooperation with the Armed Forces Engineering Authority to expand the road and improve its quality, according to Amwal Al Ghad

El Sisi met with CBE Governor Hisham Ramez on Tuesday to discuss the stability of hard currency reserves during Ramadan. According to statement issued by the office of the president, the discussions focused policies and mechanisms including FX auctions and helping the banking system capture a larger portion of remittances. (Read in Arabic)

A power outage at the Maspero building took place at around 9 PM CLT, the second to hit the building today, shutting down broadcasts. An Electricity Ministry spokesman said the ministry could not have been responsible for the power outages, adding that the ministry considers the building a strategic national asset and priority. The South Cairo Electricity Distribution Company dispatched crews to address the problem. (Read in Arabic)

Zawya launches new distribution company for independent and arthouse films: In a development that holds promise for better quality Egyptian cinema, arthouse theater Zawya has announced a new joint venture with its parent company Misr International Films to distribute independent films in Egypt. Hopefully the new venture, Zawya Distribution, will help facilitate a renaissance in Egyptian cinema, whereby moviegoers may finally witness a trailer for an Egyptian movie that does not contain the holy trinity of Egyptian movie trailers: a woman getting slapped, a woman bellydancing, and people screaming at each other at the top of their lungs. (Read in Ahram Online)

Israel has struck Gaza after a rocket landed near the Israeli port Ashdod, Reuters is reporting.

The world is drowning in debt, warns Goldman Sachs: Andrew Wilson, head of Europe, Middle East and Africa (EMEA) at Goldman Sachs, has warned that the world is suffering from potentially crippling debt, and combined with an ageing global population which foretells a country’s’ debt piles are in danger of growing out of control, will drive the world into further instability. “There is too much debt and this represents a risk to economies. Consequently, there is a clear need to generate growth to work that debt off but, as demographics change, new ways of thinking at a policy level are required to do this,” he said. (Read)

***
A MESSAGE FROM PHAROS HOLDING

IMF Loan Still a Possibility Despite Concerns over Capital Gains Tax

The International Monetary Fund’s (IMF) Egypt chief Chris Jarvis made a statement that raised concerns over the postponement of the capital gains tax. Jarvis believes that this delay would translate into the burden of the budget deficit being carried by those less able to afford it. In our previous reports published on 8 April 2015and on 6 May 2015, Pharos Research highlighted that the IMF’s mission chief’s support for the capital gains tax, and the minister of finance’s determination to implement it signaled a level of technical cooperation between the government and the IMF that could lead to a full-fledged standby agreement.

Despite the roll-back by the MoF on the capital gains tax, we still believe that a loan agreement is highly possible. To find out why, click here.
***

WORTH READING + WATCHING

Iran, the Gulf, and the exploitation of sectarianism for geopolitical gain: The escalation of the regional conflict between Saudi Arabia and Iran through their proxies puts states including Egypt in a difficult position. It would be naive or deeply cynical to deny that Iran is clearly an aggressive and expansionist power. At the same time, the exploitation of sectarianism by the Gulf states for geopolitical gain only threatens to further unglue the region and should be pushed back against.

With regard to Syria, the United States and the Gulf have consistently dismissed Egypt’s position on the need for a political solution. And now, in what the less charitable among us see as laying the psychological groundwork to make genocide palatable, Al Jazeera Arabic on 8 May aired a program in which its host and one of two guests openly call for the slaughter of the Alawites, including their children, saying that the Alawites will only give up power over their dead bodies. (Watch in Arabic with English subtitles, running time: 10:03).

David Motadel writes in The New York Times Sunday Review, with regard to the regional cold war: “And yet, as new and disturbing as these developments may appear, the linkage of sectarian and secular interests is a return to the classic geopolitics of religion in the Middle East. During the 18th and 19th centuries, great powers presented themselves as protectors of specific religious groups to expand their influence and provoke unrest and division in rival states. That does not mean that the current developments are not alarming. But to fully understand them, we need to understand the nature and history of such sectarian patronage systems.” (Read Defending the Faith’ in the Middle East)

EGYPT IN THE NEWS

The AP’s Maggie Michael has a brief piece on the ongoing mystery surrounding the death of Ain Shams engineering student Islam Atito, who was last seen alive when he was pulled out of an examination. The Cairo Post actually has much more thorough coverage of the story. According to a statement from his university, Atito left campus unaccompanied; the university claims it has surveillance footage that backs its assertion, but has yet to release it. The student union, however, has resigned in protest over his death, and issued a statement saying that witnesses allege he was pulled out of an exam by a faculty member and an unidentified man. Atito’s body was found one day later on the side of a road in the Fifth Settlement. Police claim he was killed in an exchange of gunfire from his “hideout.” The official version of the story stops short of explaining why police would leave the body behind after having killed Atito in a gun battle. The AP piece quotes an unnamed judicial official as saying that Atito’s killing is currently being investigated.

DIPLOMACY

Egypt protests Pakistan criticism of preliminary Morsi death sentence: Egypt summoned Pakistan’s charge d’affaires to protest at Islamabad’s criticism of the preliminary death sentence handed down to Morsi, the MFA said on Tuesday as reported by Al Arabiya. The summons was in response to a statement made by Pakistan’s foreign ministry on 19 May that read: “The dispensation of justice must be based on the principles of equity and fairness … This is all the more important when political prisoners especially a former elected president, who was ousted from office, is brought before the court of law.”

SPOTLIGHT ON: Erdogan tells NYT Editorial Board to “Know your place”

It began with a New York Times editorial criticizing: “… criminal complaints … filed against editors of the Hurriyet Daily News and its website over a headline Mr. Erdogan had objected to. Referring to the verdict in the case of Mohamed Morsi, the deposed president of Egypt, it read: ‘The world is shocked! Death sentence for president who received 52 percent of the vote.’ Mr. Erdogan, according to Today’s Zaman, said the headline suggested that he could face the same penalty; Mr. Erdogan was also elected with 52 percent of the vote in 2014. Not only is the accusation distorted and absurd; it is a slap at the idea that Turkey is still a democracy.” (Read Dark Clouds Over Turkey)

In response, Erdoğan lashed out, telling the Editorial Board to “know their place.”

It’s a story of mixed emotions for us here at Enterprise. The Editorial Board’s takedown of Erdoğan is a thoroughly enjoyable read, though we’re hardly a fan of the body’s views on Egypt. And Erdogan clearly reveals his illiteracy when he says, “Can you write such a thing against the U.S. administration? [Enterprise: Yes] If you do, [the administration] would immediately do what is necessary.”

One is almost tempted to feel sorry for him, like an elderly family member, as he seems to legitimately be unaware of how the Western media operates. In fights like these, there simply is no party to root for. The only thing one can do at times like these is summed up by the following image: (View)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

EEHC secures USD 521 mn loan
Al Masry Al Youm | 26 May 2015
The Egyptian Electricity Holding Company (EEHC) secured a USD 521 mn loan arranged by Banque du Caire, according to Al Masry Al Youm. Banque du Caire is providing USD 60 mn of the syndicated loan to EEHC. The loan has a maturity of five years and will be used to finance the emergency electricity projects before next summer. (Read in Arabic)

OIL & GAS

EGAS extends deadline for Mediterranean tender, increases number of blocks
Reuters | 26 May 2015
EGAS has increased the number of blocks it is tendering for exploration to 12 from 8 initially and extended the deadline by two month, Reuters reported. The four new offshore blocks added include Northeast Haby, North Farma, North Tabiya, and Northeast Amriya bringing up to total concession area on offer to 20,548 sqm. EGAS did not give a reason behind its decision to extend the tender’s deadline. (Read in Arabic or in English)

GANOPE sells data for four zones of its current bidding round
Daily News Egypt | 25 May 2015
GANOPE has sold USD 600,000 worth of data on four zones of its current bidding round, a source told DNE. Companies that acquired the data include GDF Suez (Engie), Mediterra, IPG, and Pacific, the source added. The current bidding round, which will be finalized by May’s end, includes eight zones in total and DNE says they are all offshore in the Gulf of Suez. (Read)

El Hamra Oil to invest USD 70 mn next fiscal year
Al Borsa | 25 May 2015
El Hamra Oil Company is set to invest USD 70 mn in FY2015/16, Al Borsa reported. The company will also drill four new wells and engage in development studies. At present, El Hamra is digging two exploratory wells as well as two support wells at a total cost of USD 16 mn. El Hamra is owned jointly between EGPC and the IPR Group of Companies. (Read in Arabic)

HEALTHCARE

Marcyrl to build an EGP 100 mn plant
Amwal Al Ghad | 26 May 2015
Marcyrl Pharmaceutical Industries announced its plans to build an EGP 100 mn to manufacture synthetic hormones. The plant will be built on a 10,000 sqm plot in the industrial zone of Obour City. Marcyrl’s marketing director told Amwal Al Ghad that hormones cannot be produced in the same facilities as regular pharmaceuticals, which is why the company opted to engage in this investment. (Read in Arabic)

TOURISM

Ministerial committee formed to oversee the Grand Egyptian Museum’s completion
Al Borsa | 25 May 2015
PM Mahlab formed a ministerial committee to oversee the completion of the Grand Egyptian Museum project and ensure that the funding required is in place. The Tourism Ministry has plans to include the museum as part of the visiting the pyramids’ experience. The first phase of the Grand Egyptian Museum was supposed to be ready in 2011, but funding issues, exacerbated by the unrest, affected the project’s progress. (Read in Arabic)

TELECOMS & ICT

Etisalat to repurchase unsold SIM cards
Al Mal | 26 May 2015
Etisalat Egypt agreed to repurchase the SIM cards on the market that were previously given to distributors, the head of sales at i2 Stores told Al Mal. The decision comes after the CIT Ministry’s three-month moratorium on SIM card sales except through the three mobile operators in Egypt. Etisalat’s only stipulation for its repurchase is that the original packaging of the cards be maintained and cards inactivated. (Read in Arabic)

BANKING & FINANCE

IFC invests USD 10 mn in Wamda Capital’s fund
Al Borsa | 25 May 2015
The IFC is investing USD 10 mn in Wamda Capital’s investment fund to support its growth and expansion in the Middle East and North Africa, Al Borsa said. Wamda aims to provide funding for promising technology start-ups in the region. It will provide technical consultancy and support for start-ups. Wamda aims to raise USD 75 mn for its fund. (Read in Arabic)

OTHER BUSINESS NEWS OF NOTE

Villages to be covered by sewage network in five years, Housing Minister says
Al Borsa | 25 May 2015
Villages will be covered by sewage network as part of a five-year plan, Housing Minister Moustafa Madbouli said. 40% of the plan will be completed in the first two years, Madbouli said as he inaugurated to sewage plants in villages in Qalyubia. Only 15% of villages have access to a sewage network, Madbouli added noting that this percentage goes up to 80% in urban settlements. (Read in Arabic)

Egypt targets USD 5 bn exports to African markets within 5 years
Amwal Al Ghad | 26 May 2015
The government would like to substantially increase Egypt’s exports to its African neighbors to USD 5 bn within the next 3 years, said Minister of Commerce and Industry Mounir Fakhry Abdelnour. Africa’s three largest trade blocs – the Common Market for Eastern and Southern Africa, the East African Community, and the South African Development Cooperation- are expected to sign a tripartite free trade agreement on June 10 in Sharm El Sheikh, thereby providing ample opportunities for Egypt to increase its exports. (Read in Arabic)

EGYPT POLITICS + ECONOMICS

Real estate taxes projected to bring in EGP 3.5 bn next year
Al Shorouk | 26 May 2015
Real estate tax revenues are projected to record EGP 3.5 bn in FY2015/16 budget, according to an unnamed Finance Ministry source. This is close to what is expected to be generated in the current fiscal year. The source said that tax revenue projections usually grow by 10% annually, but in this case, due to problems with tax collection, it is expected to remain stagnant. (Read in Arabic)

Vnesheconombank to increase its support to Russian exporters to Egypt
Amwal Al Ghad | 26 May 2015
Vnesheconombank, Russia’s development bank, is targeting to increase its support to Russian exporters to Egypt to USD 2 bn. USD 800 mn were spent supporting Russian exporters to Egypt last October, a Russian official told Amwal Al Ghad. Vnesheconombank is currently looking for a financial partner in Egypt to expand economic cooperation between the two countries. (Read in Arabic)

Qatari energy minister arrives in Cairo to attend ministerial Arab Water Council Forum
Al Mal | 26 May 2015
Qatari energy minister Mohamed Ben Saleh arrived in Cairo on Tuesday to attend the ministerial Arab Water Council Forum which begins on Wednesday. The forum, which gathers cabinet ministers from across the Arab World and will be held in Arab League building, will focus on water resource development based on the agreed upon 19 articles; addressing the effects of climate change on regional water resources; and working on furthering the millennium goals set out by the UN. (Read in Arabic)

REGIONAL

Jordan’s BG deal paves way for more agreements, Padico Holding’s head says
Al Hadath | 26 May 2015
The agreement Jordan signed with BG Group will pave the way for further energy deals, the head of Padico Holding said. He expects the BG agreement to bring about future deals in the Gaza offshore fields. During the WEF meeting last weekend, Jordan had signed a USD 6 bn deal with BG Group to import Palestinian gas over the 20 years. (Read in Arabic)

ON YOUR WAY OUT

The Supplies Ministry is considering issuing plastic bags emblazoned with sayings and drawings to promote “virtuous behaviour” during Ramadan with its rations. The Ministry is also assessing including free additional food items with its usual rations.

“What’s happening in Egypt today is a joke,” -El Baradei: Inclusive governance, transparency, and accountability are the foundations for the development of nations in 21st century Africa, said former Vice President Mohamed Elbaradei. Speaking at a forum in South Africa, Elbaradei went on to criticize how these foundations have been absent in the continent and specifically Egypt. The result has been the continuation of instability in the region. (Read in Arabic)

BY THE NUMBERS

USD CBE auction (last sale on Tuesday, 26 May): 7.5301 (unchanged since Monday, 02 Feb)
USD parallel market (Tuesday, 26 May): 7.675 (unchanged from Sunday, 24 May, Reuters)

EGX30 (Tuesday): 8,975.32 (-0.83%)
Turnover: EGP 568.9 mn (1% above the 90-day average)

WTI: USD 58.31 (+0.48%)
Brent: USD 63.84 (+0.19%)

TASI: 9,801.4 (+0.8%)
ADX: 4,615.1 (-0.2%)
DFM: 4,059.5 (-0.2%)
KSE Weighted Index: 420.7 (-0.1%)
QE: 12,409.1 (+0.1%)
MSM: 6,390.3 (+0.2%)