Companies are pricing the dollar at EGP 9.00 to 9.50 in their 2016 budgets

TL;DR

CBE leaves EGP / USD unchanged, Amer widely expected to meet cabinet policymakers today (Speed Round)

“What are business leaders worried about?” Al Borsa sets out to answer the president’s question (Speed Round)

Natural gas market regulator to start working in mid-2016 (Energy)

IFC completes acquisition of 20% stake in Sphinx Glass (Manufacturing)

FT’s “Saudi Arabia: The Wake Up call” will be the talk of the region this morning in certain quarters (What We’re Tracking)

UAE’s Sultan Al Jaber denies rift with Egypt, stresses importance of fast-tracking legislative and regulatory reforms (Speed Round)

By the Numbers + How are major corporates pricing the USD in their FY2015 budgets?

WHAT WE’RE TRACKING TODAY

With no Central Bank of Egypt currency auction over which to stress until tomorrow — and with regional businesses largely viewing the COP21 talks in Paris as a side show — the most-talked-about story regionally this morning is likely to be this bombshell from the FT: Saudi Arabia: The wake-up call: Ensuring stability will be crucial for Riyadh’s power brokers as they face discontent and war. As the paper’s Big Read to kick-off the business week, Roula Khalaf, Lionel Barber and Simeon Kerr say that King Salman “faces the daunting challenge of managing a new era in Saudi Arabia,” opening by declaring that “Inside the sprawling royal court in Riyadh, a team of technocrats is putting the final touches to plans for a drastic overhaul of the Saudi Arabian economy. Backed by an army of highly paid western consultants, the royal aides have identified billions of dollars of waste and government largesse that the desert kingdom can no longer afford.” From palace intrigues to the “spectre of Iran” and economic belt-tightening, it’s a powerful piece of reporting that should be read this morning against suggestions of Egypt-Saudi discontent (Egypt in the News) and the UAE hinting Egypt needs to get moving on the economic reform font (Speed Round).

President Abdel Fattah El Sisi is expected to deliver a speech at the COP21 UN Climate Conference taking place in Paris today on behalf of African countries. The conference aims to craft an agreement on climate change in what’s being billed as the “biggest UN talks on global warming and tackling emissions” since the failed 2009 Copenhagen summit. India’s Narendra Modi threw a hand grenade among the chickens this morning with a piece for the FT arguing that “advanced countries that ‘powered their way to prosperity on fossil fuel’ must continue to shoulder the greatest burden. ‘Anything else would be morally wrong,’ he says.” The COP21 talks are a side-show for many Middle Eastern businesses this morning, but we’ll certainly care about their failure if the day should come that Alexandria is under water, the Nile Valley is drying up, and it’s not safe for human beings to walk around outside in the GCC. The FT’s focus on the talks is here,

Egyptians abroad will vote today and tomorrow in runoffs for the second round of parliamentary elections in 13 governorates, including Cairo, North and South Sinai, and Menoufiya. 426 candidates are contesting 213 individual seats, with voters in Egypt heading to the polls Tuesday and Wednesday for 13 governorates. Final results for this second and final round of parliamentary elections will be announced on Thursday by the Higher Elections Committee.

The IMF looks set to officially recognize China’s renminbi (or yuan, as it’s more commonly known) as a reserve currency later today. CNBC has a solid take on why — and why it matters. (Beware the autoplay video.)

Philip ter Woort, Director of the European Bank for Reconstruction and Development (EBRD) in Egypt is hosting a forum titled Supporting SMEs in the Automotive Sector in Egypt at the Conrad Hotel, Cairo today at 9:00 am CLT. Attendees are requested to confirm attendance by emailing knowhowegypt@ebrd.com.

ON THE HORIZON

The Markit / Emirates NBD Purchasing Managers Indexes (PMI) for Egypt, the UAE and Saudi are due out a week from tomorrow (Monday, 7 December). The full calendar for upcoming PMI releases is available here.

The U.S. Federal Reserve will meet on 15-16 December 2016. It is widely expected to raise interest rates for the first time since June 2006.

LAST NIGHT’S TALK SHOWS

Qalaa Holdings Chairman and Founder Ahmed Heikal spoke by phone with CBC Egypt’s Lamis El Hadidy regarding Qalaa subsidiary Mashreq Petroleum, which on Saturday signed a settlement agreement with Chairman of the Suez Canal Authority (SCA) Vice Admiral Mohab Mamish. The agreement saw Mashreq return a 210k sqm plot of land at East Said Port that was initially set to be used as a build operate and transfer (BOT) liquid bulk station. Heikal explained that the agreement to develop the station was signed two and a half years ago under a previous development plan. In the past two months, a new development plan was put forward, which resulted in changing the location of the planned logistics zone. Heikal also noted that the government compensated the company for costs incurred in preparing the site to the amount of EGP 150 mn. Heikal also reviewed the company’s overall strategy of exiting from certain investments to focus on core subsidiaries as well as to deleverage Qalaa.

The birds and the bees, with Lamis El Hadidy. Earlier in the program, El Hadidy had bizarrely enough promised to talk about “the birds and the bees,” like that wouldn’t be absolutely mortifying coming from El Hadidy, with special regard to marital happiness and the negative effect that consumption of certain films may have on a marriage. She noted that the inspiration for the topic came from Al Kahera Wal Nas television host Intessar and her recent on-air admission that she wants recreational films to be more widely employed — a comment that resulted in a lawsuit being filed against her, which everyone seems to have forgotten about, including the lawyer who filed it. It’s unclear if this segment even went forward, because this reviewer mercifully passed out before she got to it, and the promised discussion appears not to have been uploaded online with the rest of the episode at the time of dispatch. Here is El Hadidy noting the segment at the beginning of her episode. (Watch in Arabic, until the 1:50 mark)

Amr Adeeb, while affable and occasionally funny, once again got lost in the cornfields while trying to make several points criticizing calls for protests and another revolution. He sarcastically asked people to put off another revolution till next year. His argument that people should rely on the incoming House of Representatives to air their grievances and to hold officials accountable rather than taking to the street is sensible enough, but misses the real point: With the absence of politics, it’s unclear how effective the new legislature can be in fulfilling its responsibilities. The only satisfying and consistent part of his rant was his singling out the graduate and PhD students who recently demonstrated demanding employment. “You have a PhD and you want to work for the government?” Their protest on Saturday was dispersed by security forces and several were arrested, according to reports.

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SPEED ROUND

Tarek Amer’s Central Bank of Egypt kept the exchange rate unchanged at the first FX auction since he took office over the weekend. Reuters said traders were expecting Amer to remove the restriction on USD deposits in banks and to have moved to strengthen the EGP by EGP 0.10 against the USD. After meeting with in-house staff and members of his board yesterday, Amer is expected to sit today for meetings with key members of the Ismail cabinet.

Answering the president’s question on Saturday “What are business leaders worried about?” members of the community from a certain era stepped out yesterday explaining why they feel reluctant investing in Egypt, Al Borsa reported. Many of them mentioned the arrest of PICO group founder Salah Diab directly or indirectly as being a concern. Mohamed Farag Amer, the head of the Borg El Arab Investors’ Association and chief of Faragalla Food Industries said, “Some businessmen were defamed recently because the government recklessly took wrong decisions. The president’s message should reassure them.” The same concern came out of Electrostar Chairman Mohamed El Menoufi, who said, “Insults directed to businessmen lately will affect the economy for years to come. We should treat businessmen with respect and not involve the police.” Real estate developer Hussein Sabour said that the state too-often fails to honor agreements with business: “Courts issue final verdicts in many legal disputes, but the state keeps on trying to reopen those cases. How can a businessman feel safe in such environment?” Sabour added.

UAE Minister of State Sultan Al Jaber denied recent reports of disagreements between his country and Egypt. Commenting at a press conference to mark Martyrs’ Day in Abu Dhabi, Al Jaber said the relationship between the two countries is strong and that the UAE is committed to supporting Egypt at this “difficult time.” Asked if low oil prices will affect financial support the UAE had pledged to Egypt, the State Minister said one of the outcomes of March’s Egypt Economic Development Conference was a commitment by UAE, KSA and Kuwait to each deposit USD 2 bn in the CBE, which has happened. Al Jaber also stressed the importance of developing laws and regulations that will encourage investment in Egypt, which suggests to us that the UAE is keeping a close eye on the legislative overhang.

Government reaches preliminary settlement with Qalaa over liquid bulk station: Qalaa Holdings and the General Authority for the Suez Canal Economic Zone have reached a preliminary agreement regarding terminating a concession agreement for a liquid bulk station to have been constructed on a BOT basis by Mashreq Petroleum, a subsidiary of Qalaa Holdings, “informed sources” told Al Borsa. The newspaper claims Qalaa will receive compensation of EGP 35 mn for the concession and project plans; in a call-in to CBC Egypt’s Lamis El Hadidy last night, Qalaa Chairman and Founder Ahmed Heikal put the figure at EGP 150 mn (see Last Night’s Talk Shows, above, for more). Al Borsa claims change in project ownership was prompted by the receipt of a more comprehensive offer from a foreign investor.

Lecico Egypt to limit expansions in 2016: Medical equipment and ceramics manufacturer Lecico Egypt had been expanding in a number of European markets including Sweden, Finland and Italy, but does not plan further land grabs in 2016 until the economic and political outlook in the region stabilizes, said managing director Taher Gargour. Gargour pointed to difficulties exporting to the MENA region as a significant factor in the company’s calculus. Lecico has been cushioned over the past year by rising demand from the rebound in real estate in Europe and has opened distribution centers in Italy, Poland, and England. (Read in Arabic)

Beltone Financial Holding will most likely be chaired by Sameh El Torgoman, the current Chairman of ACT Financial, sources told Al Mal. Following the acquisition by Orascom Telecom Media and Technology Holding (OTMT) and ACT Financial, Maged Shawky is expected to become Vice Chairman, and Bassem Azab will serve as Managing Director. OTMT is expected to be represented by its deputy CEO, Tamer El Mahdi, who is poised to become a board member.

Al Masry Al Youm is promoting an initiative to manufacture 400k vehicles in Egypt. AMAY wants the country to move from assembling cars to a complete manufacturing process by providing incentives to attract international manufacturers and sign two agreements to manufacture 200k vehicles each before the end of 2016. It’s the latest high-profile endorsement of the so-called “Automotive Directive” that domestic assemblers have been seeking to protect them against what they call “unfair competition” from Moroccan, European Union and Turkish imports, which enjoy preferential tariff structures.

When is this conference anyway? The Upper Egypt Investment Conference has been postponed for a third time, after it was due to be held in 11 December in Hurghada, according to government sources speaking to Al Borsa. They add that the cabinet had not decided on new date for the conference — which was widely touted as the cornerstone for the Ismail government’s economic policy in Upper Egypt. They speculate that it might be moved towards late December or even early next year. The much hyped conference has been marketed since summer, with GAFI already sending out invitations to delegates.

The MENA region is up to speed with what EY labels as the “digital future,” Rachel Williamson notes in a feature for Wamda. Businesses regionally are not using 80% of the data they generate, similar to the global average. While cybercrime is still not a major threat in the MENA region, Saudi Aramco was attacked in 2013-14, driving Saudi Arabia to lose 0.17% of its GDP to cybercrime.

EU pays off Turkey with EUR 3 bn, promises of inclusion in Schengen visa zone and re-starting ascension talks to keep migrants and refugees out of Europe: European Union leaders and Turkish prime minister Ahmet Davutoglu signed an agreement in Brussels on Sunday that would see a transfer of EUR 3 bn to Turkey to raise the living standards of Syrian refugees there and incentivize them to stay out of Europe, Reuters reports. The aid comes as part of a package to Turkey that includes promises of putting Turkey on the path to be included in the visa-free Schengen zone within a year, as well as a restart of EU ascension talks. Reuters notes: “Aware of a sense of desperation in Europe for a solution to a crisis that has called into question its own cohesion and the future of its Schengen passport-free travel zone, Turkish President Tayyip Erdogan has driven a hard bargain.” German Chancellor Angela Merkel has seen her approval ratings decline from 75% in the spring to just 50% now, according to the New York Times.

Shell’s takeover of BG Group seen to secure green light from Chinese regulator: Australian and Chinese regulators are seen likely to give the green light to Shell’s proposed takeover of BG Group, the Telegraph reports. “Competition lawyers say [China’s competition authority] Mofcom has a history of demanding remedies that often favour China in return for approving [agreements] … The authority has become a nightmare for dealmakers, as they are given little visibility about how the regulator reaches its decisions, while staff shortages often mean that reviews can become drawn out affairs, even when there are limited competition concerns.” However, the piece goes on to note unnamed sources as saying Shell has already put forth such remedy proposals to China, and that its national energy companies also back the takeover deal, as they work with Shell in various projects worldwide. If Shell wins all the requisite approvals, the tie-up would make the new entity the UK’s largest public firm.

EGYPT IN THE NEWS

Egypt is to blame for the “baffling” relationship with Saudi Arabia. That’s what high-profile Saudi academic Khaled El Dakheel believes, penning a rare outburst that underscores how far the two countries have grown apart since the death of King Abdullah. In his widely read column in the London-based daily Al-Hayat, the author writes that Egypt and Saudi face common threats across the region, including: State failure in Syria and Iraq, the rise of Iran as the regional bully, and a deteriorating relationship between GCC countries and their traditional ally, the United States. That should have brought the two countries closer together — and hasn’t. “Egypt’s reluctance to cooperate with Saudi Arabia on regional issues is because Egypt refuses to admit that the kingdom is the leading regional power now,” El Dakheel says. “There is a state of denial in Egypt about what Egypt can achieve while it’s lagging behind in politics, economy, and science.” The author goes on to discuss why Egyptian state officials and its elite are to blame. In his conclusion, El Dakheel speaks to Egypt saying, “those grey political moves don’t help anyone. They prove that Arabs can’t follow one strategy and allow external forces to mess with the region.”

DIPLOMACY + FOREIGN TRADE

Customs Authority calls into question the benefits of Agadir Free Trade Agreement: Egypt has not reaped significant benefits from the Agadir free trade agreement with Jordan, Morocco and Tunisia, said Ahmed Hassanien, the head of technical office at the Customs Authority. The agreement — designed to link the Arab countries with European goods and signed by Egypt three years ago — has failed to deliver on its intended purpose and has outlived its usefulness, said Abdel Aziz at a forum organized by the Belgian-Egyptian Association. In other news, the Customs Authority is drawing up a “white list” and a “black list” of importers, classifying those who have kept up with regulations and those it accuses of customs evasion, according to the head of the Customs Authority Magdy Abdel Aziz. (Read in Arabic)

President Abdel Fattah El Sisi took advantage of being in Paris ahead of the COP21 climate talks, meeting with a number of political and corporate leaders. Highlights, per readouts from Ittihadiya, include:

• Meeting with Iraqi President Fuad Masum, El Sisi expressed hope that Iraqis pursue national reconciliation and preserve the territorial integrity of Iraq. The two leaders reviewed the latest developments in the war against Daesh in light of the liberation of the strategic city of Sinjar from the terrorist group.
• Meeting with the CEOs of Dassault Aviation and DCNS Group, El Sisi lauded cooperation with Dassault (supplier of Egypt’s Rafale aircraft) and acknowledged the support DCNS Group is offering to the Egyptian Navy.
• During a meeting with UNESCO Director-General Irina Bokova, the latter extended an invitation to El Sisi to visit UNESCO and present to member states Egypt’s views on issues related to heritage and culture.
• Talks with the the Secretary General of the Organization for Economic Cooperation and Development (OECD) included an update on Egypt’s upcoming reforms to economic and social programs.

Japan’s government pledged to provide USD 100 mn to finance a 20 MW solar power station in Egypt, the Foreign Affairs Ministry said. The pledge came during Foreign Affairs Minister Sameh Shoukry’s visit to Japan and in preparation for President Abdel Fattah El Sisi’s anticipated visit to Tokyo.

El Molla studies cooperation opportunities with Sudan: Petroleum Minister Tarek El Molla met with his Sudanese counterpart Mahmoud Abdel Rahman in Cairo to discuss means of mutual cooperation in petroleum and gas, reports Al Borsa. Abdel Rahman highlighted training, developing refineries, and maintenance of projects as the primary fields that require Egyptian assistance. El Molla assured that the petroleum sector was ready to provide any assistance necessary.

ENERGY

Natural gas regulator to begin operations mid-2016
The national entity regulating natural gas sales domestically will be operational from mid-next year, Oil Minister Tarek El Molla said. The entity will not price the gas directly, but rather price the service of providing and transporting the gas, El Molla explained. He added that not all requests by private-sector companies to import gas from abroad have been given a rubber-stamp approval, as importers will need to meet set criteria. (Read in Arabic)

Zohr gas purchase price has not been set, El Molla says
There has not been an agreement reached on the purchase price of gas from the Zohr gas field, Oil Minister Tarek El Molla said. Negotiations are still under way and reports that the price will be capped at USD 4.88 per mmBtu are untrue, he added. There still is a disagreement between EGPC and Eni, sources told Al Mal. Eni projects it will be investing USD 16 bn to develop the field, whereas EGPC only expects USD 14 bn and the difference, when accounted for, yields different purchase prices. (Read in Arabic)

INFRASTRUCTURE

EGP 100 bn needed to fix the wastewater infrastructure problem
It will take an urgent allotment of EGP 100 bn to overhaul the dilapidated drainage infrastructure of rural areas, said Housing Minister Mustafa Madbouly. The government plans to fix 50% of these drainage networks in three years, said Madbouly in an interview in Al Qahera We Al Nas. He added that overhauling the country’s entire networks will need an investment of EGP 9 bn, stating that the government cannot go at it alone. This urgent plea for funds critical to infrastructure comes on the back of flash floods that wrought catastrophic damage and loss of lives in Beheira and Alexandria. These led to a massive outcry over the government’s neglect of water infrastructure. (Read in Arabic)

BASIC MATERIALS + COMMODITIES

Prime Minister approves Ministry of Agriculture’s sustainable development plan
Prime Minister Sherif Ismail approved the plan presented by the Ministry of Agriculture for sustainable development as part of the government program that will be presented to the House of Representatives in its first session, reports Amwal Al Ghad. The plan includes the Ministry’s 2030 strategy, and the studies conducted for the 1.5 mn feddan land reclamation project. (Read in Arabic)

MANUFACTURING

IFC completes acquisition of 20% stake of Sphinx Glass
The International Finance Corporation has completed its acquisition of a 20% stake of Sphinx Glass “to boost the glass manufacturing sector in the region, support the company’s expansion, and spur job creation and growth.” The decision to invest in the company was approved in June. Sphinx Glass is a subsidiary of Saudi Arabia-based Construction Products Holding Company (CPC). (Read)

REAL ESTATE + HOUSING

Emaar Misr to expand commercial development portfolio with a EGP 23.1 bn plan
Emaar Misr is moving forward with a EGP 23.1 bn eight-year plan to expand its portfolio of commercial developments, according to Al Borsa. Emaar plan will center around retail development as it provides a constant revenue stream. It hopes to develop 270 km2 in retail rental space, according to NBK Capital research. The company also plans to develop 170 km2 in office buildings and 4000 hotel rooms. (Read in Arabic)

TELECOMS + ICT

Huawei in talks over networking government databases
Huawei is negotiating with the Supply Ministry to bid on the project to develop IT infrastructure to network government ministries, said Huawei-North Africa executive Abdullah Mahmoud. Mahmoud did not specify the size of the company’s investments in the project, but stated that the company will contribute 25% of the funding. The Supply Ministry has been actively promoting the project’s benefits for the some time in streamlining and bettering communication between government agencies. (Read in Arabic)

ASUS invests USD 10 mn into smartphones in Egypt
Computer and electronics manufacturers ASUS have decided to break into the smartphone market in Egypt with an investment of USD 10 mn, according to the General Manager for Europe, Middle East, and North Africa Eric Ou. The decision comes after extensive studies of the Egyptian market, said Ou. (Read in Arabic)

AUTOMOTIVE + TRANSPORTATION

Tunnel authority issues construction works preliminary tender for first phase of the fourth metro line
The National Authority for Tunnels (NAT) issued a preliminary tender for the construction works of the first phase of the Cairo Metro’s fourth line. Qualified companies will then be asked to submit their financial and technical proposals in another bid in January. NAT is aiming to being operations on the line in July 2016 and expects the project to take two years for completion. The project will be financed through a USD 1.2 bn loan from the Japan International Cooperation Agency (JICA). (Read in Arabic)

OTHER BUSINESS NEWS OF NOTE

EFSA approves AXA acquisition of CIL
The Egyptian Financial Supervisory Authority (EFSA) granted AXA its final approval for the acquisition of CIL for EUR 88 mn, or EGP 763 mn, Hassan El Shabrawishi, Managing Director of AXA Egypt told Amwal Al Ghad. AXA received the Cabinet’s approval for an acquisition of a share larger than 10% earlier last month. (Read in Arabic)

LEGISLATION + POLICY

Tax policy criticized at the Shalakany Tax Law Forum
The Ismail government’s tax policies were heavily criticized at a forum focused on tax law and its effects on investments organized by the Shalakany Law Firm. Governments since 2012 have adopted a policy of amending and changing tax laws at a pace indicative of a lack of careful study, said Emad El Shalakany, one of the firm’s senior partners. He specifically cites certain property tax regulations which have been amended in 2012 and 2014, and the three-year 5% capital gains tax which was shortened to one. He also criticized corporate taxation which fluctuated from year to year. This lack of clarity in tax policy has had a negative impact on investment, he argues. (Read in Arabic)

SPORTS

Vodafone to sponsor Al Ahly football jerseys for EGP 100 mn
Vodafone Egypt will have its name printed on Al Ahly’s football jerseys after securing sponsorship rights for three years after paying EGP 100 mn. The agreement was reached with Saudi Arabia’s Sela Sports, which secured the rights to market sponsorship for Al Ahly’s football team in an EGP 231 mn three year-agreement. Sela will get 65% of the marketing rights of Al Ahly contract. Vodafone had lost Al Ahly’s sponsorship rights to Etisalat four years ago. (Read in Arabic)

ON YOUR WAY OUT

YouTube enables offline viewing for Egypt. Users will be able to make videos playable offline for up to 48 hours at the tap of a button, this YouTube Support page will show you how.

Pope Tawadros II did not enter Jerusalem on an Israeli visa, the Coptic Church said. The Pope’s visit to Jerusalem came in coordination with the Palestinian Authority but has not met with any political official from any country during his visit. The Church insists that its stance on barring Copts from pilgrimage to Jerusalem still stands, according to Al Masry Al Youm.