Sunday, 14 August 2016

Teetering on the edge: We have a USD 12 bn staff-level agreement with the IMF. Here’s what’s next.

TL;DR

What We’re Tracking Today

Let Olympian Sara Samir sit for exams: Sara Samir (referred to in the international press as Sara Ahmed) who at 18 years of age made history as the first Egyptian woman to win an Olympic medal said she was denied a request to defer her high school exams to train for Rio. Samir made the remarks in a call-in to Ahmed Shoubair’s show after her win (Arabic, 5:42). She went on to state that she was informed by the Ministry of Education that as a result, she would receive failing marks in all her classes. The Ministry of Education denied she had ever made such a request, AMAY reported on Thursday, which is probably the wrong thing to say in this situation.

… It would appear, however, that the Ministry may slowly be arriving at the realization that the typical response is not going to fly at all. On Saturday, the Ministry’s department of Legal Affairs indicated that Sara may be granted the chance to sit for her exams upon returning from Rio. We believe public pressure in this case is appropriate and necessary to make sure her case does not fall into a bureaucratic black hole once everyone forgets about Rio and the pride that Sara Samir and all our athletes who embraced the spirit and sportsmanship of the Olympics brought to Egypt.

(And as an aside, we do note that Egyptian weightlifter Abeer Abdelrahman was retroactively awarded a silver medal at the 2012 London games after her Russian rival was disqualified for doping.)

Morgan Stanley, JP Morgan, and BNP Paribas were among the 20 investment banks that have submitted proposals to advise on Egypt’s USD 3-5 bn bond issue in 2016 as part of a tender that ended on Thursday, a senior government official tells Al Borsa. Mandates will be handed out tomorrow. The maturity on the bonds will be between 5-10 years, with some long-term bonds carrying a maturity of 30 years, said Deputy Finance Minister Ahmed Kouchouk, Al Borsa reports.

What We’re Tracking This Week

Central Bank of Egypt Governor Tarek Amer is set to meet with the managing directors of all domestic banks on Monday. Likely on the agenda are the issues of FX availability and EGP devaluation, Al Borsa speculates.

Fall is in the air: Cairo American College is back to school on Wednesday, 17 August (16 August for new students). MBIS are back on Sunday, 21 August, BISC on 28 August, and both AIS and MES are back in session on 4 September. Now might be a good time to check your calendar and make sure the kid(s)’ first day is penciled in.

Speed Round

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We have an agreement: Egypt and the International Monetary Fund have reached a staff-level agreement on a three-year extended fund facility (EFF) worth USD 12 bn, the IMF’s mission chief to Egypt, Chris Jarvis, said. The “agreement is subject to approval by the IMF’s Executive Board, which is expected to consider Egypt’s request in the coming weeks,” according to the IMF’s official press release.

“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently,” the statement reads. “The program aims to improve the functioning of the foreign exchange markets, bring down the budget deficit and government debt, and to raise growth and create jobs, especially for women and young people. It also aims to strengthen the social safety net to protect the vulnerable during the process of adjustment.”

“The government’s fiscal policy will be anchored to placing public debt on a clearly declining path … general government debt is expected to decline from about 98% in 15/16 to about 88% of GDP in 2018/19… Budgetary savings that come from other measures will be partially spent on social protection: including specifically food subsidies and targeted social transfers…The CBE monetary and exchange rate policy will aim to improve the functioning of the foreign exchange market, increase foreign reserves, and bring down inflation to single digits during the program. Moving to a flexible exchange rate regime will strengthen competitiveness, support exports and tourism and attract foreign direct investment… significantly improve Egypt’s ratings in Doing Business and Global Competitiveness.”

“We at the IMF are ready to partner with Egypt in this program. We will also encourage other multilateral agencies and countries to support Egypt. We have talked to our colleagues in the World Bank and the African Development Bank and they are willing to help. It would also be very helpful for Egypt’s bilateral partners to step forward at this critical time.”

So, what does a “staff-level” agreement really mean? It means that members of the IMF technical staff and the negotiating officials from Egypt — led by Finance Minister Amr El-Garhy and including CBE Governor Tarek Amer — have reached an agreement on the proposed economic reform programme as well as the funding package that could be provided. It doesn’t mean that Egypt is certain to receive IMF funding, however. The agreement has to be approved by the House of Representatives as well as the IMF Executive Board.

This particular agreement is different: An EFF is a lending facility (IMF definition or Reuters definition) to help members with balance of payments problems that need an adjustment period longer than that provided for under stand-by arrangements (SBA, the type of agreements we reached with the IMF in 2011 and 2012). “A country requesting an extended fund facility outlines its objectives and policies for the period of the arrangement, usually about three years, and each year presents a detailed statement of the measures it plans over the next 12 months.” In other words, if we don’t stick to the economic plan, the IMF has the power to halt the funding within the three years. SBAs, in contrast, allow countries “to draw on a specified amount of credit for a specified time, usually one to two years, provided that its economic policies conform to the terms set out in the agreement.”

We’ll be swimming in IMF “roz” soon enough, no? Not necessarily, even if the IMF Executive Board and House of Representatives approve the agreements. There is recent precedent that staff-level agreements between the IMF and Egypt don’t translate to actual funding. In June 2011, Egypt reached a staff level agreement on a 12-month SBA for USD 3 bn in funding. Another 22-month SBA agreement was reached in November 2012 for USD 4.8 bn. In both cases, when it came to implementing economic reforms, the government got cold feet, and this time we’ll have to decide on reform measures every year for the next three years — and we haven’t even passed VAT legislation yet.

What’s different this time? The wolves are at the door. The gun is at our head. Choose your metaphor, but we either way: We have a history of (only) performing under pressure.

JARVIS INTERVIEW WITH AMAY: The loan will be divided into three tranches, which will be disbursed over six payments, IMF head of mission in Egypt Chris Jarvis told Al Shorouk in an interview carries Friday. The first tranche will be worth a total of USD 4 bn, with the first instalment being worth USD 2.5 bn and a second payment of USD 1.5 bn to follow, Jarvis added. (Elsewhere in the newspaper, a government official told Al Masry Al Youm that the first tranche would be USD 2.5 bn and would arrive in 6-8 weeks.)

Interest on the facility has not been agreed, but should be in the 1.5% range. The first payment will be delivered within weeks of the IMF’s Executive Board approving the agreement. Al Shorouk quotes Jarvis as saying that the board’s deliberations will take into consideration the status of loan agreements with other finance institutions including the World Bank and the African Development Bank.

Speaking on the timeline of the reform program, Jarvis asserted that “devaluation is only months away.” He added that the government has already taken steps to cut energy subsidies and “we are not worried about the implementation timeline. The government wishes to protect the lowest income citizens from the inflationary effects of such a decision, and the IMF can appreciate that,” said Jarvis.

As for the value-added tax, the government will begin enforcing the tax as soon as the House of Representatives approves the legislation, Jarvis said, adding that 14% is an appropriate baseline rate if exemptions are not extensive. Asked whether the IMF felt the exemptions list was too extensive, Jarvis is quoted as saying: “We were never informed of the exemptions list and did not discuss it during the negotiations, but we are confident that the government will take the appropriate action.”

Bottom line: Jarvis comes across as convinced the government will stay the course on the required reforms.

Asked if there was anything which would block the loan in a separate interview with Reuters, Jarvis stated that the IMF would need reassurances that the reform program must be fully funded. He seemed optimistic, however, saying that Egypt should receive USD 1 bn from the World Bank as soon as the VAT is passed by the House. He also confirmed that the first disbursement will be USD 2.5 bn, and should be delivered in September, while future disbursements will depend on progress on the reform program.

El Sisi sells nation on IMF program in second economic speech in as many weeks: President Abdel Fattah El Sisi reaffirmed the administration’s commitment to its reform program during a speech at the opening ceremony of the Ethydco Petrochemicals complex on Saturday. The speech can be seen in full here (run time 39:52).

With tough times ahead, El Sisi said he is committed to implementing economic reforms,Reuters noted in their summary of the speech. A significant portion of the speech involved talk on public spending on salaries and pensions. Public pressure saw the state hire some 900k new employees it did not need after January 25, 2001, the president said. Public wages grew from EGP 80-90 bn to EGP 228 bn in the last four years, while government debt grew by EGP 600 bn as a result to 97% of GDP. Meanwhile, pensions have gone up by 35% in the last two years, at a cost of EGP 70 bn.

On electricity, fuel, and the Metro: El Sisi briefly addressed recent price hikes on electricity, saying that while the lowest consumption tier will only see their electricity bills rise EGP 1.50, that tier as a whole costs EGP 28 bn in subsidies. Taken as a whole, the rise in electricity prices will see EGP 20 bn restored to the state budget. El Sisi also noted that talk of subsidy reform should not be “misconstrued” to mean we face imminent fuel price hikes. A plan to phase-out fuel subsidies will be announced before it is implemented, he said. El Sisi also hinted at a possible Cairo Metro ticket price increase as the operating cost would require a ticket price of “over EGP 10.”

El Sisi also laid out specific development targets to be achieved by mid-2018, including:

  • Completing 7,000 km of roads and 200 bridges at a total cost of EGP 100 bn;
  • Completing 800k to 1 mn low-income housing units and building another 150k homes for residents of informal housing settlements at a total combined cost of EGP 100 mn;
  • Wastewater treatment (including agricultural, industrial, sewage): 10 mn cubic meters per day, or 3.5 bn cubic meters annually;
  • Seawater desalination: 1 mn cubic meters per day;
  • 1.2 bn sqm in new cities,including New Qena, New Assiut, New Minya, New Sohag, the new administrative capital, New Alamein, East of Canal zone, New Suez

The president also mentioned at target of increasing cement production by 20-30% from today’s level, among other initiatives.

The Interior Ministry’s Public Funds Investigation Unit shut down 12 FX bureaus on Wednesday and Thursday for trading currency on the parallel market, Essam Saad, head of the department, told AMAY on Friday. Saad added that Interior Minister Magdy Abdel Ghaffar had given strict orders to shut-down bureaus proven to be involved in parallel market activities and manipulating the USD exchange rate. We had reported on Thursday that the state had closed 48 exchange offices since the beginning of the year.

The parallel market fluctuated on Thursday between EGP 12.55 and EGP 12.75, Al Mal reports. We were unable to find quotes from reliable sources for Saturday’s rate.

Twenty solar energy companies may quit phase one of the feed-in-tariff program following their “sit-down” with Electricity Minister Mohamed Shaker on Thursday, Al Borsa reported. Representatives from the companies said they lost faith in the government and believe it is deliberately trying to sabotage their projects. Shaker is trying to impose a financing structure that limits the investors’ access to local banks to just 15% of the total cost of their projects. The original contracts have not imposed any specific financing structure on them, the FiT companies said, so having the Ministry require them to seek 85% of their funding from foreign banks is essentially “illegal,” they argue. Readers will remember that international lenders have pulled their backing for phase one thanks to the state’s insistence on domestic arbitration of any disputes that may arise.

Cairo Solar has already decided to withdraw, Al Borsa reports, quoting Chairman Hisham Tawfik as saying the company’s board of directors has voted to shelve a USD 100 mn project for a 50 MW solar power station in Benban, Aswan. “How can we secure 85% of our funding from international institutions when they are refusing to agree to domestic arbitration clauses?” Tawfik asked.

…Also confirmed withdrawing from first phase: ACWA Power, OTMT, and the SunEdison-Orascom Construction consortium have all confirmed they are withdrawing from the first phase of the feed-in-tariff project and waiting for announcements on phase two, Al Mal reports. Norway’s Scatec Solar is also considering exiting phase one and hasn’t said whether it will stick around to discuss phase two, company sources tell Al Borsa. As we had previously reported, both Abdul Latif Jameel and Italy’s Enel Green Power also pulled out of the program when it became clear the state had effectively made it impossible to get project financing.

Going against the mold was Infinity Solar, which has declared that it intends to carry on with phase one and is in talks with insurance firms to insure any financing from German banks under the 85% foreign funding condition imposed by the minister, Al Borsa quotes company GM Nayer Fouad as saying.

Member of house investigative committee points finger at Supply Minister: “We have accounting documents that implicate the Supply Minister in the misappropriation of EGP 14 bn in the wheat corruption scandal,” alleged Rep. Yasser Omar, a member of the House of Representatives committee investigating allegations of fraud in this winter’s wheat harvest, Al Mal reports. It’s the most direct accusation levied against Supply Minister Khaled Hanafy to date. Omar also alleged that behind-the-scenes talks between the committee and the minister’s office aim to extricate Hanafy from political jeopardy before the final report is tendered. Omar Made offered no proof of his allegations, and the EGP 14 bn frankly beggars the imagination: The state paid EGP 14 bn to farmers for the 2016 wheat harvest, so Omar is essentially claiming that the entire harvest was fraudulent.

Meanwhile, Al Ahram has confirmed that 13 officials and private silo owners have been arrested on orders of the Prosecutor General for their alleged involvement in the scandal. The news comes as the Supply Ministry makes preparation of the start of this year’s 2 mn tonne rice harvest in September, Al Mal reports.

The government is keen on implementing the shounas and silos projects on time, Prime Minister Sherif Ismail told a delegation from Blumberg Grain on Thursday, state mouthpiece Al Ahram reported. Ismail met with company representatives to review the latest developments in the program. Al Borsa says Blumberg presented their plans for the second phase their project in Egypt to build and develop 300 shounas nationwide and have also offered to invest USD 350 mn in food storage and preservation projects. This comes in contrast to news from last week speculating that Blumberg Grain was told the state won’t be working with it for the second part of the shounas program after the Supplies Ministry reportedly refused to sign on.

ExxonMobil has reportedly joined Lukoil, Total, and BP on the list of IOCs negotiating with Eni to acquire at least 20% of its stake in the Zohr field, sources tell Reuters. ExxonMobil does not have upstream concessions in Egypt, but has recently landed bordering acreage in Cyprus, the news wire reports. Eni is trying to raise EUR 5 bn from asset disposal over the coming two years. As we had previously reported, Eni’s CEO Claudio Descalzi had previously said he expects to reach an agreement in 2017 when final appraisals are complete and production begins.

The House of Representatives is drafting a law governing SMEs with the aim of forming a single accredited body responsible for the domestic SME sector, Al Mal quoted House Planning and Budget Committee Chairman Hussein Eissa as saying on Saturday. The proposed agency would be responsible for business formation, liquidation, and taxation in the SME sector. The move aims to facilitate funding and decrease the risk of SME credit default. This comes as the Finance Ministry prepares to introduce legislation that would set-out a new tax framework for SMEs soon after the House passes the value-added tax (VAT), said Deputy Finance Minister Amr Al Monayer, Al Mal reported.

** Earnings watch: Among those reporting earnings this quarter, with just two days left to go in the official reporting season for 2Q:

  • EFG Hermes reported a 2Q2016 net profit from continuing operations of EGP 48 mn, with operating revenues up 10% y-o-y at EGP 288 mn. The company’s consolidated results for the quarter, which showed a net loss of EGP 67.55 mn, do not reflect the EGP 525 mn gain from the sale of 44.3% of Crédit Libanais, with this amount being booked only on the company’s standalone financial statements. The company’s consolidated results do reflect the impact of one-time tax charge in Egypt related to the sale.
  • Telecom Egypt reported a 175% y-o-y increase in net profit to EGP 1.04 bn in 2Q2016. This brings up the net profit figure for 1H2016 to EGP 2.32 bn.
  • Orascom Telecom reported a sharp decrease in 1Q16 net profit to EGP 48.7 mn, down from EGP 373.9 mn in the same period last year.

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Egypt in the News

We wish we could say news of a USD 12 bn agreement with the IMF was dominating international coverage of Egypt this morning, but it’s not. No, a crybaby named Islam El Shehaby has blotted out reporters’ memories of the Egyptian beach volleyball team and weightlifting medalist Sara Samir for refusing to shake his opponent’s hand — despite having been warned in advance by his federation that he was expected to play by the rules.

Coverage of the IMF facility made headlines in the Financial Times, where Heba Saleh quotes IMF Egypt chief Chris Jarvis as noting that assistance from Egypt’s pals in the GCC remains important: “We are looking for additional finance from bilateral sources. The argument we would like to make is that if there is a moment to provide balance of payment support to Egypt, this is it.” Saleh also quotes Jarvis as saying the first tranche of USD 2.5 bn would be disbursed to Egypt immediately after the board meeting.

Where will the EGP and interest rates fall? The Wall Street Journal quotes Capital Economics’ William Jackson as saying, “In the near-term, an [agreement] with the Fund is likely to lead to a devaluation of the EGP and higher interest rates. Our current forecast is for [the EGP] to drop to 9.50 per USD by end-2016 from 8.88 per USD now, although the risk now is that it falls further.”

The New York Times’ Nour Youssef picked up on CBE Governor Tarek Amer’s admission that “It’s been a year since we have received any money” from GCC countries. The story takes a generally negative line, noting, “The announcement of the loan reinforced a general sense of foreboding among Egyptians, especially after Mr. Sisi suggested twice in recent months on state television that they may have to go hungry for their economy to stabilize. The prices of food and electricity have soared.”

Bloomberg have also followed-up on the story since we noted their original coverage on Friday morning.

International media is having the field day you would expect after Egyptian judoka Islam El Shehaby refused to shake Israeli opponent Or Sasson’s hand after losing in an elimination bout last week — to the loud and very deserved boos of the audience (watch, run time: 0:52). El Shehaby had also refused to bow (as is customary at the end of judo matches) until being ordered to do so by the referee. The story is the single dominant piece on Egypt this morning, appearing everywhere from the Times of Israel to Reuters, the Daily Mail and the Telegraph. The International Olympic Committee (IOC) opened a disciplinary probe into El Shehaby’s actions, The International Judo Federation will decide “if any further action should be taken,” while the Egyptian Olympic Committee has since made an official statement (Arabic) saying, “We told Islam El-Shehaby before the game he should fulfill all the sporting behaviors and rules against his Israeli opponent as this is just a game in a major world tournament. What happened after the match was just personal behavior."

El Shehaby was pilloried on social media by Egyptians who objected to his poor sportsmanship, giving birth to memes making fun of his actions. See our Image of the Day.

The US State Department issued its annual Religious Freedom Report for the year ended in 2015 on Wednesday, with the section on Egypt (pdf) highlighting the visible efforts of President Abdel Fattah El Sisi to change public discourse and attitudes toward sectarianism in the country. The report was less forgiving on the inaction of the country’s police force with regard to responding to incidents of sectarian violence, especially in rural Egypt. The report notes “Actions and statements of President Sisi, however, were seen by Christian leaders as positive messages that Christians were full members of society. Police failed to act in the face of victimization of Christians in Upper Egypt who were disproportionately targeted for kidnapping and extortion, according to human rights activists and Christian leaders, although there were some reports of police successfully securing the release of kidnapped Christians.”

Income inequality in Egypt is higher than suggested by some conventional data, World Bank economists believe. “Household income surveys underestimate income inequality because they fail to capture top incomes. A popular solution is to combine the household survey with data from income tax records, though for countries like Egypt these records are not available, leading to an underestimate of inequality.” So they worked around this ambiguity by using house prices data to estimate the top tail of the income distribution. Their results push the Gini Index (a measure of inequality) from “a survey-based figure of 0.36, which suggests that it is one of the world’s most equal countries, to 0.47.”

Daesh and other jihadi groups are scavenging unexploded Second World War landmines from Egypt’s Western Desert and reusing them as weapons of their own, Peter Schwartzstein writes for Newsweek. “With periodic supply problems and an exceptional quantity of large anti-tank mines rich in explosives seemingly readily available, the temptation to pilfer the relics of Hitler’s war has proved too tantalizing to resist.” Schwartzstein says “what makes Egypt’s minefields so problematic—aside from the large volume of bomb-making matter—is that they protect smugglers and jihadis penetrating inland from the uncontrollable Libyan border.”

Topping the wrong lists: Artnet compiled a list of the 10 most hated public sculptures in the world and an Egyptian monstrosity claimed the top spot. Number one is the yellow monolith “ugly Nefertiti,” which was installed in Upper Egypt last year. It is “unquestionably a monstrosity,” Artnet describes. Also making the list, even though it is not a sculpture, is the botched David Bowie mural in Sheffield, England.

Worth Reading

The Brotherhood, three years after Rabaa: George Washington University’s Mokhtar Awad reviews the current condition of the outlawed Islamist group for the Cipher Brief. “The Brotherhood is now an organization in shambles, slowly rebuilding its networks across Egypt and attempting to lead an opposition from exile… Most [within the movement] seem convinced that a revolution is just right around the corner, as far away from reality as this is.” (Read No End in Sight)

Image of the Day

Egyptian memes on judoka El Shehaby’s refusal to shake Israeli Sasson’s hand: As noted in Egypt in the News, and as many of our readers may have enjoyed over the weekend, Egyptian social media was replete with memes mocking Islam El Shehaby’s poor sportsmanship at Rio for refusing to shake the hand of his Israeli opponent Or Sasson. View images: Funny but sexist or funny but contains strong profanity in Arabic.

Worth Watching

Focus group of actual Trump supporters unwittingly being shown fake Trump campaign ads: If you feel like terrorizing yourself today, do not miss Triumph the Insult Comic Dog’s staged focus group with actual Donald Trump supporters being told they are being shown potential advertisements for Trump’s campaign. If one were to ask: Where can the line be drawn before Trump’s supporters will not support statements even fictitiously attributed to their candidate, the following video demonstrates that there is no line. (Watch, running time: 14 jaw-dropping minutes)

Diplomacy + Foreign Trade

International Cooperation Minister Sahar Nasr met with a delegation from the Islamic Development Bank to discuss a future cooperation strategy, Al Masry Al Youm reported. Nasr prioritized development projects in the Sinai Peninsula, as well as agricultural projects that serve the 1.5 mn feddans project. The delegation also discussed the final arrangements for opening a branch in Egypt to expand its domestic operations.

Energy

Oil Ministry considering talks with IOCs to increase production in Delta area

The Oil Ministry is considering getting foreign IOCs to increase their output of oil in the Delta region to 770 mcf (137 mn barrels), up from a current 440 mcf (78 mn barrels), said Oil Minister Tarek El Molla. This increase should help cover 20% of the state’s oil needs, added El Molla. He acknowledges that the government needs to provide further incentives to IOCs in order to get them to increase production in the field, Al Borsa.

Electricity ministry to borrow EGP 5 bn to pay back dues to EGPC

The Electricity Ministry is set to borrow EGP 5 bn to pay its debts to the Egyptian General Petroleum Corporation (EGPC), with EGPC set to bear the loan’s interest until it receives part of its dues from the Electricity Ministry, according to an unnamed Petroleum Ministry source, Al Borsa reported on Saturday. The Petroleum Ministry is reportedly owed around EGP 60 bn from government bodies, with EGP 46 bn owed by the Electricity Ministry as a result of its gas, fuel and diesel consumption, as well as unpaid monthly bills. The Electricity Ministry had previously taken out an EGP 10 bn loan to pay back EGPC back in July of last year, and most recently NBE had approved a loan of EGP 3.5 bn by Egyptian Electricity Holding Company to pay back EGPC over a period of eight years.

EGAS pumps 36 bcf of gas in July through Ain Al Sokhna port FSRUs

EGAS has reportedly pumped around 36 bcf of natural gas through the two FSRUs at the Ain Al Sokhna port in July, unnamed sources told Youm7 on Saturday. This amount has been mainly directed towards power stations, with an average of 1.2 bcf/d supplies, with one unit supply 500 mcf/d, while the other supplying 700 mcf
/d.

Manufacturing

Cabinet economic group to determine minimum bidding price on cement licenses this month

The cabinet economic group will set the floor price for its auction of cement licenses sometime this month, said Ismail Gaber, head of the Industrial Development Authority, Al Borsa reports. Six companies are expected to bid on eight of the 14 new licenses to build cement factories.

Chinese firm to provide USD 600 mn in funding for factory producing phosphoric acid in Al Wadi Al Gadid

Chinese firm Weng Fu has reportedly signed an MoU to provide USD 600 mn in funding to build a factory in the Abu Tartur mine in Al Wadi Al Gadid to produce phosphoric acid, a report from the company Phosphate Egypt to Petroleum Minister Tarek El Molla revealed, Ahram reported on Sunday. Phosphate Egypt has conducted marketing, environmental and hydrogeological studies for the plant. The whole project is worth USD 900 mn, with the rest of the cost to be covered through bank loans. The factory will have a production capacity of 517k tons of phosphoric acid to be exported annually.

Health + Education

EIPICO postpones development plan due to USD shortage

The Egyptian International Pharmaceutical Industries Company (EIPICO) is postponing its expansion plan due to the ongoing FX crunch, head of finance at EIPICO Ali Ragheb told Daily News Egypt. The plan included adding production lines and investing in feeder industries, he said. The company allocates its USD 32 mn in export proceeds to the import of raw materials, for which the company has demand for USD 50 mn annually, and manages to secure the balance through the banking system, said Ragheb. EIPICO accounts for 23% of Egypt’s pharmaceutical exports.

Tourism

South Sinai tourism investors claim EGP 5.2 bn needed to upgrade Sharm hotels

Tourism investors in South Sinai have estimated that EGP 5.2 bn is needed to replace or renovate hotels in Sharm El Sheikh to be on par with international standards, with each hotel needing around EGP 15-20 mn, Al Shorouk reported on Saturday. They added that should maintenance efforts be halted, the tourism sector risks losing EGP 200 bn. Subsequently, they are calling for the government to make a decision that would require banks to grant loans for the renovation and replacement efforts, as banks have been hesitant to lend to the ailing sector. Hisham Ali, head of Tourism Investors Association in South Sinai, added that these hotels have not been upgraded in five years, resulting in their rating falling to 3 or 4 stars.

Telecoms + ICT

Talks over 4G ended, final framework next week

Negotiations between the National Telecommunications Regulatory Authority (NTRA) and mobile network operators over 4G licenses have concluded, with the NTRA due to set the final terms and conditions for the 4G framework next week, according to an NTRA official, Al Borsa reports. Horse trading over the last week concluded with the NTRA promising to make more network frequencies available.

TE Data raises market share to 76% in 2Q2016

Telecom Egypt’s ISP subsidiary TE Data has seen its market share reach 76% in 2Q2016, on 189k new subscribers during the quarter, Al Borsa reported on Saturday. The firm expects to hit 80% market share by the end of the year. Competitors Orange and Etisalat have seen their market share decrease to 14.9% and 3.5%, respectively, during the second quarter, while Vodafone’s market share increased to 5.5%. We previously noted that TE had reached a settlement with the Egyptian Competition Authority over allegations of anticompetitive practices in the ADSL market, vowing to pay a fine of a maximum of 1% of the revenue on utilization fees of its upgraded infrastructure. TE and TE Data have been accused of poaching clients from competitors under the guise of upgrading infrastructure, as well as of causing ADSL providers to lose EGP 100 mn and 300k clients as result of its monopoly over broadband infrastructure.

Other Business News of Note

Two Indian firms set to invest a total of USD 80 mn in the Egyptian petrochemical and agricultural markets

Two Indian companies are set to invest USD 80 mn in Egypt, according to Khaled Abu Al Makarem, chairman of the Egyptian-Indian Business Council, Al Borsa reported on Saturday. The first project involves building a USD 40 mn agricultural equipment plant expected to begin operations next year. Meanwhile, Sanmar Group wants to invest USD 40 mn to build a petrochemical factory in Port Said in partnership with an Egyptian firm, with the project to begin operations in early 2018. Sanmar had vowed to invest USD 350 mn in a new production line in Egypt back in April of last year. The council aims at increasing the volume of trade between the two countries to USD 8 bn in the coming three years from USD 5 bn today.

Egypt Politics + Economics

Govt signals full reversal on verbatim Friday sermons

The government appears to have made a full reversal on a recent decision by the Ministry of Religious Endowments to have imams follow verbatim Friday sermons drafted by the Ministry, signalled by the airing of an improvised sermon last Friday on state television, Gulf News reported. The reversal was further confirmed by a statement issued by the Ministry of Religious Endowments that said it was now optional for imams to follow pre-written sermons.

Mahinour El Masry finally released

Leftist activist Mahinour El Masry and Youssef Shaaban were released from prison on Saturday after serving 15 months for allegedly “storming” an Alexandria police station in 2013, Ahram Online reported. Human rights lawyer El Masry and journalist Shaaban were originally sentenced to 20 years in February 2015 on charges of “storming” a police station and “injuring policemen,” according to the charges against them. While serving her prison sentence, El Masry was awarded with the Ludovic Trarieux International Human Rights Prize for her work on the defense of human rights.

Suez Canal Revenues in FY2015-16 up EGP 2.3 bn, says Mamish

Suez Canal Revenues grew to EGP 41.2 bn in the FY2015-16 fiscal year, up EGP 2.3 bn from the FY2014-15 fiscal year, according to Suez Canal Authority Chairman Mohab Mamish, Al Mal reports. He provides no USD figures for the canal’s revenues and has not provided a detailed account of these revenues. Mamish had announced last week that USD revenue had grown 4% y-o-y in the first seven months of 2016.

National Security

Commanding General of US Army Central visits Egypt

Commanding General of United States Army Central Lt Gen Michael X. Garrett visited Egypt last week, according to a statement by the US Embassy in Cairo. During the visit, Garrett “met with senior Egyptian military officials to discuss the long-standing partnership between the United States and Egypt, joint efforts to fight terrorism, and shared interests in regional stability and security.”

The markets yesterday

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USD CBE auction (Tuesday, 09 Aug): 8.78 (unchanged since Wednesday, 16 March)
USD parallel market (Thursday, 11 Aug): 12.55-12.75 (from 12.75 on Wednesday, 10 Aug)

EGX30 (Thursday): 8,377.7 (+1.0%)
Turnover: EGP 861.0 mn (98% above the 90-day average)
EGX 30 year-to-date: +19.6%

Foreigners: Net Short | EGP -57.3 mn
Regional: Net Long | EGP +7.3 mn
Domestic: Net Long | EGP +50.0 mn

Retail: 66.4% of total trades | 64.4% of buyers | 68.3% of sellers
Institutions: 33.6% of total trades | 35.6% of buyers | 31.7% of sellers

Foreign: 9.2% of total | 5.9% of buyers | 12.6% of sellers
Regional: 9.1% of total | 9.5% of buyers | 8.6% of sellers
Domestic: 81.7% of total | 84.6% of buyers | 78.8% of sellers

WTI: USD 44.49 (+2.30%)
Brent: USD 46.97 (+2.02%)
Natural Gas (Nymex, futures prices) USD 2.60 MMBtu, (+0.35%, Sep 2016 contract)
Gold: USD 1,341.70 / troy ounce (-0.11%)

TASI: 6,325.6 (-0.5%) (YTD: -8.5%)
ADX: 4,527.0 (-0.3%) (YTD: +5.1%)
DFM: 3,524.4 (-0.2%) (YTD: +11.9%)
KSE Weighted Index: 353.4 (+0.2%) (YTD: -7.4%)
QE: 10,955.3 (-0.4%) (YTD: +5.0%)
MSM: 5,896.7 (+0.1%) (YTD: +9.0%)
BB: 1,156.5 (+0.4%) (YTD: -4.9%)

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Calendar

05-21 August (Friday-Sunday): Rio Olympics.

29-30 August (Monday-Tuesday): Wastewater Egypt conference.

04 September (Sunday): Arab Trade & Supply Chain Finance Conference.

05-08 September (Monday-Thursday): The 6th EFG Hermes London MENA and Frontier Conference, Emirates Arsenal Stadium, London, UK.

05 September (Monday): Markit Emirates NBD PMIs out for Egypt, Saudi Arabia, UAE at 6:15am CLT.

06-08 September (Tuesday-Thursday): Citi’s 2016 Global Technologies Conference, New York.

11-13 September (Sunday-Tuesday): Eid El Adha (national holiday, tentative date).

14-16 September (Wednesday-Friday): Bank of America Merrill Lynch Global Healthcare Conference 2016, London, UK.

19-20 September (Monday-Tuesday): Euromoney Egypt conference, venue TBD.

19-20 September (Monday-Tuesday): Arqaam Capital MENA Investors Conference 2016, Park Hyatt Dubai, UAE.

19-21 September (Monday-Wednesday): Bank of America Merrill Lynch Global Consumer and Retail Conference 2016, London, UK.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

27-29 September (Tuesday-Thursday): Citi’s Frontier Markets Symposium – London 2016, UK.

02 October (Sunday): Islamic New Year (national holiday, tentative date).

06 October (Thursday): Armed Forces Day (national holiday).

11 October (Tuesday): 2nd Annual Leasing Conference entitled “New insights to stimulate financing instruments”, Four Seasons Nile Plaza Hotel, Plaza Ballroom, Cairo.

11-12 October (Tuesday-Wednesday): Global Islamic Economy Summit, Madinat Jumeirah, Dubai.

November (TBD): Delegation of German companies in the renewable energy sector due to visit to discuss investment opportunities.

14-16 November (Monday-Wednesday): Bank of America Merrill Lynch MENA 2016 Conference, The Ritz Carlton, Dubai International Financial Centre, Dubai.

17 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

27 November (Sunday): 2016 Cairo ICT, Cairo International Convention Centre.

29-30 November (Tuesday-Wednesday): Citi’s Global Consumer Conference, London, UK.

04-06 December (Sunday-Tuesday): Solar-Tec exhibition, Cairo International Convention Centre.

04-06 December (Sunday-Tuesday): Electricx exhibition, Cairo International Convention Centre.

07-08 December: Citi’s 2016 Global Healthcare Conference, London, UK.

11 December (Sunday): Prophet Muhammad’s Birthday (national holiday; date to be confirmed).

11-13 December (Sunday-Tuesday): The Middle East Fire, Security & Safety Exhibition and Conference (MEFSEC), Cairo International Convention Centre, Cairo.

13 December (Tuesday): Amwal Al Ghad’s top 50 most influential women in Egypt women forum, Four Seasons Nile Plaza Hotel, Cairo.

29 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meets to review rates.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.