Flip-flopping on energy subsidies + NY Times loves CrossFit, Cairo Runners

The House of Representatives’ vote on the value-added tax could come as early as Sunday, 28 August; no date is as-yet confirmed.

The House of Representatives’ fact-finding committee will present its report on the government’s domestic wheat purchasing programme in a public session on Monday, 29 August, Bloomberg reports. “The report will display the shortcomings of the local wheat program and suggest ways to reform the sector, including modernizing the procurement and the silos system,” parliamentary committee head Magdy Malak said.

Also next Monday: Russian security officials will inspect Cairo, Hurghada, and Sharm El Sheikh airports.

President Abdel Fattah El Sisi be in India on Monday, 1 September for a state visit. The stopover will come on his way to China for the 4-5 September G20 summit.

Egypt, Ethiopia and Sudan are set to sign contracts with two consulting firms to perform impact studies on the Grand Ethiopian Renaissance Dam on 5 or 6 September, according to Foreign Ministry spokesperson Ahmed Abu Zeid, Ahram Online reported. It would appear no one seems to have bothered to tell Water and Irrigation Minister Mohamed Abdel Aty about it though, according to Al Shorouk.

The flip-flopping on fuel subsidy removal continues: Egypt plans to remove fuel subsidies within three years, government sources told Reuters. “What was agreed lately with the IMF delegation in Egypt is cancelling fuel subsidies within three years,” one unnamed official said. The Oil Ministry’s spokesperson denied to Al Ahram that there is a plan to remove fuel subsidies within the timeframe specified, saying no decision has yet been made. The phase-out of fuel subsidies altogether by 2020 was first announced in November 2015, but the government backtracked the decision a month later, diluting the plan down to a promise made to the World Bank to cut fuel subsidies to 30% of their mid-2014 level.

…Fuel price hikes, the Reuters piece suggests. The government will increase fuel prices to 65% of their actual cost in the current 2016-17 fiscal year. The newswire notes that 92-octane fuel sells today for 58% of its cost, while 80 octane is sold for 57% of what it costs to produce. The more pronounced price hike is expected in diesel, which is being sold now at about 53% of cost. The government had said in April it plans to reduce expenditure on fuel subsidies by nearly 43% y-o-y in the FY2016-17 budget.

The USD 1 bn UAE deposit announced on Monday has apparently been with the Central Bank of Egypt since Sunday, government sources tell Al Shorouk. Another government source tells Youm7 that the deposit will carry a 2.5% interest rate and will be returned over the six years in three USD 333 mn tranches, with the first tranche due on 20 May 2019. The deposit will be used to shore up FX reserves and help with the financing gap, said Finance Minister Amr El Garhy in a statement on Tuesday, Al Shorouk reports.

And speaking of GCC assistance: Egypt can no longer take unconditional Gulf support for granted, analysts told Bloomberg. “Sisi’s popularity is declining, pretty dramatically, and the economy is showing no signs of improving, so the U.A.E. and Saudi are likely discussing whether Egypt is worth their investing … But, given Egypt’s importance, I don’t see the relationship ending any time soon,” Sarah Yerkes, a visiting fellow at the Brookings Institution, said. LSE associate professor Steffen Hertog agrees, noting even though the relationship “has clearly cooled,” for GCC countries “ Egypt is too big to fail, however diminished its regional status.”

Finance Minister Amr El Garhy confirmed yesterday that 52 goods would be “completely exempt” from the value-added tax (VAT)and again noted that the ministry’s proposed 14% baseline rate was “fair” in view of the average in most countries globally being higher, according to remarks carried by Al Shorouk. The minister also noted that investors from a number of sectors have taken a renewed interest in Egypt since the announcement of the staff-level agreement with the IMF on a USD 12 bn, three-year facility. It seems “very likely” the IMF’s executive board would approve the extended fund facility, he added.

Elsewhere, the finance minister told Al Masry Al Youmthat the value of the EGP on the parallel market does not reflect the currency’s true strength. The government is looking to cut the cost of importing production inputs while growing exports, he added, noting that it would also be important going forward to launch campaigns to improve the flow of inbound tourists.

The Central Bank of Egypt kept the exchange rate unchanged at EGP 8.78 per USD at yesterday’s regular FX auction, at which the bank sold USD 118 mn, Reuters reported. The newswire says the parallel market rate was stable at around EGP 12.50-12.65 per USD 1, whereas Al Borsa pegged the rate slightly higher at EGP 12.70.

And while we’re on renewable energy, Prime Minister Sherif Ismail reportedly tried to reassure to feed-in tariff investors on Tuesday that their contributions are valued and essential to the government’s power plans, Al Mal reports. His statements come on the sidelines of a meeting with Investment Minister Dalia Khorshid and Electricity Minister Mohamed Shaker. The meeting was to discuss “investment incentives,” but the official readout on the meeting gave no additional information. It’s likely the meeting explored prospects for phase two of the program, as Shaker and other ministry officials have made it clear that they will not back down from their investor-repelling conditions in phase one. These include enforcing domestic arbitration and forcing companies to seek 85% of funding outside of Egypt.

There appears to be a strong likelihood that Supply Minister Khalid Hanafy will face a vote of no confidence in the House of representatives after the House report on fraud in wheat harvest collection held him ultimately responsible for the issue, said MP Yasser Omar, deputy head of the committee which investigated the alleged fraud. The report, which was submitted to House Speaker Ali Abdel Aal on Sunday, will be discussed by parliament next Monday, 29 August. MPs are expected to demand a hearing on Hanafy’s alleged involvement, after which the minister could face a vote of no confidence, Omar tells Al Shorouk. Omar also noted that the report recommended the Prosecutor General open investigation into government officials and private-sector silo owners accused in the over-reporting of this season’s harvest.

Meanwhile, the hotel-stay flap continues: Rep. Moustafa Bakri, the MP who first allegations that Hanafy was staying at a Downtown hotel on the state’s dime, said separately on Monday that a petition was circulating to bring a no-confidence vote in the minister. Hanafy mocked the petition yesterday, saying it wouldn’t amount to much as petitions don’t constitute votes of no confidence, Al Shorouk reports. He added that he will attend any hearing called for by the House to discuss the report. Hanafy on Monday brushed aside suggestions he would resign over the issue.

To the delight of some parliamentarians, the Hanafy debacle is resurrecting rumors that a cabinet shuffle is in the cards. Prime Minister Sherif Ismail has consistently denied the rumors, and Al Borsa cites sources in the House as saying it is unlikely that a shuffle would happen in before the end of September. That hasn’t stopped House members from proposing names to head up a new cabinet, including Adm. Mohab Mamish of the Suez Canal Authority, Ahmed Darwish of the SCZone (who was previously minister of for administrative development), and Central Bank of Egypt Governor Tarek Amer. Government sources tell Al Shorouk that the persistent talk of a shuffle has apparently gotten to the prime minister who continues to dismiss it, and add that only the president can determine when a shuffle can come.

President Abdel Fattah El Sisi’s response when asked whether he would shuffle cabinet: Silence. So say the nation’s state-owned dailies as they reported on the third installment of the president’s interview, which focuses this morning on domestic politics. (Yesterday’s zeroed-in on the economy, Monday’s focus was foreign policy).

El Sisi defended Prime Minister Sherif Ismail, whom he called “the most competent prime minister” and singled-out Electricity Minister Mohamed Shaker for praise, Al Ahram reports. The president implied that he would seek a second term in office if that is what the “people wish,” though he fell short of actually making an announcement.

Speaking on the political landscape, the president supported the move towards multi-party politics and urged people to trust in the democratic process. He added that local elections will be the key step towards enshrining the process in Egypt.

El Sisi beat the drum once more on the pressing need to moderate religious discourse, a key plank in the ongoing battle against extremist though generally and Daesh and the Muslim Brotherhood specifically.

El Sisi noted that while he was committed to improving Egypt’s human rights record, progress on that front has to come in a way that does not jeopardize national security. He added that we must focus on the right to security, employment, food and shelter. El Sisi also reiterated plans to develop the police force in a way that will instill the principles of human rights.

He also confirmed that 300 “young men and women” (read: liberal activists) will be issued pardons. While some of the president’s pardons have included prominent youth activists and journalists, other group pardons have not. As for freedom of speech, the president held back on praising the media, as he claims many media organizations run with rumors without checking their facts.

On a related note, President Abdel Fattah El Sisi will be making a stop in India on 1 September en route to attend the G20 summit in China, Al Mal reports. His visit will coincide with an Egyptian trade delegation trip to India which is expected to sign USD 100 mn in agreements with Indian companies. The President is expected to sign bns in new agreements in China.

Danish wind turbine manufacturer Vestas is expects to sign a USD 2.3 bn agreement with Egypt that could lead to as much as 2.2 GW of orders, according to reports for Reuters and Copenhagen Post. “Vestas is continuing discussions with the authorities and we expect … to sign the cooperation agreement some time shortly after the [22-23 August] trip," Vestas’ Chief Press Officer, Michael Zarin told Reuters. Denmark’s Energy Minister Lars Christian Lilleholt arrived in Egypt to lobby for the agreement, saying “as minister, I can help to open doors and give a boost to Danish businesses, so we can strengthen exports, boost growth and create Danish workplaces.” Lilleholt says the 2.2 GW in orders could come through multiple orders, but did not elaborate further. As we noted at the time, Vestas first said it was signing an MoU with the Egyptian government for the project in May 2016 and was waiting for land allocation. The company erected its first turbine in Egypt in 1995 and currently provides turbines for 10% of Egypt’s wind power.

What’s up at Mercedes-Benz? Mercedes-Benz could have a new local dealership in Egypt by 2018, Mohamed Aboul Fotouh writes in a piece for Al Borsa. There are rumours that potential partners have already held meetings with company, Aboul Fotouh speculates. Despite a clear denial from Mercedes-Benz, he says the agreement with the current local affiliate will be terminated by 2017 in favor of a new model that would see Mercedes-Benz vehicles marketed by a number licensed distributors, including the current distributor, instead of having a single exclusive affiliate. This arrangement would not affect the market significantly, the story claims.

Russian competition for Blumberg? Russia’s Elevatorprodmashstroy consortium is renewing an offer to build grain silos, mills, and logistical centers, in addition to feed and dairy factories, consortium representative Magdy Shehata told Al Shorouk. The project will be funded by Russian financiers with favorable conditions, he added. The consortium, which includes six companies led by Melinvest, expressed interest in investing in Egypt following the announcement of economic reforms, and a unified investment law in the works, said Shehata. The consortium visited Egypt in 2014 and 2015 for similar projects, but no steps were taken which led the consortium to invest elsewhere, he added.

The Food Industries Holding Company (FIHC) will not see a partial float, as state-owned holding companies will not be listed on the EGX or privatised, Public Enterprise Minister Ashraf El Sharkawy said, according to Al Masry Al Youm. El Sharkawy’s statements confirm those by Investment Minister Dalia Khorshid earlier this month that companies falling under the Public Enterprise Ministry are not IPO candidates. The remarks should end speculation that the FIHC was being considered for listing. “The rumors are baseless,” El Sharkawy said.

**Earnings watch: Integrated Diagnostics Holdings (IDH) reported 1H16 results, posting net profit of EGP 126.5 mn and a 12% rise in revenues, according to its 1H2016 earnings release issued yesterday. IDH is the largest private sector medical diagnostics services provider in Egypt, established through the 2012 merger of Al Mokhtabar and Al Borg Laboratories. Speaking on the latest earnings statement, IDH Chairman Lord St John of Bletso said the company “continued to perform up to market expectations despite challenges regarding the availability of foreign exchange in Egypt that, compounded by rising inflation, have had a knock-on impact on consumer spending.” Chief Executive Officer Dr. Hend El Sherbini restated the company’s guidance for 15% revenue growth and EBITDA margins in the historical 43-45% range, noting the company has renegotiated key supplier contracts to mitigate possible cost inflation amid widespread expectation of devaluation.

Other earnings: GlaxoSmithKline’s Egypt division reported 1H2016 consolidated net loss of EGP 34.60 mn, down from a loss of EGP 103.96 mn recorded during the same period last year, according to a bourse statement.

Kim looks set to return as president of the World Bank: “The World Bank’s board has ignored a call by its staff to conduct an international search for a new president, unveiling a process that clears the way for the reappointment of the US’s Jim Yong Kim to a second five-year term within weeks,” the Financial Times (paywall) notes this morning. Business Insider also has the story this morning (picking up a dispatch from Reuters), and you can read the World Bank statement on the matter here.

Investors anxiously await US Federal Reserve Chairwoman Janet Yellen’s speech at an upcoming conference this Thursday for indications about the possibility of a rate hike this year, “amid weak US productivity and economic growth data, but a string of hawkish commentary from Fed officials over the past week has brightened the outlook for rate increases,” writes the Wall Street Journal’s (paywall) Chelsey Dulaney.

BlackRock overweight on EM stocks: BlackRock, the world’s largest asset manager, on Monday said it had upgraded emerging market equities to overweight, “as the firm expects a stable [USD], low rates and a better outlook for growth,” Evelyn Cheng reports for CNBC. “Strength in the greenback puts pressure on emerging market nations, which may be forced into a competitive devaluation of their currencies to remain competitive, while finding it harder to pay down [USD]-denominated debt,” Cheng writes, paraphrasing Gerardo Rodriguez, portfolio manager at BlackRock Total Emerging Markets Fund.

The New York Times’ Rod Nordland gives Cairo Runners and Egyptian devotees of CrossFit lots of love this morning in “Egyptians take to the streets again, now in workout gear.” The piece (long and punctuated by lovely, atmospheric images by photographer Sima Diab) notes that “Egypt’s young people have once again taken to the streets. This time, though, they are in spandex and on bicycles, in kayaks and sculls on the Nile, doing street workouts in the slums of Giza or CrossFit exercises in makeshift rooftop gyms. … Egyptian squash players are among the best in the world, and privileged families have long pushed their children to take up sports, but the new focus on fitness is drawing in people from all classes, with substantial numbers of women, too, and is more about exercise for exercise than about games or competition. Many Egyptians see it as a direct outgrowth of the withering of the political revolution under President Abdel Fattah el-Sisi.”

Making Ancient Egypt accessible — in English: Penguin Classics is releasing the first English-language translation of collected Ancient Egyptian works that were “never before…published together as an accessible collection”, The Guardian’s Dalya Alberge reports. Scholar and Author Toby Wilkinson said that he first decided to begin working on the anthology as there was a missing dimension in how Ancient Egypt was viewed. “The literary fiction includes The Tale of the Shipwrecked Sailor, a story of triumph over adversity that Wilkinson describes as ‘a miniature masterpiece’,” Alberge adds.

Writing for state-owned daily Al Ahram, columnist Farouk Goweda criticizes the House of Representatives for failing to show up in critical sessions where two thirds of a vote are needed to pass necessary legislation. The current stalling of the reform process by the House is an “abandonment of a national responsibility,” he says, and asks how the House hopes to impose its status on anybody if it can’t respect it itself.

Former MP and scholar Amr El Shobaki tries, and fails, to sound like an authority on economic matters. He says it will be difficult for the IMF loan to solve the root causes of Egypt’s economic conditions because Egypt should have adopted some of the economic reform measures before pursuing the IMF loan, in a piece for Al Masry Al Youm. The root problems, in his opinion, are a decline in industry’s contribution to the GDP from 22% to 16.4%, while industrial exports fell by EGP 60 bn.

The government should get out the business of owning TV stations and newspapers, the Al Masry Al Youm columnist who writes under the pseudonym Newton says. They are nothing but a drain on state finances and add no real value. Newton reminds readers of a Nazif-eraproposal that never saw the light that follows a French model to divest from all of the government’s media holdings except for two TV channels.

The ethics of banning the niqab in Europe: Hussein Ibish, senior resident scholar at the UAE-funded Arab Gulf States Institute thinktank in Washington, penned an entry back in 2010 in his personal blog where he debated the merits of a proposed niqab ban throughout Belgium, which since passed into law in 2011 following a similar ban in France. Ibish’s post remains just as relevant today, as more principalities around the world ban the niqab on the local level while most of the Muslim world (with the exception of Egypt) moves in the opposite direction, lifting previous bans on the hijab and niqab in public institutions. Just yesterday, a Muslim woman asleep on the beach in Cannes wearing a burqini was ordered by four armed police officers to remove the garment on the spot, inspiring what may be for the first time in history something remotely approaching an interesting exchange of comments on the story in the otherwise unreadable tabloid the Daily Mail. Out of 2,400 comments posted thus far, the two top-rated read: “Funny how these rules on ‘modesty’ never seem to apply to the men,” and “This garment causes fear and resentment amongst French people who have suffered at the hands of extremists.”

Ibish’s conflicted feelings on the matter reflect what many of us may feel: “One instinctive reaction is to rally to the defense of a small, beleaguered minority in the name of freedom of religion and expression… There is, however, a second instinctive reaction, which is to recoil at the idea that women are in a sense walling themselves off from others in societies that do not expect women to spend most of their time behind closed doors… All the pseudo-feminist arguments about agency aside, it’s impossible for me not to see the burqa and niqab as expressions of a cultural sensibility that is fundamentally oppressive towards women and that cannot but restrict and impede their social engagement.” (Read Banning the burqa in Belgium and beyond)

Brought to life, 2,000 years later: The University of Melbourne brought together faculty across a number of disciplines to use CT scanning and 3D printing to render their best guess as to the features of a 2,000 year old mummy. (View image here, and read the full-length article by Andrew Trounson here)

What’s causing this mass stampede on the streets of Taiwan? A really rare Pokemon. A Snorlax to be precise. (Watch, running time: 31 seconds)

Abou Zeid interview: Egypt has done great work to ensure the safety of its airports and we anticipate that Russia will lift its travel ban soon, said Foreign Ministry spokesperson Ahmed Abou Zeid in an interview with Arabic Sputnik. Speaking on a possible rapprochement with Turkey, Abou Zaid stated there are conditions for government-to-government talks, including the Turkish government acknowledging the legitimacy of 30 June and to stop interfering in Egypt’s internal affairs. That said, the current state of affairs between both governments cannot continue and Egypt welcomes all efforts towards improving these ties. The interview looked at President El Sisi’s Palestinian-Israeli peace initiative and the possibility of a multilateral approach to the issue which would include Moscow’s efforts.

Elsewhere, the Egyptian Tourism Federation’s Nora Ali told Al Shorouk that Russian tourists could be coming back to Egypt as early as October. The director of the Russian tourist association Turpomosch, Alexander Osaulenko, confirmed the reports to Sputnik, saying the second half of October is a potential resumption date. “Our experts positively assess the situation and say that, if the situation develops with the same dynamics, then flights will be resumed in the second half of October,” he said. The comments came as Civil Aviation Minister Sherif Fathy denied on Monday claims that Russia had demanded Egypt set up special terminals for Russian nationals as a condition of resuming flights, Ahram Online reports.

Italy’s ANSA news service notes that “Egypt wants Italy’s new ambassador to Cairo to ‘effectively arrive,’” citing what it said were remarks by Foreign Ministry spokesman Ahmed Abou Zeid yesterday. Ambassador Giampaolo Cantini was recalled to Rome “over a lack of Egyptian cooperation in the case of Giulio Regeni, an Italian doctoral student tortured to death in Cairo,” ANSA reports.

Egyptian President Abdel Fattah El Sisi met with Pan-African Parliament head Roger Nkodo Dang yesterday to discuss regional issues, said Ittihadiya spokesperson Alaa Youssef, according to Ahram Gate. House Speaker Ali Abdel Aal affirmed how critical it is for Egypt to regain its formerly influential role on the continent.

An unnamed Egyptian national has been sentenced to six years in prison by a Saudi court on charges of espionage for Iran, Ahram Online reports. He was also fined SAR 5,000 and will be deported after completing his sentence.

Eni plans to bring gas production at Nooros field to 180 mcf/d by mid-September after connecting three of the field’s wells to the national grid, Al Borsa reports. Gas production from the field is expected to reach 700 mcf/d by year’s end, said a source from EGAS.

The Military Production Ministry signed an MoU with China Electronics Technology Group (CETC) to build a solar panel factory that incorporates all stages of production from extracting silicon to producing photovoltaic cells, Al Masry Al Youm reported. CETC will import all required production lines and spare parts, in addition to training engineers and technicians at the factory. As we had reported earlier, the International Cooperation Ministry said the government was in talks with China over building a 1,000 MW solar power plant and a solar panel factory using USD 3.3 bn in financing from China.

The Agriculture Ministry is preparing a response to claims that Egyptian strawberries were responsible for a number of hepatitis A cases in the United States, Al Mal reported. The Tropical Smoothie Cafe chain, where the cases were discovered, blamed it on shipments of contaminated Egyptian strawberries. The Agriculture Minister has reportedly set up a fact-finding commission to look into the matter and it will issue a final report within two days. US-based authorities have notified Egypt of any violations, the Ministry’s spokesperson told Al Masry Al Youm. He added that frozen strawberry samples tested so far were found to be free of any disease.

Egypt’s new quarantine requirements that prohibit unloading grain before obtaining test results for contaminants will drive up import costs domestically, Black Sea Grain reported. The process can take up to 10 days and is discouraging grain traders, the report adds. Black Sea Grain sees the cost of the analysis and appropriate certification, in addition to tonnage and demurrage, are going to drive up the cost of imported wheat for Egypt.

The Supply Ministry is reportedly considering increasing the price of sugar cane per tonne EGP 50 to EGP 450 during the domestic harvest collection, due to kick off in January 2017, Al Borsa reported on Tuesday citing an unnamed ministry source. The move was prompted by demands from sugar growers, who in the past have successfully pushed for the price to increase to EGP 400 from EGP 360 per tonne.

Capital Group Properties, an Egypt-based joint venture between UAE companies Abu Dhabi Capital Group and Al Ain Properties, has received ministerial approval for its Alburouj residential project in Al Shorouk, Al Mal reports, following delays since the initially scheduled approval date in February. The company had already paid USD 100 mn to get the project connected to the state’s infrastructure last February. The EGP 40 bn project will sprawl over 1,200 feddans of land.

A delegation of tourism officials from Malaysia, including representatives from 19 companies, is expected to visit Egypt from 13-20 September, according to Egyptian Tourism Authority chairman Sami Mahmoud, Amwal Al Ghad reported on Tuesday. On a separate note, Mahmoud said the number of Gulf Arab tourists recorded a 10% y-o-y increase in 1H2016, Al Shorouk reported.

Five hundred pieces from the Tutankhamun collection at the Egyptian Museum are set to move to the Grand Egyptian Museum by the end of September, according to the museum’s general manager of restoration Eissa Zidan, Al Borsa reported on Tuesday.

Prosecutor General Nabil Sadek has requested that the freeze on businessman Hussein Salem’s assets abroad be lifted, Al Mal reported on Tuesday. The prosecutor’s office is also currently in talks with Interpol on removing Salem’s name from its list of figures with a Red Notice. Salem, a former shareholder in East Mediterranean Gas Company, is reportedly expected to request a retrial of his money laundering case, where he was sentenced to seven years in prison. The move follows a settlement agreement between the government and Salem, in which he reportedly deposited EGP 5.5 bn in the state’s coffers. Hopefully, some of that can be used to help pay compensation costs in arbitration with Israel over cutting natural gas exports, pending a final settlement agreed to by both states.

The Ismail cabinet approved turning the Mineral Resources Authority into an independent economic authority, Al Borsa reports. The legislation, which changes the authority’s name to the Geological Survey and Mineral Resources Authority, was sent to the House of Representatives, said the authority’s head Amr Toeima. Members of the House of Representatives industrial committee praised the change but continue to urge the government to simplify procedures for obtaining a mining license, Al Masry Al Youm reported. The move appears to conflict with a previous cabinet decision tasking the Local Development Ministry with issuing all licences and permit approvals within one month of receiving security permits to operate, as we noted last month.

The man who helped wipe-out smallpox has died: Daniel Henderson, the architect of a global campaign to eradicate the disease, died of complications after breaking a hip at the age of 87, the BBC reported.