Medicine prices set to rise 30-50% under new MoH formula

It looks like it’s the Finance Ministry’s week in the spotlight between a presser Finance Minister Amr El Garhy is due to hold today and the start of the roadshow for Egypt’s eurobond issue tomorrow.

Egypt’s eurobond roadshow kicks off on Tuesday, 17 January with joint lead managers BNP Paribas, Citi, J.P. Morgan and Natixis holding a series of investor meetings in the Middle East, US and Europe, according to a statement from BNP Paribas over the weekend. The Roadshow kicks off in the UAE on Tuesday (breakfast in Abu Dhabi, lunch in Dubai), moves to New York on Wednesday (one-on-ones), Boston on Thursday (also one-on-ones), Los Angeles on Friday (one-on-ones), before wrapping up on Monday, 23 January in London. The statement notes that in addition to five- and 10-year notes, a 30-year tranche “could be considered” depending on market conditions. We’ve had a quick look at the roadshow presentation, and it looks very solid indeed. Speakers on the roadshow will include Finance Minister Amr El Garhy, Vice-Minister of Finance for Fiscal Policies Ahmed Kouchouk and Samy Khallaf, advisor to the Minister of Finance and Head of Debt Management.

The Finance Minister will be holding a press conference today to discuss Egypt’s fiscal position in 1H2016-17, AMAY reported. The presser comes after El Garhy and other senior ministry officials met with investor associations over the weekend, with the minister reiterating his target of seeing tax collection equivalent to 15% of GDP. BothEl Garhy and Deputy Finance Minister Mohamed Maait are offering more conservative guidance on growth and the budget deficit: El Garhy sees GDP growth clocking in at 4% this year, lower than previous projections of 5%. Maait also expects the budget deficit come in higher than originally planned on the back of the float of the EGP and rising global energy prices. He added that Egypt must grow at 7% every year in order to keep up with an annual population growth of 2.5%, Al Borsa reports.

El Garhy has message: The private sector needs to be patient. It will take three years for the reform agenda to deliver sustainable results, he said, adding that the current challenges will ease over the next 6-12 months. He cites slight improvements in tourism revenues and Egypt meeting fuel imports required by industry as being crucial recent signs we’re on the right track. Pro-investment policies and tax incentives will also help speed up the recovery, El Garhy added.

Also: Stop importing, start exporting. It makes no sense that Egypt can muster a paltry USD 18 bn in exports and maintain a trade deficit of USD 50 bn, El Garhy said, when economies comparable to Egypt’s export USD 150-200 bn. “We used to import everything from needles to rockets.” Maait added.

All of this comes as an IMF team is set arrive in Cairo this week to follow up on the reform agenda, particularly on taxation, government sources tell Al Borsa. The delegation will reportedly meet with senior Tax Authority officials on the progress in implementing the value-added tax (VAT) and settlement of taxation disputes — the two key taxation reform policies adopted in 2016. Want to know what’s on the Finance Ministry’s mind in the meantime? The ministry issued a statement yesterday that should go some way to helping on that front.

Meanwhile, the local press continues to lose its mind over why the terms of the USD 12 bn IMF loan haven’t been made public, despite reassurances by the Ismail cabinet and the Finance Ministry that it is heading to the House of Representatives for a vote. The government has approved releasing the full report sometime this week, IMF Communications Director Gerry Rice told Al Shorouk in response.

Deputy Finance Minister Amr El Monayer also discussed the ministry’s vision for a tax policy for SMEs, saying that this will not breaks on unpaid taxes from years past, AMAY reports. “We are looking to address the root cause of why these businesses do not pay taxes,” which El Monayer, who heads tax policy at the finance ministry, believes boils down to complicated tax procedures. The ministry is working with the Trade and Industry Ministry and the Federation of Egyptian Industries on a law to simplify the tax code for SMEs, which (reading between the lines) could include a lower tax rate for the smallest of companies.

One of Trump’s top economic advisors is Egyptian by birth: Goldman Sachs partner Dina Powell, 43, a former State Department official and one-time White House staffer, is joining the Trump administration as Assistant to the President and Senior Counselor for Economic Initiatives, according to a statement from Goldman Sachs that’s gotten wide pickup (Bloomberg, Financial Times). The story is getting plenty of ink as the latest example of Goldman’s “return from the wilderness” to the corridors of power, but we’re taking note because Powell is Egyptian by birth, as the FT reminds us: “The daughter of an Egyptian Army captain, Ms Powell was born in Cairo and emigrated with her family to Dallas when she was four years old.” Many of our readers will remember Powell as head of Goldman’s 10k Women and 10k Small Businesses initiatives. Politico broke the news, and CNN is now following Politico’s lead in positioning Powell as Ivanka Trump’s proxy in the White House.

Did you miss any of our CEO interviews? Last week was our first Enterprise CEO Week, and based on your response, we’re going to make it a semi-annual feature. In the meantime, the roster of participants, just in case you missed an interview:

• Karim Awad (EFG Hermes)
• Ahmed Badr (Renaissance Capital)
• Ahmed Badreldin (The Abraaj Group)
• Hani Berzi (Edita)
• Hisham Ezz Al Arab (CIB)
• Ahmed El Sewedy (Elsewedy Electric)
• Wael Fakharany (Careem)
• Raouf Ghabbour (GB Auto)
• José Maria Magrina (Suez Cement)
• Magued Sherif (SODIC)
• Karim Sawabini (Moon Capital)
• Aly Shalakany (Shalakany Law Office)
• Elwy Taymour (Pharos Holding)

Gold exploration tender: The bidding window for the Petroleum Ministry’s gold exploration tender in the Eastern Desert and Sinai opens on 15 January and ends on 20 April, Youm7 reported. The tender includes four areas in the Eastern Desert and one in South Sinai.

The African Cup of Nations 2017 kicked off last night, with hosts Gabon being dealt an early blow with a surprising 1-1 draw against Guinea-Bissau. Egypt has been lumped in with power house Ghana in Group D, and will play its first match against Mali on Tuesday, 17 January at 9.00 pm CLT. Egypt’s game comes amid a controversy over broadcasting rights that itself may threaten Egypt’s participation in future tournaments and CAF events. After the Egyptian Competition Authority (ECA) announced an official investigation into CAF broadcasting bidding practices and a probe of its head Issa Hayatou, members of the Egyptian Radio and Television Union (ERTU) announced they will broadcast Egypt’s matches regardless of who has the broadcast rights. The Egyptian Football Association issued a warning that the country risks being barred from CAF events for the coming two years if ERTU follows through with the threat, Al Mal reports. ECA head Mona El Garf is receiving a lot of flak on the opinion pages for her move against Hayatou and the CAF, as some fear the CAF HQ would be moved out of Cairo as a result.

The World Economic Forum takes place in Davos, Switzerland, this week, running 17-20 January.

An agreement on pricing between the pharma industry and the Ismail government dominated the airwaves last night. (We have additional coverage in Speed Round, below).

Lamees Al Hadidy interviewed Rasha Zeyada, the Health Ministry’s undersecretary for pharma industry affairs, who repeated Health Minister Ahmed Rady’s statements that the new prices are only for meds manufactured after the date of the agreement. “Our inspection committee monitored the market on Saturday and we noticed that all pharmacies are selling with the usual prices,” she said. (watch; runtime: 8:35).

New prices should hit stores within a month, Ahmed El Ezaby told Amr Adib on Kol Youm. El Ezaby, of the chain of retailers by the same name, is also head of the Federation of Egyptian Industries’ pharma division. He noted that consumers can make certain they’re not being taken advantage of by looking at the pricing printed on boxes (watch; runtime: 6:22). Division member Hossam Aboul Enin defended the new price scheme (watch: runtime: 8:34). Pharmacists are still grumbling that they were not included on the Health Ministry’s pricing committee and are demanding they be guaranteed 20-25% profit margins, according to Pharmacist Syndicate sec-gen Ayman Osman speaking with Al Hayah Al Youm’s Lobna Assal (watch; runtime: 2:33).

Lamees also discussed reports that EgyptAir flight MS 804 from Paris to Cairo crashed because of an iPhone battery explosion, with investigator Hani Galal criticizing the suggestion, which emerged over the weekend (watch; runtime: 4:07)

Cutting out the middleman: Adib spoke with Morshedy Group chief Mohamed Al Morshedy, who suggested launching helping curb inflation by launching what he calls “open day markets” that would see manufacturers sell directly to consumers (under government supervision, of course) to cut out wholesales and traders (watch: runtime: 3:37). Is there a “poop” emoji here somewhere?

The prices of 3,010 individual medicines (pdf) will rise 30-50% under new pricing formula approved by the Health Ministry. Retail prices of 15% of all domestically manufactured products and 20% of all imported products will rise under the formula, for which industry has been lobbying for months, Al Mal reports. Domestic products in the EGP 1-50 price category will rise 50% at the counter, those in the EGP 50-100 bracket will cost 40% more, and the meds above EGP 100 per SKU will increase 30%. Meanwhile, imported products in the EGP 1-50 category will see a 50% price increase, while those costing EGP 50 or more will rise 40%. The list includes 619 products approved to treat chronic illnesses, said Health Minister Ahmed Rady. The ministry is requiring manufacturers to abide by directive 499 — which imposes profit margin minimums for pharmacies through discounts by manufacturers — and warns against stockpiling and price gouging, Al Borsa reports. Rady has vowed to reduce med prices once FX rates stabilize, according to the newspaper.

The Pharmacists Syndicate, not happy that they were excluded from the bargaining table, decided at an emergency meeting on Saturday to file a lawsuit against the Health Minister over the move. The syndicate, however, voted to postpone strike it had planned for 15 January by another two weeks, according to AMAY.

What does Cabinet want foreign investors to know? Look no further than the cabinet-sanctioned readout (pdf) from EFG Hermes’ Egypt Conference, which provides person-by-person account of key messages from President Abdel Fattah El Sisi, Finance Minister Amr El Garhy, Trade and Industry Minister Tarek Kabil and Investment Minister Dalia Khorshid and CBE Governor Tarek Amer. Their audience: 27 foreign fund managers from the US, UK, France, Germany, South Africa and the GCC with AUM of c. USD 3.5 tn. A statement released by the Central Bank in connection with the meeting is the backbone of a Reuters piece citing CBE Governor Tarek Amer as saying that foreign investors will be able to repatriate profits “in the coming period” as foreign currency reserves are recovering.

Pencil in 2Q2017: Banque du Caire’s IPO will be in “April or May” of this year, Al Mal reported. Issuance managers EFG Hermes and HSBC are waiting for the bank’s results to be released to identify the exact financial requirements, according to the source. Baker & McKenzie was appointed legal advisor for the offering, the source added.

The second phase of the Kramer purge will remove 40 mn people from the supply smart card subsidies system, bringing the total number of supply subsidies beneficiaries to 30 mn, unnamed Supply Ministry officials tell Al Shorouk. This is by far the largest estimate we have heard of the number of people due to be cut from welfare rolls. Most of those purged, according to previous cabinet statements, are double-dipping, dead, living abroad or not qualified to receive social assistance. The initial phase of the cuts, which is currently ongoing, should cut 14 mn people from the system, according to statements attributed to Supply Minister Mohamed Ali El Sheikh. The purge will take place over three phases, said the sources.

Egypt’s natural gas sector is “on pace for a profound change in the next five years,” consultant Wood Mackenzie says. “After swinging from the world’s eighth largest liquefied natural gas exporter in 2009 to the world’s eighth largest LNG importer in 2016, the wheel is set to turn again,” a report emailed to UPI found. Wood Mackenzie expects Egyptian gas production levels to increase to 7.3 bcf/d, leaving the market “inundated” following positive exploration results and higher gas prices. The report adds that the turnaround will be largely seasonal. “Better gas availability for domestic sectors — power especially — could exacerbate seasonality through the demand response … Our analysis suggests that over the production ramp-up period, seasonal LNG imports could be needed to cover demand in the peak summer months, while excess gas could be available for LNG exports in the winter.”

Read that with: IOCs are rethinking the Eastern Mediterranean region’s gas potential, according to analysis by IHS Markit carried by Offshore Energy Today. Interest in the region as a whole has grown with Total’s announcement that it will drill a 2017 exploration well in its deepwater Block 11 located offshore Cyprus. “Zohr’s success clearly encouraged Total leadership to re-examine Block 11’s potential, since it is contiguous with the Egyptian Shorouk Offshore Block, which is home to Eni’s Zohr Field,” senior director of plays and basins research at IHS Markit Graham Bliss says. He added: “If the Zohr carbonate play extends northward into Total’s Block 11, then the potential for a significant discovery in Block 11 exists … A major find would provide competition with offshore Israel gas fields to fulfill Egypt’s rising gas demand … could even potentially lead to gas exports to Turkey.” Bliss says the most likely outcome for a significant Block 11 discovery is exporting to Egypt.

Businesses will soon learn how they can treat for tax purposes the discrepancy between what they paid for FX in 2016 and the official market rate at the time, Finance Minister Amr El Garhy told Al Borsa. The ministry is consulting with business associations and looking for a solution that’s fair to all parties, the minister said. In addition to the Finance Ministry, the Egyptian Financial Supervisory Authority is reportedly studying the issue, according to Al Mal.

New regulation is in the pipeline for the financial industry, with mergers and acquisitions and private placements set to come under closer scrutiny as a result of two separate reviews of existing legislation.

ECA to have signoff on M&As? The Egyptian Competition Authority (ECA) intends to finalize by March amendments to the Competition Protection Act that would give it the authority to approve mergers and acquisitions AMAY reported, citing ECA chief Mona El Garf. The amendments to the act would require approval from the House of Representatives.

The Investment Ministry has formed a committee to study amendments to the Capital Markets Law, Al Mal reported. The amendments could entail changes to how private placements are regulated and will also cover the issuance of sukuks and allow trades on the EGX to be reversed when international money laundry is suspected, the newspaper says. The amendments would also give the EGX flexibility to set lower listing fees to attract smaller companies to the bourse, said Egyptian Financial Supervisory Authority (EFSA) chief Sherif Samy. The committee will be led by Khorshid, and will include Samy, the CEO of the General Authority for Free Zones and Investments, as well as representatives from the CBE, the EGX, and the ministries of justice, finance, and parliamentary affairs.

Our friends at the Sharkawy & Sarhan law firm published their take on the executive regulations of the movable guarantees law that came into effect in December. They also included their notes from a meeting that included various stakeholders, as well as EFSA Chairman Sherif Samy and GAFI Chairman Mohamed Khodeir. Overall, Sharkawy & Sarhan say the executive regulations are “a very positive step to facilitate financing and hence boost businesses’ ability to grow,” but say clarification is needed particularly in regards to the ranking of creditors — an issue that could impact the law’s implementation.

Eastern Company has raised the prices of Cleopatra cigarettes by EGP 0.25-1.50 per pack, blaming FX pressure of the move, Al Masry Al Youm reported. Eastern had promised last month to not raise the price of its lowest-cost product category.

Did an iPhone bring down MS804? The French investigation into the crash of EgyptAir flight MS804 from Paris to Cairo are pointing to an iPhone 6S, an iPad mini 4, and several bottles of perfume reportedly belonging to the co-pilot as potential culprits behind a fire in the cockpit that brought down the plane last May, according to French newspaper Le Parisien. French investigators are suggesting that overheating the devices’ batteries overheated after being left on the cockpit’s dashboard, resulting in the outbreak of a fire. French investigators to downplay odds that the plane was brought down by an act of terror, with all of the implications that would have for airport security at Charles de Gaulle. The Daily Mail has coverage of the story in English.

Just five days before he’s due to be sworn into office, US president-elect Donald Trump is stirring the pot with Russia and China. In an hour-long interview with the Wall Street Journal (paywall), Trump said he is not opposed to the idea of lifting US-imposed sanctions on Russia “if Moscow cooperates on issues of mutual interest.” Trump then went on to upset Beijing by saying he is not “committed to a longstanding agreement with China over Taiwan.” Beijing responded to the newly elected leader saying that a revision of the One China agreement, which makes Taiwan a province of China’s, was “non-negotiable,” according to USA Today.

The lead story on Egypt in the Western press this morning focuses on international criticism of a court decision freezing the assets of a number of prominent human rights groups. France 24’s coverage is typical, and the story has been picked up everywhere from The Guardian to the Associated Press. Criticism from the European Union and the UK led the Egyptian Foreign Ministry to dash off its patented “comment on rulings of an independent judiciary just isn’t cricket” statement, which the Associated Press has dutifully picked up. “[Comments by the EU and Britain] amounted to ‘flagrant’ interference in the country’s affairs” the statement said. The ministry also rejected the role of unnamed “parties” — presumably Britain and the EU — that give themselves the right to judge other nations. Ahram Online, and Al Ahram each have coverage of the Foreign Ministry’s statement.

If Egypt can reorient itself as an African power, “it would be a win-win for the continent,” Simon Allison writes for the Institute for Security Studies. “Egypt is finally embracing its African identity” in its attempts to forge new alliances, particularly after the perceived fallout with Saudi Arabia. Allison says, “Egypt has been making up for lost time. There is now more than [USD 8 bn] of Egyptian investment on the continent… and contributes a hefty 12.5% of the AU’s budget. It is involved in peacekeeping operations all over Africa.” Allison says major challenges for Egypt’s relations in Africa remain, including the dispute with Ethiopia of the Grand Ethiopian Renaissance Dam project, as well as concerns over racism.

Squash ace Mohamed El Shorbagy — and his mom — get big love from the New York Times in a piece headlined “If You Lose the Next Point I’m Sending You to Your Room, Young Man.” His mom, an Alexandrian engineer, is as much the subject of the profile as is Shorbagy as the Times finally catches onto Egypt’s dominance of squash: “(Topic for further inquiry: What on earth is going on with squash in Egypt? Seven of the top 10 male players, and four of the top female players, are Egyptian — a level of domination that exceeds even what the Chinese have achieved in table tennis.)”

Newton questions the merits of maintaining public sector companies: The mismanagement of state-owned companies awash in red ink is costing the government valuable resources that could be better appropriated for education or health, Newton writes in his latest piece for Al Masry Al Youm.

A team of Swedish archaeologists have discovered a dozen burial sites in the Gabal al-Silsila area north of Aswan that dates back almost 3,500 years to the New Kingdom, Reuters reports. Human and animal remains were found in the cemeteries. Initial examinations show several complete bodies as well as evidence of malnutrition and broken bones as a result of heavy labor, the ministry quoted expedition head Maria Nilsson as saying. “While the tombs had been described by previous visitors to the site, no comprehensive survey, nor any proper archaeological work, had been conducted until 2015,” Nilsson told Ahram Online.

President Abdel Fattah El Sisi has reportedly told a delegation of Irish parliament members visiting Egypt he will offer a pardon to Irishman Ibrahim Halawa once his trial is over, BBC reported. “Sinn Féin TD Eoin Ó Broin, who is among the delegation, told BBC News NI that the president gave a commitment to intervene to secure Mr Halawa’s release and return to the Republic of Ireland once a verdict was handed down in his trial, which is due to go ahead next week.” Ó Broin says El Sisi told them “if he could do it today, he would,” but he cannot interfere with the judicial process.

El Sisi met with the presidents of Macedonia and Belarus, as well as several other current and former heads of states as part of an international conference entitled “democracy and security in a time of fundamentalism and terrorism,” Al Masry Al Youm reported. El Sisi spoke with German Chancellor Angela Merkel over the phone to discuss “regional and international developments” and ways to boost bilateral relations, according to Daily News Egypt.

The Ismail government can begin spending the second tranches of the World Bank and African Development Bank loans after receiving approval from the House of Representatives, International Cooperation Minister Sahar Nasr told Al Mal. The tranches are worth a combined USD 1.5 bn divided. Nasr also said that the ministry’s strategy is shifting to focus more on grants and investments, rather than loans, according to Al Mal.

SDX Energy announced it has entered into non-binding heads of terms with Circle Oil to acquire its Egyptian and Moroccan businesses, according to a company disclosure. The agreement has a 30-day exclusivity period and is subject to the completion of due diligence, documentation, compliance with all regulatory requirements and conclusion of an equity fundraising. “We have made clear our firm intentions to create shareholder value by growing SDX into a profitable mid-tier E&P company. Circle’s assets present an attractive opportunity to add material production and reserves at an attractive price,” SDX CEO Paul Welch said, caveating this by noting that there is no certainty the transaction will be completed.

Eni has raised its projected production targets from the Nooros gas field to 1.2 bcf/d by mid-2017, up from 1 bcf/d, Al Borsa reported. Eni will add 180 mcf/d in 1Q2017 through three wells with a total investment of USD 450 mn, sources said.

Siemens’ three new power plants are set to come online in March, sources tell Al Borsa. Siemens will be commissioning the Burullus plant over the next few weeks.

Trade and Industry Minister Tarek Kabil has issued a decree making the General Organization for Export and Import Control (GOEIC) the sole government body charged with regulating private-sector imports of strategic agricultural goods (including wheat and corn), Al Mal reported.

GASC has purchased 235,000 tonnes of wheat from Russia and Romania, Al Borsa reports. The wheat is set to arrive between 20 February and 5 March, with Russia providing 175,000 tonnes and Romania providing the remaining 60,000 tonnes.

Saudi Egyptian Ready Mix and Delta Cement have applied for cement licenses that went unclaimed during last year’s cement production license auction. The Industrial Development Authority (IDA) had received approval from the Ismail cabinet to offer the remaining licenses until the end of 2017, an unidentified government source told Al Borsa. A third company is also preparing to apply for a license.

SODIC says it only delayed submitting the general plan for developing 655 feddans with Heliopolis Housing by 10 weeks to March 2017, according to a bourse statement. There were rumors, denied by SODIC, that the company was looking to delay submitting the development plan until September. SODIC adds the extension will have no effect on the launch date for the project, slated for 2H2017, and adds that there is no effect on the contractual agreement with Heliopolis Housing.

Egyptians spent about USD 650 mn on property in Dubai last year, topping the list of regional expat investors in the emirate’s real estate sector, according to a report from the Dubai Land Department, picked up by AMAY.

The German short- and medium-haul package holiday market was stable at just under 27.8 mn in 2015-16, but Turkey, Egypt, and Tunisia, along with Morocco and Cyprus lost out on the German market, tourism portal FVW reported. The number of German tourists visiting Egypt in 2016 dropped by 37% y-o-y to 669k. However, there could be a glimmer of hope as tour operator TUI said demand for summer 2017 bookings was "significantly" above the level seen at this point last year and that Germans were once again booking their holidays earlier, according to Reuters. The report did not mention where the majority of the books were to.

Tourism revenues made up 11.3% of Egypt’s total GDP in FY2015-16 and 7.3% of total foreign currency inflows, Tourism Minister Yehia Rashed said, according to Al Borsa. He added, during his speech at the Ahram Economic Conference, that the government has plans to boost tourism, which include online marketing campaigns and building lasting relationships with tour operators and airlines.

For the umpteenth time, Russian Transport Minister Maxim Sokolov has said that flights between Russia and Egypt will resume in the “near future,” adding that the Transport Ministry is preparing a report on the security of Egyptian airports following its latest inspection, according to TASS.

Etisalat Misr, Orange Egypt, and Vodafone Egypt are looking into charging Telecom Egypt a 1% administrative fee for using their infrastructure to provide 4G service, Al Borsa reports.

TEDA Holding signed an agreement with Sokhna Logistic Car City to establish a car industry and shipping hub in the special economic zone with an investment value of EGP 300 mn, Al Mal reported. The city will serve as a base for import and export, as well as re-exporting vehicles and storage, said TEDA CEO Wei Jianqing.

The Social Solidarity Ministry will be sending a draft of the proposed social welfare act to the Ismail cabinet within days for approval, Al Borsa reported. Minister Ghada Wali said draft would amend the social welfare and pension systems.

Take note, Europe? Egyptian border patrol and coast guard forces stopped more than 12,000 people of various nationalities from illegally entering or leaving the country in 2016, the military said, according to Reuters. In total, the military says it made 12,192 arrests and recorded a total of 434 cases of illegal migration during the year.

Diplomatic faux pas: South Sudan’s flag was hoisted upside down during President Salva Kiir’s visit to Cairo. “The display sparked anger and protest, with some commentators blaming south Sudanese diplomats in Egypt for failing to notice the obvious mistake and correct it before the arrival of the president,” Radio Tamazuj reported.

Celebrated Egyptian actress Kareema Mokhtar passed away on Thursday at the age of 82, Youm7 reports. Mokhtar, mother of talk show host Moataz Al Demerdash, had a long career in Egyptian film and television and was famous for being typecast in the role of the matriarch. Some of her well-known films include Al Hafid (the grandchild) and Al Farah (the wedding).