Is this guy the reason The Donald is holding back aid to Egypt?

There is only one story that matters in Egypt this morning: The rough landing accorded White House envoy Jared Kushner in Cairo yesterday. Trump’s son-in-law landed in Egypt just hours after word leaked to the press that the US is withholding some USD 290 mn in aid to Egypt. The Foreign Ministry, which was to meet the delegation to discuss prospects for peace between the Israelis and the Palestinians, said in a statement, “Egypt sees this measure as reflecting poor judgment of the strategic relationship that ties the two countries over long decades and as adopting a view that lacks an accurate understanding of the importance of supporting Egypt’s stability.” Kushner met with President Abdel Fattah El Sisi and then later touched based with Foreign Minister Sameh Shoukry.

The order to hold back aid to Egypt came from the very top. The decision was approved by President Donald Trump and is being pushed through by Secretary of State Rex Tillerson, who US media say called Shoukry on Tuesday to tell him of the decision.

Is this all because of North Korea? The aid decision took both policy makers in Cairo and foreign analysts by surprise, particularly in view of the warm rapport between Trump and El Sisi. With the Trump administration having paid only lip service to human rights issues — other than having rather “actively” spirited Aya Hijazi out of Egypt — the New York Times kicked off speculation that this is part of a bid to pressure Egypt to cut ties with the DPRK. It’s a notion that rings fairly true to us. We have full coverage this morning in Speed Round, below.

More platitudes from the UK on restoring flights to Sharm, but at least the head of ICAO likes us: Britain’s ambassador to Egypt John Casson offered more of the on restoring flights to Sharm El Sheikh at a dinner with the press on Wednesday. Progress was made in talks between Egyptian and British officials on the issue, Casson said, according to AMAY. When will the birds fly? Somewhere between “following Brexit” and “on the third blue moon from Tuesday.” (Quotes ours, not Mr. Casson’s.) Meanwhile, International Civil Aviation Organization (ICAO) boss Bernard Eliot lauded Sharm El Sheikh as an attractive destination for global tourism while touring the city, Al Masry Al Youm reports. Eliot is in town to attend a civil aviation security conference, which wraps up today.

Samsung’s Note 8 launches: Despite being iSheep, we’re excited about the release this week of Android Oreo and of prospects for the upcoming Google Pixel 2. Heck, even the idea that Google could be working on an AirPods clone is cool. But we’re finding it harder to get excited about yesterday’s unveiling of the Samsung Galaxy Note 8 other than to hope it doesn’t explode in anyone’s pants pocket this year. Still, it looks like a beast of a device (spec-wise) and Samsung has in recent years killed it in the screen and camera departments. Better yet, it has blessedly toned-down its TouchWiz nonsense. The WSJ’s Geoffrey Fowler has a nice look.

Finally, the Financial Times has advice from entrepreneurs and CEOs for otherentrepreneurs and CEOs on how to re-enter the world of work after your summer vacation. If you’re reading this morning from Sahel, bookmark this to read the day before your break ends, whether that’s this coming Saturday or on the last day of the upcoming Eid break.

We’re officially looking at a five-day weekend next week: The Ismail cabinet announced that the Eid Al Adha holiday will be from Thursday till Monday, according to Ahram Gate, meaning we are back to work on Tuesday, 5 September.

The Council of State (Maglis Al Dawla) is set to begin reviewing the executive regulations to the Investment Act in September, after the cabinet signed off on them last week.

Cabinet should begin discussing the Universal Healthcare Act before the end of the month and send it to the House of Representatives when it reconvenes in September. Prime Minister Sherif Ismail met with the ministers of health and finance Sunday to review the latest draft.

Did Egypt’s freetrade agreement with Mercosur countries come into effect? We noted in late July it was set to go into force in a month’s time.

The Trump administration’s decision to withhold some aid to Egypt is “contradictory” tothe “strategic and vital” nature of the two countries’ ties, Foreign Ministry spokesman Ahmed Abu Zeid told Hona Al Asema’s Lama Gebril, who’s filling for Lamees Al Hadidi. Abu Zeid also attributed the decision to pressure from American civil society and media, downplaying Foreign Minister Sameh Shoukry’s initial reaction to cancel a scheduled meeting with White House envoy Jared Kushner. He said Shoukry’s schedule is revised several times each day (watch, runtime 6:54).

Meanwhile on Masaa DMC, host Osama Kamal and Trade and Industry Minister Tarek Kabilhad a chat about the newly-issued Industrial Permits Act. The minister talked mostly about the law assisting in the growth of industry by cutting down the timeframe for acquiring permits. The previous 600-day average had fueled the country’s informal economy, he said (watch, runtime 9:28).

Kamal then dove into Caterwings’ 2017 Meat Price Index, which we said yesterday ranks Egypt as the fifth-cheapest country in the world to purchase meat. This is likely due to the Armed Forces jumping in “fill the market gap,” Federation of Egyptian Chambers of Commerce butcher’s division deputy Haitham Abdel Baset told Kamal (watch, runtime 4:22).

Over on Yahduth fi Misr, Sherif Amer and political analyst Mostafa El Fekki picked up where they last left off on the prospects of extending the president’s term in office to six years from four. Their discussion came as “the Higher Council for Judges announced that members of the National Election Commission that will be responsible for supervising Egypt’s 2018 presidential election had been selected,” according to Ahram Online.

Strained ties with the US following aid cuts? White House envoy Jared Kushner’s Middle East tour hit a speed bump when he landed in Cairo yesterday after the US State Department let slip it was cutting or withholding some USD 290 mn in aid to Egypt. The Foreign Affairs Ministry was initially reported to have canceled planned meetings with the delegation (which is touring the region to jump-start Palestinian-Israeli peace talks), but the meeting went ahead, as did a sit-down with President Abdel Fattah El Sisi. Also part of the delegation are international negotiations chief Jason Greenblatt and deputy national security adviser Dina Powell.

The move to deny USD 95.7 mn in aid and delay a further USD 195 mn “may have a negative impact on common interests,” the Foreign Ministry says. The Ministry’s statement added that “Egypt sees this measure as reflecting poor judgement of the strategic relationship that ties the two countries over long decades and as adopting a view that lacks an accurate understanding of the importance of supporting Egypt’s stability,” according to Reuters. Bloomberg’s Tarek El Tablawy writes that “the funding penalty again thrusts Egypt’s human rights record under an unforgiving spotlight at a time when the country is working to revive its economy and attract foreign investment. Although Trump has praised Egypt for battling Islamists, rights groups say the crackdown has been extended to encompass all government opponents, leaving no room for political dissent. The NGOs Act — which has received criticisms from Republican senators — is being widely touted as one of the major reasons for freezing aid.

Is this really about human rights and democracy — or our ties to North Korea? Writing for the New York Times, Gardiner Harris and Cairo bureau chief Declan Walsh convincingly suggest that the Trump administration is using the aid as leverage to push Egypt to break its civilian and military ties with North Korea. “Secretary of State Rex W. Tillerson’s top priority has been to increase North Korea’s economic and diplomatic isolation, and he has asked foreign leaders in almost every meeting that they cut ties with Pyongyang.” Egypt and North Korea have cooperated on the military front since the 1970s, and the UN alleged in 2015 that North Korea has smuggled weapons through Egyptian ports. Naguib Sawiris and OTMT’s role in setting up the country’s cell phone network was cited example of civilian cooperation between both countries.

Trump actually raised his concerns about North Korea with El Sisi in a call last month. According to a readout of the 5 July call released by the White House: “The two presidents also discussed the threat from North Korea. President Trump stressed the need for all countries to fully implement U.N. Security Council resolutions on North Korea, stop hosting North Korean guest workers, and stop providing economic or military benefits to North Korea.”

The Foreign Ministry did reverse what the foreign press is calling “the snub.” Foreign Minister Sameh Shoukry later sat in on Kushner’s face-to-face with President Abdel Fattah El Sisi, which according to official statements from Ittihadiya was focused squarely on the Middle East peace talks. The delegation expressed “their appreciation of Egypt’s efforts in the fight against terrorism and extremism, as well as its historical role in supporting a comprehensive settlement of the Palestinian issue.” The Americans then sat down with Shoukry separately at the Foreign Ministry, where the he reportedly outlined Egypt’s views on the state of affairs on the ground in Israel, the West Bank, and Gaza, said foreign ministry spokesperson Ahmed Abou Zaid. Neither statements touched upon the aid issue.

The decision is unlikely to have great impact on Egypt’s economy or foreign investors’ renewed appetite for all things Egyptian, AmCham Executive Vice President Ahmed Abou Ali tells Daily News Egypt. AmCham plans to hold a board meeting next week to discuss ties between the two countries.

Valiant members of our House of Representatives are volunteering to make the oneroustrip to the mosquito-infested swamp that is Washington, DC, to help dispel misconceptions about Egypt’s human rights record, reports Al Mal. The announcement had caused an uproar within the halls of parliament, where MPs are viewing it as another attempt to put pressure on Egypt, just as the Obama administration had done. The sacrifices our elected representative are willing to make in defense of our democracy are simply breathtaking.

The reversal of the Trump administration’s stance on human rights in Egypt — which dominates the conversation on Egypt in the foreign press — has been confusing pundits across the globe, generating wide speculation on the behind-the-scenes purpose of the move. Foreign Policy’s Emily Tamkin believes that the administration had been paying attention to testimony by regional experts, including Michelle Dunne, before the a subcommittee of the Senate Appropriations Committee. Slate is even suggesting that this might be a genuine reversal on making human rights a lower priority. “It’s encouraging that the State Department is acknowledging the deteriorating state of human rights in Egypt and the grave implications for stability in the Middle East,” Amnesty International’s Advocacy Director Adotei Akwei said in a Wednesday statement. “To effectively make human rights a priority, these transfers [of military aid] must be suspended immediately.”

No mentions of the Qatar rift: Kushner’s visit follows meetings with leaders from UAE, Qatar, Saudi Arabia, and Jordan, and based on statements from the Saudi Press Agency and Qatar News Agency, Palestine-Israeli peace talks was all that was discussed. Neither statements mentioned the diplomatic rift with Qatar. Kushner will be in Israel today.

This story will have legs in the international press for another cycle or two — we don’t think it is stretching things to say it’s the dominant foreign policy story globally this morning. Depending on your reading preferences, see coverage in the Wall Street Journal, Financial Times, Politico, the New York Times (here and here), Washington Post (plus a gloating editorial egging Trump on to give us another slap), Slate, CNN, the Guardian, the Los Angeles Times, Foreign Policy, Russia Today, and the BBC. We could go on, but you get the point. And note, please, that these are original pieces to which these outlets devoted staff time — not just wire pickups.

Credit Suisse sees scope for Egypt’s economic recovery to “steadily accelerate” and is “optimistic on the outlook for fiscal consolidation,” according to a recent report (pdf). The investment bank maintains its positive outlook on fixed income, particularly short-dated T-bills, and see scope for further steady appreciation in the EGP on improve macro fundamentals. The report does note that “the challenges facing Egypt remain significant and our recommendations therefore carry materially higher risk compared to our other Middle East recommendations.” Credit Suisse also sees scope for “credit rating upgrades as the macro environment improves, though it requires the government to keep making positive progress on the elevated fiscal deficit.”

…Separately, Egyptian eurobond yields declined to their lowest levels since issuance in January 2017, according to BNP Paribas’ Africa Weekly DCM Market update (pdf). The average yield declined by over 100 bps across the different maturities on favourable emerging markets backdrop and continued investor confidence in Egypt’s reforms. “One factor driving continued yield tightening for Egypt is increased liquidity. The bonds are trading better since inclusion of Eurobond tap in Emerging Markets Bond Diversified Index (EMBI Diversified) leading to increase of Egypt’s weight to 2.0% as of July higher than comparable EMs such as Morocco, Nigeria and Pakistan at 0.5-1.0% each and closer to South Africa and Peru at mid 2%. That is a key factor driving secondary market liquidity as the index is closely followed by all top EM investors,” the report states.

Beltone Financial is looking to quadruple the value of its index fund from EGP 55 mn and list it on the Nasdaq Dubai exchange, Director of Asset Management Kareem Naema told Reuters in an interview. “We’ve been working over the past three months on listing the index fund on the Nasdaq Dubai. It’s going to be a good step for Egypt and it’s going to attract a lot of investments to the Egyptian financial markets,” Naema says. He says Beltone will go on roadshows to promote the fund in the GCC, Europe, and the US in September and October. Naema also reiterated plans announced by CEO Bassem Azab to launch a USD 1 bn fund to invest in fixed-income instruments.

The Ismail government signed off yesterday on the amended Leasing and Factoring Act that the Egyptian Financial Supervisory Authority had drafted in April, according to a Cabinet statement. The bill, which will now be passed to the Council of State (Maglis Al Dawla) for review, adds clauses to regulate SME financing and mandates the country’s economic courts with resolving legal issues pertaining to the law. Other decisions out of yesterday’s weekly meeting:

• Approving an amended bill to regulate river traffic and commercial transportation on the Nile that mandates the River Transport Authority and the Local Development Ministry with issuing licenses for different types of commercial units. A previous version of the bill would have seen the establishment of a single agency to streamline the licensing process;
• Approving a request from the Damietta Port Authority to revise contracts with a liquid bulk trading company on a right-to-use basis;
• Ratifying amendments to the executive regulations of the law regulating universities, allowing Aswan University to establish a dental college.

REGIONAL- Small businesses in the UAE are likely to be most impacted by the 5% value-added tax (VAT) that will be imposed as of January next year, Muzaffar Rizvi writes in Khaleej Times. Larger enterprises have been preparing themselves for the impending tax, which represents “a significant shift in the UAE’s fiscal policy and wider GCC region.” Although it will be the lowest rate in the region — compared to Egypt’s 14% and Turkey’s 18% — the UAE has “a broader base than you see in most jurisdictions” by virtue of it being the region’s “most diversified economy.”

Other regional stories worth a glance this morning:

• The Tel Aviv Stock Exchange could IPO itself on the TASE in 2019 after it finishes its transformation into a for-profit company, the bourse’s CEO told Bloomberg yesterday.
• Saudi’s potentially USD 1 tn SWF has reportedly hired Rashed Sharif from Riyad Bank to manage the Public Investment Fund’s Saudi-based assets worth some USD 111 bn.
• Bahrain intends on filing a complaint against Qatar at the UN Security Council and International Criminal Court, reports The National. Bahrain argues that Qatar has attacked Bahrain using “fourth-generation warfare” techniques — shorthand for terrorism, psyops, and media warfare.

A diplomatic victory for Egypt? Chad has become the latest government to poke a stick into Qatar’s spokes, shuttering its embassy in the statelet, according to Reuters. The move comes less than a week after President Abdel Fattah El Sisi visited Chad as part of his Africa tour, which also included Rwanda, Tanzania, and Gabon. Chad shares Egypt’s concerns about the conflict in Libya, sharing as it does a border with that country, and Qatar has supported Islamist-leaning factions there.

Russia’s ambassador to Sudan was found dead yesterday in his swimming pool, Reuters reports, becoming the fourth Russian envoy to die abroad since December. Mirgayas Shirinskiy, 62, appears to have had a heart attack, RT suggests. Shirinskiy, a fluent Arabic speaker, was previously posted to Egypt and Saudi Arabia.

US President Donald Trump said the North American Freetrade Agreement (NAFTA) is likely to be terminated, CNBC reports from a rally in Arizona. NAFTA, which US negotiators had previously referred to as “unfair” and in need of “major improvement,” had been a key rallying point of Trump’s presidential campaign. The Donald said at his rally on Tuesday night: “I personally don’t think you can make [an agreement] without a termination but we’re going to see what happens, OK?” In keeping with election traditions from last year, the Mexican Peso traded down after his comments.

Globalization in retreat — capital flows decline since crisis: The volume of cross-border capital flows has fallen sharply, but that may not be a bad thing, says Shawn Donnan in the Financial Times. Capital flows have dropped to USD 4.3 tn in 2016, down to a third of the USD 12.4 tn in 2007. Leading the retreat are European banks which have significantly reduced cross-border lending. Donnan argues that the move has made global finance much more stable, especially considering how it was ease of cross border lending that was a driving force behind the housing bubble and the subsequent financial crisis. Another important side effect from this decline appears to be the shift among investors towards relying on foreign direct investment in long-term projects across the globe. This may not altogether be positive, says Donnan, as the move is driving countries to compete for FDI by lowering taxes.

Egypt is at the “ideological center” of the ongoing dispute between Qatar and its neighbouring GCC countries, Karen E Young writes for the Washington Post. Young says the dispute, in many ways, is about the “exercise of economic statecraft.” She mentions the economic aid from the GCC to Egypt as well as its importing of Qatari LNG, but also that Egypt is “a test case of some of the austerity measures the GCC states need to implement at home… a test case of how society responds to mechanisms of economic governance at the behest of a strong security state.” She says “for now, investment in Egypt’s political stability and economic growth remains a foreign policy priority of the UAE and Saudi Arabia.”

Exports from the Robeki Leather City are expected to exceed USD 1 bn in 2020, up from a current USD 200 mn, as it grows to become the new hub for Egypt’s leather industry, Eric Knecht and Mohamed Zaki write for Reuters. The fully integrated leather manufacturing zone is set to be completed by mid-2018, when foreign investors will be allowed to start buying land.. “The value-added of our exports will increase five times when we reach the stage where we’re exporting final products like shoes and bags,” says Mohamed El Gohary, chairman of a state-owned company marketing the site. Italian companies are already interested in investing in the zone, he added.

Anti-dumping duties: economics or politics? Steel prices have jumped 22% since anti-dumping duties were imposed on the industry in June, raising questions about the measure’s efficacy, a story by Al Monitor says. At face value, the measure appears to be protecting steel producers against foreign currency suppliers, as they struggle with rising costs of production inputs. However, some view the measure as a protectionist policy serving a largely monopolistic sector and giving manufacturers the ability to raise prices as they please, the article says. This has affected sectors such as real estate, where prices also continue to rise.

We present to you the state-funded Cosmic Village, in all its creepy glory. If you’ve ever wondered what kind of bizarre projects into which the state pours its resources, then we invite you to learn more about the Cosmic Village. Somebody thought it would be a good idea to create replicas of Egypt’s most notable cultural and historical features and cram them into one compact area … still in Egypt. Whoever came up with this brilliant plan — which saves people the hassle of actually going to the original sites — also thought it would be a great idea to throw in what can only be described as a haunted house-version of Disneyland’s “It’s a Small World” water ride, complete with trolls and crocodiles (watch, runtime 4:10).

The potential agreement to reopen the border crossing between Egypt and Hamas “reflects the changing dynamics of the region,” according to Financial Times. “The fact that the Cairo meetings took place illustrates a shift in regional relations. Hamas has become more isolated and is in need of new patrons. The UAE, which has become more assertive in its foreign policy, and Egypt want to counter the influence of Islamist groups and bring stability to a troublesome border. They also want to begin positioning a successor to Mahmoud Abbas, the 82-year-old president of the Palestinian Authority, analysts say.” The agreement is being reached at talks brokered by former Gaza security chief Mohammed Dahlan, who could be positioning himself to a return to Palestinian political life and attempting to build a base for a bid for Palestinian presidency. The FT also adds that Egypt is “upgrading its side of the Rafah border terminal, adding cameras, watchtowers and other security equipment ahead of its reopening.”

Egypt and Vietnam to sign five MoUs: Egypt and Vietnam will sign five MoUs, including ones that encourage investments between the two countries and promote stock exchange, according to a statement from the ministry. Investment Minister Sahar Nasr and Suez Canal Economic Zone (SCZone) chairman Mohab Mamish discussed cooperation in fish farming, pharma, food industries, and shipbuilding with Prime Minister Nguyen Xuan Phuc and a number of cabinet officials in Hanoi on Wednesday. Separately, the fifth Egyptian-Vietnamese Joint Committee convened and has decided it will be signing 8 MoUs in sectors including fish farming and tourism. The cabinet’s roadshow will be heading to Singapore next.

Investment zones to be established in Sharm El Sheikh, Qalyubia, Kafr El Sheikh: The investment supremos at GAFI have ordered the establishment of a tourism investment zone in Sharm El Sheikh, according to an Investment Ministry statement. The authority also ordered the establishment of an investment zone on a 15k sqm area inside in Qalyubia, and another one in Kafr El Sheikh at its board meeting on Tuesday. We had noted yesterday that the ministry plans to open a public freezone in Nuweiba.

UN ESCWA to offer technical training for oil sector projects: the Executive Secretary of the United Nations Economic and Social Commission for Western Asia (UN ESCWA) Mohamed Ali Alhakim discussed the possibility of his organization providing technical training for oil sector projects with Oil Minister Tarek El Molla, according to an Oil Ministry statement.

Production at the second phase development of the West Delta fields, which will include the Giza and Fayoum fields, is expected to begin in 2018, Oil Minister Tarek El Molla said on Wednesday. The remarks came during a meeting with Thomas Rappuhn, CEO of Germany’s DEA, which owns a 17.25% share in the project. Production had initially been slated for 2019. Separately, El Molla met with Malaysian company Petronas’ Vice President Adnan Zainal Abidin to discuss the company’s projects in Egypt. Petronas and Royal Dutch Shell will begin work on phase 9B of the Borollos gas field in 4Q2017, after having halted work last year over disagreements on prices with the government.

Korean agricultural investment firm WooNong has halted plans for a EGP 35 mn investment in a 500-feddan land plot in New Valley’s Farafra oasis, according to Al Mal. The firm froze its investment after it failed to conclude negotiations with the Agriculture Ministry.

Heliopolis Company for Housing and Development awarded a EGP 7.4 mn project to Utilco for Engineering and Contracting to build a tunnel crossing below the road leading to the medical center in New Heliopolis, according to an EGX filing.

iHome real estate has invested EGP 1 bn in their projects so far,according to Al Mal. The majority of their projects are in the New Cairo area and include projects such as ‘Beit el Watan,’ which is due to deliver units in 2020.

Ride-hailing app Careem is integrating the Hurghada-based Orange Taxi into its network of affiliates in a bid to expand its presence in the city, the company said on Wednesday (pdf). This comes amid expectations of a rise in tourist arrivals, says Ramy Kato, Head of Careem Egypt Operations and Vice President of Careem Care. “The integration of Orange Taxi aligns with Careem’s strategy to integrate taxis across Egypt within the Careem network, as with the integration of the white taxis in Cairo,” he added. Careem has been operating in Hurghada since December last year.

The Egyptian Arab Land Bank and EFG Hermes Leasing announced concluding a EGP 50 mn agreement to “jointly offer leasing solutions for fixed assets to small businesses in Egypt.” The agreement provides funding at low-interest-rate lease arrangements for small enterprises in Egypt and aims to capitalize on the central bank’s initiative to support SMEs.

The National Investment Bank (NIB) sold 459,395 shares in Abu Dhabi Islamic Bank (ADIB) Egypt for EGP 4.8 mn, according to an EGX filing (pdf). This brings the state-owned investment bank’s ownership in ADIB to 10.497% from 10.726%. Cairo Capital Securities brokered the transaction.

First world problems with first world solutions: Icelandic capital Reykjavik now has theworld’s first drone delivery service, according to CNBC. The new service — offered through the combined efforts of Flytrex and online goods distributor AHA — would eliminate the problem of slow deliveries, caused by the city’s waterways. The Icelandic Transport Authority signed off on the service as a measure for road safety.

Egyptian researcher Ahmed Osman Ahmed believes diesel fuel tech can still be useful even if the substance itself goes extinct. The Queen’s University-based scientist tells The National’s Gavin du Venage that Dimethyl Ether (DME) is a clean and renewable alternative to diesel that uses the same compression engines minus all the toxins. “It can be used for cooking and heating as a replacement for propane or in transportation as a fuel in cars or even in the power generation to produce electricity,” Ahmed says. It could be especially useful for developing countries like Egypt, as landfill biogas could be used as feedstock for DME, he adds.