Gov’t mulling EUR 1.5 bn eurobond in November + Mercedes-Benz could assemble in Egypt once again

** TAP OR CLICK HERE TO TAKE OUR 3Q2017 READER SENTIMENT SURVEY: We’re asking you throughout this week how you feel about doing business in Egypt this year, if you’ll invest more and the biggest challenges you face, among other questions. The survey, the largest quarterly take on the pulse of the business and investing community, will run until Thursday. It won’t take more than a couple of minutes to complete unless you’d like to leave us a note at the end (optional, but it would be cool if you did). We’ll have the results ready for you next week.

Some good news to kick off a short workweek: Egypt’s budget deficit crashed through the 10% barrier to hit 9.5% of GDP in FY 2016-17, President Abdel Fattah El Sisi announced on Thursday. The deficit dropped from 11.5% of GDP in FY2015-16, Reuters adds. El Sisi also expects the inflation rate to fall by more than half in 2018 with an overall goal to reduce the inflation rate to around 13% in 2018, according to the Associated Press.

Finance Minister Amr El Garhy expects GDP growth in the current fiscal year to come in at 5-5.25%, up from 4.2% in the fiscal year that ended in June, according to Al Shorouk.

Bye-bye, dog days of summer: The mercury is plunging to much more civilized levels, with today’s forecasted high standing at 32°C. The stock market is also welcoming the cooler weather, with turnover rising to EGP 1.5 bn on Thursday, or about 77% above the trailing 90-day average. The benchmark EGX30 advanced 1.3%, good for a YTD gain of 10.3%.

El Sisi to meet Trump in US this week, push for engagement on Libyan crisis: President Abdel Fattah El Sisi is heading to New York today to attend the 72nd Regular Session of the UN General Assembly, which kicked off last week and runs until 25 September, according to a statement from Ittihadiya. El Sisi is expected to meet with US President Donald Trump on Wednesday, according to the White House. He is also scheduled to participate in a UN Security Council summit on international peacekeeping missions as well as a working meeting on the Libyan crisis. Foreign Minister Sameh Shoukry is already in New York ahead of El Sisi’s arrival.

The Ikhwan will, accordingly, be having a blast in the US of A this week, planning to “welcome” the president to New York on Wednesday and fêting the lunatic from Ankara in Washington tomorrow, according to analyst Eric Trager.

If you care about what you put in your body — or the future of our species — there aretwo pieces you must read this week. Both on nutrition, which is supposed to be the most boring (and junk-science-filled) subject on the planet, right? The New York Times and Politico make it absolutely compelling. First, the Times looks at how Nestlé and other Big Food companies are helping destroy public health in emerging markets by pushing high-sugar processed foods that are driving growth in obesity and the diseases related to it, including diabetes, high blood pressure and heart disease. Then flip over to Politico to read “The great nutrient collapse,” about how “the atmosphere is literally changing the food we eat, for the worse. And almost nobody is paying attention.” It’s one part public policy story, one part science whodunit and entirely compelling. Both stories are long — save ‘em to Pocket to read on your commute or later this week if you can’t down either of them before you have to dash to work this morning.

** PSA- It’s a blessedly short week as we prepare for a Thursday-Saturday long weekend in observance of Islamic New Year. Prime Minister Sherif Ismail has made it official. Make the weekend count — with 6 October falling on a Friday, we figure it’s our last holiday until the Prophet’s Birthday on or about 30 November. Happy 1439, y’all.

4G data will go live within the coming days on all mobile networks, Communications Minister Yasser El Kady said on Saturday, according to AMAY. Meanwhile, the National Telecommunications Regulation Authority is reportedly weeks away from issuing a decision on MNOs’ request to hike charges on local roaming, an unnamed source tells Youm7.

Euromoney runs Monday and Tuesday of this week, with Ministers Amr El Garhy, Sahar Nasr and Tarek Kabil all slated to attend.

The House Industry Committee will resume hearings on the so-called Automotive Directive inOctober when the House of Representatives reconvenes, said the committee’s deputy chair Mohamed El Ziny. He tells Al Borsa that the committee plans to meet with Trade and Industry Minister Tarek Kabil to discuss the bill, which would give assemblers incentives to go further up the value chain into manufacturing, giving them a measure of protection against what they say are unfair benefits enjoyed by Turkish, EU and Moroccan imports. He added that the committee has received a number of studies on the act which it will also review. The bill had been stalling in the House thanks to lobbying by auto importers and European exporters.

Egypt will sign the Dabaa nuclear power plant contracts with Rosatom in October after the Council of State (Maglis El Dawla) is through with reviewing them, said El Sayed Al Baz, member of the House of Representatives’ Energy Committee. He tells Al Masry Al Youm that the project will not be held up in the House which approves of the contracts.

President Abdel Fattah El Sisi’s trip to the Big Apple for the UN General Assembly reigned supreme on the airwaves last night, with many of the talking heads dissecting what the visit means for US-Egypt relations. None took it as far as Amr Adib, however, who decided to set up shop in New York for the rest of the week.

The host of Kol Youm said the Trump administration is looking for a way to compensate Egypt for the USD 290 mn in aid it is withholding. He said El Sisi will play hardball in any case and declare that Egypt doesn’t need the aid, but will work to understand the reason for the aid cuts in light of the country’s ongoing struggle to contain terrorism (watch, runtime 1:51).

Over on Masaa DMC, Political Science Professor Tarek Fahmy told host Eman El Hosary that El Sisi’s speech at the UN will likely focus on showcasing Egypt’s work on the Palestinian and Syrian crises as well as efforts to combat terrorism. Fahmy said El Sisi will also carve out some time to meet US investors to pitch them on the improved business climate, particularly after the passing of the Investment Act (watch, runtime 5:25).

Hona Al Asema’s Lamees Al Hadidi interviewed Qatari opposition leader Khaled El Hail at the Qatar Global Security and Stability Conference in London, an apparent gathering and lobbying event of the Qatari opposition (watch, runtime 5:59). Lamees also gave a rundown of the GBP 40 bn worth of Qatari investments in Britain, noting that the lion’s share is concentrated in the real estate sector (watch, runtime 4:25).
Al Hadidi took note of the AFI financial inclusion summit in Sharm El Sheikh, briefly discussing the importance of better access to the banking system (watch, runtime 6:18).

Egypt mulls EUR 1.5 bn eurobond issuance in November: Egypt is considering raising USD 1.5 bn in a new eurobond issuance “before the end of November,” Finance Minister Amr El Garhy told Bloomberg on Thursday. Some USD 3-4 bn in eurobonds will be up for sale in 1Q2018, El Garhy told Al Borsa in a separate interview. The move will be part of a larger USD 10 bn foreign currency-denominated bond program the government is also considering, the minister said, stopping short of giving a detailed timeline for the program. The country is leaning towards more bond issuances of this sort as a result of the interest foreign investors have had in emerging markets bonds and Egypt in general, he added. El Garhy expects foreign holdings of Egypt’s bonds since the EGP float to increase to USD 20 bn, up from a current USD 16.5 bn.

Mercedes-Benz “agrees in principle” to resume assembling in Egypt? Mercedes-Benz “has agreed in principle” resume car assembly in Egypt, according to a statement by the Suez Canal Development Authority (SCZone) picked up by Al Shorouk. The company decision was taken following a meeting between company representatives and SCZone head Mohab Mamish on the sidelines of last week’s International Motor Show 2017 in Frankfurt. The company had closed down its assembly line in mid-2015 amid FX shortages and as the straight import of already assembled vehicles was made easier amid falling tariffs under an EU-Egypt trade liberalization pact.

Gov’t disavows the dreaded “P” word when it comes to railways: Egypt’s railways will not be privatized, Prime Minister Sherif Ismail said on Saturday, according to Al Masry Al Youm. The private sector’s involvement in the railways will be limited to “providing services.” He did not clarify what “services” meant — it could be anything from running specific lines to playing roles as contractors in the overhaul of the system. Ismail’s statement was likely designed to quell public distrust of privatization, particularly when it comes to a means of transport on which mns of citizens use to travel to and from the capital city several times a year. Wahid Qarqar, deputy chair of the House of Representatives’ Transportation Committee had said last month that MPs would introduce a bill that would allow the private sector to directly build, manage, and maintain railway infrastructure — a surprising development, considering the House’s aversion to privatization.

Could the unwinding of carry trade positions see the EGP drop against the USD? The EGP could slide to something on the order of EGP 20 to the greenback by 2019, Capital Economics’ Jason Tuvey told CNN Arabic in an interview on Thursday. The USD has been holding steady at around EGP 18, largely on the back of short-term foreign inflows, says Tuvey. As the EGP appreciates, a sell-off by the carry trade and other short-term investors will lead to a depreciation in the EGP by 2019, he added. He also points to the drop in Egyptian equities, which fell to five-month low in July, as presaging a coming slide in value of the EGP.

The European Investment Bank is willing to kick in EUR 255 mn in funding for the Transport Ministry’s planned upgrades to the Cairo Metro’s first and second lines, a delegation of EIB representatives told Minister Hisham Arafat during a meeting in Cairo on Thursday, Al Borsa reports. Line 1 would receive EUR 180 mn, and the remaining EUR 75 mn would be directed towards work on Line 2. The EIB has already provided around EUR 600 mn in funding for the development of Cairo Metro Line 3. The ministry is also in talks with the EIB and the central bank to receive a facilitated loan to purchase spare parts and brakes for the railway, Arafat tells the newspaper. The ministry is negotiating with the CBE for subsidized financing at a 6% interest rate normally offered to SMEs, according to the minister.

USD 3 bn petchem plant to begin production in 2021. A USD 3 bn plant being built by the state’s Egyptian Petrochemicals Holding Company (ECHEM) in the Suez Canal Economic Zone is expected to begin production in 2021, ECHEM head Mohamed Saafan said on Friday, Al Mal reports. ECHEM is working with Toyota Tsusho to complete feasibility studies on the plant by 1Q2018. The plant will produce 3.5 mn tonnes of petroleum products per annum, in addition to 1 mn tonnes of polypropylene and ethylene derivatives, with some of the products slated for the local market and the remaining for exports. The government had announced plans to construct the plant in July.

INVESTMENT WATCH- US food and agri company Cargill plans to invest USD 150 mn in Egypt in the coming period, according to an Investment Ministry statement that quotes Melvin Menke, Cargill’s general manager in Egypt. Menke’s statements came at a meeting with Investment Minister Sahar Nasr, who met with a number of US companies on Friday. Nasr also sat down with representatives of GE, AbbVie, Johnson & Johnson, Merck, ExxonMobil, Kellogg, JPMorgan Chase bank, and Mastercard, according to a ministry statement.

IPO WATCH- Al Tawfeek Leasing Co. is planning to list 15% of its shares on the EGX before the year is out, CEO Tarek Fahmy said, Al Masry Al Youm reports. The company is still conducting a fair value assessment and will list its shares once it receives the necessary approvals, Fahmy said. Al Tawfeek is also looking to offer EGP 500 mn in funding for companies in the pharma, education, automotive, and real estate sectors.

Naguib says North Korea investments not political, has no plans to divest: It’s best not to issue empty threats against North Korea, Naguib Sawiris told CNBC TV in an interview on Thursday. “If you threaten and you don’t act you really look stupid, so it’s best not to,” Naguib says. He added that he still has the only mobile operator license in North Korea, without plans to divest, and that his investments there were worth about USD 250 mn, “but that these have nothing to do with politics and that Egyptian businesses with North Korea are old.” He says “I believed I’ve extended a good service to the innocent people of North Korea … They’re allowed to have the simplest services that everybody in the west has. It has nothing to do with politics… As an investor, I obey by all UN resolutions making sure we’re not violating any sanctions, any rules.”

It’s worth noting here that Naguib effectively lost control of his North Korean subsidiary Koryolink in late 2015 with Orascom Telecom Media and Technology Holding writing off the fair value for its former subsidiary and redesignating it as an associate in November 2015. Closer to home, Naguib also spoke about the rift with Qatar, saying it is not a political row, and accused Doha of harboring terrorists. He added that he does not think the US cutting military aid to Egypt is “a smart move,” but he does not believe it was US President Donald Trump’s decision. Aid cuts aside, Naguib says the economy in Egypt is in better shape with a better investment climate, but the high interest rate remains a negative “side effect.” He hope interest rates would come down in the next “year or two.”

MOVES- President Abdel Fattah El Sisi swore-in Ferial Hamid Kotb as the new head of the Administrative Prosecution Authority yesterday. Kotb succeeds Rasheeda Mohamed Anwar Fathalla, according to an Ittihadiya statement.

Chilling (but unsurprising) factoid of the Sharm financial inclusion gathering: Only 29% of adults in the Arab world have access to financial services, against 69% in Asia-Pacific, according to Al Maghrib Abdellatif Jouahri, chairman of the Union of Arab Banks.
Just as bad: Only one of every five SMEs is able to access bank financing even though they represent 80% of the regional economy, Jouahri added.

How big is the nation’s informal economy? It clocks in at about 40% of GDP, with wholesale and retail trading representing 35-40% of the total informal economy and manufacturing another 15% of it, according to CAPMAS numbers cited by Planning Minister Hala El Said. Most of the agricultural sector operates in the informal economy, she said. Separately, Prime Minister Sherif Ismail said the informal economy is worth about EGP 1.6 tn annually.

President Abdel Fattah El Sisi delivered a speech (pdf) at the opening ceremony of last week’s Sharm financial inclusion summit, in which he said the Egyptian people are fighting a battle for development at the same time as they combat terrorism (watch, runtime 10:12). The president highlighted Egypt’s accelerating economic growth and said he wants to shrink the informal economy and enhance access to financial services for women and young people.

CBE Governor Tarek Amer highlighted growth in subscribers to digital payment solutions (watch, runtime 8:19), suggesting that progress to-date is just the beginning. He also stressed that the float of the EGP made Egyptian manufactured goods globally competitive.

Prime Minister Sherif Ismail spoke at the gathering, recapping the usual economic growth figures (watch, runtime 5:51).

Policy initiatives: The Alliance for Financial Inclusion’s ninth global policy forum was co-hosted by the Central Bank of Egypt and closed in Sharm El Sheikh on Friday with the launch of the Financial Inclusion in the Arab Region Initiative (FIARI). The initiative will support national-level financial inclusion programs. AFI also unanimously endorsed the Sharm El Sheikh Climate Change Accord, mandating AFI members “to pursue peer learning on practical policy solutions to the intersecting challenges of financial inclusion, climate change and green finance.”

CBE gets AFI leadership role: Deputy Governor Lobna Helal will be vice-chair of an AFI board committee on women and financial inclusion, and the central bank became a member of the institution’s board.

Russian cosmonaut Sergey Ryazanskiy captured an image of the Nile at night — as viewed from space — surrounded by lights that are just as bright from outer space as they are from Cairo’s streets. The image is both a pretty aerial view of the river and a visual representation of how dense the population is around the Nile Basin versus areas farther into the desert. You can check out more of his pictures of Earth via his Twitter account.

Topping coverage of Egypt in the foreign press this morning is former president Mohamed Morsi receiving a 25-year prison sentence in the Qatar espionage case. The final ruling, which the Court of Cassation issued yesterday, reduced the sentence from an original of 40 years, Reuters reports.

Egypt is giving privatization and economic reforms another go, but the impact might not be felt on the street, The Economist suggests in its print edition. The newspaper laments the small stakes on offer in the state-owned companies set to be listed, saying they “buyers’ ability to carry out restructuring.” The newspaper suggests that the potential sales “may help the state’s balance-sheet. But they will not fix dismal public infrastructure and hospitals.”

Over 250 eminent persons from some 50 countries, including 20 heads of state and government and 90 Nobel laureates, have signed a letter of support for Ismail Serageldin, Science Magazine reports. Serageldin has been handed a preliminary prison sentence, but his appeal is scheduled for this week. The letter’s signatories say they “launched this campaign and plan to send the letter with the many eminent signatures to the media.” Local figures had also penned a similar letter last month.

Other stories worth noting in brief:

• The Islamist insurgency in North Sinai is “still not really under control” four years on, despite security forces receiving bns in counterterrorism aid from the United States, the Washington Post says.
• Opinion writers at China’s Global Times hope that Egypt could become the next member of the BRICS.
• Egypt is capitalizing on high-profile visits from world leaders and celebrities, as well as slashing costs and spending mns on upgrading airport security in a bid to boost tourism, Quartz says.
• Human Rights Watch is accusing Egyptian authorities of violating the basic rights of a couple with allegedly have Ikhwan ties.

With no candidates to rival President Abdel Fattah El Sisi, next year’s presidential elections will make people unmotivated to actually go out and vote, which would undermine the legitimacy of the process as a whole, Abdullah El Sennawy writes for Al Shorouk. The lack of pluralism amounts to a breach of the constitution and will only produce elections reminiscent of pre-2011 referendums.

The Arab world is home to the worst AGMs, but China is home to the most unusual: It’s a known fact that the worst-ever AGM was held in Kuwait a couple of years back, and featured both chair-throwing and the arrival of the local constabulary. (Sadly, Youtube video of the gathering — our most-clicked video of 2015 — has been taken down from the interwebs.) Lest you, Egyptian CEO / IRO, think you’re under pressure to perform at your next meeting of shareholders, consider the lengths to which Alibaba’s Jack Ma went for his AGM, showing up on stage ‘riding’ a motorcycle to do his best Michael Jackson impression (watch, runtime: 1:09).

Ties between Egypt and Sudan are going through “a crisis” because of the issues surrounding the Halayeb Triangle and Egypt’s “restrictions” on Sudanese miners there, Sudan’s Foreign Affairs Ministry said, according to Ashorooq. A senior official at the ministry said he hoped the issues are resolved soon, but reiterated Sudan’s claims over the Halayeb Triangle. We had noted reports from the Sudanese press last week that claims that 16 miners were apprehended by Egyptian security forces in Sudanese territory.

Egypt, the UAE, Iraq, and China may become observers in the Syrian peace process, a source told Sputnik.

The Sisi administration has decided to allow Hamas to set up a representative office in Cairo, according to AMAY. The office will be headed by Hamas member Rawhi Mushtaha and will help facilitate talks and prisoner swaps. In further thawing of Hamas’ relationship in the region Egypt has also presented a new framework for prisoner exchanges between Hamas and Israel, Haaretz reports.

Foreign Minister Sameh Shoukry met with his Italian counterpart, Angelino Alfano, in London on Thursday to discuss cooperation on illegal migration and Italy’s role in Egypt’s petroleum industry, according to a ministry statement. They also reiterated their commitment to cooperating in the ongoing investigation into Giulio Regeni’s murder.

Shoukry also met with UK Foreign Secretary Boris Johnson to discuss economic cooperation ahead of British trade envoy Sir Jeffrey Donaldson’s visit to Egypt this month. The two also discussed neverending UK travel warning on Egypt.

Shoukry’s meetings came on the sidelines of the six-party Arab League ministerial conference on Libya.

Elsewedy Electric was awarded a photovoltaic solar energy power plant project in Benban, Aswan, under the second phase of the feed-in tariff program, according to a bourse release. The project comes at an investment cost of USD 70 mn and will produce 65 MW annually. Project funding will be provided by the European Bank of Reconstruction and Development and Agence Française de Développement subsidiary Proparco. Elsewedy expects financial close for the project to be reached before 27 October and for construction to begin in 1Q2018, with the beginning of operations slated for before 2018’s end.

International oil companies have raised their investments in Egypt to USD 10 bn this year on the back of payments the government have been making to arrears it owes them, Oil Minister Tarek El Molla tells Al Borsa on Saturday. Arrears had fallen to USD 2.3 bn, the lowest it has been since 2013, El Molla stated. The ministry plans to issue new tenders and auctions for concessions, he added.

BP says it is on track to begin production from Zohr before the end of the year, according to comments made by BP CEO Bob Dudley to Reuters. BP completed the acquisition of 10% of Eni’s stake in the Zohr gas field in February, and Rosneft also owns a stake in the field.

Confusion over the red and pink types of the poppy flower were behind the holdups regarding the poppy-containing wheat shipments, the French embassy has suggested, according to Bloomberg. “Red poppies, or papaver rhoeas, can grow in fields of grain crops where their life cycle matches management of the land, according to the Botanical Society of Britain and Ireland. The pink flower, papaver somniferum, can be cultivated for opium. The seeds of the red type aren’t toxic, the French embassy said in a letter to Egypt’s import and export authority.” A senior analyst at Eurasia Group says the timing of the dispute is not good for Egypt as “creating a bottleneck, creating these sort of problems in the supply of food to the population could actually have a disruptive impact.” Egyptian authorities had agreed last week to sieve the shipments before deciding whether to reject them or not. Reuters is noting that the shipments continue to be under the custody of the Prosecutor General as of Saturday.

EgyptAir will resume flying the Cairo to Tokyo route in October following a four-year suspension, Ahram Online reports. “EgyptAir chairman Safwat Mosalam said that flights would resume starting 29 October, with one flight scheduled every Saturday evening.” The route was suspended in 2012 following weak demand.

The This is Egypt promotional campaign (watch, runtime: 1:24) has won Best Tourism Promotional Video in the Middle East at the General Assembly of the World Tourism Organization (WTO) in China, beating out 63 other contestants,according to Al Shorouk.

The EGX has decided to notify companies that do not meet the listing regulations and gave them six months to address the bourse within two months with a plan that has a maximum timeline of six months to rectify the issues. Among those receiving warnings are Orange Egypt and QNB Al Ahli Bank for violating the percentage of shares in float, Misr National Steel (Ataqa) and Obour Land for not meeting the requirements for the minimum number of investors, and Arab Dairy for not meeting both requirements. The full list can be found here. The EGX also gave an update about the number of shares still available to be converted to GDRs for the relevant listed companies.

Boutique investment firm Premiere Holding is considering setting up a EGP 200 mn fund to invest in agriculture by the end of the year, reports AMAY. The firm is also considering launching a real estate fund with capital of EGP 250 mn. The firm, which focuses on investments in securities, agriculture, real estate and SMEs, is trying to get their assets under management to EGP 500 mn.

National Bank of Egypt is considering launching factoring services,Vice President Yehia Abou El Fotouh also said, according to AMAY.

Saudi Arabia’s Al Saqqaf Group is investing EGP 30 mn in a factory to produce cleaning products,said company chairman Mohamed Al Saqqaf, according to Al Mal. His statements came at the signing of an agreement between the company and Amer Group to co-develop a EGP 300 mn mall in 6 October City.

The board of the GAFI has approved establishing four new investment zones in Suez and Luxor. The investment zone in Suez would focus on SMEs in the fields of food and other manufacturing industries. Luxor would get three zones, two of which to support poultries and the third for agricultural development.

BPE Partners is planning to liquidate the EGP 180 mn Beltone Midcap Fund, BPE CEO Abdel Moneim Omran said, Al Masry Al Youm reports. BPE has received offers to be bought out from investments in the Cairo Kidney Center and Bio Pharma Egypt, according to Omran.

The executive regulations for the law which governs regaining possession of land seized by the government for being illegally occupied have been sent to the Council of State (Maglis Al Dawla) for review, Prime Minister Sherif Ismail said yesterday, according to Al Ahram. Cabinet had signed off on the regulations last week.

A former member of FIFA’s Governance Committee alleges that there are “serious allegations” concerning the election of Egypt’s Hany Abo Rida to the FIFA Council in May, BBC reports. Abo Rida’s opponent in the elections had alleged that he threw a party and flew in delegations from the other federations, a violation of FIFA’s election regulations. Miguel Maduro, who was ousted as chair of FIFA’s Governance Committee in May, made the claims when addressing a British parliamentary committee on Wednesday and said “we intended to investigate the matter.”

Parliamentarians are in the hot seat again after accusations that some have sold Hajj visas they had been gifted by the Saudi government, according to Gulf News. The accusations have prompted calls for an investigation.

ON THIS DAY- On this day in 1978, Egyptian President Anwar Sadat, Israeli Prime Minister Menachem Begin and US President Jimmy Carter signed the Camp David Accords in Washington. The accords laid the groundwork for peace between Egypt and Israel and called for a formal peace treaty to be signed between the two countries within three months and for establishment of diplomatic relations. It is also India’s Prime Minister Narendra Modi’s birthday today. On this day two years ago, Enterprise readers were reading about how Jim Rogers, who made his name co-founding the Quantum Fund with George Soros, was betting on North Korea to become the next frontier and saying “if I could put all my money on North Korea, I would … It’s where China was in 1980.”