Sunday, 29 July 2018

Lowest budget deficit in six years.

TL;DR

What We’re Tracking Today

First, it is the Space Force. Next, a NATO-style Arab alliance: US President Donald Trump could be holding a summit with Arab leaders in Washington on 12-13 October to discuss the establishment of a NATO-style Arab military force, sources told the Washington Post. The force that could be “tentatively known as the Middle East Strategic Alliance (MESA)” would include an alliance between six gulf Arab States, as well as Egypt and Jordan. We had first heard of the idea for the alliance last year, when it was floated as a means of countering Iran’s growing influence in the region.

The Federation of Egyptian Industries (FEI) will present its remarks on the Finance Ministry’s new and improved Customs Act this week, FEI tax committee chair Mohamed El Bahey said last week. Their points of concerns include stipulations requiring importers to submit letters of guarantee from an accredited bank covering the cost of customs duties and taxes, in addition to higher penalties for customs evaders and smugglers. The FEI’s notes come as a preliminary “national dialogue” between the ministry and business associations on the law. Finance Minister Mohamed Maait had previously told us that the ministry would introduce a “whitelist” of importers who benefit from expedited clearance of goods. The new act will replace the current one.

Saudi Arabia temporarily halted the movement of oil shipments through the Red Sea’s Bab El Mandeb Strait, “virtually [halting] oil shipments through Egypt’s Suez Canal or the SUMED crude pipeline that link the Red Sea and Mediterranean,” Reuters reports. Saudi said that Yemeni Houthi militias attacked two of its oil tankers while they passed through the strait, which means it is “unlikely to reverse the decision until it’s confident that crew, ships and cargoes are safe.” Bloomberg answers all the FAQs here.

Goldman Sachs is calling it — is it really the end of the EM Zombie Apocalypse? The plunge that emerging market assets witnessed this year could have bottomed out in June, with the rally witnessed in July looking likely to be a sustained rebound, according to an analysis by Goldman Sachs picked up by Bloomberg.

The recent retreat isn’t out of the ordinary and don’t stand out as being unusual when considered against history, Goldman analysts Caesar Maasry and Ron Gray wrote in the report. “EM assets tend to be volatile and these sorts of corrections happen every year,” they said. “The moves this year are well in line with the historical playbook.”

Whether it’s the right time to plunge back into emerging markets varies by asset class, they concluded. “The strategy of calling a bottom on a stabilization of prices alone is unlikely to be a winning strategy, especially since the risk of mis-calling the bottom and facing the sharp drawdown that typically comes in the last month can be extremely painful,” the report said.

The MSCI Emerging Markets Index rose 2.1% — the biggest weekly rally since the five-day period that ended in May. Analysts at Bloomberg put this rally to Chinese stimulus measures and an agreement between the US and EU to suspend new tariffs lifted risk appetite.

Goldman urges you to avoid Turkey like the plague: One EM the investment bank is recommending to avoid like a weeklong Sahel break with the in-laws is Turkey. “One has to be nervous about Turkey,” Goldman Sach’s emerging markets chief Sam Finkelstein tells Bloomberg TV. “They are doing everything wrong.” We could have told you that.

A word from the bears: Emerging market bears are not going to sit back and not rain on this optimistic parade. Analysts speaking to the FT are not buying it, saying that the speculation underpinning EMs currently boils down to one fundamental risk: Buyers of EM debt are lending for longer periods of time just as the credit ratings of the issuers is declining. EM governments were able to issue USD 129 bn in bonds in 1H2018, while the average rating of the new debt fell towards the lowest level since at least 2002, according to data from Fundamental Intelligence (FI). The average duration of sovereign EM bonds issued in 2018 has jumped to 17.2 years, up from just 10.7 years in 2017.

Why have investors bought into this “risky” trend? The issuance of 30-year duration bonds by mostly African EMs and for the first time had enticed investors hungry for yields. These investors are now hurting from the capital losses resulting from political risk, interest rate hikes and currency dynamics. These factors “tend to have a very temporary impact,” says said David Spegel of FI.

The real danger? Historically the first-time issuer market has a “very high risk” associated with it, with a near-15% default rate in the first four years alone. It is long-term risks that threatens the speculative bubble, says Spegel.

Enterprise+: Last Night’s Talk Shows

The airwaves were saturated last night with coverage of and discussions on the National Youth Conference at Cairo University.

Egypt has long been in dire need of an overhaul of its educational system, which in its current form is making the country lag behind the rest of the world, Education Minister Tarek Shawki said in a phone-in to Masaa DMC. Shawki broke down the new system his ministry is introducing, which we cover in detail in Speed Round, below (watch, runtime: 24:20).

Al Azhar scholar Ibrahim Reda lauded President Abdel Fattah El Sisi for renewing his call to reform religious discourse, saying that extremists and political Islam groups have set a bad example of Islam (watch, runtime: 14:48).

Luxor has been working over the past year to create a “visual brand” and identity, as was proposed by two Egyptian women who presented their concept at the youth conference yesterday, according to Governor Mohamed Badr. The move is part of Egypt’s wider effort to rebrand itself to lure back tourists, tour guides syndicate member Waleed Al Batooti said on Masaa DMC (watch, runtime: 15:00).

Al Hayah Al Youm used up its airtime and that of Al Hayah fi Masr to directly broadcast the entirety of the conference.

Speed Round

Speed Round is presented in association with

FY2017-18 budget deficit narrows to lowest point in six years: Egypt’s budget deficit for FY2017-18 narrowed to EGP 433.9 bn, or 9.8% of total GDP, dropping below the 10% marker for the first time in six years, Finance Minister Mohamed Maait announced at a press conference on Thursday on the final figures from Egypt’s FY2017-18 budget, according to a ministry statement (pdf). The deficit fell from 10.9% in FY2016-17. Nonetheless, the deficit was EGP 100 bn shy of its target, he said at the conference, which came a day after Planning Minister Hala El Saeed had announced that that Egypt’s GDP growth accelerated to 5.3% in FY2017-18. Maait attributed the shortfall to “unrealized non-tax revenues,” which fell to EGP 160 bn from a projected EGP 230 bn.

Egypt achieved a primary budget surplus of 0.2% for the first time in 15 years during FY2017-18. The EGP 4.4 bn surplus was used to make interest payments on sovereign debt, which rose by 38.3% y-o-y to EGP 438 bn at the end of June, according to Maait.

State revenues rose 18.5% y-o-y to EGP 781.1 bn in FY2017-18 on tax revenues of EGP 566.14 bn, which rose EGP 157 bn over FY2016-17 collections. This can be attributed to a EGP 78 bn increase in income taxes collections EGP 304.5 bn and EGP 79 bn increase in VAT collection to EGP 261.6 bn. Taxes from real estate grew to EGP 2 bn, while the Tax Dispute Act also helped bring in EGP 16.6 bn Meanwhile, customs revenues grew 6.7% y-o-y, coming in at EGP 36.6 bn.

Increased spending on social welfare and subsidy programs saw state expenditures climb 17% y-o-y in FY2017-18 to EGP 1.2 tn. Total subsidy spending reached EGP 324.4 bn, up from EGP 276.7 bn in the previous year. Commodity subsidies saw the biggest jump, rising by 69.3% y-o-y to EGP 80.5 bn, up from EGP 47.5 bn in the previous fiscal year. The state had also allocated EGP 17.5 bn to cash subsidy programs Takaful and Karama in FY2017-18, an increase of EGP 10 bn over FY2016-17, as the number of beneficiaries grew last year. State coffers also contributed EGP 52.5 bn to pension funds, up from EGP 45.2 bn in FY2016-17. Spending on fuel subsidies also rose, coming in at EGP 121 bn from a projected EGP 110 bn, while Electricity subsidies reached EGP 29 bn.

Portfolio outflows reach EGP 3-4 bn: Meanwhile, Foreign holdings in Egyptian treasuries reached USD 17.5 bn at end-FY2017-18, Maait also said (pdf). “The number represents a sharp drop from the end of March, when holdings stood at USD 23.1 bn,” Reuters notes. Maait blamed the EGP 3-4 bn in foreign outflows from local treasury bonds on the wider EM sell off, which was triggered by rising US interest rates and a strengthening dollar, and exacerbated by a potential trade war between the US and China. “But our yields are still the best among the emerging markets,” he added.

As for oil prices, Maait said that that every USD 1 increase over the USD 67/bbl average set in the FY2018-19 budget would result in a deficit of EGP 3-4 bn.The Oil Ministry had been given the greenlight last week to sign fuel hedging contracts with international banks to prevent higher oil prices from further straining the budget.

Looking ahead, diversifying the sources of state income will be a top priority for the government, which is hoping raise as much as EGP 8-10 bn from the first wave of the state privatization program. Also serving that end will be the EGP 200 bn sovereign wealth fund that Egypt intends to launch later this year.

A wider tax base and more efficient taxation system are also expected to boost inflows into state coffers. Maait — who had previously told us that tax code amendments and policy changes to streamline tax procedures would top its legislative agenda in the fall — said that previous legislative amendments to the income and real estate tax codes, as well as legislation earmarking 5-15% of ministerial slush funds to state coffers, would help drive up revenues for the current fiscal year. Slush funds alone are expected to contribute some EGP 4 bn to state coffers in FY2018-19, he added.

Regulating public spending will also be at the head of the agenda, with a plan already in motion to restructure public sector salaries to clear existing imbalances and redundancies. The transition to a paperless economy through the Government Accounting Act and other policies that ban the use of paper and make electronic payments mandatory is also expected to help the government cut back on costs.

LEGISLATION WATCH- Parliament just won’t let the idea of a wealth tax die: It is looking increasingly likely that the House of Representatives will push legislation that will see some form wealth tax imposed. A new amended to the Income Tax Act is currently being drafted that would see those making over EGP 1 mn per annum pay an income tax of 30%, up from a current 22.5%, House Legislative Committee member Rep. Mostafa Bakri tells Youm7. His justification for the law is one we’ve heard time and time again, which is that a wealth tax would shift the tax burden to the rich from the poor. His statements imply that this current draft runs with a proposal presented by Rep. Mervat Alexan last month, which see salaries of more than EGP 500k per year taxed at a 25% rate. Bakri added that the legislation would be introduced in the fall session of the House and that businessmen and business associations will be consulted on the amendments when it goes through “a national dialogue.”

You can partially blame those blue-blooded reds for the proposal’s popularity: Bakri noted that the encouragement from in House to push through the legislation comes from “the support such a measure has in the business community.” He specifically referenced an oped by the head of the Union of Investors Associations Mohamed Farid Khamis in support of Alexan’s proposed wealth tax. Bakri insisted that the move would also not impact investments.

We said it once, we’ll say it again — stop talking about net salary: These representatives are looking at the wrong factors here to justify such a move (either intentionally or unintentionally). Just about every single employee in Egypt is quoted a net salary, meaning a salary after businesses remit wage taxes, social insurance, et cetera. No salaried employee in Egypt remits a tax return of his or her own unless they have outside income, so the working poor would never feel the impact of such a tax.

EXCLUSIVE- Sarwa Capital to list up to 40% of shares in September: Our friends at Sarwa Capital say that they will list 30-40% of their shares on the EGX in September, a source close to the transaction told Enterprise last week. 80% of the shares that will list will be offered to international institutions. The initial public offering will see our friends the Egyptian American Enterprise Fund (EAEF), who hold a majority stake in Sarwa, sell off a portion of their stake. The sale is expected to bring in around EGP 2 bn, which will be used to expand the company’s reach in the non-banking financial sector, as the firm looks to launch insurance and factoring operations. The company has officially applied for approval to list its shares with the Financial Regulatory Authority (FRA) and expects to receive final approval in around a month, the source added.

Advisers: Beltone Financial is running the transaction.

CORRECTION: The version of this story appearing in our e-mail edition incorrectly identified the investment bankers on the transaction. It is Beltone.

CIHC hopes to raise over EGP 3 bn from sale of stake in Eastern Company, Abu Qir Fertilizers: The Chemical Industries Holding Company (CIHC) is hoping to raise more than EGP 3 bn from the sale of stakes in Eastern Company and Abu Qir Fertilizers on the EGX later this year, CIHC Chairman Emad El Din Mostafa told Al Mal. CIHC intends to sell 1.5% of its 6.5% stake in the fertilizers producer — which is set to see as much as 30% of its shares offered on the bourse in December as part of the state’s privatization program — and 4.5% of its stake in Eastern Company.

State-owned investment bank NI Capital is set to launch a limited tender to investment bank to select a bookrunner and manager for the transaction soon, as well as a legal advisor, according to Mostafa. Heliopolis for Housing and Development, the Alexandria Mineral Oils Company (AMOC), and the Alexandria Container and Cargo Handling (ACCH) are also preparing to sell more shares on the before year’s end. A second wave of companies is expected to follow in 1Q2019.

On a related note, AMOC says it plans to double its investments this year to EGP 3 bn, from EGP 1.5 bn, as the company continues to expand and implement upgrades, Chairman Amr Moustafa said on Thursday, Al Mal also reports. This includes the company’s USD 500 mn oil refinery project, whose details will be made public by the end of August as soon as Dutch company Fluor completes feasibility studies and arrives at a final investment cost and financing options, Moustafa said. AMOC had denied reports back in March claiming it had reached an agreement with international financing institutions to fund its USD 500 mn project.

REGULATION WATCH- Listed companies can now split their stocks more than once a year under new simplified procedures: The EGX’s board of directors approved a decision last week that allows listed companies to split their stocks as many times a year as they want, as opposed to only once previously, the bourse said in a Thursday statement (pdf). Companies will not be required to apply for regulatory approval as long as their share turnover rate is below the market average. If the turnover rate is higher, however, the bourse and Financial Regulatory Authority (FRA) would have to sign off on the transaction beforehand.

The decision was made with the state’s privatization program in mind as it is expected to facilitate necessary restructuring at various state-owned companies set to offer stakes on the EGX soon, according to EGX boss Mohamed Farid. Removing restrictions on share splits will boost overall stock market activity by reducing share prices and making the market more accessible to all possible types of investors, Farid said, adding that it will also make it easier for companies to raise capital when they need to.

REGULATION WATCH- FRA creates registry for financial advisory firms: The Financial Regulatory Authority (FRA) issued a decision Thursday ordering the establishment of a registry for research houses that conduct financial valuations and fair value studies, FRA Chairman Mohamed Omran said in a Thursday press release picked up by Al Mal. Under the new regulations, companies will be required to renew their registration every three years. If they are found to be in violation of any laws, companies will be removed from the registry and risk losing their operating licenses, according to Omran.

Registration is mandatory for financial advisors, which have six months to comply with the new regulations. The move means to boost market transparency and is the latest in a series of regulatory amendments that seek to align policies with newly-issued legislation such as the Capital Markets and Companies Acts.

INVESTMENT WATCH- Jade Apparel to build USD 50 mn factory in Ismailia Freezone: The US-based Jade Apparel is planning to build a USD 50 mn clothing factory in the Ismailia Freezone, unnamed sources tell Al Mal. The factory is slated to start producing ready-made garments and textiles by the start of 2019, with 100% of output geared towards exports. The factory will be the company’s third in Egypt, with two facilities already in 10 Ramadan City and Borg El Arab.

ING Groep suspends credit for Egypt wheat shipments in latest wheat drama: Egypt is at risk of attracting fewer numbers of offers in its wheat tenders after Dutch lender ING Groep reportedly decided to “suspend lending for wheat shipments sold to [Egypt’s] state-run buyer,” sources familiar with the matter told Bloomberg. The decision was the result of the General Authority for Supply Commodities’ (GASC) “slowed processing” of wheat transactions in recent years, which has seen ING “hit by payment disputes involving cargoes sold by AOS Trading DMCC to GASC,” according to the sources.

Egypt, however, objected to the news, saying that payments were late due to delays in delivery. “Egypt issues payments for the cargoes once suppliers have fulfilled the terms of the contract,” Supply Ministry adviser Nomani Nomani told the news service, “adding that suspending lending tarnishes the country’s image.”

Background: GASC had removed Dubai-based trader AOS from its list of approved suppliers earlier this month after repeated delays in the delivery of a shipment in June. The state-buyer had also cancelled two orders of Russian wheat from AOS. Egypt had made its most expensive wheat purchase since 2015 last week, paying an average USD 235.65 per tonne, after a drought hit Europe and the Black Sea region.

Egypt accounted for nearly half of the International Finance Corporation’s (IFC) MENA investments in FY2017-18, Chief Investment Officer for the MENA region Deepak Khanna tells Gulf News. Of the USD 2.4 bn the IFC invested across the region throughout the fiscal year, the organization channeled USD 1.3 bn to Egyptian companies in the solar, agri-business, micro-financing, and oil and gas sectors. “We believe Egypt is coming back and the environment continues to improve, we are seeing more private activity there and plan to invest more in the future,” Khanna said. The IFC has committed to extending as much as USD 2 bn in funding to Egypt’s private sector until 2019 under the country’s cooperation framework with the World Bank Group. According to Khanna, the organization will focus on closing infrastructure gaps in the power and transport sectors in Egypt and other countries in the Middle East.

Meanwhile, the Japan International Cooperation Agency’s (JICA) provided a USD 350 mn funding package for the EGP 12 bn 580 MW Gabal El Zeit wind farm , which President Abdel Fattah El Sisi inaugurated last week. JICA support 17 power projects in Egypt with some USD 2.1 bn in funding, the organization said in a release.

The USD 1.6 bn Egypt-Saudi power interconnection project has reportedly been pushed to 2022 from 2020, Electricity Ministry sources said on Thursday, Al Mal reports. The plans for the power lines that are meant to run through Saudi Arabia will have to be redrawn with the kingdom planning to establish its USD 500 bn Neom City project. Talks are ongoing with the companies that had bid for the project, including Siemens, ABB, Alstom, and China’s State Grid Corporation, to agree on the best course of action, the sources added. The winning bid was set to be announced in June and the contracts for the interconnection project, which should see Egypt and Saudi exchange up to 3 GW of electricity, were expected to be signed some time this summer.

LEGISLATION WATCH- President Abdel Fattah El Sisi signed into law on Thursday amendments to the income tax code that would set a 2.5% tax on the quick sale value of real estate assets — whether in the form of a building or unoccupied land, AMAY reports. Under the new stipulations, property owners would not have access to basic services such as power and water until they are able to present proof that they have paid the necessary taxes.

El Sisi also ratified on Thursday a law that shields senior military officials from prosecution, Youm7 reports. Under the new law, any legal action against senior military officers requires permission from the Supreme Council of the Armed Forces. Officers will also be granted the same status as diplomats under the newly ratified law. The move is receiving coverage in the foreign press, with pickups of the AP stating that the law would protect officers from prosecution from the violence witnessed in 2013.

He also signed into law legislation to reduce the pensions of ministers, governors, and their deputies, according to Youm7. Under the law, pensions for these positions will be reduced to 25% of their pre-retirement wages, down from an original 80%.

Other legislation ratified by El Sisi last week include amendments to the Police Act, which forms the a disciplinary council for the police, according to Akhbar Al Youm. He also ratified a USD 300 mn grant from China to support the launch of a new Egypt satellite.

Youth Conference focuses on education reform and the end of rote memorization: The latest iteration of the Youth Conference, which took place at Cairo University, saw a detailed discussion and presentation led by Education Minister Tarek Shawki on Egypt’s reforms to the K-12 education system. The key highlight of the presentation: Students’ grades and GPAs will also no longer be entirely reliant on end-of-year exams, and will instead be calculated based on the best five scores from 10 open-book exams administered throughout the school year.

New exam system wants to lay Shou Ming to rest forever: In hopes of ending Egypt’s issues with cheating, the ministry will be administering tests remotely by sending them directly to students’ tablets, where the students will also be required to solve them. The strategy essentially cuts out all the middlemen that have the chance to leak an exam. This shift will also significantly reduce the cost of administering Thanaweya Amma exams, which cost state coffers around EGP 1.3 bn per year, a significant chunk of which is earmarked for printing the exams and proctors’ bonuses, according to Shawki. You can catch Shawki’s presentation of the system here (watch, runtime: 15:29).

Taking care of teachers: Raising teachers’ salaries by EGP 1,000 would require the state to spend an additional EGP 15 bn, President Abdel Fattah El Sisi said at the conference. The president said that he is acutely aware of the need to raise wages across the country, but stressed that teachers are top priorities (watch, runtime: 19:22).

GERD’s project manager found shot dead in his car: The project manager of the Grand Ethiopian Renaissance Dam (GERD), Simegnew Bekele, was found shot dead in his car in Addis Ababa on Thursday, Reuters reports. While there has been no official line, the case is widely suspected to be a homicide and the word “assassination” has even been used by witnesses at the scene, who said that police recovered a pistol from the car. It is hard to ascertain as of yet how this would impact GERD talks between Egypt, Sudan and Ethiopia, which saw a breakthrough last month, when President Abdel Fattah El Sisi and Ethiopian Prime Minister Abiy Ahmed vowed to iron out their differences peacefully, after months of souring ties.

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Up Next

Foreign Minister Sameh Shoukry is expected to land in Washington during the first week of August to meet with US Secretary of State Mike Pompeo over developments in the Middle East and US-Egypt relations.

Egypt is set to select the board of directors for its EGP 200 bn sovereign wealth fund “within days” by Prime Minister Mostafa Madbouly, according to Finance Minister Mohamed Maait.

Our friends at the American Chambers of Commerce (AmCham) are preparing to host Finance Minister Mohamed Maait for its monthly luncheon on Monday, 30 July.

President Abdel Fattah El Sisi is reportedly visiting Beijing in September to attend the Forum on China-Africa Cooperation.

Mo Salah fans have until 10 August to make him one of FIFA’s top three men’s footballers for 2018. Cast your ballots here.

Image of the Day

Egypt was a prime location for viewing Friday night’s Blood Moon and eclipse, according to AccuWeather. The total lunar eclipse was the longest in a century, lasting for almost two full hours. The next celestial event of the same proportions takes place in June 2123. If you missed this one, we advise you to check out this really great slideshow of the Blood Moon from different parts of the world

, courtesy of Reuters.

Egypt in the News

Negative coverage on Egypt’s human rights leads the conversation in the foreign press: Topping coverage of Egypt in the foreign press this morning is a court’s decision yesterday to sentence 75 Ikhwan members to death over their involvement in the 2013 Rabaa sit-in. The defendants include Essam El Erian, Mohamed Beltagy, and Safwat Hegazy, according to Reuters. The decision is not final and can still be appealed. The court has referred the ruling to the Grand Mufti to give his opinion on the case — which is legally required, albeit non-binding, BBC notes. Haaretz and Xinhua also have the story.

Meanwhile, a debate is being waged in the foreign press over the US decision last week to unfreeze USD 195 mn in military aid to Egypt it suspended last year. Leading the charge against the decision was the New York Times. With the move, the State Department has practically given Egypt a thumbs up on human rights while its jail population has continued to swell, writes Declan Walsh. “The aid decision reflects the new tenor of American foreign policy under Mr. Pompeo and the national security adviser, John R. Bolton, who have shown a willingness to trade American leadership on human rights for an embrace of friendly autocrats,” he writes. David Kirkpatrick echoes similar sentiments on the state of human rights in Egypt, while extending the accusation of the US government’s disinterest in human rights in Egypt to the Obama administration.

The US should leverage Egypt’s dependence on military aid to press it on the human rights issue, says Bran Dooley on the Hill. Dooley says that withholding the aid had proven effective, citing a retrial ordered by Egyptian authorities on the foreign funding case, which saw 43 employees of foreign NGOs sentenced to up to five years in jail.

Foreign Ministry’s Abu Zaid with the counter argument: Asharq Al Awsat is running statements by Foreign Ministry spokesperson Ahmed Abu Zaid where he saus the decision reflects the “importance and specificity” of Egypt-US relations. The move comes “in light of Washington’s recognition of the importance of the Egyptian role in promoting [the] stability of the Middle East,” Abu Zeid said.

More negative coverage: This comes as Human Rights Watch denounced the release of the aid, saying in a statement on Thursday that it “[sends] the wrong message” to Egypt on its human rights record. Meanwhile, UN human rights experts are calling on Egyptian authorities to release songwriter Galal El Behairy, who faces imprisonment for criticizing government policies in his songs, according to UN News. Finally, the Guardian’s Ruth Michaelson attacked the Press and Media Act, saying that it would stifle dissent by criminalizing fake news.

On Deadline

The National Youth Conference should exclusively be held in underserved governorates to remind the government of how much work needs to be done outside of central cities, Soliman Gouda writes for Al Masry Al Youm. Thus far, the youth conference has only been hosted by cities that are already faring relatively well, which only serves to confirm the idea that other areas of the country will always be marginalized, Gouda says.

Energy

Egypt’s Zohr production capacity at 1.6 bcf/d, to reach 2 bcf/d by September

The supergiant Zohr gas field is now pumping out 1.6 bcf/d and is expected to reach 2 bcf/d by September, Eni said in a release (pdf). The company also said it raised EUR 50 mn “as an advance on future gas supplies to Egyptian state-owned partners to finance Zohr.” This came as the Italian oil producer reported EUR 1.25 bn in net profits for 2Q2018, up from EUR 18 mn in the same period last year, thanks mainly to higher global crude prices.

Edison to begin drilling exploratory wells in Mediterranean concessions in 2H2019

Italy’s Edison will begin drilling exploratory wells at its North East Hapi and Theqa concessions in 2H2019, Oil Minister Tarek El Molla said. The company’s studies of the concessions show geological structures that indicate there is a “good chance” the areas hold natural gas reserves. Edison had signed an USD 86 mn agreement with EGAS in January 2017 for E&P operations.

Oil Ministry planning new petrochem, refinery projects in New Alamein City

The Oil Ministry is studying establishing several new petrochemicals and refinery projects in New Alamein City over the coming few years, according to a statement. The statement does not provide any further details on the planned projects or the expected investments, but notes that there is potential for them to be executed under a public-private partnership framework.

Basic Materials + Commodities

Rice imports are bad for local growers, not an effective tool for market regulation, farmers say

Egypt’s decision to start importing rice is bad for local growers and is not the right tool to use to regulate market prices, farmers tell UKRAgroConsult. “Those greedy traders will monopolize the imported rice as they are doing with the local one,” one farmer said, suggesting that stronger oversight of the market is the way to go. President Abdel Fattah El Sisi had approved earlier this month a government decision allowing rice imports in a bid to reduce prices, which rose after new legislative amendments restricted the cultivation of water-intensive crops. The Supply Ministry had said it would set a cap on the amount of rice Egypt will import. On a related note, some House Reps. tell Al Mal that repeated requests to the Agriculture Ministry to approve the cultivation of a type of rice grain that requires less water to grow have gone unanswered.

Manufacturing

Sumitomo Electric Wiring Systems breaks ground on 6 October City factory

Sumitomo Electric Wiring Systems Egypt broke grounds on a new factory in 6 October City on Wednesday, according to Al Masry Al Youm. The factory’s investment value was not disclosed, but construction work is expected to be complete in March, with operations set to start in April, company executives told Prime Minister Mostafa Madbouly during a meeting in Cairo. They added that the company is interested in growing its local investments further. The company previously announced plans to invest EGP 100 mn in expanding its automotive wiring harness factory in Port Said.

Health + Education

Housing Ministry allocates two land plots for Batterjee medical services to build medical cities

The New Urban Communities Authority (NUCA) approved the allocation of two land plots in 6 October City and Luxor to Saudi’s Batterjee Medical Services to establish new medical cities, Al Mal reports. Prime Minister Mostafa Madbouly met with company head and CEO of the Saudi German Hospitals, Sobhi Batterjee, in Cairo on Thursday to discuss upcoming investment plans in Egypt. No details on the value of the land or timeline of the project were revealed.

Tourism

Canada expands air transport agreements with Egypt, as tourism demand increases

Canada has expanded its air transport agreement with Egypt to allow airlines to operate up to seven passenger flights per week, from four, Canadian Minister of Transport Marc Garneau said in a press release. Under the agreement, designated airlines from both countries will be allowed to operate in any city in the other country’s territory. On a related note, Luxury travel company Abercrombie & Kent has reportedly added 19 departures of its ‘Egypt and the Nile’ itinerary citing "dramatic growth in demand,” according to Travel Weekly, adding that Egypt is one of the company’s top-selling destinations for 2018. Meanwhile, Aswan governorate has received on Friday Spanish tourists arriving from the first direct flight from Madrid in nine years, according to Egyptian Streets.The flights between Madrid and Aswan will be weekly until 28 November.

Automotive + Transportation

Military Production Ministry, Bombardier agree to cooperate in manufacturing railway locomotives

The Military Production Ministry has reached an agreement with Canada’s Bombardier to cooperate in manufacturing locomotives for Egypt’s railway projects, Al Mal reports. The agreement will see Bombardier providing its know-how for the manufacturing of the locomotives at the ministry’s factories. No details were provided on the timeline or expected investment value of the project.

Banking + Finance

EIB, NBE sign EUR 375 mn financing agreement to support Egypt’s SMEs

The European Investment Bank (EIB) and National Bank of Egypt (NBE) have signed a EUR 375 mn financing agreement to support SMEs in Egypt, Al Mal reports. The agreement comes as part of the EIB’s Economic Resilience Initiative. EIB had also signed a financing agreement under the initiative with Bank of Alexandria last month.

Sports

Egypt sweeps African Youth Games, walking away with 206 medals

Egyptian athletes won a total of 206 medals at the African Youth Games in Algeria, placing Egypt at the top of the championship’s ranking in terms of the number of medals won, Al Ahram reports. The sweep includes 103 gold medals, in addition to 58 silver and 45 bronze medals. Swimmer Lujain Diaa El Din is among the athletes bring home gold medals after she came in first place in the 100-meter and 200-meter butterfly competitions, according to Egypt Today.

On Your Way Out

EG Bank and Cairo Angels have launched the second cycle of the MINT Incubator, following a successful Spring 2018 cycle, according to an emailed statement. “The incubation period entails workshops, boot camp, mentorship, subject matter experts, business development and accelerating growth.” Click here for the details on the incubator and to apply for the upcoming cycle.

Egypt is planning to build a museum of “religious tolerance” at the New Administrative Capital, Antiquities Ministry Khaled Anany said, Egypt Independent reports. The museum will include pieces from the Pharaonic, Islamic and Jewish civilizations to show how Egypt’s “inclusive culture creates a diverse environment for all religions to flourish.”

The Market Yesterday

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EGP / USD CBE market average: Buy 17.85 | Sell 17.95
EGP / USD at CIB:
Buy 17.85 | Sell 17.95
EGP / USD at NBE: Buy 17.78 | Sell 17.88

EGX30 (Thursday): 15,199 (+0.1%)
Turnover: EGP 986 mn (6% above the 90-day average)
EGX 30 year-to-date: +1.2%

THE MARKET ON THURSDAY: The EGX30 ended Thursday’s session up 0.1%. CIB, the index heaviest constituent ended down 0.5%. EGX30’s top performing constituents were Juhayna up 3.1%, SODIC up 2.5%, and Heliopolis Housing up 1.9%. Thursday’s worst performing stocks were Qalaa Holdings down 4.0%, Abu Dhabi Islamic Bank down 3.5%, and Kima down 2.2%. The market turnover was EGP 986 mn, and foreign investors were the sole net sellers.

Foreigners: Net Short | EGP -72.0 mn
Regional: Net Long | EGP +13.2 mn
Domestic: Net Long | EGP +58.8 mn

Retail: 44.9% of total trades | 41.7% of buyers | 48.1% of sellers
Institutions: 55.1% of total trades | 58.3% of buyers | 51.9% of sellers

Foreign: 34.1% of total | 30.7% of buyers | 37.5% of sellers
Regional: 7.8% of total | 8.5% of buyers | 7.2% of sellers
Domestic: 58.1% of total | 60.8% of buyers | 55.3% of sellers

WTI: USD 68.69 (-1.32%)
Brent: USD 74.29 (-0.34%)

Natural Gas (Nymex, futures prices) USD 2.78 MMBtu, (+0.72%, September 2018 contract)
Gold: USD 1,232.70 / troy ounce (-0.21%)

TASI: 8,367.70 (-0.38%) (YTD: +15.79%)
ADX: 4,844.19 (+0.29%) (YTD: +10.13%)
DFM: 2,948.80 (+0.14%) (YTD: -12.50%)
KSE Premier Market: 5,378.62 (+0.44%)
QE: 9,607.89 (-0.06%) (YTD: +12.72%)
MSM: 4,335.91 (-0.89%) (YTD: -14.97%)
BB: 1,367.90 (+0.37%) (YTD: +2.72%)

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Calendar

26-28 July (Thursday-Saturday): Green Banking: The Road to Sustainable Development, Baron Palace, Sahl Hasheesh, Hurghada.

30 July (Monday): Finance Minister Mohamed Maait will address the American Chambers of Commerce on Egypt’s financial reform agenda.

05 August (Sunday): Egypt’s PMI reading for July released.

16 August (Thursday): CBE’s Monetary Policy Committee meeting.

21-25 August (Tuesday-Saturday): Eid Al Adha (TBC), national holiday.

28-29 August (Tuesday-Wednesday): CI Capital’s 5th Annual Egypt Equities Conference, Cape Town, South Africa.

04-05 September (Tuesday-Wednesday): Euromoney Egypt Conference 2018, Cairo.

10-13 September (Monday-Thursday): EFG Hermes’ 8th Annual London Conference, Emirates Arsenal Stadium, London.

11 September (Tuesday): Islamic New Year (TBC), national holiday.

18 September (Tuesday): Cairo Economic Court to issue ruling on EGP 5.6 bn antitrust case against pharma companies including Ibnsina.

20-23 September (Thursday-Sunday): 2018 Automech Formula car expo, Cairo International Convention Center, Nasr City, Cairo.

22 September (Saturday): New academic year begins for public schools, universities.

24-25 September (Monday-Tuesday): Arqaam Capital MENA Investors Conference 2018, Four Seasons Resorts, Dubai.

24-25 September (Monday-Tuesday): Egypt Water Desalination Forum, venue TBD.

26 September (Wednesday): E-Commerce Summit, Nile-Ritz Carlton, Cairo.

27 September (Thursday): CBE’s Monetary Policy Committee meeting.

06 October (Saturday): Armed Forces Day, national holiday.

23-24 October (Tuesday-Wednesday): Intelligent Cities Exhibition & Conference 2018, Fairmont Towers Heliopolis, Cairo.

15 November (Thursday): CBE’s Monetary Policy Committee meeting.

20 November (Tuesday): Prophet’s Birthday (TBC), national holiday.

22 November (Thursday): US Thanksgiving.

25-28 November (Sunday-Wednesday): 22nd Cairo ICT, Cairo Convention Center, Nasr City, Cairo.

03-05 December (Monday-Wednesday): First Egypt Defense Expo, Egyptian International Exhibition Center, Cairo.

25 December (Tuesday): Western Christmas.

27 December (Thursday): CBE’s Monetary Policy Committee meeting.

01 January 2019 (Tuesday): New Year’s Day, national holiday.

07 January 2019 (Monday): Coptic Christmas.

25 January 2019 (Friday): Police Day, national holiday.

25 April 2019 (Thursday): Sinai Liberation day, national holiday.

28 April 2019 (Sunday): Easter Sunday, national holiday.

29 April 2019 (Monday): Easter Monday, national holiday.

01 May 2019 (Wednesday): Labor Day, national holiday.

06 May 2019 (Monday): First day of Ramadan (TBC).

05-06 June 2019 (Wednesday-Thursday): Eid El Fitr (TBC).

10-13 October 2019 (Tuesday-Sunday) Big Industrial Week Arabia 2019, Egypt International Exhibition Center.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

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