Is rural poverty in Upper Egypt now in decline?

News is slow this morning as more than a handful of members of the community are either “bridging” until after Coptic Christmas or simply taking it a bit easy. That makes Apple’s rare warning that it will fall short of its sales forecast the story of the day. And as we suggested yesterday, what news there is dominated by the government.

Apple shocked Wall Street late yesterday with an extremely rare revenue warning, saying revenue in this first quarter of its fiscal year would fall as much as 10% short of guidance. Why? The company blamed weakness in the Chinese economy and a slower-than-expected pace of iPhone upgrades in advanced economies. The news has rattled Asia-Pacific forex markets and the speculation now is whether this means the “iPhone is losing its lustre,” the Financial Times says. The news leads the FT, Wall Street Journal, CNBC, Bloomberg and Reuters this morning.

It’s looking a bit ugly as we wait for the opening bell this morning: Apple shares are down 7% in after-hours trading and Dow futures are off more than 300 points as tech shares take it on the chin, CNBC warns. Expect that Apple’s sales warning will stoke the “slowdown fears” that are “stalking global markets,” with Reuters flat-out saying that the warning is a “bad omen for Wall Street bulls.”

EM shares didn’t exactly start the new year on the best note, with the closely watched MSCI EM index falling around 1.8% yesterday, according to the Financial Times. The slump was driven mostly by weak trading in “a closely watched gauge of Chinese manufacturing,” indicating that the US-China trade war is taking a toll on the latter’s economy. Most EM currencies also weakened against the USD, save for the Brazilian real, which has been bolstered by “optimism over newly sworn in president Jair Bolsonaro’s reform plans.”

Across the pond, the Dow Jones Industrial Average made up just 19 points yesterday of its 400-point loss last month, says the Wall Street Journal. The index is still reeling from significant volatility in the market, which investors expect to persist for a while longer. US President Donald Trump seems unfazed, calling the US stock market’s performance last month — its worst December since the Great Depression — a “little glitch” that will be glossed over once trade agreements with China and other countries are sealed, according to Bloomberg.

The EGX30 rose 1.3% yesterday, supported by a 1.9% jump in the shares of index heavyweight CIB.

Oil fared better on the first day of trading in 2019, with Brent crude closing up 2.1%, Bloomberg reports. The price recovery comes after “skepticism about OPEC’s ability to prevent a surplus this year had helped drive prices to an almost 40 percent decline to end 2018.”

Lower oil prices have been a godsend for Egypt, but they spell disaster for Iraq’s postwar recovery, particularly as the country relies on oil exports for around 95% of its revenues, the Associated Press notes.

So what should you expect of oil prices in 2019? Bloomberg put the question to the CEO of ConoccoPhillips, a portfolio manager at Pimco, strategist at JPMorgan and the head of oil markets at the International Energy Agency.

Also worth knowing this morning:

• Saudi bank mega-merger: The National Commercial Bank and Riyad Bank are reportedly seeking advisors for a tie-up that would create the Gulf’s third-largest lender. (Bloomberg)
• Brexit clarity? UK Prime Minister Theresa May will press European Union leaders this week as she looks for any advantage ahead of a vote in parliament next week on her Brexit agreement. (Financial Times)
• Survey says: Fed’s gonna go slow: “Investors increasingly believe the Federal Reserve won’t raise interest rates in 2019, a sign of fading confidence that the U.S. economic expansion will continue at the stable pace the central bank foresaw just two weeks ago.” (Wall Street Journal)
• Mifid what? The FT looks at how Mifid II has changed the relationship between fund managers and analysts a year on.

President Abdel Fattah El Sisi launched yesterday a new initiative, dubbed “A Decent Life,” to improve living conditions for the country’s most needy. The president called on state bodies and civil society to come together to implement projects under the initiative this year (see tweets here and here and here). The story dominated the airwaves last night, leaving the talking heads with little else to talk about.

The concept behind A Decent Life is to create a healthy environment to live in, a solid education system, and job prospects, among others, Social Solidarity Minister Ghada Wali told Yahduth fi Masr’s Sherif Amer. Wali said she is set to hold her first meeting with civil society organizations today to pool their ideas and resources. The ministry already has a database of the country’s poorest villages, which will be prioritized, she noted (watch, runtime: 06:38). Wali also had a similar chat with Masaa DMC’s Osama Kamal (watch, runtime: 11:56). Kamal lauded the initiative, but said that El Sisi’s involvement seems to always be necessary to get these ideas off the ground (watch, runtime: 07:48).

The initiative is proof that the state is not clamping down on civil society, and instead wants to work side-by-side with NGOs, Cabinet spokesman Nader Saad said on Al Hayah Al Youm (watch, runtime: 01:34). NGOs that have promising project ideas but lack funding will now be able to get backup and financing from the government, allowing them to hit the ground running, Saad said (watch, runtime: 01:35).

The Housing Ministry is already planning on implementing wastewater and sewage projects in some 347 villages across the country, ministry spokesman Hany Younes told Al Hayah Al Youm’s Lobna Assal (watch, runtime: 03:50).

Masaa DMC kept within the development theme with a wrap-up of the development projects the government undertook last year. Host Osama Kamal had a chat with the Slum Development Fund’s executive director, Khaled Seddik, who noted that the fund has completed two housing projects at a combined cost of around EGP 1.2 bn, and has more in the pipeline (watch, runtime: 11:15). Fayoum Governor Essam Saad also updated Kamal on his governorate’s development projects (watch, runtime: 15:06).

Elsewhere last night: The country’s upper class must bear the brunt of the economic reform program, since it is more financially comfortable, political commentator Mostafa El Fekky told Yahduth fi Masr’s Sherif Amer (watch, runtime: 02:03).

Poverty in rural Upper Egypt may have fallen sharply, a potential boon for supporters of the Sisi administration’s economic policies. The poverty rate in rural Upper Egypt could have fallen as much as 10 percentage points (or nearly 18%) to 47% in 2018 from 57% three years ago, according to an unnamed government source speaking with the domestic press about the preliminary results of a state-commissioned income and expenditure survey.

The story leaves plenty unclear, starting with the details of the reported study, the fact that the alleged results are preliminary. Heck, the report doesn’t even make clear whose definition of poverty the survey is using. But if rural poverty in Upper Egypt — long one of the most stubborn indicators of progress in the war on poverty — is declining, the story bears watching.

Egypt’s budget deficit dipped to 3.1% from 3.7% y-o-y during the first five months of FY2018-19, coming in at EGP 162.3 bn, down from EGP 163.6 bn in the same period last year, according to a Finance Ministry report (pdf). Inflows to state coffers during the five-month period came in at EGP 321 bn while expenditures topped EGP 484 bn. Egypt is targeting a budget deficit of 8.4% for the current fiscal year.

Gov’t puts pen to paper on EastMed energy hub strategy: A government committee has drafted a strategy to advance Egypt’s plan to become the premier energy hub in the Eastern Mediterranean region, according to a Cabinet statement. The strategy involves studying and benchmarking similar projects elsewhere, conducting a cost–benefit analysis, and devising short- and long-term action plans. We could also see our ports become the first to set up natural gas marine fuel stations along the eastern Mediterranean. The committee will hand its recommendation to cabinet for review.

This comes as friendlier oil and gas contracts are set to take effect this quarter: We had noted last October that the Oil Ministry is planning to roll out new production sharing contracts with friendlier terms for international oil companies. The new framework, which is set to take effect this quarter, would grant the companies a larger share of the output and allow them to sell their share of production to anyone they like. This would replace the current, more rigid system, which gives producers only one-third of output and sets the government as the only buyer of their share of production at preset prices. Taken with a push — emphasized last week by President Abdel Fattah El Sisi — for more refining capacity as well as for the repayment of arrears to E&P companies, the move could significantly improve an already bright climate for oil and gas players in Egypt.

Israeli energy minister coming to town next month: Also on the energy hub front: Israeli Energy Minister Yuval Steinitz will be in town between 11-13 February for talks with President Abdel Fattah El Sisi and Electricity Ministry Mohamed Shaker, an Israeli government official told i24NEWS. Steinitz’s visit will coincide with the Egypt Petroleum Show and comes after a USD 1.76 bn international arbitration ruling in November paved the way for Egypt to import as much as USD 15 bn worth of natural gas from Egypt over a 10-year period.

Etisalat Misr wins EGP 700 mn arbitral award against Vodafone Egypt, Matouk Bassiouny & Hennawy law firm, which presented the former, said in a press release (pdf). Vodafone, which filed the lawsuit in 2016 due to concerns over interconnection fees with Etisalat Misr, is currently processing the verdict in order to respond appropriately, Youm7 noted.

Passenger car sales were up in October for the ninth consecutive month, rising 55% y-o-y to 14,640 vehicles, according to an Automotive Information Council (AMIC) report (pdf). Bus and car sales also increased 48.6% and 52.1% y-o-y, respectively, during the month. Passenger car sales also registered a 39% y-o-y increase in 11M2018, reaching 123.5k units compared to 88.5k in the same period last year, Al Mal said, citing AMIC data. Chevrolet captured a 21.4% market share during the period, followed by Hyundai (17.6%), Nissan (14.3%), Renault (8.4%), and Toyota (7.1%). The automotive industry has been rebounding since January 2018, following a slump that was exacerbated by the EGP devaluation in 2016.

Egypt Post could be about to get into the microfinance game: The ICT Ministry is planning to introduce microfinance services through Egypt’s postal offices, minister Amr Talaat said, according to Al Mal. No further details were provided on the timing or specifics of the system. The number of microfinance borrowers in Egypt, who will benefit from the mechanism, is in the range of 2.7 mn, Financial Regulatory Authority head Mohamed Omran said earlier this month, according to a separate report by Ahram.

Fawry gets insurance brokerage license: The Financial Regulatory Authority (FRA) has given e-payments chain Fawry final approval for a license to provide insurance brokerage services, Amwal Al Ghad reports, citing unnamed sources. Fawry’s insurance brokerage arm will kick off with EGP 2 mn in capital. There are now a total of 80 companies that provide the service in Egypt.

INVESTMENT WATCH- UAE’s DP World moving ahead with EGP 1.6 bn expansion of Ain Sokhna port: DP World has signed an EGP 1.6 bn agreement to move ahead with part of its project to expand Ain Sokhna port, the domestic press reports, citing unnamed sources. Rowad Modern Engineering has been hired as a contractor for the project, which will bring the port’s total capacity at 1 mn TEU per year. Bringing DP’s total investments in the Ain Sokhna port to more than EGP 8.9 bn, the project is expected to be the largest environmentally friendly container handling facility in Egypt, according to AMAY.

Hyundai Rotem lands USD 134.5 mn contract to supply metro cars: Hyundai Rotem has landed a USD 134.5 mn contract to supply Egypt with 48 air-conditioned cars for line two of the Cairo Metro by 2021, South Korea’s Pulse News reports. The agreement will be funded via a facility fund from the European Bank for Reconstruction and Development (EBRD) amid government efforts to upgrade the country’s metro system, Youm7 reported. The agreement includes Hyundai provides maintenance for the cars through 2031. This is the third time the South Korean company has won a bid to supply Egypt’s National Authority for Tunnels with metro cars. In 2017, it signed a c.EUR 350 mn agreement to supply 32 cars for Cairo Metro’s lines three and four. The Korea Herald also had the story.

Something’s going on out by the Pyramids, but we can’t quite put our finger on it: The latest turn in the saga between Naguib Sawiris’ Orascom Investment Holding (OIH) and Prism International sees Prism ceding its exclusive right to run the Sound and Light show at the Giza Plateau to a joint venture it had earlier created with OIH, sources told Al Mal. The JV is 70% owned by OIH, which the story claims had “asked” Prism to walk away from the project as the Sound and Light Cinema Company (SLCC) prepared to annul the USD 10 mn contract. And the SLCC? It’s still going to pull the plug on the contract, says Mervat Hataba, chairperson of the state-owned General Company for Tourism and Hotels (better known as EGOTH). She says the SLCC is putting the right to commercialize the sound and light show back out for tender. Prism, meanwhile, is reportedly looking to take OIH to arbitration — mirroring a threat OIH had previously made.

CABINET WATCH- Cabinet approves three funding facilities for water projects: Cabinet ratified during yesterday’s Council of Ministers meeting four agreements with preferential funding terms for water, sewage treatment and sanitation projects, according to a statement. The first, a KWD 15 mn facility from the Kuwait Fund for Arab Economic Development (KFAED), will be used to set up four desalination plants in South Sinai. The second, a KWD 25 mn facility also from KFAED, will go towards the construction of a sewage treatment facility in Sharqia. The third and fourth, EUR 79 mn and EUR 69 mn from the European Bank for Reconstruction and Development, will be used for the Kitchener Drain depollution project. The latter project had also received funding from other sources.

Also approved during the meeting:

• Establishing a USD 50 mn textiles freezone in the 10th of Ramadan City;
• An earlier decision to legalize 80 churches and church service buildings;
• Establishing the five-faculty Heliopolis University campus along the Cairo-Belbeis desert road near Salam City.

MOVES- National Tunnel Authority gets new boss: Transport Minister Hisham Arafat has appointed Gen. Ahmed Abdel Moneim Mohamed as the new president of the National Transport Authority, according to a ministry statement.

Three Egyptian startups made Disrupt Africa’s list of “12 African startups to watch in 2019”: Elves, a personal assistant app, raised USD 2 mn in seed funding at the end of 2017, which gave it room for expansion and growth in 2018. Shezlong, an online psychotherapy platform, raised USD 350k in funding last year and presented at the African Early Stage Investor summit. Halan, a tuk-tuk and motorbike ride-hailing app, last year also raised multi-mns during a series A round.

An administrative court will hear on Saturday Beltone Financial’s appeal against a six-month suspension handed to its investment banking arm by the Financial Regulatory Authority. The FRA last month rejected Beltone’s appeal of the decision.

Are we hosting the African Cup of Nations? The football supremos at CAF will reveal this coming Wednesday whether Egypt or South Africa will host this year’s African Cup of Nation.

Egypt, Sudan begin trial runs on electricity grid connection project in three weeks: Egypt and Sudan will begin trial runs for the first phase of a USD 60-70 mn electricity interconnection project in three weeks at a capacity of 100 MW, local news reported. A government source said 95% of the project has been completed. The electricity minister had previously said the two countries would exchange 200-300 MW of power in the first phase, with the second phase expected to be completed in 1Q2020 bringing capacity to 600 MW.

A government committee mandated with defining Egypt’s informal economy is set to meet for the first time this month. Look at the committee’s work in light of the Madbouly government’s bid to convince the World Bank and the IMF to agree to include the informal economy in calculations of Egypt’s GDP.

Bond issuance plans to be made clear this month: Finance Minister Mohamed Maait said last month that the government would unveil its international bond issuance plans for 1Q2019 in January.

Cairo makes WSJ’s New Year’s Eve photo gallery: Reuters photographer Amr Abdallah Dalsh’s shot of a crowd gathered in Cairo on New Year’s Eve this past Monday has made the Wall Street Journal’s image gallery of celebrations from all around the world.

Will the Spanish come running for the Egyptian King? Mohamed Salah’s central role in maintaining Liverpool’s unbeaten league record so far this season has CNN wondering if the Premier League club will be able to keep the star forward around for much longer. The likes of Real Madrid and Barcelona could soon come for Salah, who has proven he is more than a “one-season wonder,” retired Egyptian footballer Ahmed Hossam “Mido” said.

Other news worth noting:

• A 53-year-old American citizen who’s currently on a hunger strike in an Egyptian prison is in very dangerous conditions, his family told the Los Angeles Times, urging the US government to take action.
• The forthcoming amendments to the NGOs Act indicate that the government is either adopting a friendlier approach to civil society or putting on a show,Muhammed Magdy writes for Al-Monitor.

The Sisi administration’s “A Decent Life” initiative is dominating the front pages of the country’s three main state-owned dailies (Al Ahram | Al Akhbar | Al Gomhuria). In keeping with the theme of development, Al Akhbar’s front page also features updates on the Tahya Misr Fund’s spending on irrigation projects. Meanwhile, Al Ahram and Al Gomhuria are both carrying stories on El Sisi instructing Higher Education Minister Khaled Abdel Ghaffar to boost scientific research in the country.

Ever thought about getting rid of your smartphone and regressing to the age of Nokia bricks and Motorola flip phones? Jason Kehe of Wired did, much to his mother’s chagrin. His starting point? The smartphone is “so integrated into our consciousness, can it even be hacked off?” Despite clearer phone calls, and the initial rush of detox, Kehe struggled with the inconveniences of life without a smartphone. “Without a working GPS, I was forced to scribble rights and lefts on napkins and receipts and, when those pieces of paper inevitably disappeared, call up 21st-century Googlers from the road, sometimes multiple times per journey.”

Diving several meters underwater without a breathing aid is “the closest thing to praying or meditating,” says Egyptian freediver Raghda Ezzeldin (watch, runtime 03:37). Freedivers, who undergo training and take serious safety precautions, are judged by the depth of their dives as well as how long they can stay underwater. Red Sea sites like Ras Mohamed and Dahab are freediving Meccas for novices and experts. At their Red Sea workshops, Ezzeldin and her fellow freediver Alia Hassan teach enthusiasts everything from how to get suited up to the crucial skill of relaxing in the water. And while freedivers chase their own depth and time records, the real reward is the sense of peace, Hassan said.

Royal Dutch Shell’s Idku liquefaction plant has increased exports of natural gas to 520 mcf/d, up from 300 mcf/d previously, an Oil Ministry official tells Reuters. The gas is being exported via Malaysia’s Petronas, Royal Dutch Shell and two state companies, the newswire noted. We reported last month that exports had gone up to 500 mcf/d as winter curbed local consumption. Shell and the Oil Ministry had agreed in 2016 to gradually ramp up production at the Idku LNG plant.

Beheira will be ready to launch its agricultural commodities wholesale market in April, head of the Beheira Chamber of Commerce Fathy Morsy said at a presser yesterday, according to Al Masry Al Youm. Work on the market, which was initially expected to be launched last September, is currently around 75% complete, Morsy said. President Abdel Fattah El Sisi had ordered the establishment of the market in 2017 as part of his strategy to spur development in the Western regions of Egypt.

Five companies are bidding to build Egypt Aluminum (EgyptAlum)’s new product line, whose estimated capacity is 250k tonnes per year, according to an EGX disclosure (pdf). The US’ Bechtel, PROJECAS, Home International and Canadian companies HATCH and SNC-Lavalin have all submitted offers for the USD 600 mn project. EgyptAlum did not disclose a date for when the selected bid will be announced.

The New Urban Communities Authority (NUCA) will raise its land prices by 15-20% in 2019, a government source said. The expected hikes will be gradual and based on how the real estate sector performs, the source said, adding that the authority has yet to set the final prices for 2019.

Egypt’s Car Dealers Association (CDA) has called on the Consumer Protection Authority (CPA) to take the necessary action to prevent European auto dealerships from monopolizing the industry, according to Al Mal. The call comes two days after customs duties on fully assembled EU cars fell to 0%. The CDA said it wants traders to be able to import cars directly without having to go through dealerships to prevent monopolies and above-market pricing.

The government is in talks with at least six global automotive manufacturers to set up full-scale operations in Egypt, Public Enterprises Minister Hisham Tawfik told Hona Al Asema’s Lama Gebril on Tuesday (watch, runtime: 5:37). “We are waiting for serious investors, someone who would go above 50k vehicles a year,” Tawfik said. The minister did not name any of the manufacturers, but said that one of them is a “leading brand.” Trade Minister Amr Nassar said last month that the government is planning to introduce policies aimed at attracting foreign investments to the sector, an alternative to the foregone automotive directive — legislation which would have local assemblers incentives to start manufacturing.

Eight new Egyptian companies joined the Qualified Industrial Zone (QIZ) program before the end of 2018, raising the number of participating companies to 1,004 from 996, local news reported. Egypt is trying to increase the number of exporting companies, said head of the Trade Ministry’s QIZ unit Ashraf El Rabie. QIZ exports increased 16% y-o-y to USD 730 mn in 10M2018 from USD 629.3 mn during the same period last year. Participants in the QIZ agreement enjoy access to the US market without tariffs, provided they meet a minimum required amount of Israeli content.

Egyptian, Saudi, Jordanian, Djiboutian, Yemeni and Sudanese naval forces began on Tuesday joint exercises in Saudi’s Red Sea waters, according to an Armed Forces statement. The drills, which focused on naval warfare mobilization, are part of a strategy of cooperation between the participants to exchange expertise, the statement notes. Xinhua also has the story.

Egyptian squash champion Karim Abdel Gawad rose to the fifth spot in the Professional Squash Association’s men’s world ranking, after beating compatriot Ali Farag in the final match of the Black Ball Squash Open in Cairo, according to Inside the Games. Abdel Gawad was ranked ninth prior to the championship. Egypt’s Mohamed El Shorbagy remains at the top of the men’s ranking, while the top three positions in the women’s ranking are held by Egypt’s Raneem El Welily, Nour El Sherbini, and Nour El Tayeb, respectively.

SMEs in Egypt contribute less than 25% of the country’s GDP, despite accounting for 80% of the country’s enterprises, according to BusinessDay Media. The economic contribution of SMEs in Egypt pales in comparison to those in Ghana: SMEs contribute 70% of the country’s GDP and account for 92% of Ghanaian businesses.

The most impressive satellite photos of 2018: Biblical floods, fires and earthquakes, Russian war games, and massive protests — these are just some of the most captivating images the AP caught by satellite cameras in 2018. Pictured above: Lava flowing from Hawaii’s Kilauea volcano.