FinMin to relax tax violation punishment

It’s PMI Day: The Markit / Emirates NBD purchasing managers’ index for February is due out at 6:15am CLT. You can download the summary report here when it arrives. The indicator, which measures non-oil business activity in Egypt, hit its lowest level in over a year in the January survey.

EBRD to present report today on new labor market trends: European Bank for Reconstruction and Development Managing Director for the Southern and Eastern Mediterranean Janet Heckman will chair a panel discussion today to present the findings of a report on the impact of modern trends on the labor markets of Egypt and developing nations, according to a press release (pdf).

An African Development Bank delegation will arrive in Cairo today for four-day talks with the Egyptian government, according to the domestic press.

Foreign Minister Sameh Shoukry is due to host a tripartite meeting today with his Algerian and Tunisian counterparts to discuss the situation in Libya, Ahram Gate reports. The three countries, which have met several times to discuss Libya, had put forward in early 2017 a political solution to the conflict. Libya’s rival leaders have recently agreed to call national elections.

82-year-old Algerian President Abdelaziz Bouteflika has officially submitted his candidacy papers for a fifth and final term in office, prompting “thousands” of Algerians to protest across the country, Heba Saleh writes for the Financial Times. “In an effort to calm public anger, Mr Bouteflika promised in a written message to call a national conference immediately after his election to discuss and set a date for another poll in which he would not be a candidate.” The octogenarian, who suffered a stroke in 2013, is paralyzed and rarely makes public appearances, leading many Algerians to denounce his candidacy as a “farce.”

Israel is easing the rules of its latest oil and gas exploration bid round in hopes of luring in companies, Israeli Energy Minister Yuval Steinitz told Bloomberg. The Israeli government is offering more flexible drilling timetables and more geological information to encourage companies to compete for the five offshore concessions that are up for grabs. Israel’s 2017 exploration tender for the Leviathan gas field has largely been a failure, in large part due to more attractive terms from Israel’s EastMed gas rivals, such as Cyprus. Our eastern neighbor hopes it can raise its output to meet growing demand for EastMed gas in Europe and to keep up with regional major discoveries in Egypt and Cyprus.

Tesla is getting ready to unveil its new Model Y,10% bigger and more expensive than Model 3, on 14 March, CEO Elon Musk said on Sunday, according to Reuters.

The UK’s Warwick Business School’s online MBA sits at the top of the FT’s 2019 online education rankings. The list’s main criteria were alumni’s key progress, diversity of the cohort, and the quality of online delivery.

Egypt’s leading business awards ceremony bt100 honored several cabinet members yesterday for their roles in improving and developing their respective sectors, including the economic and investment climate, reports Egypt Today.

It was another mixed bag of nuts on the airwaves last night.

President Abdel Fattah El Sisi met with officials yesterday to discuss efforts to attract investment in the Damietta Furniture City’s manufacturing complex, which the country hopes will become an exporting hub, Masaa DMC’s Eman El Hosary highlighted (watch, runtime: 03:05) and (watch, runtime: 08:15). El Sisi also held another round of talks with relevant officials to discuss social net programs (watch, runtime: 01:33).

The CBE has apparently warned against the use of currency notes that have text written on them, saying transactions using the notes will not be accepted (watch, runtime: 01:16). Hona Al Asema also had the story (watch, runtime: 05:26). There was no official CBE release about this alleged warning as of dispatch time.

Foreign reserves also got some attention on Al Hayah Al Youm (watch, runtime: 06:06). We have the latest on this in Speed Round, below.

Developing railway infrastructure was also a point of discussion on Hona Al Asema last night (watch, runtime: 21:12).

The talking heads were also still going on about the “let it rust” campaign to boycott car purchases following the 0% customs decision on European cars. El Hekaya’s Amr Adib interviewed both sides (watch, runtime: 01:45), (watch, runtime: 3:00) and (watch, runtime: 3:33).

Enppi IPO to go to market by Ramadan? The initial public offering of petroleum industry contractor Enppi might take place in 1H2019, or as early as before Ramadan begins in May, Oil Minister Tarek El Molla tells Al Shorouk. Public Enterprises Minister Hisham Tawfik told us earlier this week that IPOs of companies that aren’t listed on the EGX, including Enppi, will begin in September. The government plans to sell 25-30% of the company’s shares and will also offer GDRs in London, sources close to the matter had said last month.

Separately, El Molla said Egypt’s natural gas output is expected to reach 7.5 bcf/d by the end of 2019 from 6.8 bcf/d currently, and natural gas exports to reach 2 bcf/d from 1.1 bcf/d currently. Egypt will also achieve self-sufficiency in diesel and gasoline in FY2021-22 and should begin exports in 2022 and 2023 as more refining capacities become operational. Fuel consumption fell by 3% in the past period after subsidy cuts, El Molla said.

IPO WATCH- Eastern Tobacco’s public offering 42.3% covered on second day of subscription: The public offering portion of Eastern Tobacco’s share sale was 42.3% covered by the end of the second day of subscription, according to local media reports. The public offering ends today. The private placement, which constituted 95% of the share sale, was 1.8x oversubscribed at EGP 17/share over the weekend. EFG Hermes has advised on the transaction.

Gov’t defends its decision to be secretive over share sale: The Public Enterprises Ministry released a statement (pdf) yesterday defending last week’s private offering against what it described as “Facebook comments from non-specialized” users regarding the details of the share sale. The ministry defended its decision to abstain from announcing the offering prior to taking it to market as a deliberate measure to avoid fluctuations in the share price.

IPO WATCH- Speed Medical has obtained regulatory approval to debut its shares on the EGX, Chairman Mahmoud Lasheen said, according to Al Mal. The IPO, for which Lasheen provided no specific timeline, would come as the company is looking to expand its hospital on Ismailia Desert Road and widen its ownership base. Speed Medical owns and operates Speed Lab and Speed Clinic. Ostoul Financial Consultancies will manage the expected IPO, according to Lasheen.

Egypt’s net foreign reserves stood at USD 44.060 bn at the end of February, up from USD 42.616 bn the previous month, the CBE announced.

EXCLUSIVE- FinMin to ease tax violation penalties under draft tax procedures law: The Finance Ministry has agreed to amend the draft law on new unified tax procedures amid concerns from taxpayers over harsh violation penalties, a government source tells Enterprise. The ministry will likely scrap several clauses, and replace them with a single stipulation that would make fines the default method of penalizing non-compliant taxpayers. The stipulation would hand prison sentences of 2-5 years only in incidents of deliberate tax avoidance. The initial draft, which is up on the ministry’s website until Thursday to invite public discourse, had loosely phrased articles stipulating 3-5 years of prison time and fines of up to EGP 50k. There were also other reservations from the community about the Tax Authority’s (TA) increased power to investigate tax filings, which some see as an infringement on company privacy.

LEGISLATION WATCH- Cyber Crimes Act regs out this month: The executive regulations for the controversial Cyber Crimes Act — a recently enacted legislation giving authorities a tighter grip on internet platforms — are expected this month, House ICT Committee Secretary General Ahmed Zidan said, according to Al Shorouk. The law mandates that internet service providers hold user data and records of web activity for a period 180 days, introduced a clause to ban websites posing threats to national or economic security and subjected anyone found guilty of a cybercrime to state prosecution. House Solidarity Committee member Mohamed Abo Hamed said prosecutors are pushing for the regs to be finalized and issued after the Ramses train disaster brought about “a flurry of lies and rumors on social media.”

M&A WATCH- Our friends at EFG Hermes are advising on an unspecified USD 500 mn M&A transaction in Saudi Arabia, and are expecting more business to come their way from the kingdom this year, head of investment banking Mohammed Fahmi tells Reuters. The leading investment bank is also advising on a separate IPO in Saudi, but Fahmi gave the newswire no details.

The government is working to devise a plan to attract new US investments from big players, according to a Cabinet statement. The plan will focus on offering new incentives and forging partnerships with US-based health, military production, housing, and utilities companies, as well as with investors in the Suez Canal Economic Zone (SCZone). Automotive, electronics, ICT, and pharma manufacturing will be the focus of the SCZone’s strategy to attract the US companies, Suez Canal Authority boss Mohab Mamish said. The Military Production Ministry is also currently in talks with a potential US-based automotive partner, as well as several others, Minister Mohamed El Assar said.

BEEF WATCH- Case against Emaar still under court review but negotiations are positive: An arbitration case againstEmaar Misrfiled by El Nasr Housingis still being reviewed by the Cairo Regional Centre for International Commercial Arbitration, the UAE-based company said in a statement (pdf). Negotiations between the two companies over their two-year-old dispute are positive and signal a potential resolution, Emaar said. Public Enterprises Minister Hisham Tawfik was quoted by the domestic press earlier this week as saying that the two companies will sign next week the final contracts to resolve their dispute over a land plot and delays in Emaar’s Uptown Cairo project. The two companies had reached an agreement whereby the former would pay EGP 100 mn to settle. The agreement also involves Emaar completing the project, and either returning 5% of the project land or buying it at market value.

Background: State-owned El Nasr brought the arbitration case against Emaar in June 2017 alleging that the UAE-based company failed to develop 3 mn sqm of land allotted to it in 2005. El Nasr also claimed there are 215k sqm unlawfully within Uptown’s borders. Emaar’s offer of EGP 100 mn in settlement was then met with acceptance since El Nasr’s arbitration case was said to be “baseless.”

The European Bank for Reconstruction and Development launched yesterday a program to support women in Egypt’s renewable energy sector, according to a statement. “The programme aims to identify and address the key barriers hindering the development of the region’s renewable energy economy,” which the EBRD identifies as a “high-value, high-growth sector,” and will see the EBRD working hand-in-hand with the government to overcome the issues keeping women out of the industry. By scaling up Egypt’s renewable energy sector, and mainstreaming gender balancing initiatives from the get-go, the EBRD program hopes to boost female participation in the workforce and, in particular, facilitate a greater number of women-led SMEs in the sector. The program is part of a USD 7 mn partnership with the Green Climate Fund that aims to bring Egypt’s renewable energy generation up to 20% by 2022 and 42% by 2035. As we mentioned yesterday, women make up a shockingly small 23% of Egypt’s labor force, a share that has not grown in past decades.

Suez Canal revenues rose to USD 468.7 mn in January 2019, up from USD 451.9 mn in January of last year, reports Reuters.

EARNINGS WATCH- Egyptian cheese maker Obour Land recorded a net profit of EGP 236.2 mn in FY2018, down 2.4% y-o-y from EGP 243.2 mn during the previous year, according to its earnings release (pdf). Revenues for the year increased to EGP 2.4 bn, up 20% y-o-y from EGP 2.0 bn in FY2017.

MOVES- SODIC has appointed Nabil Amasha (LinkedIn) as Commercial and Operations Manager, Al Mal reported. Amasha previously served as manager of the same department for Emaar Misr.

Tourism forum ITB Berlin is kicking off on Wednesday, according to the convention’s website. Tourism Minister Rania Al Mashat is taking part in the sessions of the first day.

Egypt and a UAE company will sign an operation and management agreement in the field of tire manufacturing “within days,” Public Enterprise Minister Hisham Tawfik said, according to Al Mal. The minister did not disclose the name of the UAE company, but said the move comes amid efforts to attract foreign investment, and boost manufacturing and trade.

AmCham is putting on a one-day entrepreneurship event on 11 March, in collaboration with the AUC School of Business, Mindsalike Network, the Entrepreneurs’ Organization and Endeavor Egypt. “The Egyptian Dream” will feature keynote speeches and workshops led by leading entrepreneurs to inform and educate aspiring business owners on the challenges and rewards of entrepreneurship.

A consortium of Russian companies is expected to visit Egypt this month to explore investment and operational logistics in the Russian Industrial Zone area of the Suez Canal Economic Zone, reports the local press.

The gov’t will begin rolling out its debt control strategy this month. The four-year strategy aims to bring down Egypt’s public debt to 80-85% of GDP by the end of FY2021-22.

An Egyptian ministerial delegation will visit France this month to discuss boosting bilateral trade, local press reported.

The Egypt-Sudan electricity grid connection project is on track, and is set to begin its first-phase trials next month, according to The North Africa Post.

A delegation of 50 Japanese companies is expected in Egypt early next month to sign several investment agreements and explore areas of cooperation for the development of technical industries, reports Egypt Today.

Smaller countries tend to outperform booming economies in wellness, lifestyle health index: A new report from investment firm LetterOne has found that high-GDP countries tend to fall behind in terms of lifestyle and wellness, with many small countries with emerging economies such as Oman, Bahrain, Thailand, Honduras, and Laos making it to the top 25 spots in the Global Wellness Index. The ranking — which relies on metrics such as life expectancy, blood glucose levels, happiness, and exercise — indicates that countries with a strong economy and high levels of government spending on healthcare services do not necessarily boast healthy lifestyles, “with rich countries experiencing high rates of depression and obesity.”

The (surprising) winners and losers: Although Canada sits at the top of the ranking, and Nordic countries such as Norway and Sweden also score near the top, many developed countries do not fare as well. The US and Japan, for instance, “score surprisingly low, and sit outside the top 25, held back by poor scores on obesity and blood pressure. The UK, with the fifth highest GDP ranking globally, comes in at 16th place, while the Maldives comes in at fourth place despite having a lower GDP ranking of 169th place.” Egypt doesn’t fare very well due to high rates of obesity and blood pressure and its poor score on life expectancy, but beats out South Africa, whose economy the report notes was growing at impressive rates at the turn of the millennium.

This ranking is not the first to find this surprising inverse correlation between wealth and wellness, but lends further credence to the shift in the conventional wisdom on the relationship between the two indicators. The International Commission on the Measurement of Economic Performance and Social Progress found in a study published 10 years ago that GDP is a deeply flawed metric of social progress, and the OECD Better Life Index published last year discourages reliance on GDP as the sole indicator of social welfare.

This is China’s Ocean Flower Island, one of a slew of commercial reclaimed islands designed to draw an über wealthy crowd à la Dubai’s Palm Jumeirah, Bloomberg reports. Commercial land reclamation in China has been an immense project: From 2013 to 2016, nearly 420 square km was reclaimed, not counting the disputed islands in the South China Sea. The practice was banned last year over environmental concerns though, and the industry has since slowed. While commercial developments have halted, public works and national defense projects continue.

The release of award-winning photojournalist Mahmoud Abu Zeid (Shawkan) after being detained for five years is topping coverage of Egypt today. Abu Zeid was arrested back in August 2013 while covering clashes between security forces and supporters of former President Mohamed Morsi. He was retrospectively sentenced to five years in prison in September 2018 along with 213 others on charges including murder, attempted murder, assault and vandalism. Abu Zeid will now be on probation for five years, a measure that Amnesty International has termed “ludicrous” and “outrageous.” AFP, the Washington Post, and the NYT all picked up the story.

The international press is also taking note of comments made by Hamas chief Ismail Haniyeh, who announced that Egypt will lead a new round of talks between Israel and Hamas, Associated Press reports. Xinhua meanwhile noted his statements on improving relations with Egypt.

El Sisi pushes for efforts to support vulnerable groups: President Abdel Fattah El Sisi’s meeting with officials to discuss social welfare programs to support vulnerable groups topped the front pages of all three state-owned newspapers this morning (Al Ahram | Al Gomhuria | Al Akhbar).

Helicopter Ben and the new American Left: Talking to any veteran South American lefty about helicopters is likely to trigger less-than-fond memories of the dark days of the 1970s. And while many of the Trump-loving Twitterati are only too happy to give out helicopter rides without charge to supporters of Bernie Sanders, center-left Democratic Party politicians may be seeing political benefits from an altogether different use of the helicopter, David McWilliams writes in the FT.

Opening the floodgates: Former Fed Chairman Ben Bernanke earned his moniker ‘Helicopter Ben’ after he masterminded the central bank’s quantitative easing (QE) strategy during the 2008 financial crisis. In a last-ditch attempt to prevent the implosion of the financial sector, the Fed frantically bought up junk securities and treasury bonds; propping up asset prices, lowering interest rates and staving off economic collapse. The helicopters were deployed above Wall Street and the sector became awash with cash.

And now the millennials have bones to pick: While QE succeeded in protecting the assets held by the boomer generation, it has effectively cordoned off property ownership as an unrealistic ambition for many millennials. This is beginning to exact political consequences, with the generational division of wealth becoming a hot topic in the early run-up to the 2020 presidential election. With Pew Research finding the majority of millennials supporting center-left policy positions, Fed monetary policy may well be responsible for a profound shift in US politics. As McWilliams asks ominously: “What if a policy designed to protect the balance sheets of the wealthy has unleashed force that may lead to the mass appropriation of those assets in the years ahead?”

It’s one of the perennial questions of our era: when it comes to companies, how big is too big? In the case of big tech companies, it’s a particularly thorny issue. Although Facebook, Amazon and Google may be “the big oil or railroad corporations of their day,” in order for the US to take antitrust action it would usually have to demonstrate that the consumer has been harmed in some way — usually by price increases. Still, anyone who has watched Facebook gobble up rivals must be tempted to sympathize with critics who argue that giant tech companies are in danger of undertaking some fairly anti-competitive practices, states this FT video (watch, runtime: 1:49). For that reason, measures are being put in place in the US for an entirely different approach to regulating the tech sector. The Federal Trade Commission is setting up a taskforce to examine antitrust issues, and even re-review agreements it previously approved. The ubiquitous nature of huge tech companies affects all of our lives. Watch this space.

A little less than a century ago, a little-known Lebanese architect tried to do away with the way Arabic script is written. This podcast episode from Kerning Cultures explores the story of Nasri Khattar, the man “tried to completely overhaul the Arabic script — singlehandedly” (listen, runtime: 24:20). Khattar’s idea was to reduce the number of variations for each letter in the language: The entire alphabet is only 28 letters, but once the different shapes according to their position in a word and vocalization marks are taken into account, “a complete set of glyphs can easily reach up to 150 shapes,” type designer and professor Yara Khoury Nammour notes. This vast number of variances made it extremely difficult to fit all of the letters on a regular typewriter. Ultimately, Khattar believed that replacing the traditional Arabic typography with his proposed Unified Arabic system would reduce illiteracy rates across the Arab world by eliminating hurdles to mass producing printed materials in Arabic.

Sadly, Khattar’s system never caught on: Few people actually liked the idea of Unified Arabic; not scholars, not politicians and not the average book readers. And when computers replaced typewriters, the problem that Khattar spent his life trying to solve became irrelevant.

But although Khattar’s system never properly took flight, his ideas lived on: In Egypt, the Academy of Arabic Language actually launched a competition to revamp Arabic script and make it more uniform. While some proposed “Latinizing” Arabic (the equivalent of modern-day “Franco-Arab” WhatsApp language) and others wanted to literally recreate a whole new alphabet, there were some entrants in the competition who prescribed to the idea of reducing the number of letters or otherwise streamlining the Arabic language.

The Egyptian Food Safety Authority (FSA) has asked its Saudi Arabian counterpart for a six-month grace period to meet the latter’s newly-imposed import eligibility specifications, FSA head Hussein Mansour said, according to Al Mal.

Egypt is committed to increasing its cooperation with Kenya during its AU chairmanship, President Abdel Fattah El Sisi told a delegation of visiting Kenyan officials on Sunday, Ahram Online reports. The meeting included discussions about strengthening bilateral relations between the two countries, as well as ways to combat terrorism and the situation in the Horn of Africa.

Egypt and Uzbekistan have signed agreements for developing tourism infrastructure and pharmaceuticals, as well as joint ventures for processing fruits and vegetables, during a bilateral business forum, according to the outlet Azernews. The Uzbek-Egyptian business forum was held on Friday in Tashkent, Uzbekistan, and attended by representatives of over 40 Egyptian companies.

Misr Asset Management and China’s Yingli Solar are in talks to build a 100 MW solar plant for USD 80mn and sell its electricity output to BMIC’s cement plant, local press reported. The Asian Development Bank has agreed to provide USD 50 mn towards the costs of the plant. The project awaits final approval from BMIC’s board.

The government is considering building a logistics center in Ain Sokhna to facilitate trade with Djibouti and other African countries, Al Mal reported.

The Arab Organization for Industrialization and China’s TBEA signed a memorandum of understanding (MoU) to increase Egypt’s role in the manufacturing of electric transformers and electric charging stations, MENA reported.

Investment Minister Sahar Nasr launched yesterday a strategy to support Egyptian families with an EGP 540 mn grant from the European Union, the ministry said in a statement. The strategy aims to provide family planning support and awareness as well as enhance medical and medicinal services for young married couples. The move comes amid government efforts to resolve the overpopulation problem.

A real estate development company owned by Naguib Sawiris has been awarded a contract to develop 58.9 feddans in Sheikh Zayed in partnership with the New Urban Communities Authority (NUCA), government sources said without revealing the value of the contract. NUCA awarded Sawiris the contracts after El Mashreq for Tourism and Urban Development pulled out of negotiations. El Mashreq previously offered to pay EGP 3,303 per sqm to purchase the land.

Construction company Redcon has opened talks with local banks to get an EGP 1.7 bn revolving loan to finance development projects in the new administrative capital and New Alamein, Al Mal reported.

Egyptian and French naval forces conducted joint military exercises off the Red Sea coast, according to a Defense Ministry statement. Air forces from both countries also began a separate drill which will wrap up in a few days, the Armed Forces said in a statement.