Turkey fumes as Egypt and Greece ink pact on EastMed economic zone

Good morning, friends, and welcome to another late-summer workweek. It’s the last full week before some of our readers send the kids back to school (in one form or another) and we hope all of you enjoy every last second of it.

Look for three stories to dominate headlines this week:

1- It’s an election week. Voters living abroad can cast ballots today and tomorrow in the first-ever elections to the nation’s Senate, the newly reconstituted upper house of parliament. Voters here at home will head to polling stations on Tuesday and Wednesday. We’re officially in a quiet period now after the 15-day campaign came to an end yesterday. Expect to go back to the polls in September if runoffs are necessary. Some 300 people will sit in the senate, 100 of them appointed by the presidency and the rest elected whether they run as individuals or on party lists.

2- It’s interest rate week. The Central Bank of Egypt’s monetary policy committee meets to review interest rates on Thursday. Will it take advantage of the low global interest rate environment and make it easier for Egyptian businesses to take on debt to finance post-covid growth? With many companies still at less than 100% utilization of both their existing plants and facilities, it wouldn’t be surprising if the CBE were to leave rates on hold to bolster our position as one of the world’s most attractive destinations for the carry trade. Doing so would help ensure a steady flow of FX into the country at the same time as tourism, remittances and Suez Canal receipts take it on the chin. Look for a hint on which way things are going tomorrow, when inflation data for July should land.

3- All eyes around the region are on Beirut, which was wracked by protests yesterday as businesses take stock in the wake of last week’s massive explosion. We have the full rundown in this morning’s Speed Round, below.

Is the gov’t planning to redefine “Made in Egypt”? How much local content does something need to be declared made in Egypt? A Trade and Industry Ministry committee is looking at that question right now, Al Shorouk reports. Manufacturers currently have to obtain at least 25% of their components from local sources for products to be considered Egyptian.

SIGN OF THE TIMES #1: 20% of incoming first years at Harvard are taking a gap year, having reportedly told the university they want to defer their admission.

SIGN OF THE TIMES #2: BP looks like it’s going to sell oil and gas assets with a view to cutting its output of hydrocarbons by as much as 40% and getting more into renewables, according to a Reuters exclusive. The story doesn’t specify which assets are on the auction block other than to note that “sources have previously told Reuters” that BP could shed oil sands projects in Canada and deep water blocks off Angola.

What’s it like to be a (new) CEO right now? That’s the subject of a lengthy Wall Street Journal piece that looks at how new bosses are getting squared away and working on that “vision thing” when they can’t meet face-to-face with their subordinates. It’s a story worth reading even if you’ve occupied your office for a few years now. Follow it with the Journal’s sage advice to let your deputies step up if you’re not able to and ask yourself if your company is doing remote work “right,” courtesy of the NYT.

Still think the best way to learn is with a case study? New leaders could do a lot worse than to go read about how “Tim Apple” took over from Steve Jobs and remade the world’s most valuable company in his image — while simultaneously preserving that which is special about its culture and DNA. See the WSJ’s How Tim Cook made Apple his own.

The Health Ministry confirmed 21 new deaths from covid-19 yesterday, bringing the country’s total death toll to 4,992. Egypt has now disclosed a total of 95,314 confirmed cases of covid-19, after the ministry reported 167 new infections yesterday. We now have a total of 51,672 confirmed cases that have fully recovered.

Egypt’s single-day case numbers have been inching up since Tuesday, 4 August, when we had reached a near-four-month low.

Starting 15 August, foreign visitors will need to show a negative PCR test for the virus that causes covid-19. The test must have been taken no more than 72 hours before passengers want to travel, the Civil Aviation Ministry said in a statement. Exemptions will apply for Arab travelers as well as passengers traveling on direct flights to Sharm El Sheikh, Taba, Hurghada, Marsa Alam, and Matrouh International Airports.

Sudan is officially reopening its land border with Egypt today, after closing the Argeen and Eshkeet crossings in March to curb the spread of covid-19, according to a Sudanese government decision picked up by the press.

Covid-19 cases in Africa top 1 mn: The number of confirmed cases of covid-19 in Africa has exceeded 1 mn, with South Africa accounting for more than half of infections on the continent, Reuters reported on Thursday. Almost 22k people had died from the virus as of Thursday and more than 676k had recovered. Although infection rates are low in comparison with the rest of the world, the virus is likely to be more widespread than the data suggests due to low levels of testing, according to health experts.

The current occupant of the White House signed four executive orders on covid relief for US citizens after the collapse of talks with opposition Democrats. The orders partially extend several measures passed in March that expired at the beginning of this month, potentially deepening economic hardship for unemployed citizens and damaging any recovery.

But at least the jobless rate is falling: The US unemployment rate fell to 10.2% in July from 11.1% in June, as employers added 1.8 mn jobs — a much lower number than June’s 4.8 mn — according to the US labor department. Leisure, hospitality, retail, and healthcare are among the industries that saw the largest gains, the Financial Times reports. The US has recovered fewer than half the jobs lost during the pandemic, data shows.

Twitter may be interested in buying TikTok, emerging as a late rival to Microsoft’s bid for the video sharing app’s US operations, Reuters writes, noting that it’s very much an open question whether Twitter could put together an offer that outbids whatever Microsoft is willing to put on the table.

Berkshire Hathaway’s net earnings shot up 87% y-o-y in 2Q2020, signaling a huge turnaround from massive first quarter losses, according to its earnings report (pdf). The Warren Buffett-owned conglomerate is often seen as “a bellwether for the market given the diverse businesses it owns,” says CNN Business.

Central bankers in emerging markets have done well throughout the covid-19 crisis, thanks to quantitative easing programs mirroring what advanced market central banks do to keep long-term interest low, the Financial Times’ Jonathan Wheatley writes. While the policy approach in EM is not quantitative easing in the traditional sense, the policies have, in some respects, “achieved spectacular success” in improving local bond markets. Since a panic-induced selloff in March saw investors flee USD 33.5 bn-worth of EM bonds, central bank policies have managed to lure back nearly USD 62 bn.

It was a relatively insipid night on the airwaves, save for some commentary on Egypt’s EEZ agreement with Greece and some coverage of the latest developments in Beirut, both of which we cover in detail in this morning’s Speed Round, below.

Arab League Secretary-General Ahmed Aboul Gheit’s meeting with Lebanese President Michel Aoun to visit the site of the blast at Beirut’s port and discuss the situation in the country was on Ala Mas'ouleety's Ahmed Moussa’s radar (watch, runtime: 1:45).

Masaa DMC’s Eman El Hosary took note of the protests that broke out in the Lebanese capital following the blast in demand of accountability and also called up a host of Lebanese celebrities for their two cents on the explosion (watch, runtime: 6:40 and runtime: 5:38).

Back at home, Moussa urged his viewers to continue wearing face masks in public places and warned against falling into “pandemic fatigue” that has caused some to stop taking precautionary measures. Moussa pointed out that daily case numbers are edging back up (watch, runtime: 4:45).

Egypt and Greece have signed an agreement creating a joint exclusive economic zone in the oil-and-gas-rich eastern Mediterreanean, the countries’ foreign ministers announced at a joint press conference in Cairo on Thursday. “This agreement allows both countries to move forward in maximizing the utilization of the resources available in the exclusive economic zone, especially promising oil and gas reserves,” Foreign Minister Sameh Shoukry said during the presser (watch; runtime 13:45) with Nikos Dendias, his Greek counterpart. The agreement will also help Egypt launch more hydrocarbon exploration tenders in the natural gas rich area, Oil Ministry spokesperson Hamdy Abdel Aziz said yesterday (watch, runtime: 9:57).

The objective: Containing Turkey. According to a map seen by Reuters, the demarcation of the Egypt-Greece economic zone ignores the agreement signed between Turkey and Libya last year for a joint maritime zone. Greek diplomats claimed that Thursday’s pact nullified the Turkey-Libya agreement, and Dendias did not mince his words at the presser, saying it “is the absolute opposite of the illegal, void and legally unfounded” MoU between Turkey and Tripoli, which “has ended up where it belonged from the beginning: in the trash can.”

The nutter in Ankara doesn’t recognize the Egypt-Greece pact (shocking, we know): Turkey’s foreign minister described the Egyptian-Greek agreement as “null and void,” saying it infringed on Turkey’s continental shelf and violated Libya’s maritime rights — adding that Ankara would not allow activity in the area. Egyptian Foreign Ministry Spokesman Ahmed Hafez said on Twitter that Turkey’s comments were “strange” given it had not actually seen the agreement.

Turkey is again exploring for energy in the eastern Mediterranean, President Recep Tayyip Erdogan said on Friday, telling reporters that “we don’t feel obliged to talk with those who do not have rights in maritime jurisdiction zones.” Ankara had agreed last month to put on hold its gas exploration efforts and hold talks with Greece.

International opprobrium for Turkey: Cyprus, Greece, France, and the UAE have all joined Egypt in condemning Turkey's successive attempts this year to drill for natural gas in Cyprus' disputed maritime zone. Greek Prime Minister Kyriakos Mitsotakis said last week that if his country and Turkey remain at loggerheads over their maritime boundary dispute he would welcome international court intervention, Al Monitor reports.

The UAE welcomed the Greco-Egyptian pact: Minister of Foreign Affairs and International Cooperation Sheikh Abdullah bin Zayed Al Nahyan congratulated Shoukry on signing the latest agreement, saying it “represents an important step that reflects the efforts of Egypt and Greece to enhance the stability foundations in the Eastern Mediterranean Region,” the UAE’s state news agency WAM reported on Friday. The Emirates’ Foreign Affairs Minister Anwar Gargash also took to Twitter saying that “the signing of the maritime border demarcation agreement between Egypt and Greece is a victory for international law over the law of the jungle.”

The pact is getting plenty of ink in the international press: Reuters | Associated Press | Bloomberg | Al Arabiya | Arab News | Ekathimerini.

Foreign reserves tick up in July: Egypt added USD 150 mn to its foreign reserves in July, marking the second consecutive month of gains after falling almost USD 10 bn during the height of the covid-19 pandemic, according to central bank figures released on Thursday. Reserves increased to USD 38.31 bn from USD 38.2 bn in June, having fallen from a peak of USD 45.5 bn between March and May as the bank stepped in to cover portfolio outflows, debt repayments and imports of commodities.

Amer calls for huge IMF, World Bank rescue package for Africa: Central Bank of Egypt Governor Tarek Amer has called on the IMF and the World Bank to extend more than USD 500 bn in financial assistance to African countries, the local press reports. Speaking at the IMF / World Bank African Caucus of Governors, Amer said the existing funding has fallen short of what the continent needs to recover from the economic crisis caused by the covid-19 pandemic, and called for a package equal to the value of goods imported by Africa from developed countries, which he put at USD 549 bn.

What have the IMF and World Bank done so far? The IMF has so far given more than USD 24 bn in emergency financial assistance to African countries and approved debt relief for 25 countries, 19 of them in Africa. The World Bank had announced earlier this year its plans to provide a total USD 160 bn in grants and financial support to 100 developing countries as they battle with the fallout from covid-19.

What emergency assistance has Egypt received this year? The IMF has provided almost USD 8 bn in financial assistance to Egypt through one-year USD 5.2 bn standby loan and a USD 2.8 bn rapid financing instrument. Meanwhile, the World Bank approved a USD 50 mn fast-track facility to support Egypt’s covid-19 emergency response capabilities in addition to a previously agreed upon USD 400 mn loan for a universal healthcare project.

New solutions needed? Amer called on African countries to come up with new solutions to mitigate the economic damage caused by the pandemic such as foreign exchange swaps, and urged the IMF and the World Bank to negotiate with G7 states to place greater restrictions on capital flight and negotiate softer loan agreements with Western counterparts.

In a best-case scenario, Africa’s economic growth could slow down by 1.8%, or by 2.5% in a worst-case scenario, according to United Nations Economic Commission for Africa (UNECA) data International Cooperation Minister Rania Al Mashat cited during the meeting. Between 5 to 29 mn individuals could fall into poverty due to the pandemic, UNECA expects. Data from the International Labour Organization, meanwhile, forecasts that 19 mn Africans could lose their jobs amid the crisis.

REGULATION WATCH- Banks are now allowed to hold larger stakes in payment processing companies after the Central Bank of Egypt (CBE) lifted a cap that limited banks’ holdings in these companies at 40%, according to a circular (pdf). The previous limit was imposed in 2004. Banks are still held to a 2014 regulation that requires them to notify the CBE two months in advance if they plan on contributing more than 5% of a company’s issued capital.

The EBRD has approved a USD 50 mn long-term loan to help finance a USD 560 mn, 500 MW wind power plant in the Gulf of Suez. The plant, which will be located approximately 40 km northwest of Ras Ghareb, will be one of the largest privately-built wind plants in Egypt, the EBRD said. Partners in the plant include Orascom Construction (25%) Engie (35%), a consortium of Toyota Tsusho Corp and Eurus Energy (together holding 40%). The plant is close to Lekela Power’s 250 MW West Bakr plant, which the EBRD also financed, and which was said to be the current largest wind power plant.

Lebanese protesters took to the street yesterday in the aftermath of last week’s explosion, which killed at least 158 people and has left the nation with USD 15 bn in damage to clean up in the capital. Prime Minister Hassan Diab called for early elections as police forces fired tear gas at demonstrators who took to the streets of the Lebanese capital yesterday demanding the government’s resignation. Four members of parliament resigned in response to the demonstrations.

Demonstrators briefly occupied the foreign, economy and energy ministries as well as Lebanon’s banking association, according to AFP’s Beirut bureau.

Food security is an issue in Lebanon, which imports almost all of its wheat. Its only large grain silo was destroyed in the blast. The country was already battling a financial crisis this year, defaulting on debt exceeding 150% of economic output and with IMF loan negotiations at a virtual standstill.

President Michel Aoun has raised the possibility that the blast was caused by “external interference,” announcing to the local press that an investigation would determine whether it was the result of negligence, an accident, or an attack. Twenty people are said to have been detained so far in relation to the blast. Aoun previously said explosive material was stored unsafely for years at the blast site.

Egypt is among several countries mobilizing to support Lebanon in the aftermath of the explosion. The Arab League has pledged its assistance in the investigation and will participate in an international conference call today to discuss aid for the country, Secretary General Ahmed Aboul Gheit told reporters. Meanwhile France, which is organizing the conference call, is being alternately hailed as a beacon of hope and criticized for neocolonialist interference after President Emmanuel Macron visited Beirut earlier this week, AP reports.

DIVE DEEPER into what’s going on in Lebanon with the Financial Times’ Big Read of this morning.

CABINET WATCH- Cabinet approves emergency medical response fund, USAID funding for education and agriculture: The Madbouly Cabinet approved during its weekly meeting a draft law to establish a Cairo-based emergency medical response fund that will replace family health centers created nearly 20 years ago, according to a statement. The fund will provide financial support during major emergencies, purchase medicines, and finance services provided by the Health Ministry to reduce waitlists, as well as other needs not covered by the state budget. The statement didn’t disclose how much money would be put into the fund or how it would be funded. The committee will be under the purview of the prime minister, who will serve on its board of trustees alongside the health, finance, higher education and scientific research ministers, as well as the governor of the central bank and other appointees by the prime minister.

Cabinet also approved a USD 630 mn facility from the Arab Monetary Fund to help fund government reforms to improve administrative processes such as budgeting, procurement, debt management and tax administration.

Fresh USAID grants: The council of ministers also approved amendments to the government’s agreement with the United States Agency for International Development (USAID) to provide USD 15 mn to improve basic education for students, improve literacy and numeracy for adults, and train new teachers. Another USD 4 mn was also earmarked for scientific cooperation between Egypt and the US, in addition to USD 10 mn to support family planning and reproductive health services, and USD 4.4 million to increase incomes and create agriculture jobs in Upper Egypt.

The board of EGX-listed HHD will announce a new corporate strategy in the coming two weeks, Public Enterprise Minister Hisham Tawfik said on Thursday. The semi-privatized state-owned real estate company is rethinking its development strategy following an abortive attempt at selling a 10% stake + management rights to an investor in March. Hesham Aboul Atta, chairman of HHD’s parent company, the Holding Company for Construction and Development, said last month that the plan will see the company partnering with other real estate companies to develop projects.

FinMin collects EGP 30 bn in back taxes after settling 30k tax disputes: The Finance Ministry settled more than 30k tax disputes between March and June, netting the government more than EGP 30 bn in back taxes, Finance Minister Mohamed Maait said in a statement on Friday. The passage of a temporary tax dispute bill in March allowed the ministry to offer incentives to taxpayers to file for a settlement until the end of June. The ministry settled almost EGP 18k income tax disputes in the four-month period, collecting EGP 14.3 bn in the process. It also collected EGP 15 bn in unpaid VAT while real estate disputes were settled for EGP 989 mn.

A bill to extend the Tax Dispute Resolution Act once again until 31 December is now with President Abdel Fattah El Sisi for final approval, head of the Tax Authority’s central administration Saeed Fouad said yesterday (watch, runtime: 5:11). The House of Representatives had signed off last month on the bill, which would also waive interest and late fees on taxes for late taxpayers.

Background: The temporary tax dispute resolution bill signed into law earlier this year extended the Tax Dispute Resolution Act, allowing newly-established dispute settlement committees to handle tax disputes and unfreeze assets until 30 June. The law initially permitted businesses to make a 10% down payment to unfreeze their assets, file for settlement and enroll in a repayment plan. The Finance Ministry later reduced the down payment for businesses to 5% of dues owed to the government and 1% for individual taxpayers who had yet to submit an appeal.

STARTUP WATCH- Egyptian fintech startup ElGameya has raised an undisclosed six-figure investment in a pre-seed round led by AUC Angels, reports Menabytes. Cairo Angels and Alex Angels also participated in the funding round. The company will use the investment to grow its user base and aims to reach 1k cycles by 2021. ElGameya was founded by Ahmed Mahmoud in 2018, and works as a digital ‘gameya,’ a popular way of saving in Egypt where a group of people deposit a fixed amount of money and take it in turns to receive the whole pot. The startup receives the money and facilitates payments to users, and operates a marketplace where users can purchase products using their savings.

MOVES- The UK’s CDC Group has appointed Sherine Shohdy (LinkedIn) as its new coverage director in Egypt, establishing a “permanent presence” in the country, according to a press release (pdf). Shohdy joins the UK government’s development finance arm after a long career with spells in leading positions at the International Finance Corporation, where she was most recently a senior consultant.

Tourism Minister Khaled El Anany has tapped Gen. Bassam Fayed, a former official at the Army’s National Service Products Organization (NSPO), as assistant minister for finance and administrative affairs.

It’s a quiet morning for Egypt in the international press, with news of a new shared exclusive offshore economic zone between Egypt and Greece dominating the conversation on Omm El Donia.

Also getting ink: Egypt’s budding #MeToo movement has a long way to go, Reuters argues, while state-funded broadcaster Voice of America claims that Ethiopian refugees in Egypt are paying the price for the Cairo-Addis dispute over GERD. The Committee to Protect Journalists, meanwhile, has zeroed in on the case of journalist Mohamed Monir, who died after contracting covid-19 while in detention at Tora Prison.

Addis Ababa says any Nile water allocation agreement requires bringing all Nile Basin countries to the negotiating table: Ethiopia will not sign any agreement with Egypt and Sudan that would enshrine specific water quotas for downstream countries without bringing all 11 Nile Basin countries into the discussion for a comprehensive agreement, Ethiopian Foreign Ministry Spokesman Dina Mufti said at a press briefing, according to Al Shorouk. Mufti also slammed the US and World Bank’s “attempts to pressure Ethiopia into signing [a] lopsided agreement,” according to the Ethiopian Herald (pdf). Ethiopia also accused Egypt of not capitalizing on alternative water sources, including groundwater and sea water. Egypt and Sudan walked away from the last round of GERD negotiations after Ethiopia’s latest proposal dodged mention of a binding dispute resolution mechanism after it was agreed upon by the three countries.

Shoukry and Pompeo discuss Libyan ceasefire: Foreign Minister Sameh Shoukry and US Secretary of State Michael Pompeo discussed on Thursday the need to achieve a ceasefire in Libya through United Nations-brokered talks, according to a US Embassy statement.

Kom Ombo Petroleum — a JV between the Egyptian General Petroleum Company and Mediterra Energy — will begin drilling two wells at its Baraka concession, which is expected to cost USD 2.5-3 mn, Al Mal reports, citing unnamed industry sources. The Baraka concession has produced some 350 to 400 bbl / d of oil this year, the sources say.

The General Authority for Supply Commodities (GASC) has accepted seven offers in a tender to purchase 410k tonnes of wheat after receiving a “record number” of bids, according to data seen by the press. GASC will purchase 120k tonnes of Russian wheat and 290k tonnes of Russian and Ukrainian wheat.

Orascom Development Egypt has sold a 40k sqm plot of land in El Gouna to Mangroovy Hotels for EGP 104.8 mn, according to a bourse disclosure (pdf). Mangroovy will use the plot to provide “different types of services” for people living at its Mangroovy Residence project.

Canada’s Bombardier is planning to begin this month manufacturing rolling stock for the two planned monorails linking Sixth of October City to Giza and Nasr City to the new capital, the company’s Egypt boss, Ahmed El Damanhoury said. Egypt last year signed a 30-year contract with Bombardier, Orascom Construction, and Arab Contractors that will see the consortium construct, operate, and maintain the lines. The companies target completing the new capital monorail by June 2022 and the one running from the Sixth of October by July 2023, El Damanhoury said.

The Agriculture Ministry is working to modernize the irrigation systems used in eight governorates as part of government efforts to use water more efficiently and moderate consumption. Techniques such as drip irrigation, sprinkling, and laser land leveling systems will be introduced to 500k feddans of land, cabinet said in a statement, one week after President Abdel Fattah El Sisi called for more advanced irrigation methods to help the country conserve water.

State prosecution has released Strong Egypt Party deputy head Mohamed El Qassas from pre-trial detention on Thursday, while investigations into the charges against him remain underway, Cairo24 reports. El Qassas was arrested in 2018 on charges of joining an illegal group and spreading false news. Strong Egypt was founded in 2012 by Abdel Moneim Aboul Fotouh, the former Islamist leader turned ‘centrist’ presidential candidate.

Two Egyptian pilots died on Thursday after their light aircraft crashed at El Gouna, the Civil Aviation Ministry said in a statement. The pilots, Mohamed Saeed, 61, and Akram Al Hosary, 36, were pronounced dead at the hospital after their two-seater Apollo Fox plane crashed at the Red Sea resort town’s airport. Ministry investigators are probing the crash.

The Cairo Criminal Court has postponed to 6 September the trial of former Finance Minister Youssef Boutros Ghali on charges that a decree he signed in 2005 illegally approved the use of cars impounded by the Customs Authority, Al Mal. Separately, the court postponed to tomorrow the trial of former Housing Minister Mohamed Ibrahim Soliman and businessman Samir Abdel Kawy on charges of alleged misuse of public assets related to the sale of land in Sixth of October.

Two Ancient Egyptian statues were returned to the country on Thursday to be displayed at the Grand Egyptian Museum, cabinet said in a statement. The statues had been on the touring exhibition “Sunken Cities: The Enchanting World of Egypt” since 2015. The exhibition included 293 artifacts recovered from the sunken city of Heracleion in Abu Qir, and had traveled to Paris, London, Zurich, and four US cities.