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Sunday, 24 September 2017

Privatizing the railways, Moody’s sticking to its flawed ratings, and the automotive directive

It was an interesting night on the airwaves as the talking heads delved into a number of key issues, including privatizing the railways, Moody’s sticking to its guns on Egypt’s rating, and the automotive directive.

Privatization of the rail network in all but name: Transport Minister Hisham Arafat had a chat with Hona Al Asema’s Lamees Al Hadidi about legislation that will allow the private sector to operate and manage parts of the national rail system. The minister said private sector participation is a necessity to cover the EGP 42 bn required to upgrade rail lines and signaling systems. A few weeks back, Arafat had met with investors to urge them to invest in developing the railway system. The minister stressed that the government will maintain control over ticket price, while private companies will be responsible for upgrades, operations, and maintenance (watch, runtime 11:27). Bottom line: Private companies can invest in and operate lines, just don’t call it “privatization” lest we stimulate the expression of our (not-so-recessive) socialist genes. (Prime Minister Sherif Ismail tried to calm fears of privatizing the railways last week.)

Lamees then moved on to discuss Moody’s decision to leave unchanged Egypt’s credit rating at B3. Middle East Rating & Investors Service President Amr Hassanein — whose firm is Moody’s local arm — was apologist-in-chief. Hassanein defended Moody’s main sticking point, including Egypt’s debt levels, which are nearing 90% of the country’s GDP, as well as the government’s large financing needs. He also pointed to issues with the rule of law, corruption, and the effectiveness of governance as areas dragging down the nation’s ranking (watch, runtime 10:42).

Lamees also looked into her crystal ball for predictions on the management shakeup at state-owned banks, saying Prime Minister Sherif Ismail will keep the chairmen of Banque Misr, Banque du Caire, and the National Bank of Egypt in place. Lamees’ sources tell her that Mortgage Finance Fund head Mai Abdel Hamid will head up the Egyptian Arab Land Bank, while Emirates NBD Deputy Managing Director Sahar El Damati will be appointed as Banque Misr’s deputy chairman.

Trade and Industry Minister Tarek Kabil’s comments on the Automotive Directive at the Automech Formula Exhibition caught the eye of Kol Youm host Amr Adib. Kabil continued to press on the government’s target of increasing local content of domestically assembled cars to 70%. Egypt currently exports USD 500 mn worth of auto components, which Kabil said will attract auto part manufacturers to set up shop here in Egypt (watch, runtime 3:41). From what we’re seeing in the report, it appears that no significant concession were made to car importers, who have been hard at work trying to torpedo the act.

Holding Company for Garbage Collection? Host Amr Adib went on to discuss a proposal that could see the House of Representatives authorize the establishment of a holding company for garbage collection with House Local Development Committee member Mona Gaballah. The government would hold a 51% stake, with the remainder being opened to other stakeholders including investors, banks, garbage collectors unions and civil society organizations. Gaballah added that the hopes the new company would be included in the state IPO program. The Local Development Ministry is scheduled to meet with the committee on Tuesday to discuss the structure of the company, Gaballah said (watch, runtime 8:23). Is this a move to clean up city streets, or a sign that private producers of refuse-derived fuel are about to face competition from a state-owned company?

Over on Masaa DMC, host Eman El Hosary discussed proposed amendments to the Nationality Act with the Interior Ministry’s legal affairs department undersecretary, Abdel Fattah Serag. Serag tells the host that the law would strip citizenship from those found guilty of belonging to a terrorist group or holding terrorist affiliations (watch, runtime 5:09).

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