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Mission to step up Turkish trade

Egypt’s prime minister, Ahmed Nazif, and minister of trade and industry, Rachid Mohamed Rachid, traveled to Turkey in November to promote trade liberalization between the two countries. The visit comes as the Turkish parliament prepares to finalize ratification of the Egypt-Turkey free trade agreement signed last December. The agreement is expected to attract Turkish investment in the Egyptian textiles industry to take advantage of Egypt’s favorable trade deals with Europe and the US. Trade between the two nations reached $949 million last year.

CBE ups interest rates to cool inflation

The Central Bank of Egypt (CBE) hiked interest rates on November 2 in an effort to dampen inflation. The CBE raised overnight deposit rates to 8.5 percent and set overnight lending rates at 10.5 percent. The move will increase the cost of borrowing, which could slow growth by discouraging investment. It also increases the discount rate used to calculate depreciation of a company’s assets, which is expected to lower the valuation of Egyptian companies.

The annual inflation rate increased to 10 percent in October, from 9.6 percent in September and 8.9 percent in August, despite stability in the money supply and exchange rates. Analysts say the inflation is caused by rising energy prices, and an increase in disposable income due to tax cuts and newly created jobs.

Electricity price shock

Electricity prices rose in October, the third price increase since October 2004. The increases are part of a five-year government plan to reduce the cost of energy subsidies, which reached a record LE 3 billion in FY 2005-06. The move increases household electricity bills by between 4.9 and 8.1 percent. For the commercial sector, prices increased more than 7 percent.

Agricultural exports could flow north

The Egyptian government and the European Free Trade Association (EFTA) have signed a memorandum of understanding (MoU) to establish a bilateral free trade zone. If implemented, the free trade zone would give Egyptian agricultural and food products greater access to EFTA states. The MoU tackles agricultural goods market liberalization and intellectual property rights protection, and mandates the establishment of an arbitration authority to handle disputes.
The EFTA states are Switzerland, Iceland, Norway and Liechtenstein.

EU unifies carry-on restrictions

EU countries have agreed to a standard policy on carry-ons to avoid confusion among passengers. The new restrictions on liquids are based on analysis of the requirements to make a liquid explosive. Passengers traveling to and from the EU may carry liquids in containers up to 100 milliliters in size. These containers must be placed in a clear plastic bag with a total volume no more than one liter.

Restrictions on liquids in carry-on baggage were put in place after an attempted terrorist attack on airliners in August. The restrictions only apply to flights to or from EU countries.

Microfinance makes macro impact

The microfinance market in the MENA region is booming and has increased tenfold over the past seven years, says Planet Finance, an NGO that organized this year’s microfinance conference in Dubai. The total number of borrowers has risen from 129,000 in 1999 to 1.5 million in 2006, while the total portfolio of active microfinance loans in the region reached $349 million at the end of October 2005, the last date for which figures are available. Among microfinance clients, 61 percent are women and 78 percent live in urban or semi-urban areas.

Vodafone, Telecom Egypt strengthen ties

Vodafone Egypt (VE) has extended its agreement with Telecom Egypt (TE) on international gateway services beyond 2007. The move will reduce the number of TE’s competitors for the international gateway licenses. The National Telecommunication Regulatory Authority had stated that it would issue two such licenses in 2006, effectively ending TE’s monopoly on international calling. VE and Mobinil, along with at least a half dozen other bidders, were interested in gaining a license for this service.

VE’s contract with TE was set to expire at the end of next year. The renewed agreement also expands cooperation in other areas. For example, Vodafone will be able to promote services through Telecom Egypt outlets.

Telecom Egypt, a major stakeholder in VE, has approved the proposed sale of an additional 4.9-percent stake of Vodafone Egypt to Vodafone International at LE 100 per share. The move would bring Vodafone International’s share of VE to 55 percent, while TE’s share would be 45 percent.

In a related story, Vodafone Egypt last month won a bid to assist Vodafone Australia’s VoIP customers, beating competitors India and Indonesia. The new center will employ 1,500 technicians, the company said.

Satellite project launched

Egypt’s National Authority for Remote Sensing & Space Sciences has announced plans to launch three new satellites by early 2007. The satellites are being developed in collaboration with Ukraine and will be used for water resources management, natural disaster assessment, rural planning and climate change monitoring.

Egypt already has two satellites, Nilesat 1 and Nilesat 2, used for television, radio and multimedia broadcasts to the MENA region. The three new satellites will be the country’s first for scientific use.

Angry workers shut shipyard

A strike at Port Said shipyard brought the facility to a halt but did not stop traffic in the Suez Canal. Around 3,000 workers went on strike November 8 to demand better working conditions and compensation for the family of a deceased colleague, Mahmoud Mohammed Attiya, a 42-year-old dockworker who was killed in a crane collapse in early November.

Energy group swallowing gas giants

Taqa Egypt, an energy group owned jointly by Egyptian, Saudi and Emirati investors, purchased Nile Valley Gas Company (NVGC), Egypt’s largest gas distribution company, for $35 million in November. The deal is part of Taqa Group’s plan to expand its hold on the Egyptian market, which began with its purchase of Genco Group, which itself controls City Gas, Master Gas and House Gas.

British Gas and Italian Edison owned 37.5 percent of NVGC each, while Egyptian firm Orascom Construction Industries (OCI) owned 20 percent and the remaining 5 percent was owned by MEGA Company.

Pharmaceutical firm increases its dosage

Mercury Pharmaceutical Manufacturing SAE of Egypt has purchased a 93-percent stake in Amoun Pharmaceutical Co. for $459 million. Mercury is a consortium of international firms including Citigroup Venture Capital International, Capital International Private Equity Fund IV and Concord International Investments.

Mercury is expected to attempt to purchase the outstanding shares in Amoun, which are currently traded publicly on the Cairo & Alexandria Stock Exchanges (CASE). Mercury purchased its stake at LE 47 per share and plans to purchase the remaining 7 percent of floated shares. CASE rules require that minority stakeholders be offered the same price as majority holders during a buy-out.

Amoun, founded in 1976, had LE 155 million in profits in 2005, up 190 percent from 2004. Its products include human and veterinary medicines. The Basilly family, former owners of Amoun, have said they will use the revenues from the sale to set up an investment holding company.

Bird flu rears ugly head

The government announced the discovery of new cases of avian flu among domestic poultry in Alexandria and Luxor in November. The government is continuing its program of monitoring domestic poultry and culling birds in the vicinity of infected areas. The Ministry of Health warns that the winter bird migrations may help spread the H5N1 virus.

Last year, the government banned the unregistered raising of poultry until the start of summer and culled 30 million birds. This year, the government has said it does not plan to ban domestic poultry, as it found that this only encourages people to hide their birds, which makes containment of the virus more difficult.

Bird flu was first reported in Egypt in February 2006. Since then, the virus has infected thousands of birds as well as 15 humans, seven of whom died from the disease. Most reported cases in Egypt have involved backyard poultry.

Airports up for grabs

Minister of Civil Aviation Ahmed Shafik has announced the government’s intention to offer non-strategic airports to private investors through build-operate-transfer (BOT) deals. The plan was announced during the fifth year anniversary celebrations of Kharafi Group’s Marsa Alam airport, the first privately owned airport in Egypt.

The Ministry of Civil Aviation has begun to liberalize the aviation sector in line with World Bank recommendations. The ministry has allowed the establishment of private domestic airlines to compete with EgyptAir, the national carrier. It is also considering the sale of a 20-percent stake in EgyptAir on the stock exchange to raise funds for the airline’s expansion.

Development report on hold

Release of the UN Development Program’s annual Human Development Report has been postponed, allegedly due to a conflict between the UNDP and the Ministry of State for Economic Development over the report’s conclusions. The report gives countries ratings based on factors related to standards of living such as life expectancy, literacy and education. The UNDP generally awards medium or low marks to Egypt. Last year, Egypt ranked 119th among 177 countries on the report’s Human Development Index. The report has been issued since 1995.

Investment conference fizzles

Ministerial absences plagued last month’s Egypt Invest conference, which was criticized by attendees for falling short on substance. Last minute cancellations included Prime Minister Ahmed Nazif, who was scheduled to give the opening remarks. Also absent were Minister of Trade and Industry Rachid Mohamed Rachid, Minister of Finance Youssef Boutros-Ghali and Minister of Investment Mahmoud Mohieldin, who were accompanying President Hosni Mubarak on a trip to China.

Despite the lack of participation from the government, panelists discussed several issues that the private sector sees as crucial for long-term economic growth. Two ideas floated at the conference that sparked discussion were incorporating Egypt’s academic and business communities, and increasing access to credit.

Harsh prescription for pharmacists

The police have launched a campaign to investigate the sale of expired and smuggled drugs in pharmacies. Over 150 pharmacists have been arrested thus far, prompting an angry response from the Egyptian Pharmacists’ Syndicate. The syndicate is challenging the legality of these searches and has threatened a general strike. Pharmacists claim they keep expired drugs to be returned to the company. The arrested pharmacists have all been released.

The crackdown comes as the government is preparing a law to allow multinationals to purchase local pharmacies. There are 26,000 pharmacies in Egypt. Some fear the move would lead to higher drug prices and unemployment of pharmacists.

Good luck getting change

The Egyptian government has announced plans to issue LE 200 and LE 500 bank notes in March and July respectively. The idea is to simplify large cash transactions for businessmen. However, the move is seen by many as an illustration of the weakening of the pound. Others fear that the new bills will make smuggling cash out of the country much simpler. Merchants are concerned that they will not be able to break such large bills.

Critics argue that while the bills may ease business transactions, they are also an acknowledgement of the lack of a proper check and credit card system in Egypt. They say the bills are not likely to be common and will not have a dramatic effect on the country’s monetary system.

Poultry growers get feathers ruffled

The government has decided to extend imports of poultry, red meat and fish until March 2007, leaving the Poultry and Meat Committee of the Egyptian Chamber of Food Industries disgruntled. The bird flu scare prompted the government to allow meat imports in June to stem the rise in meat prices, which have risen by around 20 percent since the outbreak in February. Poultry growers oppose imports and have lobbied to reinstate trade barriers.

US aids Egyptian economy

USAID administrator Randall Tobias met with Minister of State for International Cooperation Fayza Aboulnaga in Cairo in late October to discuss the changing structure of US development assistance to Egypt. In 1998, Egypt and the US agreed on a plan to reduce US economic assistance by 5 percent, about $40 million, each year to reach $415 million by 2008. The USAID budget for 2007 is $455 million. During the visit Tobias visited recipients of LE 5.1 billion in USAID microfinance loans, of which 2.1 million have been disbursed since 1998.

Egypt to kill $4.5 million bouquet

Egypt has granted $4.5 million to Uganda to combat water hyacinth, a fast-growing water plant that clogs up rivers and lakes. The grant will extend an existing weed-clearing project for three years beginning in January. Cooperation on this project began in 1999 with a $13.9 million Egyptian grant. So far, more than 70,000 tons of the gregarious weed have been removed from Ugandan lakes.

Egypt is concerned with protection of Ugandan waters to ensure the supply of Nile water. In high densities, the water hyacinth blocks sunlight killing aquatic life and causing anaerobic conditions. It can also limit water flow and access to waterways. The weed can be removed mechanically, chemically or biologically.

Daqahliya water pumped with cash

The Ministry of Housing & Urban Development has set aside LE 175 million to upgrade water facilities in the Daqahliya governorate. The governorate’s drinking water network has been experiencing supply and contamination problems. The funds will be used to build potable water stations with a capacity of 284,000 cubic meters of drinking water per day, as well as to upgrade an existing facility in Meet Fares, increasing its output to 100,000 cubic meters, from 34,000 cubic meters.

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