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IMF mission highlights reform measures

Representatives of the International Monetary Fund (IMF) concluded a two-week mission to Egypt on April 16 that took stock of recent economic developments in the country and reviewed future economic policies. IMF representatives praised recent structural improvements to Egypt’s economy, including the establishment of a functioning foreign exchange market, banking reform, widespread privatization, the strengthening of the tax and customs regimes, and improved transparency in budgetary operations.

In its recommendations, the mission identified job creation as the major challenge facing Egypt today. The next phase of reforms will need to focus on eliminating bureaucratic inefficiencies and trimming a still-massive public sector whose presence hampers private sector activity. The budget deficit and public debt in Egypt, while manageable, cannot be sustained at current levels without compromising Egypt’s economic potential. Recent tax reforms, meanwhile, need to be complemented by an ambitious and credible medium-term fiscal consolidation strategy that puts public debt as a share of GDP on a firmly downward path. To this end, Egyptian authorities agreed on the need for a comprehensive expenditure reduction program, aimed at trimming the size of government operations, increasing the productivity of expenditure and improving the targeting of pro-poor spending.

The mission also noted that the policy focus of the Central Bank of Egypt (CBE) should remain focused on keeping inflation low, implementing its multi-year program of financial sector restructuring and strengthening bank supervision. IMF representatives recognized the government’s impressive progress in the area of privatization, noting that the process should accelerate in order to bring Egypt’s business environment in line with those of successful emerging markets. The IMF expressed its readiness to continue providing technical assistance to Egypt in improving capabilities for data gathering and processing. The mission noted that further improvements are needed in the quality and availability of market data in order to support economic analysis and effective policy formulation.

WHO confirms 12 human cases of bird flu

The World Health Organization (WHO) has confirmed 12 human cases of bird flu in Egypt, four of them fatal. In an April 21 statement, the WHO said one of its collaborating laboratories in Britain had “fully validated” the test results obtained in Egypt. The four fatalities, all of them women, increase the global total to 113 deaths out of more than 200 cases since 2003. To date, 20 of Egypt’s 26 provinces have reported infected birds since the avian virus was first confirmed in mid-February, with the first human infection reported in mid-March.

Ferry disaster probe identifies multiple violations

An Egyptian parliamentary investigation has blamed the owners and captain of the Al-Salam Boccaccio 98 ferry for the vessel’s February 3 sinking in which 1,027 people died. An April 19 cabinet statement said that analysis of the ferry’s bridge recording system implicated the captain in several procedural oversights, including the failure to send a distress signal, report the situation to shore, return to port when fire broke out or order the crew and passengers to use rescue systems. The report also accused Egyptian authorities of “wicked collaboration” with the ferry’s owners in allowing the vessel to move between Egypt and Saudi Arabia in spite of blatant violations, most notably severe overloading.

Survivors of the disaster reported at the time that crew members told them not to worry about the fire, and prevented them from putting on life jackets. They also accused the captain, Sayed Omar, of abandoning ship. Omar is missing and presumed drowned.

The investigation is not yet complete, according to the cabinet statement, and copies of the voice recorder contents have gone to the public prosecutor and a committee of inquiry.

CASE, Dow Jones launch new index

Dow Jones Indexes and the Cairo & Alexandria Stock Exchanges (CASE) announced on April 12 the launch of the Dow Jones CASE Egypt Titans 20 Index, a blue-chip index that employs the transparent and objective methodology of Dow Jones to measure the performance of 20 leading Egyptian stocks ranked by free-float market capitaliztion, sales/revenues and net income. The index’s base value is set at 100 and its historical data is available back to December 31, 2001.

CASE chairman Maged Shawky said the partnership with Dow Jones will encourage the development of new products and “thus allow global investors to reap the benefits from a fast-growing and deep market like Egypt.” The new index will serve as a tool for mutual funds, exchange-traded funds and other financial products.

The Dow Jones CASE Titans 20 Index is part of the Dow Jones family of indexes, which comprises 5,000 indexes.

Cairo’s bus riders given shelter

Shiny new bus shelters and bus route placards have begun cropping up in several Cairo districts as part of a community development initiative carried out by telecom giant Mobinil in cooperation with municipal authorities. Some 227 bus stops will be erected in Giza governorate, following the success of a similar project in Alexandria, where 230 bus stops were built last year.

US Congress contests 2007 aid package

Members of Congress questioned US secretary of state Condoleezza Rice about the $1.75 billion aid package allocated to Egypt in the 2007 national budget. Congressman David Obey of Wisconsin, senior Democrat on the House Appropriations Committee, questioned the proposed funding, which comes in the form of $1.3 billion in military aid and $455 million in economic aid. Obey has voiced his disappointment at the arrest of Ayman Nour, who ran against Egyptian president Hosni Mubarak in last September’s presidential election, accusing the Egyptian government of imprisoning Nour on “trumped-up charges.” He proposed an amendment to the bill to allocate $50 million for democratic reform purposes and another $50 million for education in Egypt.

Obey was one of Egypt’s strongest supporters in 2005 when a House bill was introduced that would have cut off all financial assistance to Egypt as a result of what the US State Department described as Egypt’s “poor” human rights record. Recently, however, he has urged Rice to convey to Egyptian leaders that “they are running out of time as fast as we are running out of patience.”

Egypt receives the largest financial assistance package from the US of any country other than Israel.

Crackdown on white collar crime

Minister of Investment Mahmoud Mohieldin has added a decree to Capital Market Law 95/1992. The addendum offers capital market stockholders and institutional investors greater protection from fraud and the abuse of confidential information. The new section, which affects issuing companies, securitization companies and investors, prohibits all forms of price juggling that could negatively affect securities’ trading prices or harm investors. Also included in the restriction are clauses pertaining to the disclosure of information and to the dissemination of incorrect or misleading information.

Mohieldin also issued a decree to amend the 10th section of the Executive Regulations of the Capital Market Law on securitization, tightening the legal procedures for securitizing future financial obligations and removing barriers to issuing securitization bonds for raising capital. The amendments are expected to offer more protection to bondholders’ rights and to encourage companies to use securitization as a new financial instrument.

New coinage issued

The Central Bank of Egypt (CBE) has begun circulating new £E 1 and 50 piastre coins, which will be phased in over several months. The metal coinage – including a £E 1 coin engraved with images of King Tutankhamun and a 50 piastre coin featuring Queen Cleopatra, will replace Egyptian paper currency notes of equivalent value. The switch to coins is expected to reduce the cost of issuance. Coins generally remain in good shape for up to 15 years, while paper money, by contrast, quickly ends up torn or defaced, necessitating its replacement every few months.

Government anti-bird flu training program takes flight

The government has launched a training program to prepare professionals and volunteers to combat the spread of the H5N1 avian influenza virus. Health ministry spokesman Abdel Rahman Shahine said the training will cover culling techniques and awareness education in the districts most affected. According to Shahine, 3,200 people will take part, among them veterinarians, policemen and agriculture ministry workers. The program is intended to prevent further infections after some critics blamed previous cases on inadequate implementation of prevention measures.

The Ministry of Health is also working with the Ministry of Information to launch awareness campaigns in rural communities. Although there is a ban on domestic poultry breeding in urban areas, no such restrictions exist in the countryside. According to Shahine, “It appears impractical to impose such a ban in areas where people rely far more heavily on domestic breeding... A ban would lead many to conceal their birds, heightening the danger rather than quelling it.”

Mass wedding held for low-income couples

A mass wedding was held on April 6 at Cairo Stadium to assist needy couples in their matrimonial expenses. The three-hour event was the largest such wedding ever conducted in Egypt, with at least 100 couples, both Muslim and Christian, lining up to take their vows. The event was organized and partially subsidized by the Ministry of Social Solidarity along with two local charity organizations: the Charity of Islamic Society and the Program for Betterment.

US embassy introduces e-visa

The US embassy in Cairo’s consular section has introduced an Electronic Visa Application Form (EVAF), which allows non-immigrant visa applicants to complete the application form online before visiting the embassy. According to an embassy press release, the new EVAF system will allow applicants to print out their completed form and bring it to the embassy at the time of their interview, where consulate staff will simply scan the printout’s barcode in order to transfer the applicant’s information onto the computer. The new procedure is expected to shorten waiting times for interviews.

ETF tackles road safety

The Egyptian Tourism Federation (ETF) is carrying out physical and psychological checkups on 8,000 tourist bus drivers in a bid to reduce the number of road accidents, 80 percent of which are attributed to driver fatigue or error. Random spot checks are being conducted on drivers while on duty to ensure they are performing properly and are not overly fatigued.

The ETF will also install speed limiters in many of the country’s 7,000 tourist buses that will prevent the vehicles from exceeding 100km per hour.

OECD hails fertilizer project

The US-based Organization for Economic Cooperation & Development (OECD) has awarded Indo Egyptian Fertilizer Company, an Indian-Egyptian joint venture, the 2005 Investor of the Year Award. The company will invest more than $950 million in Egypt to build a $325 million fertilizer plant near Edfu expected to employ 300 workers and provide indirect employment for 2,000 more.

Italian designers consider outsourcing

Executives from four prominent Italian fashion houses – Valentino, Marzotto, Ferragamo and Ermenegildo Zegna – visited Egypt last month to speak with local companies about the possibility of manufacturing their brands in Egyptian factories. A representative of Valentino said the company plans to produce over 100,000 suits annually in Egypt, accounting for about one percent of the company’s total output. While partnerships are being sought, the executives expressed their concerns about customers seeing a “Made in Egypt” label on an Italian luxury brand. They said there are, however, good opportunities for lower-end fashion lines such as sportswear and casual wear garments.

Shura Council approves USAID grant

The Shura Council, Egypt’s upper house of parliament, has approved a multipurpose USAID grant that aims at turning Egypt into a favorable environment for regional and international business. The grant, estimated at $142.5 million, is to be directed at measures that liberalize the national economy and open it to foreign competition.

According to a report issued by the Shura Council, the grant aims to reinforce the powers of the Central Bank of Egypt (CBE) and support its role in charting monetary policies. It is also to be directed at expanding the funding of mortgage activities, particularly the establishment of a modern national system of property registry.

AMOC readies for stake sale

Public sector shareholders in Alexandria Mineral Oils Company (AMOC) have announced their intent to sell shares worth half of the state-owned firm’s capital, a statement by the company said. Bidders for the 43 million shares on offer will also be committed to purchasing all shares offered for sale by private sector shareholders. No date or pricing details were given for prospective sale.
In September, a 20-percent stake in AMOC was privatized in a heavily oversubscribed auction.

AFESD offers loans for airport, power plant

The Arab Fund for Economic & Social Development (AFESD) signed two loan agreements last month, providing Egypt $216 million to upgrade infrastructure projects. The first loan, valued at $116 million, will be used to renovate Hurghada’s international airport. The second loan, worth $100 million, will finance a key regional power plant. The interest on the loans will be 3 percent, payable over 21 years with a grace period of five years on the first loan and six years on the second.

ERTU, BBC to promote radio learning

The Egyptian Radio & Television Union (ERTU) and the British Broadcasting Corporation (BBC) have agreed to jointly produce an English-language learning radio program. The 60-minute “BBCe!” entertainment show, to be broadcast on three Egyptian radio stations, will target 18-35 year-olds who want to improve their English skills.

GAID earmarks land for 120 projects

The General Authority for Industrial Development (GAID) has allocated land for some 120 industrial projects at a total cost of £E 2.7 billion. New projects will be established on the land in Sixth of October City, Borg Al Arab City, Damietta Al Gadida and Badr City.

Turkish investors have already taken interest and are preparing to sign a £E 2 billion agreement to develop a factory project in a special textiles and clothing manufacturing zone that GAID has established near Borg Al Arab City. The products of this factory will be geared for export.

OPEC powerless to rein in prices

Energy ministers from the Organization of Petroleum Exporting Countries (OPEC) said on April 24 that their countries can do nothing to bring down global crude oil prices, which soared to over $75 a barrel in April and threatened to retard economic growth and undercut long-term demand. The ministers, meeting at the 10th International Energy Forum in Doha, Qatar, said that their refineries are already operating at capacity, and blamed prices on consumers’ sense of vulnerability and on political tensions, particularly in Iran.

Egypt’s minister of petroleum, Sameh Fahmy, in Doha for the forum, agreed, absolving OPEC and fingering rampant consumption in western nations and a refinery bottleneck as the chief culprits. He urged major industrial nations to fully cooperate with oil-producing countries, especially in terms of production costs.

NTRA readying broadband model

The National Telecommunication Regulatory Authority (NTRA) is preparing to announce a new model for Egypt’s broadband initiative, Minister of Communications and Information Technology Tarek Kamel said during a conference last month. He said technology is driving convergence, which represents a good opportunity for economic growth, new investment and employment opportunities. Internet use grew 25 percent in 2005 to reach 5 million users, he said, adding that the NTRA will issue a WiMax white paper for public consultation in May.

Brokerages given six months to raise capital

The Capital Market Authority (CMA) has approved new membership rules for the Cairo & Alexandria Stock Exchanges (CASE). The new rules raise the minimum required capital for brokerage companies operating in the market to £E 5 million, but grant existing companies a six-month grace period to make adjustments.

New law to ease taxes on contractors

The new real estate law, currently under review by parliament, will reduce the tax burden on contractors by combining land and construction taxes under one clause, Minister of Finance Youssef Boutros-Ghali said. He added that lower taxes should encourage contractors to expand their activities.

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