In Focus – Daily News Egypt Egypt’s Only Daily Independent Newspaper In English Fri, 23 Jun 2017 13:32:56 +0000 en-US hourly 1 Egypt ranks 105 in Global Innovation Index 2017, Switzerland in top spot Thu, 22 Jun 2017 08:00:43 +0000 UAE secures the top rank in the North Africa and West Asia region

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Egypt ranked 105 in the 2017 “Global Innovation Index”(GII) moving two places from its 2016 ranking, while Switzerland still ranks as the top innovative country for the seventh year in a row. The Global Innovation Index ranks the economies of 127 countries or territories using an innovation performance score out of 100 points, based on the country’s institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and finally creative outputs.

The results of the index, co-authored by Cornell University, French business school Insead and the World Intellectual Property Organization (WIPO), were officially announced during a press conference held on 15 June at the UN headquarters in Geneva.

In regards to Innovation Output Sub-Index and in the Knowledge and technology outputs, Switzerland performs best in comparison to other countries. Its lead seems largely uncontested. For the first time it ranks among the top 10 in all pillars and is the 3rd economy in the world in innovation quality.

The report indicates that Switzerland position withing the ranks, is due to their improvements in the areas of Institutions (where they ranked 8 globally), Infrastructure (with the 6 rank), and Creative outputs (ranking 3), while its Innovation Efficiency Ratio has improved from 5th to 2. Switzerland presents a few areas of weakness on the input side. Such as: ease of starting a business, graduates in science and engineering, gross capital formation, ease of getting credit, and growth rate of GDP per worker.

According to the report, the six key findings in 2017 are: the importance of creating new sources of innovation-driven growth, the need to overcome serious food challenges by smart agricultural innovation in developing countries, that more innovation convergence is required globally, leveraging the rise of new East Asia Innovation Tigers, to foster deeper regional innovation networks, prioritising the need to preserve the momentum of innovation in Sub-Saharan Africa, in addition to the fact that Regional clusters of inventive activity – such as Tokyo, Yokohama, Shenzhen, Hong Kong, San Jose- are essential to national innovation performance.

Moreover, in regards to regional rankings, in this year’s edition, Europe still dominates the top rankings, with 8 countries in the top 10 economies, and 15 in the top 25 global economies. The report concludes that these results are due to Europe’s strong stance in human capital and research, infrastructure, and business sophistication.

While for North America, the United States of America secured the 4 rank, and Canada was in the 18th spot. Which is an indicator to the particularly in market sophistication index, and intensity of venture capital activity, which acts as a driver to stimulate private-sector economic activity.

In the United States case, various factors have contributed to their rank, such as the existing high-quality universities and firms, which conduct global R&D, quality of scientific publications, software spending, and the state of its innovation clusters. While for Canada, they ranked high in the ease of starting a business and quality of scientific publications, and their exceptional political, regulatory and business environment draw top marks. However they lagged behind in improvement in its education system.

South East Asia, East Asian, and Oceania region, Singapore maintained it’s position as the region’s innovation leader despite dropping by 1 rank globally in 2017 index. While South Korea secured the second place regionally, and the 11 spot globally, followed by Japan which ranked 3 regionally and 14 globally.

Furthermore, according to the report, China sustained its progress in the overall ranking, by securing the 22 spot, which make it the first ever middle income country in the top 25 ranking. China’s position came as a result to their high scores in business sophistication and knowledge and technology outputs, as well as their strong performance in the presence of global R&D companies, research talent in business enterprise, patent applications and other IP‐related variables.

Moving on to Central and Southern Asia region, Central and Southern Asia, India, moving six ranks from 2016 index, secured the top rank in the region, and the 60 spot globally, outperforming on the innovation relative to its GDP per capita for the seventh consecutive year.  The report indicates that India ranks 14 globally in the presence of global R&D companies, performing better than the rest of lower- and upper-middle-income economies. India’s positive performance is due to its success in maintaining its 2nd position in both university rankings and citable documents among middle-income economies.

On the other hand the Islamic Republic of Iran ranked 2 in the region and 75 globally, with an exceptional performance in tertiary education, as well as ranking second in the world in number of graduates in science and engineering.

While in the Northern Africa and Western Asia region (NAWA), Israel and Cyprus achieved the top two spots in the region for the fifth consecutive year, with a global ranking for 17, and 30 consecutively. The report indicates that Israel has improved in various indexes such as: gross expenditure on R&D, as well as ICT services exports, in addition to maintaining its top ranks globally in researchers, venture capital deals, and research talent in business enterprise.

The United Arab Emirates came in the third place regionally, and jumped 6 ranks to reach 35 globally, which benefits from increased data availability and shows strengths in tertiary inbound mobility, innovation clusters and ICT-driven business model innovation.

On the other hand, sixteen out of the 19 economies in the NAWA region are in the top 100 globally, including Turkey (43), Qatar (49), Saudi Arabia (55), Kuwait (56), Armenia (59), Bahrain (66), Georgia (68), Morocco (72), Tunisia (74), Oman (77), Lebanon (81), Azerbaijan (82), and Jordan (83). While Egypt came in the 17 spot regionally followed by Algeria.

Egypt, which moved 2 ranked in 2017 index, has shown slight improvements in institution index ranking 121 compared to 123 in 2016, and 107 in market sophistication versus 110 in 2016, 120 in business sophistication compared to 122 in 2016. However two factors has taken their toll on Egypt’s global average score, the country’s infrastructure score which has fallen from 82 in 2016 to 93 in 2017.

The report cites that, the largest economies in Latin America and the Caribbean region Chile, Mexico, Brazil, and Argentina show particular strengths in institutions, infrastructure, and business sophistication. Chile, which secures the region’s top rank for another year,  have shown good performance in areas of infrastructure, market sophistication, and knowledge and technology outputs.

However, the report indicates that the region’s GII rankings have not significantly improved relative to other regions in recent years, and no country in Latin America and the Caribbean currently shows any innovation out-performance relative to its level of development.

The Sub-Saharan Africa region, which draws its highest scores in institutions and market sophistication. As a result to the fact that economies such as Mauritius, Botswana, South Africa, Namibia, Rwanda, and Burkina Faso perform on par or better than some of their counterpart peers in Europe and South East Asia, East Asia and Oceania.

According to the report, Sub-Saharan Africa has counted more “innovation achiever” countries than any other region, since 2012. With Kenya, Rwanda, Mozambique, Uganda, Malawi, Madagascar and Senegal standing out for being the top innovation achievers this year, and several times in the previous years. While Burundi and the United Republic of Tanzania have also became innovation achievers in 2017. The report emphasizes that preserving and building upon this innovation momentum in Sub-Saharan Africa is now essential.

According to the report, closing the innovation divide between high-income and developing economies was the initial purpose of the index. The 2017 rankings singled out specific ‘innovation achievers’ that have grown relative to 2016 and contribute to the continual effort of overcoming developmental differences. In total, nine come from the Sub-Saharan Africa region, including Kenya and Rwanda, and three economies come from Eastern Europe.

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As raw commodity prices accelerate, food companies likely to reprice products Thu, 15 Jun 2017 06:00:02 +0000 Milk powder prices hover around 5-years high, sugar rises 7.5% in 2 months

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Most Egyptian food companies, which are reporting a big drop in sales volume during 2017 after they hiked their product prices in the wake of the currency flotation, seem to be under new pressure due to a jump in raw commodity prices in global markets.

With sugar and milk powder prices hovering around a multi-year high, companies operating in the Egyptian market could raise their product prices again to avoid reporting losses on an expected jump in input material prices.

But new hikes in their product prices could only mean more drops in their sales volumes and net profits.

The worst is still to come, with new governmental austerity measures underway and an anticipated rise in fuel prices, which add more pressures on these companies to raise their product prices.

Raw material commodity prices have been badly affected in 2017, with a jump in demand against a big drop in supply due to climates problems.

A survey by Daily News Egypt of some food companies working in the Egyptian market showed that most of them care about their market share, even if they may be obliged to accept lower profit margins.

When Egypt floated its currency seven months ago, local companies started raising their product prices gradually, with some companies doubling their prices at the moment.

Milk powder prices weigh on 

With some local companies depending on importing whole milk powder to use in their products in case of a shortage in local supply, a jump in commodity prices in the global market means more pressure on their input costs.

Since the beginning of 2017, whole milk powder prices have inched up about 45% according to data provided by the Global Dairy Trade, a platform that supplies data about the commodity.

The whole milk powder increased by 12.5% in June from the previous month to $3,395 per tonne. Some 22,004 tonnes of the product were sold, up from 21,236 tonnes the previous month, according to data compiled by Global Dairy Trade.

“The market conditions are getting stronger for the milk powder, and there is a growing demand from emerging markets,” AgriHQ Dairy analyst Susan Kilsby told Daily News Egypt.

Emerging markets are among the top consumers of the milk powder around the globe, according to the UN’s Food and Agriculture Organization (FAO).

“Lack of supply in return is casting its shadow over the market. I think prices could continue their rally in the few coming months until the beginning of Autumn; then, milk output from New Zealand is expected to recover this season,” she added.

For Danone Company, a rise in the milk powder prices could hurt the company pricing policy, which may badly affect its market share.

“A jump in milk powder prices could affect our profit margin in the last three months of the year. That also means that we will pay more hard currency to import the powder,” John Mayers, the company spokesperson for Africa and the Middle East, added.

Prices have soared since the authorities in November floated the exchange rate of the Egyptian pound as part of drastic reforms to obtain a $12 billion loan from the International Monetary Fund (IMF).

The value of the pound has since plummeted, with one dollar—then worth EGP 8.8 at the official exchange rate—now worth more than EGP 18.

Sugar prices are on the rise too

Despite the current downtrend for sugar prices, they are gaining momentum again in the last two months, with commodity prices soaring 7.5% in two weeks.

In the international market, prices of raw sugar and white sugar have both risen in the last couple of months, with white sugar on the Intercontinental Exchange up 6.8%, while raw sugar futures rose 7.5%.

“There is a big drop in supply at the current time, which led to a recovery in the white commodity prices,” Reina Augustu, a senior commodities analyst at Agridata, told Daily News Egypt.

She also noted that growing demand from African and Middle Eastern countries is offsetting a low demand in Europe and America.

Sugar output is expected to be less than consumption in 2017-18, according to a research note by Südzucker Group.

“There could be a slight increase in closing stocks, which explains the recent gain in sugar prices. Europe will also see the end of sugar quotas from the beginning of August, which could cause prices to continue the rally,” according to the note.

“Sugar consumption in 2017-18 may rise by 10.4%. This is double the average growth seen in the past decade. There is an excessive consumption of sugar in developing markets. This can explain why prices are rising,” it added.

But even with sugar prices ticking up, any change in pricing policy is critical for Edita.

“We couldn’t raise prices even with sugar prices rising again. At the current moment, all we have to do is keep our market share safe,” a senior official at Edita told Daily News Egypt.

Hero Food Industries’ managing director, Mohamed Bazan, told Daily News Egypt that their pricing policy could hardly change, even with an uptick in sugar prices.

“Volumes of our sales were affected, but the value is on the rise. The volume drop is due to a big drop in customer’s purchasing power in the wake of the flotation,” he explained.

Hero had lifted the price of jam by 30% and that of baby food between 17% and 43%.

Austerity measures another weigh

Among the top reasons that could affect the pricing policy of food companies is the expected governmental austerity measures, such as cutting subsidies and lifting fuel prices.

The Egyptian government is expected to enact a second round of economic reforms at the beginning of fiscal year (FY) 2017/2018.

The country’s inflation rate fell to 29.7% in May from 31.5% in April, the first decline since the currency was devalued seven months ago.

“If there is any increase in the cost of production, I think food companies will put the cost on the consumer as usual,” Ramy Orabi, a senior economist in Pharos told Daily News Egypt.

Dubai-based Arqaam Capital expects prices to soar again in the coming months because of fiscal reforms and seasonal factors, including the holy month of Ramadan, when consumption rates increase significantly, and electricity consumption during the summer rises.

HSBC said in a research note that with Ramadan usually adding to food price pressures, the downward trajectory could reverse in the near term, particularly if the government delivers on the next round of subsidy cuts and VAT increases in July (the start of the new fiscal year).

HSBC also noted that while the headline rate of price growth will remain well above the Central Bank of Egypt’s (CBE) 9% target in 2018, it expects to see signs that inflation has stabilised.

“The high fiscal cost of rate increases and strong foreign appetite for Egyptian debt at current yields also argue against further monetary tightening,” it added.

Meanwhile a research note issued by Capital Economics London also expected prices to resume their rally starting next July.

“Data provide the first hard evidence that the inflationary effects of the 50% drop in the Egyptian pound against the dollar since November have started to fade. And the more timely survey evidence suggests that price pressures have continued to ease—for example, the price components of the PMI have admittedly dropped sharply,” the London-based consultancy explained.

“There may be another temporary jump in inflation if the government pushes ahead with subsidy cuts, as well as plans to raise the rate of the VAT from 13% to 14%,” it added.

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Egypt food security in wake of climate change and water scarcity Wed, 14 Jun 2017 08:00:01 +0000 Egypt has relied on the Nile, the world’s longest river, as the main source of fresh water, since the time of the Pharaohs. For thousands of years, annual floods dumped rich silt on the river’s banks, allowing the country to serve as a Mediterranean bread basket. However, with the completion of the Aswan High Dam …

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Egypt has relied on the Nile, the world’s longest river, as the main source of fresh water, since the time of the Pharaohs. For thousands of years, annual floods dumped rich silt on the river’s banks, allowing the country to serve as a Mediterranean bread basket.

However, with the completion of the Aswan High Dam in 1970, the annual flood became a thing of the past, and soon Egypt might be unable to even support its surging population, which currently accounts for over 90 million citizens.

Food security challenges

In May, the Egyptian Minister of Water Resources and Irrigation, Mohamed Abd El-Ati, has declared a state of extreme emergency as part of the ministry’s plan to get ready for the summer crop season. Abd El-Ati has also launched a campaign in order to limit and eliminate heavy water consumption crops, especially rice.

Egypt has an intensive agricultural sector, with around 5m feddans of crops farmed annually by Egyptian farmers. Such intensive agricultural leads can create problems, such as salinisation, water logging, and nutrient depletion.

According to the Ministry of Water Resources and Irrigation, Egypt’s agriculture sector annually consumes more than 85% of the country’s share of Nile water. Despite the fact that part of Egypt’s fertile land was lost due to urbanisation, this has been balanced by expansion of agricultural areas.

Egypt is already facing a water scarcity challenge with the current 600 cubic metre of water supply per capita per year, forecasted to fall below the 500 cubic metre threshold that marks “absolute scarcity” under international norms by 2025. Salinisation caused by rising sea levels could also one day reduce supply.

Trying to deal with the challenges ahead, the authorities took the decision to raise the prices of water household water by around 200%, following Egyptian President Abdel Fattah Al-Sisi’s remark in one of his speeches in 2016 that water was provided very cheaply.

Moreover, the Grand Ethiopian Renaissance Dam (GERD) and hydroelectric plant upstream, with 60% of the construction already completed, is expected to reduce Egypt’s annual share of the Nile. Talks between the two countries have taken place to discuss ways of filling the planned water reserve slowly and to decrease the negative impact GERD will have. No detailed agreement was reached, however.
With the completion of GERD, it would be able to hold around 74bn cubic metres of water. According to Alaa El-Zawhiri, a member of the Egyptian board of experts studying the effects of the dam. He added that while the dam’s reservoir is filling up, water flow to Egypt will be reduced by around 25% or more for 3 years.

Consequently, both fresh water and energy shortages are expected in the next 50 years, especially with the incredibly high population growth rates, according to a report published by the Geological Society of America’s (GSA) earlier in March.

However, the GSA estimates an approximately 100 cm rise in sea levels between now and the year 2100 at the Nile Delta’s coast. The report cited that the total seal level rise could increase due to a lowering in neotectonic levels, which has affected the Nile Delta in the past. This could lead to the displacement of around 2 million people.

Sustainable solutions

A possible solution to alternative cultivation, especially in the wake of water scarcity could be Aquaponics. Which is defined as the integration of conventional aquaculture (captive rearing and production of fish and other aquatic animal) with soil-less culture (growing agricultural crops without soil) according to the United Nations’ (UN) Food and Agriculture Organization (FAO).

To put it simply, aquaponics is a semi-closed ecosystem that makes use of the symbiotic relationship between plants and fish. A tank of fish turns fish feed into waste, and the water is then pumped out of the fish tank onto growing beds where bacteria then converts the ammonia and other fish wastes into fertilisers the plants make use of. The water then continues through a filter bed, until it returns to the fish tanks clear and oxygenated.

The advantage is that the plants are fertilised in a completely organic way, and you get the addition of producing both proteins and vegetables at the same time.

Aquaponics also uses significantly less water than conventional crop-growing. According to the FAO’s, aquaponics reduce water usage by around 95% compared to normal irrigation. Since aquaponics uses a closed loop of recycling water, some water will be lost to evaporation, but it will not be as significant as if the water was being poured on the ground with all the associated run off.

The agriculture sector currently contributes between 20-25% of the global emissions of greenhouse gases. According to the FAO’s “Climate is changing. Food and agriculture must too” report, which stressed the importance of adopting smart agriculture systems that focus on the application of sustainable agricultural practices, leading to increased productivity and the ability to withstand and mitigate the greenhouse gas emissions and to a reduction in the pressure on water resources.

The report cites aquaponics as one of the sustainable farming systems, due to the fact that it simulates nature, where the fish in the water of the ponds and streams and underdevelopment litter is nourished by plants. There is a symbiotic relationship is clear as fish contributes to plant nutrition, while plants provide oxygen and cleans the water for fish.

Moreover, aquaponic could be established on roofs of houses or any limited space, where the plant is placed in the pipeline or growing beds and is exposed to the sun and provided with the required nutrients from the fish tank water. This helps plants grow faster and more naturally compared to planting on soil.

Ashraf Omran, an international expert in modern agriculture and the director of the office of research and development of the African Economic Community, has conducted aquaponics experiments for 25 years with James Rakocy of the University of Virginia.

“We started our experiments with raising fish in fresh water or brackish water wells. After a period of time, the water became turbid due to the increasing ammonia concentration resulting from fish waste. Instead of getting rid of them, we decided to use this water on the roots of plants, to feed them and, in doing so, the plants acted as a natural water filter,” Omran explained.

He recommended choosing specific types of plants, such as leafy plants lettuce, parsley, basil, and mint. He added that, before determining the type of crops, it is necessary to take into account the amount of cultured fish, the amount of water in the basin, and the amount of fish feed.

Aquaponics systems could be used in fields to cultivate fish at the top of the field and recycle the water to irrigate the crop, said Omran. They have successfully applied this system in palm farms as well as clover farms, he added.

Furthermore, the Central Laboratory for Agricultural Climate in Egypt has conducted research on aquaponics systems to test their effectiveness. During the experiment, the same water within the closed system was used without change for more than 10 years, without any effect on the quality of the fish or plant growth.

According to the FAO, aquaponics is most appropriate where land is expensive, water is scarce, and soil is poor.

Prospects of aquaponics in Egypt

According to the FAO, aquaponics is most appropriate where land is expensive, water is scarce, and soil is poor. Deserts and arid areas, sandy islands and urban gardens, are the locations most appropriate for aquaponics because it uses an absolute minimum of water. Which is the case in Egypt. In aquaponics there is no need for soil, and it avoids the issues associated with soil compaction, salinization, pollution, disease and tiredness.  It could improve people in developing countries’ lives by increasing food security, employment opportunities and economic growth.”

However, this technique has various disadvantages as well, as it can be complicated. In addition, small-scale units will never provide all of the food for a family. Aquaponic systems are expensive, as the owner must install a full aquaculture system and a hydroponic system.

Moreover, successful management requires holistic knowledge and daily maintenance of the three separate groups of organisms involved. Water quality needs to be measured and manipulated. Technical skills are required to build and install the systems, especially in the case of plumbing and wiring.

Furthermore, aquaponics require consistent access to some inputs, such as electricity, which is a requirement of all aquaponic systems. Unreliable electricity grids or a high cost of electricity can make aquaponics unfeasible in some locations—in addition to the fact that fish feed needs to be purchased on a regular basis, and there needs to be access to fish seed and plant seed.

However, these inputs can be reduced by using solar panels or any other renewable electricity source, fish feed production, fish breeding, and plant propagation, but these tasks require additional knowledge and add time to the daily management.

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New controls will lead 30% of importers to exit market: businessmen Mon, 12 Jun 2017 06:00:11 +0000 Restricted policies may decrease the import bill by $2bn by the end of the current year, says El-Naggar

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In December 2015, Minister of Industry and Trade Tarek Kabil issued a decree that was published in Egypt’s official gazette, Al-Waqa’ia Al-Masriya, which said only foreign factories registered in the record of the General Organisation for Export and Import Control (GOEIC) will be allowed to export to Egypt. This was put into effect in March 2016 to regulate the process of importing goods into Egypt as a means of encouraging local production to reduce foreign competition and improve the foreign exchange reserve. Thus, the ministry put some requirements that consist of the registration of foreign manufacturers at GOEIC, and it increased the import customs duty on numerous imported goods, where President Abdel Fattah Al-Sisi issued a decree to raise customs tariffs on some imported goods in December 2016. Furthermore, the ministry obliged the importer to attest import commercial invoices and adopting a policy of “cash against documents”.

Furthermore, on 3 June, Minister of Trade and Industry Tarek Kabil issued a decision to regulate imports and stop the entry of low-quality imported goods to Egypt.

Minister of Industry and Trade Tarek Kabil
(Photo by Asmaa Gamal)

Kabil said that the decision also aims to stimulate injecting more investments into the national industry and to protect domestic production from the unfair competition with low-quality imported goods. Kabil noted that the decision came after consultation with the Federation of Egyptian Chambers of Commerce (FEDCOC).

The minister explained that the decision included a number of new controls on the facilities allowed to conduct importation. These include raising the minimum capital to enlist individual importers from EGP 10,000 to EGP 500,000. The minimum threshold for individual companies and limited companies was also lifted from EGP 15,000 to EGP 2m. Joint-stock import companies must now have a capital of at least EGP 5m.

Moreover, the Importers Record Law saw the introduction of a new condition on the minimum limit of doing business.

Moreover, individuals seeking enlistment on the registry must prove previous expertise and seriousness. The insurance deposit was increased from EGP 3,000 to EGP 50,000 for individuals and EGP 200,000 for legal entities.

The new decision gives import cardholders a period of six months to adjust the capital and insurance to remain on the importers registry. Kabil also stipulated that to be enlisted, the cardholder must have completed a training course to ensure having enough experience.

The new amendment also gives the Ministry of Industry and Trade the authority to take temporary measures, such as suspending violating importers for a period of up to two years in case of harming the health of consumers or violating intellectual property.

These amendments directly address foreign manufacturers, their authorised distributors or companies owning the manufacturer products’ trademarks, compelling them to use a legal representative or an agent to register with the GOEIC to grant products—such as cosmetics, furniture, shoes, motorcycles, or food—entry into the Egyptian market for trade. The resolution has specified the registration’s deadline by giving these foreign manufacturers a two-month notice period. After March 2016, goods that stem from a non-registered source were denied entry into the Egyptian market.

James Moran, former EU ambassador to Egypt

EU, US, and others unwelcome the decree

Meanwhile, newly adopted Egyptian policies have been perceived by many international actors, such as European Union (EU), as unfriendly.

In July 2016, the EU demanded to lift the import restrictions that were set in motion by the Egyptian government. James Moran, the former EU ambassador to Egypt, previously told Daily News Egypt that the EU has held some meetings with the World Trade Organisation (WTO) to discuss the negative results of the new restrictions as they restrict trade between the two parties.

“We held different meetings with Egypt’s Ministry of Industry and Trade in an effort to convince the Egyptian side to cancel these restrictions. The new measures will negatively affect not only foreign investments but also the European exporters and the Egyptian importers,” Moran said. “European factories are facing many difficulties because they are unable to get the registration licence,” he added.

Egypt’s policies as the solution to its foreign currency exchange crisis, besides European exports, are hugely affected by the restrictions as factories claim they are unable to get the registration licence from the GOEIC. The Egyptian side, however, believes they have the right to protect the Egyptian economy by all measures, especially since these measures are aligned with the WTO regulations on trade, according to Moran.

Moran has made numerous statements regarding this issue. He has claimed that the attempt to address the new situation is now on a bilateral level, but the EU will seek assistance from the WTO if both parties are unable to reconcile, which will be expected to effectively disrupt the trade flow and damage business interests.

The EU and Egypt have bilateral trade, which has increased significantly from €11.8bn in 2004 to a peak of €23.9bn in 2012 after the signing of the Association Agreement (partnership agreement), which came into force in 2004, establishing a free trade agreement over a 12-year transitional period. From the European side, there is a general feeling of discontent.

This might not only be exclusive to the EU, but might also affect Turkey, China, and the United States, all of which have announced an unwelcoming stance towards these policies.

Imports reject

Former head of the Importers Division at the Cairo Chamber of Commerce Ahmed Shiha said the proposed establishment of the record, which requires the registering of foreign factories that export to the Egyptian market, violates the World Trade Organisations (WTO) agreements and import and export law 118/1975, which has been in effect for 40 years.

Shiha said the new decree to control imports will in effect circumvent laws that regulate trade and will increase the risk of monopoly. Shiha contended that Kabil is unfamiliar with the laws his declaration will render ineffective. He further expressed his fear that other countries would institute a similar policy on Egyptian exports, which could lead to an imbalance in trade exchange.

“Egyptians products do not see enough domestic consumption, and we cannot protect the local product because we do not have an industry,” Shiha said. “Even Egyptian products depend on imports of raw materials from abroad.”

Local manufacturers welcome the decision

In addition, local manufacturers have welcomed the restriction procedures taken by the ministry, as they were unable to compete with importers who were avoiding taxes by putting artificially low prices on customs bills, consequently enabling them to sell at unnaturally low prices. The policies, thus, were aimed not only to ease the foreign currency reserves policy, but also to boost the local production and consequently decrease unemployment, which will eventually save the economy.

Moreover, Mohammed El-Bahi, a board member of the Federation of Egyptian Industries (FEI), also noted that the decision will boost foreign currency and avoid reductions of foreign currency values by the Central Bank of Egypt (CBE).

While, Hamdy El-Naggar, a representative of the General Division of Importers at FEDCOC said that the decision itself is good and will lead junior importers to exit the market as the restricting policies will seize the importers who have import licences, but their imports have low quality—and some, to import poor materials to sell at a higher price in the local market, manipulate their paperwork that guarantees a quality control check on imports.

El-Naggar added that the restricted policies may decrease the import bill by $2bn by the end of the current year.

Reducing the trade deficit is the reason

After adopting these policies and entering force in March 2016, foreign currency reserves had stood at $16.477bn at the end of January, down from $36bn in 2010. Since the 25 January Revolution in 2011, Egypt’s main foreign currency source, tourism, and foreign direct investment were drained. This problem was aggravated further as a result of Egypt’s heavy reliance on imports, with a value of almost $61bn in 2014/15, compared to exports worth slightly over $22bn and a trade deficit widening to $38.7bn in fiscal year (FY) 2014/15 compared to $34bn a year earlier. While the government has tried to secure loans from sources such as the World Bank and the African Development Bank, President Abdel Fattah Al-Sisi, and his office have introduced policies of rationalising imports to alleviate the foreign currency reserves crisis by introducing local alternatives to non-essential goods.

Due to the application of these policies, the Ministry of Industry and Trade announced a decline in imports during the first quarter (Q1) of FY 2016/2017 by $810m to reach $13.93bn, down from $14.74bn in Q1 2015/2016.

Double-edged decision

Hamdy El-Naggar said that the decision may ultimately lead to higher prices and could potentially harm local production rather than promote it. However, now, having to face no competition, the incentive for ameliorating quality and decreasing prices is almost not existent, which creates a vacuum for monopolists and corrupt market practices.

Further, El-Naggar noted that these polices may increase smuggling of very poor products. He further noted that the cash insurance deposit, increased in the last restrictions put by the trade minister from EGP 3,000 to EGP 50,000 for individuals and EGP 200,000 for legal entities, will be very hard for the junior importers to pay.

He pointed out that the junior importer is very important because they serve short and medium enterprises (SMEs) that seek export by providing them imported raw materials at affordable prices.

“We called the ministry to provide acceptable terms. Furthermore, total cash insurance is the impossible condition,” said El-Naggar. “In addition, the letter of guarantee deducts 100% of the value, which means cash payment and which put more burden on the importers.”

We have also requested the ministry to extend the period of six months to adjust the capital and insurance to remain on the importers registry to be not less than one year.

About 30% of importers will exit the market because of the new controls on executive regulation of importers’ record, according to El-Naggar.

Other importers criticised the decision, noting that the decision may hurt future foreign investment opportunities, as one prominent model of foreign investment in Egypt will be compromised. Protectionist policies on imports will disable international brands and companies from entering the Egyptian market, which not only blocks their chance of exporting to Egypt, but also—and more importantly—blocks Egypt’s ability to attract potential investors.

Possibility of reciprocity

Whether these policies will help improve the foreign currency exchange, the problem is still unclear. As far as trade is concerned, Egypt’s imports from the EU (mainly heavy transportation equipment, fuel, mining products, chemicals, and agriculture goods) and the United States (mainly maize, wheat, soybean oil, and pharmaceutical products) have decreased by 8% and 40% respectively in March 2016, compared to March 2015. These countries may increase their import measurements from Egypt to seize Egypt’s exports.

The list of imports that have decreased includes primary goods that are considered not only essential to Egyptian local production, but also consumption. Therefore, if Egypt fails to replace these products on a local level, imports will inevitably rise again.


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Egypt’s energy future between reality and fantasies Tue, 06 Jun 2017 08:10:16 +0000 Egypt is the second largest producer of natural gas in Africa after Algeria, yet Egypt’s power generation infrastructure is dependent on natural gas. More than 75% of the electricity generated in Egypt comes from natural gas plants. Egypt currently produces about 3.9bn cubic feet of gas per day and imports another 1-1.1bn cubic feet per …

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Egypt is the second largest producer of natural gas in Africa after Algeria, yet Egypt’s power generation infrastructure is dependent on natural gas. More than 75% of the electricity generated in Egypt comes from natural gas plants. Egypt currently produces about 3.9bn cubic feet of gas per day and imports another 1-1.1bn cubic feet per day with an estimated cost of $300mn per month, in order to meet the growing needs of the electricity sector.

The country does have multiple areas of undeveloped reserves, which had not been able to afford their development, as the Egyptian government  had not offered high enough prices to foreign firms capable of developing the reserves. That changed lately with the new Mediterranean discoveries.

Egyptian consumption of natural gas has been increasing by approximately 7% per year over the past decade. The increasing level of consumption combined with the decreasing level of production meant that Egypt was only able to export 5% of its total natural gas production in 2013.

Egypt’s Energy challenges

Although Egypt is a hydrocarbon rich country, it faces numerous energy challenges. Ensuring reliable, affordable, and sustainable energy is still a major challenge for the Egyptian state, especially after the country’s shift in recent years from being an exporter of natural gas to an importer.

Egypt’s gas exports to Jordan and Israel began in 2003, soon after which it began exporting gas through two liquefied natural gas (LNG) facilities to different markets. By fiscal year (FY) 2007/2008, Egypt’s earning from gas exports reached $3.2bn.

In the period between 1995 and 2010, Egypt’s proven reserves more than tripled from 22.8tn cubic feet (TCF) to 78 TCF. Since 2010, the remaining reserves have declined, until the recent exploration of Zohr field, which has an estimated reserve of 30 TCF.

Egypt’s natural gas supply comes from 4 main geographical locations: Western desert (onshore), Nile delta (onshore), Gulf of Suez (offshore), and Mediterranean Sea (offshore).

Before the 2011 revolution, Egypt’s natural gas production was on the rise, increasing by around 6.3% annually between 2005-11 to reach 61.4bn cubic meters (5.9bcf/d) in 2011. This growth was supported by new discoveries, which raised reserves to 2.2tn cubic meters(77.7tcf) in 2011 up from c1.9tn cubic meters (67.1tcf) in 2005. Additionally, new developments and drilling of existing fields, raised the production to reserve ratio to 2.8% in 2011 up from 2.2% in 2005.

Egypt’s supply and demand balance followed a similar path. The production rate started to increase in 1999. While 2004 marked only a slight increase in production, it was the first time in years where the amount of produced gas was greater than the amount of consumed gas. This triggered a turning point in 2005, as production increased by around 28% compared to 2004, and peaked in 2009, followed by a drop in 2013.

On the other hand, energy consumption increased in the first decade of the 21st century, and gas demand grew by almost 9%. Gas became the main source for Egypt’s energy needs, reaching 50% of the total energy supply, compared to 35% in 2000.

However, since 2011, production and reserves have been on a consistent downtrend. This was driven by International Oil Companies (IOCs) reducing exploration capital expenditures (capex) following the Petroleum Ministry’s inability to settle its dues, which meant that natural depletion of resources was not being offset. Government dues to IOCs peaked at USD6.4bn in FY11/12, rising from  $1.3bn in FY2009/10, as FX reserves dwindled.

However, the government repaid $3bn of dues over 2012-16 period, bringing it to USD3.5bn as of December 2016. In March, the government promised to pay 50% of IOCs dues within weeks, but there has been no update since then, CI capital forecast that full repayment will take place after receiving the second tranche of the International Monetary Fund (IMF) loan in June.

Consequently, Egypt’s natural gas reserves fell to 1.8tn cubic meters (63.5tcf) in 2015, down from 2.2tn cubic meters (77.7tcf) in 2011, while gas production fell to 45.6bn cubic meters  (4.4bcf/d) in 2015, down from 61.4 cubic meters  (5.9cf/d) in 2011, reflecting a production to reserve ratio of 2.5% in 2015 vs. 2.8% in 2011.

The demand for natural gas is expected to grow, especially after Siemens signed an €8bn deal with the Egyptian government to establish three high-efficiency natural gas power plants at a capacity of 14.4GW. Regarding the residential sector, Egypt has secured a $1.5bn project to connect 1.5 million households to natural gas.

Despite Egypt terminating a host of export deals to redirect gas supply to the domestic market, the gas shortage became acute enough to trigger nationwide power outages and shut-downs in a number of energy-intensive industries.

Egypt’s Ministry of Petroleum forecasts a drop of gas production by 3.6% to 4.85 billion cubic feet per day (bcf/day) in FY 2017/2018, compared to 5.03 bcf/day in FY 2014/2015. This is expected to lead to curtailed production at factories. The Egyptian Natural Gas Holding Company (EGAS) announced in June that the natural gas supplied will be diverted away from industrial plants in August to accommodate for the increased demand from the electric power plants.

The shortage was partially resolved in April 2015, when Egypt resorted to natural gas imports to fill the gap via Liquefied Natural Gas (LNG) and Floating Storage and Regasification Units (FSRUs) installed in April 2015  and September 2015. We estimate Egypt’s natural gas imports to have reached 8.0bn cubic meters (0.8bcf/d) in 2016 and 8.4bn cubic meters (0.8bcf/d) in 2017. Which makes up around 18.6% of domestic gas needs according to CI Capital estimates, but they believe the supply gap is actually higher (at 27.5% of domestic demand) if high heavy fuel oil usage at power plants is replaced with gas. Plans to install a third Floating Storage Regasification Unit (FSRU) were put on hold in December16, in anticipation of improved supply from the new fields, starting 2017.

However after the discovery of Zohr gas field-the largest gas field in the Mediterranean Sea-, which EGAS aims that it will produce 900mn cubic feet of gas per day by the end of 2017 , and is estimated to produce 2.7bn cubic feet per day by 2020. will help to serve the Egyptian domestic market demands.

As new gas fields come on stream starting 4Q17, we expect Egypt’s natural gas production to increase to c82bn m 3 (7.9bcf/d) in 2020, up from 48.3bn m 3 (4.7bcf/d) in 2016. The largest contribution comes from Zohr Field, which alone, should add 28bn cubic meters (2.7bcf/d) at peak production in 2020. Which will compromise around  34.5% of total gas production in 2020, based on CI Capital’s industry model.

Demand outlook

According to CI Capital “Egypt’s Natural gas outlook”, natural gas demand is expected to considerably increase while new field production picks up—with an annual growth rate of 9.4% over the period from 2016 to 2020 to reach 81bn cubic metres (7.8bcf/d). The main driver for this growth is power demand.

CI Capital estimates Egypt’s natural gas imports at 8.4bn cubic metres (0.8bcf/d) in 2017, which will represent around 13.3% of total gas demand, as well as 16% of total annual peak production from the new gas fields. The cost of these imports is $2bn, comprising around 3.6% of Egypt’s total import bill in FY16/17. 2018 is the first full year of production from the largest finds— from the Zohr field and the West Nile Delta project—and  natural gas imports are forecast to fall by 35.4% to reach 5.4bn cubic metres (0.5bcf/d).

As the result of the currency devaluation and economic reform efforts start to bear fruit in mid to late 2017, natural gas needs should increase heavily. According to CI Capital’s report. Egypt’s real GDP is expected to grow by 5%. in FY17/18 and FY18/19, and 4% in FY19/20.

It forecasts that recovering economic growth alongside population growth should drive power consumption to grow at a 6.9% annual growth rate to 265TWh from 2016 to 2021, while residential and industrial gas demand is forecast to grow at an annual rate of 4.8% to 32.7bn cubic metres (3.2bcf/d) over the same period.

Collectively, this should boost domestic gas demand by 17bn cubic metres (1.6bcf/d) during the aforementioned timeframe if other factors remain constant and no changes are applied to the fuel mix at thermal power plants. Historically, power generation accounted for 52% of demand, while residential and industrial demand collectively accounted for the remaining 48% between 2005 and 2016.

Fantasies &Realities 

Many hope that the new gas field outputs can establish self-sufficiency and drive gas exports. However, after assessing Egypt’s natural gas market CI Capital expects that Egypt will remain a net gas importer in the foreseeable future, despite output from mega fields picking up in 2017/18, adding 53bn cubic metres (5.1bcf/d) at peak, making up around 116% of 2015 production.

Incremental supply has started to hit the market and imports are exported to decrease to reach 7.6% and 0.9% over 2018-19, respectively, of local market needs down from 13.3% in 2017. But this is still a major shift from when Eni’s mega Zohr field was announced in 2015 and there were hopes for exports. On the upside, the higher domestic supply will mean gas imports will contribute 1.6% of the trade deficit by 2020 down from 11% in the current fiscal year.

CI Capital’s report concludes that there will be no room for exports due to various reasons, such as a high increase in local demand of 5.3% from 2016 to 2021, and the fact that the heavy fuel oil (HFO) use in power plants rose due to the gas undersupply to 25% of fuel consumed for electricity generation in FY15/16 from 15.3% in FY11/12 and is likely to be substituted for improved generation efficiency and cost saving.  Suboptimal exploration means that new field output has to compensate the dwindling output from existing gas fields. As Egypt pays late dues to IOCs ($3.5bn in Dec 2016), exploration capex should be reinstated and this may mean improved supply, but not over 2017-19.

According the report, major gas field discoveries—adding 53bn cubic meters at peak—will reduce import needs, from 13.3% of domestic demand this year, down to 7.6% and 0.9%, in 2018 and 2019, respectively.

However, the report concludes that Egypt is unlikely to export in the foreseeable future or achieve self-sufficiency, as domestic demand has grown substantially since major new fields were announced. Production from existing fields depleted at a 2011-15 annual growth rates of 7.1% on the back of suboptimal exploration activity.

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CBE’s decision to raise interest rate continues to stir controversy Sun, 04 Jun 2017 06:00:15 +0000 The decision was great and emphasised the bank’s determination to activate its most important tools in the fight against inflation and not just abiding to the requirements of the IMF, says Abdel-Aal 

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The controversy continues within the banking market over the past few days regarding the Central Bank of Egypt’s (CBE) decision to raise its basic interest rates by 2% on 21 May.

The surprising decision, as described in the market, was the main topic in the meeting between Tarek Amer, the governor of the CBE, and President Abdel Fattah Al-Sisi on Tuesday.

During this meeting, Amer stressed that his decision aimed primarily at reducing inflation, which is the major obstacle to investment, pointing out that the CBE always takes into account all segments of society, adding that the bank seeks to stabilise prices and control markets.

The surprising decision, as described in the market, was the main topic in the meeting between Tarek Amer, the governor of the CBE, and President Abdel Fattah Al-Sisi on Tuesday.

Regarding this decision, a senior banker told Daily News Egypt that there are two main objectives which the CBE aims to achieve: stability of prices and financial stability.

He pointed out that the stability of prices is the CBE’s main job, in which it always uses several methods, such as raising interest rates, to achieve so, while financial stability is a joint goal between the CBE and the government, notably the Ministry of Finance. He stressed that without achieving these goals, the country will not be able to attract any investment.

“The CBE is currently trying to achieve price stability and to control inflation, and this will only be achievable through raising interest rates, regardless of the objection of those who have personal interests,” a source stated.

According to the CBE’s Monetary Policy Committee, the CBE aims to bring the annual inflation rate to 10-16% during the last quarter of 2018.

The source noted that the CBE is not the only entity responsible for achieving high growth rates, and the increase of investment may not be a priority at the moment. Moreover, the high inflation rate will affect negatively on investment, he said.

“Each period has different objectives, and the CBE’s main current objective is to achieve prices and financial stability and then support investment and growth,” the source said.

The source asserted that any increase in debt instruments will be temporary and that the state should bear part of this decision’s impact.

He pointed out that those talking about the disadvantages of the decision and its negative effects should rather present alternatives to control inflation and stabilise prices.

At the moment, there are no quick alternatives that could achieve this goal except raising interest rates, he said, stressing that if the CBE had not decided to raise interest rates, the expected scenarios could have been worse.

He added that raising interest rates would limit consumption and thus reduce imports, which will in turn have a positive impact on the trade balance and the dollar price.

“The decision to raise interest rates was not aimed at supporting the pound against the dollar, as the price of the pound has been stable recently. Actually, if there was an intention to increase the pound exchange, the CBE would do it directly,” stated the source.

He pointed out that the current price of the pound against the dollar may be appropriate to achieve another goal, which is to attract foreign investors so that they would invest in state debt instruments and the Egyptian stock market.

In a statement last week, Amer revealed that Egypt received about $1bn as foreign investment in the two days following the decision, and this reflects the success of the bank’s monetary policy, which takes into account the conditions of domestic and international markets.

“Let’s hold the CBE accountable for its decision in accordance with the upcoming indicators of inflation, market prices, import rates, trade balance, and balance of payments,” said the source.

The real estate sector is one of the most active sectors in Egypt, where it activates about 90 other industries.

According to Ashraf Abdel Hakam, general manager of the Construction and Design Company, the CBE’s decision to raise interest rates by 2% was a “slap” for investment in Egypt in general and for the construction sector in particular.

This decision will push the holders of capital to put their money in banks to benefit from high returns, rather than investing and taking risks, which will negatively affect all economic sectors. He added that this effect will increase the chances of closing some companies and factories.

He pointed out that there is no economic activity that can achieve financial returns of 20%, like savings certificates in banks.

“Construction companies will face many problems due to this decision, as there are some companies that have received bank loans to implement projects, and the bank’s decision will increase the financial burden on companies,” according to Abdel Hakam.

He added that there are some companies that would like to expand and get new business through bank loans, but this decision will force them to reconsider their expansion plans.

Abdel Hakam pointed out that the profit margin of construction business ranges between 4% and 5%, so increasing interest rates by 2%, while the prices of building materials and construction costs are still unstable, will damage this sector and may lead many companies to end their activities in the market.

“The coming period may also witness a rise in the prices of building materials, especially as most of the factories have obtained bank loans, and they will add the burden on the companies. The decision may also increase prices of housing units in the coming period,” according to Abdel Hakam.

He suggested granting credit facilities to the construction companies, as well as easing the issuance of letters of guarantee, in order to reduce the negative consequences of the decision.

Prominent banking expert and board member of the Suez Canal Bank and the Arab Sudanese Bank, Mohamed Abdul Aal,

On the other hand, Mohamed Abdel Aal, a board member of the Suez Canal Bank, said that the CBE’s decision was great and will have a positive impact on the national economy.

Abdel Aal ruled out that this decision came upon the requirements of the International Monetary Fund (IMF), stressing that the decision was wise and independent.

“The decision showed the CBE’s insistence to its most important tools in the fight against inflation, which reached unprecedented rates of 32%. Raising interest rates will help the bank bring the inflation rate to 13% in the fourth quarter of next year,” said Abdel Aal.

He added that raising interest rates will also lead to achieving a reasonable exchange rate of EGP 13-15 per dollar by the beginning of the second half of next year.

Abdel Aal pointed out that the increase in interest rates will result in continuous increases in foreign exchange reserves, which will subsequently increase the credit rating of Egypt.

He noted that increasing the country’s credit rating will give the government a better chance to borrow from abroad and sell its dollar bonds in international markets at a lower cost than domestic borrowing, which will help reduce the domestic debt and the budget deficit.

Abdel Aal explained that when the Egyptian pound value gradually increases by two pounds in the near future, it will compensate the borrowers for the high cost of loans, and the devaluation of the customs dollar will also decrease the cost of importing and production inputs; thus, the price of commodities would fall.

He added that raising interest rates will compensate a very large segment of the household sector as a result of the increase in families’ revenue from their deposits in banks. The loans provided by banks to small and medium-sized and microenterprises at a 5% interest rate will reduce the high borrowing cost that resulted from the new rise in interest rates.

Regarding the decision’s impact on economic growth and investment, Abdel Aal said that Egypt has an investment law for the first time, which offers competitive incentives and a promising investment map, in addition to a large market and cheap labour. All of these features would reduce the impact of raising interest on investment.

According to Ashraf Abdel Hakam, general manager of the Construction and Design Company
(Photo handout to DNE)

A prominent banking expert told Daily News Egypt that the increase in interest rates was limited to short-term savings portfolios in banks, because there are strong expectations that the high interest rates are temporary and will decline again.

During the past two weeks, only a few banks raised their interest rates, although the CBE has raised its interest rates by 2% in one go.

The move inside banks was limited to raising the interest of some savings portfolios, which are linked to the deposit rate at the CBE, along with a very limited number of short-term saving portfolios.

Banque du Caire raised its interest rate by 2% on variable yield savings, which are linked to the CBE’s deposit rate. It also decided to increase the interest rate on the rest of deposits and savings accounts variably, while it kept the yield on the savings certificates unchanged.

The National Bank of Egypt (NBE) raised the interest rate on savings accounts of all types by 0.75% and deposits with maturities of less than 6 months by 1%.

The Misr Iran Development Bank (MIDB) raised the annual return rate on savings accounts by about 3% to reach 15% instead of 12%. The National Bank of Kuwait (NBK) also decided to raise the interest rate on deposits, savings accounts, and current accounts with yields by 1%.

The Commercial International Bank (CIB) raised the interest rate on deposits by 1%. The bank kept interest rates on other savings portfolios and retail loans unchanged. The National Bank of Greece (NBG) raised the interest rate by only 2% on variable yield certificates.

The Industrial Development and Workers Bank of Egypt (IDBE) decided to raise the interest rate on savings accounts by 1% and raise the return on deposits by 1.5%.

According to the source, the banks would not price their long-term savings portfolios based on the CBE’s basic interest rates, because this increase addresses only short-term interest rates.

For his part, Abdel Aal believes that the maintenance of high-yield certificates in banks, especially government ones, came only in response to the CBE’s decision.

He added that state-owned commercial banks account for the largest share of deposits and loans in the Egyptian market; therefore, the private banks’ responses do not affect the market.

According to Abdel Aal, it is only a matter of time before the banks that have not moved their interest rates will be forced to raise them to keep their customers and maintain their liquidity. “The profits of banks do not come from the difference in interest rates between deposit and lending only; therefore, the banks will not lose because of the high cost of funds, as some claim,” he said.

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After formation of media regulatory bodies, lights for press freedom dim Thu, 01 Jun 2017 07:00:16 +0000 The parliament’s issuance of two laws to regulate the media raises doubts of its efficiency

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In February 2011, former prime minister Essam Sharaf abolished the existence of the Ministry of Information, which was present since the 1980s to govern the media, either by setting the code of ethics or imposing censorship.

Although months later the ministry was reinstated, it was again abolished in June 2014, leaving the door open for legislators to draft a new law to regulate the media in Egypt, which has always faced restrictions.

The ministry was mainly concerned with regulating the work of state-owned media, which now has less audience than before as a result of accessibility to privately owned media and the variety of content they offer.

As the state realised the importance of replacing such a body with another regulator, not one body was established, but three: Supreme Council for Media Organisations (SCMO), National Press Authority (NPA), and National Media Authority (NMA).

However, journalists had doubts regarding the roles of the three bodies, and whether they would work towards the independence of media or against it.

Well known journalist Ragaei Al-Merghani, who was active in terms of press legislation reform, told Daily News Egypt that it was logical to replace the Ministry of Information with such bodies, as the ministry was mainly governing the Egyptian Radio and Television Union (ERTU), but now the map has changed, and the leading outlets now are the ones privately owned; hence, the presence of the ministry was no longer logical.

Al-Merghani said that the three bodies were created for a certain role: to dominate the media and the press.

“I assume that the role of the three bodies is to modulate the harmony [of the media] with the red lines set by the state,” he added.

The SCMA is assigned to generally regulate media and press affairs, while the NPA, considered as the replacement of the former Supreme Press Council, looks into press-related legislations and monitors the performance of state-owned newspapers on the financial and administrative levels, as well as appoints heads and editors-in-chief of state-owned newspapers.

The NMA’s role is similar to that of the NPA, except that it is concerned with broadcast media rather than print.

The three bodies’ chairpersons were to be chosen by the president and their work would start by a presidential decree.

“Practically speaking, security bodies are who formed these institutions, since the president only seeks assistance from them,” said media analyst Hesham Kassem, who doubted the significance of the role of the three bodies on the ground.

Kassem further questioned the selection of members of the three bodies, which he believed resulted in conflict between them once they started their work, whether about their hierarchy or headquarters.

The establishment of three bodies was stipulated in the 2016 media law thatwas ratified by President Abdel Fattah Al-Sisi in December 2016.

Kassem explained that the seven articles in the Egyptian Constitution about media regulation stipulated the formation of the three bodies. He argued that it should have been just an article to guarantee press freedom and a suitable environment to practice journalism; however, legislators did not consider the constitutional articles enough regulation for practising media.

“No constitution in any developed country includes such details about the formation of media institutions; in fact, developed countries don’t have such regulating institutions,” he said, adding: “By including such articles, the council who drafted the constitution did not leave a chance for legislators to take advice from experts.”

The year. 2016 witnessed several disputes, talks, and compromises regarding press regulations, and by the end of the year, the parliament decided that regulating the media would not require drafting one law, but two instead. The first one—ratified in 2016—was the one that resulted in the formation of the three bodies and was mainly concerned with regulating the organisational structure of media outlets.

One of the three bodies’ main roles was to present recommendations to the parliament about the second draft media law. Local media had reported several conflicts between members of the three bodies.

Earlier in May, Makram Mohamed Ahmed, chairperson of the SCMA presented the finalised memo of the three bodies’ recommendations to the parliament; however, no official statement was issued by the council to clarify the recommendations, according to member of the council’sHatem Zakareya.

“We hear from local media that they presented their recommendations to the parliament. They cannot be taken seriously,” Kassem said.

Furthermore, Al-Merghani said that the law would be of the same texture as the 2016 law.

“They gave the priority to the regulating part and drafted it in the first law so that the three regulating bodies would have a say in the second law,” he explained.

Member of the SCMA Gamal Shawky said that the council presented its vision to the parliament about the draft media law, in which the council is committed to implement the constitutional articles of freedom of expression, reported state-owned newspaper Al-Ahram.

Shawky explained that the council also recommended drafting a law to guarantee the freedom of access to information, except information related to security concerns and private information of citizens.

According to Al-Ahram, the council recommended the establishment of a legal council of members from the three institutions to draft a unified administrative bylaw for media professionals, and asserted the requirement of establishing a media outlet was to notify the council of its content and sources of funding, and no media outlet is to be established or working before receiving a licence from the council.

The council added in the recommendations that dismissal of journalists should not occur until the employer notified the concerned syndicate.

Head of the Media and Culture Committee Osama Heikal announced earlier in May that the draft law is currently in the making and considering the recommendations of the concerned parties, adding that the committee is currently discussing and researching all the related issues and would not be in a hurry to issue the draft law.

Nonetheless, before the parliament decided to draft two media laws instead of one, several media professionals, as well as the Press Syndicate, had worked on drafting a Unified Media Law (UML), which stakeholders considered to be one of the most progressive draft laws, as it guaranteed the press freedom principles that they had been calling for years before.

The process of drafting the UML witnessed several delays and amendments by several parties, as it tackled controversial issues that media professionals faced.

Journalist and member of the legislative committee Hussein Abdel Razek, who supervised this specific law, said in a press conference of the syndicate in 2016: “The law not only cancels imprisonment, but also some crimes related to ‘insulting public officials’, which only exist in Egypt, all of which are crimes that are hard to prove and are often used against press freedom.”

The UML included seven chapters organising press freedom, banning imprisonment in publishing crimes, and criminalising the assault on journalists while doing their jobs, as well as comprising boards of directors of news institutions with elected members rather than appointed members, in addition to specifying new standards for the selection of CEOs and editors-in-chief.

Furthermore, former head of the Press Syndicate Diaa Rashwan, said during the press conference that the UML marked the first time in Egypt’s modern history that laws regulating media were drafted by media professionals rather than the government. However, the UML never saw light.

Al-Merghani said that even the UML represented the minimum of demanded freedoms, as it was a compromise between all concerned parties.

“We should have used the constitutional articles to create a professional atmosphere for journalism,” he added.

“There should not be a media law in the first place; about ten articles in the constitution would be enough because the media should be regulated by the same laws that regulates any other profession,” Kassem explained, arguing that the main objective of media regulating laws is always to silence voices.

Regardless of the UML, the parliament is currently working on the second media law, which would be concerned with regulating practicing media and journalism.

Media professionals have raised concerns about the issues that the draft law should aim to solve, including journalist imprisonment, arbitrary dismissal, press syndicate membership, and financial security.

Al-Merghani said that the basic principles that guarantee a professional atmosphere for journalism should be the main concern for the next draft law, which he believed to be present all over the world.

“Such freedoms do not mean chaos; on the contrary, chaos is a result of bias and​ interference in media professionals’ work,” he explained.

There have​ been several conflicts between the state and the press. For instance, security forces raided the Press Syndicate headquarters in 2016; official statements show that there are more than 20 journalists detained; and, recently, the state reportedly blocked a number of local news websites for security reasons.

“The main issue is that the president does not believe in press freedom, and there is no seriousness towards having the type of media that acts as a watchdog over society; they only count on the Administrative Authority Control for that role, and with such a concept, we will need about 3,000 years to develop,” Kassem said, adding that the media performance would soon witness a setback.

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Borrowing rate will not slow down as debt is set to increase Thu, 01 Jun 2017 06:00:59 +0000 The finance ministry sold new bonds on international markets worth $3bn

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Ever since the Egyptian 25 January Revolution in 2011, the economy of Egypt has been facing many issues and difficult situations due to the budget deficit, the gap between imports and exports, the problem of finding sources of foreign currency, and the issues of old laws that hinder any progress with improvements of the investment climate.

Since President Abdel Fattah Al-Sisi came to power in 2014, different officials of his governments implemented several different reforms, such as the economic recovery plan under Hazem El-Beblawi, up to implementing subsidy cuts under Sherif Ismail, and floating the Egyptian pound by Tarek Amer, the Governor of the Central Bank of Egypt.

Egypt has been trying to find new sources of the foreign currency, yet borrowing became the main solution for this problem.

The government of Ismail received several loans from the International Monetary Fund, the World Bank, the African Development Bank, and other sources; however, the loans with the highest interest rate were treasury bonds.

But is the hike rate of Egypt’s foreign debt going to stop at this level?

Minister of Finance Amr El-Garhy

On 24 May, the Ministry of Finance sold new bonds on the international markets to receive loans worth $3bn. The government is to receive the money on 31 May.

According to an article issued on 24 May, Bloomberg said that according to a person familiar with the deal Egypt is offering more of the debt it issued in January, but at lower costs across maturities in 2022, 2027, and 2047.

Bloomberg added that the sale comes at an opportune time, explaining that it increased the appetite for riskier assets, “which has driven the cost of capital down for developing-country issuers and the premium investors demand to hold emerging over US sovereign debt is near its lowest in more than two years.”

Egypt is offering investors $750m of a five-year debt, yielding 5.45%, compared with a yield of 6.125% when the notes were first sold, according to the guidance who told Bloomberg.

A tranche of $1bn ten-year bonds will yield 6.65%, compared with 7.5% on the original notes, while $1.25bn of a 30-year debt will yield 7.95% versus 8.5% back in January.

Daily News Egypt asked experts about the new bonds and where the budget is heading.

Egypt’s foreign debt could easily exceed $100bn by the year 2020, according to the managing director of Multiples Group, Omar El-Shenety, who added that the increasing foreign debt is worrying.

He said that Egypt has received many loans in the last period from many sources such as the International Monetary Fund (IMF), the World Bank, and the African Development Bank.

He added that there are many other loans the government does not take into account in their budget calculations, such as loans provided to finance governmental projects and institutions like the Dabaa nuclear power plant, the power plants of Siemens, and loans related to buying weapons for the army.

El-Shenety believes that Egypt could get stuck in the trap of foreign debt in the near future, adding that the rate of foreign debt compared to the GDP will reach 150%, which is a very critical ratio that could affect the country’s outlook and put more burden on future generations.

He said that the foreign debt is bound to account for almost 50% of the government-held received loans without the state considering how they could possibly pay it back.

Amr El-Garhy, Egypt would receive another part of the IMF’s loan, this one worth $1.25bn

Loans from bonds are more dangerous for the country because it usually requires higher interest rates than loans from international bodies such as the IMF and the World Bank, he added, continuing that the government must find other sources of foreign currency, aside from borrowing.

El-Shenety furthermore said that the government of Egypt, such as any other government, does not consider paying loans back as much as it puts an emphasis on its GDP growth rate to the level where the debt becomes less worrying, yet this is not as easily achieved as the government might think.

He said that the government in January expected a growth rate of 6% in fiscal year (FY) 2017/2018, then decreased its expectation to 4.6%, which likely too will not happen because of the current situation of the country and the region as a whole.

He added that if the government continues to borrow at the same current rate, the debt ratio will easily reach 160-170%, which is a very dangerous level that could affect Egypt’s economy.

The current rate of the public debt compared to the GDP is 130% now, he noted.

He believes that the debt will increase in the next months because Egypt will receive the rest of the IMF loan, the third tranche of the World Bank loan, and the third tranche of the African Development Bank’s loan.

The IMF has approved a three-year loan programme worth $12bn for Egypt in November 2016.

According to Minister of Finance Amr El-Garhy, Egypt would receive another part of the IMF’s loan, this one worth $1.25bn, by the second half of June.

In April, Egypt received the second tranche of the African Development Bank’s loan worth $500m of a total 3-year loan programme worth $1.5bn.

Moreover, Minister of Investment and International Cooperation Sahar Nasr said in April that the government wants the World Bank’s board of directors to accelerate the process of approving the third tranche of the loan to Egypt, worth $1bn, of the total $3bn loan.

Nasr said that the government wants the World Bank to expand financing to develop projects in Upper Egypt as well.

Moreover, El-Shenety said that Egypt pays almost 35% of its budget for loans interests, which consumes all of the money that the government cut from the subsidies.

The government wants the World Bank to expand financing to develop projects in Upper Egypt

From another direction, in January, the Deputy Minister of Finance for Monetary Policies Ahmed Kojak said that the government won’t sell any other bonds in FY 2016/2017.

He explained that the government has covered the financial gap of the current FY, adding that the gap for FY 2017/2018 is also almost covered, which means there is no need for another issuance. However, he added that the ministry might consider selling new bonds by the end of 2017—during FY 2017/2018—if the government needs foreign currency.

Former economist at CI Capital Aliaa Mamdouh said that the government did not officially announce the reasons for selling more bonds to get money, yet she believes that the money raised through the previous issuing was not enough to finance Egypt’s deficits. She stated that the government has to announce how it wants to spend the money, adding that the current crisis will grow if the money got spent on anything else than improving the economy and the investment environment.

She also believes that Egypt needs foreign currency resources to cover its financial deficits.

Mamdouh stated that when the Central Bank of Egypt floated the Egyptian pound, the government thought that attracting foreign investments would make it receive foreign currency, which did not happen due to the current situation.

The way the government spends that money is not known yet, Mamdouh stated, adding that the as long as there are no new sustainable sources for foreign currency, the government is likely to spend all of the money for filling budget gaps.

The CBE stated that the local public debt has increased to 94.1% of the GDP, estimated at EGP 3.245tn at the end of 2016

She believes that issuing international bonds puts more burdens on future generations.

It is worth mentioning that the IMF published its expectations about Egypt’s foreign debt and gross international reserves in a report on 25 January. The report expected that Egypt’s foreign debt will reach $102.4bn by FY 2020/2021, and international reserves will increase annually to record $37.58bn by 2020/2021.

However, the executive chairperson of Union Capital Incorporated, Hany Tawfik, said that the local debt is worrying too.

He believes that the national debt is at a high level where the government has to pay a lot of interest, which increases the budget deficit, resulting in a vicious cycle of borrowing more money.

The CBE stated that the local public debt has increased to 94.1% of the GDP, estimated at EGP 3.245tn at the end of 2016.

He said that the government must think of other solutions for raising money, such as increasing its income, which could fix the problem of borrowing.

He explained that the government has to legalise the informal sector to raise the income, while also raising tax revenues to a rate of 25% of the government’s total income.

Tawfik said that the high number of government employees—who consume a lot of the country’s budget—must be reduced to an appropriate number, a measure which would be very hard to execute and take a lot of time to implement.

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“The People’s Right” campaign retrieves thousands of feddans of state property Wed, 31 May 2017 09:00:50 +0000 4656 incidents of encroachments of state properties in the northern lakes were recorded in 2015 and 2016, according to the GAFRD

The post “The People’s Right” campaign retrieves thousands of feddans of state property appeared first on Daily News Egypt.

Thousands of unlicensed buildings have been removed since President Abdel Fattah Al-Sisi proclaimed the beginning of “The People’s Right” campaign to retrieve state property and eradicate all encroachments in all governorates. The armed forces joined the campaign alongside security forces.

On Sunday, Egypt’s Prime Minister, Sherif Ismail, held a meeting with the governors to follow the developments regarding the removal of all encroachments on state property and to legalise the situation of violations.

The meeting discussed a proposal of creating databases for the state’s lands, depending on a geographic information system (GIS) in order to observe the changes, encroachments, and illegal buildings. By depending on technology, the state will be able to verify accurate data about encroachments and use the data to combat corruption.

Minister of Agriculture Abdel Moneim Al-Banna assigned the General Authority for Fish Resources Development (GAFRD) to coordinate with the ministries of interior and environment to remove any encroachments at lakes.

The GAFRD said that it has recorded 4,656 incidents of encroachments of state property in the northern lakes in 2015 and 2016. The total number of encroachments at Al-Manzala, Borollos, Idku, and Mariout lakes reached 64,000 on a total area of 17 feddans, according to an official report issued by the GAFRD.

The authority, which is affiliated to the Ministry of Agriculture, announced that the encroachments were located in the governorates of Damietta, Port Said, Daqahleya, Kafr Al-Sheikh, Al-Beheira, and Alexandria.

The report shows that the sum of recorded encroachments at Al-Manzala Lake in Port Said and Daqahleya reached 3,517 incidents over 57,498 feddans. According to the report, no orders of removal were issued for the 17,000 encroachments and 870 feddans of the lake in Daqahleya. Moreover, though total encroachments in Port Said recorded 37,000 on an area of 364 feddans, only one order of removal was issued.

Meanwhile, Damietta governorate has issued the removal of 205 properties, or an area of 2,264 feddans, but no decisions have been implemented yet. Also, 1,605 encroachments were recorded in Al-Borollos Lake, and a total of 105 feddans were removed. At Idku Lake, encroachments spread over 4,532 feddans were recorded, and the total encroachments at Mariout Lake recorded 382 feddans.

According to the report, the main sources of contamination in the lakes are sewage, agricultural runoffs, and industrial wastewaters.

Chief of the GAFRD Khaled Al-Husseiny believes that not removing encroachments was a result of the security situation. This has now changed after the presidential declaration to remove encroachments.

More than 400 properties removed in Kafr El-Sheikh, Assiut, Menoufia and New Wadi, according to ministry
(Photo ministry handout)

On 17 May, Ibrahim Mehleb, the president’s assistant for national projects and former prime minister, met with Minister of Defence Sedki Sobhi and with the ministers of interior, agriculture, and local development, as well as with the president of the Administrative Control Authority (ACA), to discuss the procedures of handling encroachments on state lands and ending illegal land acquisition.

The meeting discussed implementing Al-Sisi’s orders to devise a plan to count and remove all encroachments and the cooperation between the executive authorities and security directorates by the end of June.

Remarks from the governors were reviewed during the meeting as well as the procedures regarding how to prevent the return of such encroachments.

Mohammed Mahdi, owner of one of the demolished buildings in Daqahleya, told Daily News Egypt that although he has a licence for the building, the local administrative demolished and completely removed the building; Mahdi, however, refused to show reporters his licence, claiming that he is afraid of facing problems with the governorate.

Governor of Cairo Atef Abdel-Hameed said that local authorities coordinate with the Ministry of Interior before demolishing encroachments and that a committee of local officials was formed to assure and review the measurements of removing.

In Sharm El-Sheikh, Sandra Redshaw, a Dutch citizen who used to own a building in Sharm, claimed the local authorities destroyed her building. She added that she had bought the land from the Bedouin several years ago, but the government did not acknowledge buying land with this approach, so they took back the land.

She told Daily News Egypt that the South Sinai governorate gave her two options: take a different piece of land in the area or to take an apartment in Sharm El-Sheikh. She has not yet decided which of the decisions would be more convenient for her.

In Daqahleya governorate, the local authorities removed more than 598 square kilometres and 10,000 feddans in Al-Manzala Lake, according to the governor, Ahmed Al-Shaarawy.

Radi El-Halwagy, one of those whose house has been destroyed by the government, said that the demolition does not harm him so much, on the contrary it will help him legalise his position.

Urban planning and local administration expert Haytham Shawky welcomed the idea of using the GIS system in observing the encroachments. He believes that it will facilitate the procedures of counting and replanning the area.

Shawky said that the GIS needs highly qualified and trained professionals to be able to use the technique or geographers and surveyors from the private sector.

Anti-encroachment campaign focuses on agricultural lands such as by the Nile river, said the ministry
(Photo ministry handout)

Lawyer Alaa El-Basiouny explained that some people who already have buildings with no licences sometimes predict that there are orders of removal, so they bribe people from the local administration so that only one wall or a fence would be removed instead of the whole building. After that, the government considers this a resolution, and the land therefore becomes legal after paying a fine.

If the state really wants to prevent illegal buildings, it has to offer alternatives for people, especially in the countryside, where there is an overpopulation and lack of land to build on other than cultivated lands, El-Basiouny added.

According to an official statement, the committee, assigned to retrieve the state’s land, had received 17,000 requests for legalising land plots, stating that the committee retrieved nearly 70,000 feddans of cultivated lands and 7,000 feddans for the authority of the new cities, in addition to removing encroachments at the Nile and road buffers.

The meeting stressed on the state’s efforts to consider social aspects, as well as facilities for serious investors and small farmers to legalise their positions.

In his speech during the inauguration of several projects in the governorate of Qena, Al-Sisi urged the police and the military to end illegal land acquisition. The president criticised the performance of the government, urging it to improve and forcefully settle the legal status of land taken by force from the state.

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Most food and beverage companies have decreased size of products by 20% Wed, 31 May 2017 06:00:42 +0000 Shrinkflation grips Egyptian companies hit by rising production costs

The post Most food and beverage companies have decreased size of products by 20% appeared first on Daily News Egypt.

Within a few weeks of floating the currency last November, most Egyptian companies have raised their product prices in order to cope with a jump in production costs that came with the currency swing.

A jump in product prices have resulted in a big fall in companies’ sales, making them resort to shrinkflation to revive their sales and boost their presence in the market.

Shrinkflation is a rise in the general price level of goods per unit weight or size, with a corresponding reduction in the weight or size of the item sold; hence, the cost of the packaged product remains the same.

This does not affect inflation measures such as the Consumer Price Index or Retail Price Index, because there is no increase in the cost of a basket of retail goods and services.

A survey conducted by Daily News Egypt on twenty products in the market has found that most of these products have been reduced in size by almost 20% in less than one month after raising prices at least one time since Egypt abandoned its dollar-peg system last November.

The shrinkflation was first known in the United States in 1970 and was widely used following the financial crisis in 2008, when manufacturers of food, beverage, and household goods were desperate to keep reporting profits in a never-ending cycle of perceived growth.

Many of the manufacturers realised that profits cannot be achieved by simply raising prices. Subsequently, they turned to shrinkflation.

Another famous recent example for shrinkflation is Britain. Following Brexit, most British companies hit by a plunge in the British pound price, have reduced the size of their products to escape raising prices due to higher production costs.

Manufacturers and supermarket chains in the UK know from previous experience that hit the country in 2007, they will be punished by penny-pinching shoppers if prices rise too far or too fast.

As a result, some food groups resorted to shrinkflation by reducing package sizes while keeping the price constant, in hopes of persuading customers to buy their products.

Food companies take the lead

For most food and beverage companies operating in the Egyptian market, shrinkflation is a good viable option, not only for them, but also for the consumer who may tend to save money in tough conditions.

“We opted to lessen the size of many of our products instead of raising prices again in this tough condition, which is making everyone suffer—not only the manufacturer, but also the consumer,” said Moahmed Nasef, a senior product manager at Edita.

“Inflation is at a very high level, and customers can’t afford to pay more with the purchasing power already falling,” he added.

Prices have soared since the authorities in November floated the exchange rate of the Egyptian pound as part of drastic reforms to obtain a $12 billion loan from the International Monetary Fund (IMF).

The value of the pound has since plummeted, with one dollar—then worth EGP 8.8 at the official exchange rate—now worth more than EGP 18.

In April, core inflation neared 33% and rose above 44% for foodstuffs.

Danone is another example of a company that resorted to shrinkflation in the Egyptian market.

The company, which faces a fierce competition in the dairy products market in Egypt, has reduced the size of almost all its products.

“Small size sometimes is a good option to protect your presence in the market. We have decided to lessen the size instead of increasing prices in lots of countries in the Middle East, including Egypt,” a company spokesperson told Daily News Egypt.

“Rising costs are not only a result of the pound devaluation. Milk powder prices are hovering around a multi-year high. This is also a good reason why we are seeking to reduce production costs and simultaneously maintain profitability,” John Mayers, the company spokesperson for Africa and Middle East, added.

Whole milk powder prices rose 35% in 2017 so far, following an 18% gain in 2016, according to data published by “Global Dairy”, a data provider for milk product prices.

Chocolate lovers weren’t lucky either, with most companies working in Egypt reducing the size of their bars to save costs.

A survey by Daily News Egypt for five different kinds of chocolate has found that most of them have been reduced in weight by almost 25g.

Spokespersons for Cadbury, Mars, and Snickers refused to comment on Daily News Egypt’s report.

Beverage and others are on track too

Moving on to the beverage sector, most companies working in the Egyptian market have resorted first to raising prices to help maintain their profitability margins.

But starting last month, some companies tended to lessen the quantity of the package instead of the size to help offset the rise in production costs.

“Production costs​ are on the rise, and we have decided to lessen the size of certain products instead of raising the prices another time,” said Passant Fouad, a senior media officer in Juhayna.

Juhayna is one of the biggest dairy and juice producers​ in Egypt, with a production capacity of up to 3,500 tonnes per day of dairy and juice, according to the company’s website.

The company has already almost doubled its products’ prices since flotation.

“This could be a good option not to raise prices again,” she confirmed.

Lamar Egypt is another beverage company that reduced its product size.

“Sometimes you need to find solutions to sustain growth. A small quantity with the same price is a good option for us. We have already raised our product prices, and it was the time to find other solutions instead of taking this step again,” said a senior official in the company, who refused to be named as he is not authorised to speak to the media.

Lamar Egypt has a 15% market share of the juice market in Egypt, according to the company website.

“But let’s say that the decrease in the quantity was almost unnoticeable by our customers, albeit we changed the sizing information on the package,” he added.

“We don’t have any complaints; our sales are growing, and we target more in the coming few months,” he added.

“Make it smaller … that’s better”

For Ashraf El Kady, a senior officer in the Ministry of Transportation and a parent of a family that consists of six members, a smaller package with the same price is far better than raising prices while maintaining the same size.

“I think that’s far better for a lot of us who want to save every penny. We are living in tough circumstances. I have to borrow every month almost a week after the month starts to feed my child,” El Kady told Daily News Egypt.

“Sometimes my child asks me to buy chocolate for him, which I couldn’t afford to buy at the current high prices. So I agree if the manufacturers​ make a certain product smaller, but keep its price the same. Our salaries are the same. We need more help from the government to keep living,” he added.

Egypt, where almost half of the population lives near the poverty line, announced on Monday a social welfare programme worth $2.5 billion to include increased subsidies and tax exemptions for the country’s poorest.

A Finance Ministry statement on Monday said the new programme would include a salary increase for state employees to counter the rise in the cost of living.

“Sometimes, I didn’t notice any change in the size of the product. But let me tell you something: I don’t care if it is a bit smaller; the most important thing here is that I can still afford to buy it,” said Reem Monier, a household wife for a four-person family.

“I have stopped buying​ lots of products that are not necessary for me, due to big jumps in their prices. If they reduced the size of the package and kept the prices the same, I think I would continue to buy them while I am very satisfied,” she told Daily News Egypt.

“We are awaiting more jumps in prices with the government ready to reduce subsidies. I think companies should think about this step before raising the prices of their products again,” Reem finished.

Egypt is expected to again cut fuel subsidies as part of the reform package, although there is still no word about how much or when this would come into effect.

Late last year, the government adopted a value-added tax and cut fuel subsidies as part of its reforms for the IMF loan.

Even analysts are pro-shrinkflation in the Egyptian market.

“In the Egyptian market case, I think more hikes​ in product prices could simply result in stagnation,” said Marina Gonzalez, a senior analyst at IRI, a London-based retail consultancy.

“This could be the option of necessity to avoid a big drop in their sales. I think also that people there will prefer a smaller or even a lower quality product more than a new hike in prices,” she added.

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Parliament’s insignificant debates interfere with personal lives as legislative tasks linger Tue, 30 May 2017 09:00:06 +0000 MPs have been talking about a number of "illogic" issues, lack understanding of responsibilities, say experts

The post Parliament’s insignificant debates interfere with personal lives as legislative tasks linger appeared first on Daily News Egypt.

Between trying to tell people what to wear and what to name their children, members of parliament (MPs) have not stopped stirring controversy by discussing odd laws to be implemented, which had the public raise many questions on the validity of MPs’ qualifications and whether or not they are aware of their parliamentary roles.

At a different time of the year, a number of members issued several legal suggestions and bills that stirred public controversy because of their unconstitutionality. These bills were held against the members, portraying them as unqualified people.

Sometimes some MPs suggest random and illogic legal ideas or bills that undermine the parliament’s position and raises questions on its role regarding citizens and the state.

The parliament is the legislative authority of the country and is considered the third branch of the government. Major decisions should be forwarded to parliament for discussion prior to the president’s ratification and after the cabinet’s approval.

Weeks ago, MP Badeer Abdel Aziz, a member in the parliament’s Planning and Budget Committee, submitted a bill that stipulates preventing parents from naming their children foreign names, or else they would be imprisoned and/or pay a fine.

The bill stipulated that if the parents insisted on naming their children foreign names, they will be have to pay a fine that is not less than EGP 500 and not more than EGP 5,000, as well as a prison sentence of not less than 24 hours and not more than 6 months, and/or one of these two penalties.

The bill that has become known in media as the “foreign names” bill stirred huge controversy, as the issue was seen as restricting people’s freedom. Furthermore, there are no articles in any law in any country that puts such restrictions on people names—not even in the constitution, so this law is unfounded and biased.

Daily News Egypt spoke to political analysts and sought their comment on such suggestions and whether introducing such legislations would impact the parliament’s credibility or not.

Amr Rabie, the vice president of Al-Ahram Center for Political Studies, commented that such bills or legal suggestions reflect MPs’ lack of experience and their incapability to finding meaningful ways to engage with society, which implies they are concerned with issues that do not reflect the reality of Egyptian society.

When asked if the members would be ordered to make such suggestions to distract people from certain issues in the country, Rabie said he doesn’t think so, because it seems like those members are creating work for themselves. He continued, “I wish that they might be ordered with tasks, as this could be better instead of leaving them to their own decisions.”

The analyst said that there are around 35 laws related to the state’s transitional phase, which was the main goal of the parliament’s resumption in 2016, to fairly discuss and approve them. Besides these laws, citizens are also demanding the drafting of new specific laws.

“However, MPs are not working enough to finalise these laws, and proof of so is that we can see that there have only been four or five approved legislations since its first session in 2016,” Rabie said.

Since its first session in 2016, the parliament approved a number of old and new laws, where most were passed without proper communal dialogue with all concerned parties, a result of which is the presence of unconstitutional articles today. In addition to this, there are also a number of major issues—both laws and agreements that need discussion—that have been pending for months in the parliament.

An example of a law that was passed in parliament but that still awaits the president’s ratification was the Non Governmental Organisation Law, passed in parliament five months ago. This law was also passed amid criticism of NGOs owners and employees, who believed that the law includes harsh restrictions that could eliminate the work of NGOs in Egypt altogether.

Moreover, the Egyptian-Saudi maritime demarcation, which sought transferring the sovereignty of the Islands of Tiran and Sanafir to Saudi Arabia, remains pending discussion since November.

Gamal Zaharan, a former MP and political analyst, also agreed with Rabie’s comments about the members’ qualification and creativity, as he asserted that random bills suggested by the members show that they are not well-schooled and are not fully aware of Egyptian society and its requirements.

Zahran suggest that they would draft bills that could help citizens with the current issues, such as price hikes, as well as creating initiatives for fighting corruption.

“What the members are doing will impact citizens’ perception of parliament and it seems like they are distracting the public from focusing on the country’s major issues, he added.

Previously, member of the Legislative Committee Salah Hasaballah commented on Abdel Aziz’s bill, saying that parents are fully free to name their children as they want. He added that bills such as these distort the parliament’s image, as this is not what people are waiting for from this important body.

The bill stirred controversy over what it could possibly add to society and what the members are really doing in parliament. Some of the issues raised were whether MPs are really qualified for parliamentary seats or not and to what extent drafting such laws would be constitutional.

Approving important laws, such as the Medical Insurance Law, as well as local administration and amendments to civil conditions, is what people are expecting from parliament members, Hasaballah said.

Experts depicted Abdel Aziz and members drafting such legislations, as figures seeking publicity and media appearance.

Abdel Aziz previously defended his bill, saying that it is a continuation of an old law (the Personal Status Law) and that he made some amendments to it to align it with the new Egyptian constitution, especially with Article 80 on the rights of the child.

However, Article 80 only stipulates that the state is committed to protect children from all forms of violence—be it abuse, ill-treatment, or sexual and commercial exploitation—and did not mention anything about foreign names.

Giving children foreign or “modern” names was never considered taboo in any study or law and was not identified as either a source of physical or psychological harm to children.

Prior to this bill, another MP suggested a law to legalise engagements, by requiring both sides to signing a contract, so that the rights of the two parties would be guaranteed and to impose a penalty on the party that breaks the engagement off and harms the other party.

Zahran commented on this, saying that “engagement is a tradition where we give partners the time to know each other well without any restrictions.”

Implementation of such laws will prevent people from having freedom; therefore, these bills never pass legislations, Zahran concluded.

In December, MP Shadia Thabet, a member of the parliament’s Health Affairs Committee, announced the preparation of a draft law that bans the travel of doctors and engineers, except after 10 years of service in state hospitals since graduation, but dropped the proposal after it stirred the anger of doctors.

These bills came within numerous other bills, from suggesting the dropping of citizenship from people who have been proven to take part in terror attacks to preventing females from wearing cropped jeans. These bills made it unclear whether the parliament’s role is to regulate the state law, achieve citizens’ demands, or interfere and put restriction in people’s personal life.

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How 5 alternatives left ‘no option’ for Maspero Triangle residents Sun, 28 May 2017 11:00:05 +0000 In Downtown Cairo, one area has been on the government’s agenda for the past 30 years, where they have tried to find solutions to develop the area that would be satisfactory enough to its residents. The area lies in a strategic location behind Egypt’s state owned media hub, Maspero, parallel to the famous local neighborhood …

The post How 5 alternatives left ‘no option’ for Maspero Triangle residents appeared first on Daily News Egypt.

In Downtown Cairo, one area has been on the government’s agenda for the past 30 years, where they have tried to find solutions to develop the area that would be satisfactory enough to its residents. The area lies in a strategic location behind Egypt’s state owned media hub, Maspero, parallel to the famous local neighborhood of Boulaq, and is comprised of alleyways, small rooms, and wrecked houses.

One reason the area famous as “Maspero Triangle” was on the government’s agenda was that several foreign investors were reportedly interested in transforming it—the reason why residents have always rejected leaving.

During the past 30 years, the government tried several means of moving Maspero Triangle residents out of the area, but their solutions never came to reality due to several factors, whether the dissatisfaction of residents or change occurring inside the government.

However, earlier in 2017, the Ministry of Housing and Urban Development handed out to the residents forms to fill in, in which they had to pick one of five ‘alternatives’ for the status quo.

The five alternatives revolved around three main principles: either move out and let the government decide where, receive compensation and leave, or stay in the triangle under the condition of paying rent after reconstruction is conducted.

Financial compensation

In one corner between the worn out houses, one woman in her fifties hides behind her small sandwich kiosk, which she counts on as her only source of income.

The area of Maspero Triangle has not looked the same to her all the time, Sabra Mahmoud recalls, as she was born and raised, got married, and gave birth to her children in this very place.

“We [her family] have been here since these houses were only made of straw,” she said. However, Sabra’s family finally decided to take money and leave, as they chose the third option.

“We did not choose,” she said, arguing that they had no other option to take.

“We could never give up this place; this is our home and our people, but this is not our decision to make,” she explained.

Sabra also questioned the government’s promises of reconstructing the area, adding that “they said that the whole area [Boulaq] would be removed, so we decided to take money and leave, because reconstruction is not guaranteed. If this area is removed, we will be homeless; on the streets.”

Although many Maspero Triangle residents believe that whoever went with the “taking the money” option probably owned other properties outside of the area, Sabra said that she did not and that she was still looking for somewhere else near Maspero Triangle—the area where her and her whole family’s life is.

The option of financial compensation states that, for every room, the resident receives EGP 60,000, in addition to EGP 40,000 in compensation for moving out, according to the Ministry of Housing.

“This time, the talks and decisions are real, because those who asked for other houses are already in the process of moving, and those who asked for money, like us, are promised to receive the checks within the next two weeks. We already started packing our things,” she said.

Moving out 

Next to the wreckage of a house in the “triangle”, the smell of fried onion prevails from a small room, as the Abd Al-Sabour family prepares one of their last meals in the place they have always called home, after they filled out the form, ticking the option of moving to Asmarat.

The Asmarat neighbourhood was inaugurated by President Abdel Fattah Al-Sisi in 2016 to help end slums around Cairo. The neighborhood reportedly has 11,000 units and was established with a budget of EGP 1.5bn.

For the past 44 years, Mohamed Abd Al-Sabour was living in the same room where his mother gave birth to him, although its walls are worn out, they are still decorated with the wedding photo of his parents that dates back to half a century ago.

“We did not choose to leave, but we would be taken out of here anyway,” Mohamed Abd Al-Sabour said.

According to the ministry’s announcement, moving to the Asmarat neighbourhood allows the resident to receive a furnished apartment, for which he pays rent for 30 years, excluding the first year of residence.

“We pay here EGP 5 as a monthly rent, but now we would have to pay EGP 300 [in Asmarat], or if we wanted to stay, we would have to pay EGP 1,200,” he explained.

However, Abd Al-Sabour believes that moving out is “for the best” for Egypt, adding that “if you want this area for investment purposes, in the interest of Egypt, we would not mind; we would not stand against Egypt’s interests, but you cannot be cruel to the people.”

Abd Al-Sabour also explained that he was skeptical about the other alternatives, particularly the one where residents wait for reconstruction in the triangle.

“We believe that the decision to remove this area will happen. This is the first time for us to think about leaving; [reconstruction] is impossible. We don’t believe that if we leave we will be able to come back,” he said.

Deputy Minister of Housing and Urban Planning Ahmed Adel Darwish said that such concerns were actually valid; however, he assured that the residents were signing contracts with the government, which he considered as enough proof.

Darwish told Daily News Egypt that the residents who have submitted to moving to Asmarat have already started moving, while those who are receiving compensation would receive it during the next two weeks.

Staying post reconstruction

Meanwhile, 60 year old Yehya Abdallah, who lives with his sister and her son, ticked another box on the form: Rental in the same area.

Abdallah compares the triangle to the expensive neighbourhood in Cairo, Al-Zamalek, saying, “My whole life is here. If they tell me to move to Zamalek, I’d say to hell with Zamalek! It is nothing compared to here. We all live together here. When someone is ill, we’re there to help. When there is an issue, we solve it together. We’re all a family here,” he said.

Abdallah explained that three years of reconstruction would take place, and meanwhile he will have to stay outside Maspero Triangle.

Although he is afraid that if he leaves he won’t be let back in, he believes that it is the only option that has hope, as if they move to Asmarat, it will be impossible for them to come back, and the option of taking compensation makes him wonder where he could live with only EGP 100,000.

“Ever since we were children, we always heard that the whole Boulaq area would be removed, and every time, nothing happens; however, it is still hard to tell what would happen this time. What we can tell is that this time, some people really want to leave,” he said.

Darwish said that the reconstruction would start by the end of this year, and would take a minimum of three years.

He further clarified that the government does not own any properties in the area; the owners are either individuals or companies. He added that the government’s role was to assure the people that they would return after reconstruction occurred.

President Abdel Fattah Al-Sisi has put slum development as a priority. Last Tuesday, Minister of Housing and Urban Development Mustafa Madbouly announced during Al-Sisi’s inauguration of national projects that the budget of developing slums would be EGP 15bn.

However, Maspero Triangle residents still have concerns that the government’s intentions to develop the area would not be implemented, just as the previous government’s plans.

Darwish understands the suspicions of residents who view the current initiative as yet another empty promise, explaining: “it is true that development [of the area] has been stopped for 30 or 40 years, but this time, people have already started moving out.”

Meanwhile, residents are still second guessing the entire process, whether they submitted a form to leave or to stay.

The post How 5 alternatives left ‘no option’ for Maspero Triangle residents appeared first on Daily News Egypt.

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Are the high prices affecting Egyptians’ cultural way of celebrating Ramadan? Thu, 25 May 2017 08:00:13 +0000 The Egyptian Fanous, Kunafa, and Qatayef prices increased, affecting the way they celebrate the holy month

The post Are the high prices affecting Egyptians’ cultural way of celebrating Ramadan? appeared first on Daily News Egypt.

Egypt has been a nation that celebrates the Muslim’s holy month of Ramadan in its very own way.

Egyptians have their style of celebrating Ramadan with the Egyptian Fanous (lantern) as well as Kunafa and Qatayef (special Egyptian desserts for Ramadan).

However, since the Egyptian revolution in January 2011, the Egyptian economy has been facing many difficulties that have resulted in burdens upon the Egyptian people, such as the increasing prices of virtually everything, both products and services.

The prices of the traditional products that Egyptians use to celebrate Ramadan have also increased in a way that has made the poorest and middle class segments decide to stop using them or to find alternatives.

Daily News Egypt gathered the prices of Egyptian products that are used during Ramadan.

Egyptians think of food as a main thing to celebrate with, and that’s why every feast has its own type of food that Egyptians prefer to eat, such as lamb meat in the “Fattah” meal—a dish consisting of pita bread, rice, broth, and sauce—eaten during the Eid Al-Adha (Celebration of the Sacrifice) holiday, the Egyptian fermented fish “Fesikh and Ringa,” popular for the Spring feast, and the Egyptian sugar-covered cookies called “Kahk”.

Ramadan for Egyptians has its own food and drinks, as well as the traditional Egyptian lantern.

Kunafa is a main dessert for Egyptians during Ramadan, consisting of wheat flour, coconut, honey, and nuts.


Kunafa is a main dessert for Egyptians during Ramadan, consisting of wheat flour, coconut, honey, and nuts.

Its history dates back to the year 1250 A.D., when the Mamelukes were ruling Egypt, but others believe that it was invented earlier in Levant countries.

However, the simple, cheap dessert has witnessed an increase in its price, especially due to imported nuts, as well as wheat flour.

The price of coconut is around EGP 80 per kilogramme, while the price of nuts, which are used as stuffing, have hiked to EGP 220-300 per kilogramme according to the type—either almonds, hazelnuts, or cashews.

Almost 5 years ago, Egyptian confectioners decided to change the old style Kunafa and began using other ingredients, such as mango and Nutella chocolate.

The prices of prepared Kunafa cakes range between EGP120 and EGP 280 at fancy confectioners, depending on the stuffings and toppings.

At regular, local confectioners, a kilogramme of prepared Kunafa is around EGP 45.

Qatayef is also a simple cake stuffed with nuts and coconuts and covered with honey.


The history of Egyptian Qatayef goes back to 716 A.D., during the Umayyad era.

Qatayef is also a simple cake stuffed with nuts and coconuts and covered with honey.

The price of uncooked Qatayef is around EGP 15 per kilogramme, but it also increased by almost 50% for the same reasons as Kunafa. The high prices of nuts and coconuts represent the same problem. The price of prepared Qatayef at confectioners is around EGP 50 to EGP 92, depending on the stuffing.

Egyptian drinks in Ramadan

Egyptians prefer to start their meal after long hours of fasting with their special drinks, such as “Qamar El-Din” (a special apricot drink with nuts and coconuts), hibiscus, and other drinks.

The price of a pack of Syrian Qamar El-Din is between EGP 14 and EGP 22, and the price of a local packs ranges between EGP 15 and 35; however, the high price of nuts adds to the final price of the drink.

Meanwhile, the price of local hibiscus increased by 125% to reach EGP 90 per kilogramme, compared to EGP 40 last year. Imported Sudanese hibiscus costs around EGP 60.

The prices of Egyptian Fanous lanterns vary based on what are they made of and whether or not they include other features such as lighting or music.

The Egyptian Fanous

The history of the Egyptian Fanous lantern goes back to the Fatimid Caliphate, when the Egyptians were the first people to use the Fanous as a special tool to celebrate Ramadan. The kids also like the Fanous lanterns, either for playing or for decoration, as they are often hung in the streets. There are also various small toy lanterns produced specifically for children, which can include features such as playing music.

The prices of Egyptian Fanous lanterns vary based on what are they made of and whether or not they include other features such as lighting or music.

The price of wooden Fanous lanterns start at EGP 65 for the small size, while the bigger ones can reach EGP120. The metal Fanous lanterns range from around EGP 20 to EGP 150 depending on the size.

Small Fanous lanterns, which are usually used as a keychain or a toy recorded a price of EGP 20, and the price of the Fanous lanterns that use candles are around EGP 100.

Additionally, the price of the Fanous fabric ranges from EGP 30 to EGP 150, depending on the type of fabric and the size.

The price of Fanous lanterns made of glass, which are usually used to decorate the streets, starts at EGP 120.

People are not happy, boycotting products

People are likely to boycott the non-necessary products due to their high prices.

Ahmed Abdel Wahab, an engineer who lives in Giza, said that buying all the cultural products is not important to many people anymore, adding that they used to buy them before the prices increased, while they now mainly focus on the important goods so that they can save money.

He added that they also might buy Fanous lanterns for the kids if they are not overpriced, because children love to play with them.

“We cannot buy this stuff anymore,” says Aliaa Massoud, who is 28 years old.

She added that her family cannot afford to buy all that they used to buy years ago, adding that her mid-class family has more important things to buy, such as food and clothes for the Eid Al-Fitr holiday.

She believes that buying clothes for Eid after Ramadan is more important than buying desserts or food.

On the other hand, Nour El-din, a 25 year old graphic designer, said that the prices are affordable and that he is going to buy the desserts or Fanous lanterns if he wants, adding that celebrating the cultural days for him is as important as paying for food, explaining that “it’s only one month in the year.”

Moreover, Ghada Ali, a mother of four children, said that she cannot spend her money on unimportant things such as Fanous lanterns; however, she added that making Kunafa, Qatayef, and other desserts is important because she invites her family and friends for feasting, and she should provide them “something sweet after.”

She added, however, that buying desserts is not an option, because they are overpriced at the confectioners and also because she prefers to make them at her home.

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High prices affect the holy month of Ramadan in Egypt Thu, 25 May 2017 07:00:34 +0000 The inflation affects the price of all products at the time of Ramadan

The post High prices affect the holy month of Ramadan in Egypt appeared first on Daily News Egypt.

Ramadan is one holy month in the year, when Muslims fast for 30 days before celebrating Eid Al-Fitr.

For Egyptians, Ramadan represents a month of good deeds and happiness, when they celebrate and give money to the poor.

Ramadan is a month for families and friends to gather, talk, watch special television series, and eat special dishes that are only being cooked in the holy month.

However, Ramadan is coming at a difficult time, when the people of Egypt are facing hardship and are bearing the burdens of increasing prices due to the reforms the government is implementing, which have affected the prices of electricity, gas, oil, and basic commodities.

The price of approximately everything has doubled, from vegetables and fruits to rice, macaroni, sugar, and vegetable oils, as well as meat, poultry, and fish.

Moreover, in November 2016, the government decided to float the Egyptian pound, which pushed inflation to its highest level in decades, affecting the prices of almost everything.

Yet the government did not implement enough precautions to protect the people who were not able to shield themselves from the harsh consequences of these problems.

In July, the government aims to cut yet more electricity subsidies, which would affect the cost of products and put more burdens on the people.

Under the impression of the current circumstances, Daily News Egypt conducted a survey of the prices of essential commodities and looked at what the government has done to reduce the effect of high prices and rampant inflation.

When the Central Bank of Egypt (CBE) floated the Egyptian pound back in November, the prices of almost every product increased due to the great loss of the value of the pound.

As Egypt imports a lot of raw materials, even the prices of local products have witnessed strong increases. Daily News Egypt surveyed the prices of the main commodities before Ramadan.

The prices of rice, macaroni, vegetable oils, and sugar differ according to the quality and the type of products, as well as whether they are locally produced or imported.

The prices of basic commodities

The prices of rice, macaroni, vegetable oils, and sugar differ according to the quality and the type of products, as well as whether they are locally produced or imported.

The price of rice is between EGP  7 and EGP 14.5 per kilogramme, while the price of macaroni recorded between EGP 7 and EGP 16.5 per kilogramme.

The price of vegetable oils stands between EGP 16 and EGP 25.5, varying according to the type of the oil and the brand. Olive oil prices stand between EGP 45 and EGP 86, varying according to the amount and the brand.

Additionally, the prices of meat, fish, and poultry are getting higher and higher since the flotation of the pound, which affected the poor who cannot afford paying for those anymore.

The price of meat is between EGP 11 and EGP 160, dependant on the type of meat and the cut.

The price of poultry witnessed increases before Ramadan, reaching EGP 40 per kilogramme of chicken. The price of duck recorded EGP 55-60 depending on the geographic area and quality.

The price of fish ranges between EGP 15 and EGP 45 per kilogramme, depending on the type of fish. The boneless fillet is around EGP 55 per kilogramme, while shrimp recorded the highest prices, starting from EGP 90 per kilogramme.

Governmental acts to reduce prices

The government planned to establish 122 fair zones named “Ahlan Ramadan” around Egypt, which almost 200 companies are participating in to provide cheaper products for the people, according to the Ministry of Supply’s press statement.

Furthermore, it also provided money on the first of May as a holy month grant for subsidy card holders in order to help them buy basic food products before Ramadan.

The prices of some products, however, were rather high. The prices of Brazilian meat—which is usually cheaper than local meat—recorded EGP 55 to EGP 74 per kilogramme.

The price of frozen chicken recorded EGP 40 to 50 per kilogramme and EGP 65-70 for boneless fillet, while the price of duck was EGP 34 per kilogramme. The price of rabbit recorded EGP 50 per kilogramme.

Inflation affected the prices, doubts about governmental actions

According to Reuters, Egypt’s inflation “rose to a three-decade high in April, piling pressure on the government to keep a lid on prices as it embarks on politically sensitive economic reforms likely to push them higher.”

Annual urban inflation recorded 31.5% in April, up from 30.9% a month before, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).

“That was the highest since June 30, 1986, when it reached 35.1 percent,” according to Reuters data.

The government, however, did not have many other choices except for raising the interest rates in order to control inflation, based on the International Monetary Fund’s (IMF) suggestions.

It is important to mention that Egypt is committed to implementing reforms according to its deal with the IMF, which resulted in brokering a $12bn loan after the IMF’s approval of the Egyptian reform programme.

On Sunday, The Monetary Policy Committee (MPC) of the CBE raised the overnight deposit rate, overnight lending rate, and the rate of the CBE main operation by 200 basis points to 16.75%, 17.75%, and 17.25%, respectively—an action that many businesspeople, experts, and investors believe would not help with controlling the rampant inflation.

On the other hand, the Ministry of Supply and Internal Trade raised the prices of many products, such as meat, chicken, and duck, disproving the minister’s statements that asserted price stability.

People are not satisfied

Fathy Mohamed, who works as a customer service agent in the private sector and is a father of two children, says that the government is the only one responsible for the high prices, adding that his wage was barely enough to afford the most necessary goods for his family.

He believes that the government should have controlled the prices in a better way, as the current prices say that they do not care about the people at all.

Additionally, Magdy Samir, who works as a salesman, said that the current prices are unacceptable. He added that the price of red meat has reached a point where the majority of Egyptians cannot afford buying it, which means that white meat is the only available choice for the people; however, their prices are also increasing day by day.

“We cannot take it any more with the increasing prices,” says Om Hend, a mother of one child, who sells vegetables in a local market in Giza.

She added that the people are tired of the increasing prices and the government does not help them at all; instead, it raises the prices of everything to suffocate the people, she complained.

She believes that president Abdel Fattah Al-Sisi has to get involved to help the people who voted for him, because the situation is getting worse and worse.

Moreover, Amir Mohamed, a 32 year old lawyer, said that the sales in different supermarkets do not really constitute a reduction of prices.

He believes that the owners of the supermarkets want to fool them and sell the products in packages instead of pieces. He explained that there are no real offers that could help the people afford buying the food for Ramadan, while the government seems to not care about it.

From another point of view, the former dean of economics and political science at Cairo University, Aliaa El-Mahdy, said that the governmental decision of raising the interest rates will not help with controlling the prices. However, it would have negative effects on the investment climate.

She believes that if the government wants to control the prices, it has to establish serious free market rules, and then the producers will compete to provide the best prices.

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Pound flotation posed challenges for banks’ financial positions in 2016: Business News Index Mon, 22 May 2017 07:00:26 +0000 SAIB, Audi, NBE recorded the lowest ratios of unregulated loans portfolios

The post Pound flotation posed challenges for banks’ financial positions in 2016: Business News Index appeared first on Daily News Egypt.

The decision of the flotation of the pound towards the end of last year affected all banks in the banking sector in one form or another. A large number of banks achieved large profits as a result of currency shifts, while also many capital adequacy rates were affected as a result of assets inflation following the flotation. Other banks were in a better financial position because of their small assets sizes and strong capital coverage rates.

This left small banks, those that did not have large deposits in foreign currencies last year, in a better financial position after the flotation of the pound in terms of capital adequacy rates.

The adequacy of the first tranche of capital decreased in 20 of 24 banks that were being monitored by Business News last year, while a number of banks fell under the regulatory limits required by the Central Bank of Egypt (CBE), which prompted them to inject last year’s profits into its reserves or to their directly paid capitals to ensure compliance with the regulations.

Assets quality has also been affected by the rise in non-performing loans over the past year, in the opposite direction compared to the situation in 2015, which witnessed a marked decline in the ratio of these loans to total banks’ portfolios.

Ahli United Bank (AUB), Barclays, NBK, Emirates NBD, Credit Agricole, and Blom Bank occupied the top six positions in the Business News Index for the most efficient banks.

AUB topped the efficiency index, thanks to the increase in the first tranche of its capital adequacy standard, the high return on average total assets, and the return on equity and loan-to-deposit placements.

The bank managed to increase the size of the first tranche of capital, unlike most of the banks following the flotation of the pound exchange price in the last quarter of 2016.

The net income on its total average assets represented 7%, equity 46%, and loan-to-deposits ratio 63%.

Barclays occupied the second position in terms of efficiency last year as it recorded the highest rate of tier I capital adequacy among banks and the highest net income on average total assets.

The first tranche of Barclays capital adequacy standard reached 15.46%, while the net income from the return compared to the total average of total assets reached 7%. Loans-to-deposits recorded 48%, while the costs of income increases registered 33%.

Al Ahli bank of Kuwait (ABK) occupied the third position, supported by the highest return on total assets average by 11%, and return on equity at 67%.

The Commercial International Bank (CIB) occupied the fourth position in the sub-index of return on equity at 39%.

The Export Development Bank Of Egypt (EBE) outperformed the National Bank of Egypt (NBE) and Banque Misr, the largest state-owned banks, to rank 13th, while NBE and Banque Misr banks occupied the 15th and 16th place respectively.

The government banks obtained the support of the CBE through a subsidised loan worth EGP 3bn last summer before the flotation of the pound.

The flotation of the pound did not affect the largest governmental banks’ balance sheets because they are lists according to the fiscal year, but the CBE provided a loan before the flotation to support their capital.

In terms of unregulated loans, the data index showed an increase at seven banks with growth rates ranging between 25% and 200%. However, the Egyptian Gulf Bank, Union National Bank, Blom bank, NBE, Banque Misr, Audi bank, Barclays, EPE, the Industrial Development & Workers Bank of Egypt, Misr Iran Development Bank (MIDB), SAIB, and Arab Banking Corporation (ABC) managed to reduce the proportion of the portfolio of unregulated loans during the past year.

The NBE, Audi, and ABC banks occupied the top three positions in the sub-index of non-performing loans in terms of the lowest proportion, ranging between 0.6% and 2%.

The results showed lower costs to revenues in most of the banks in the banking sector. Last year witnessed high rates of loan-to-deposit placements. The Industrial Development & Workers Bank of Egypt topped the list with a 144.13% ratio.

The Housing and Development Bank (HDB) occupied the second position, achieving a growth rate of 76.68%. The NBK occupied the third position with a growth rate of 69.5 %.

Audi Bank occupied the fourth position with a growth ratio of 67.11%. The value of loans granted by the bank in 2016 is estimated at EGP 30.561bn compared to EGP 18.769bn in 2015.

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Banks offering e-services have best retail banking: Business News index Mon, 22 May 2017 06:00:21 +0000 Limited growth in retail banking portfolios of major banks due to the CBE's regulations

The post Banks offering e-services have best retail banking: Business News index appeared first on Daily News Egypt.

Banks that offer the largest number of e-services outperform those that ignore this type of banking, the Business News Index of Best Retail Bank revealed.

The Best Retail Bank Index depends on the number of e-services for individuals at banks and the quality of transactions carried out through these services. It also measures the geographical spread, the number of loan products, and the volume of individual loan portfolios compared to total portfolios in banks, as well as wealth management services.

The Commercial International Bank (CIB) topped the Business News index for best retail bank for the second year in a row, followed by the National Bank of Egypt (NBE), which has the largest spread of ATMs in Egypt and the largest market share of individual transactions.

According to the index, the Housing and Development Bank (HDB) allocates the largest part of its loans to individuals, amounting to 61% of total loans, followed by the Bank of Alexandria, which allocates 43%.

The banks with small individual loan portfolios have achieved high growth rates of almost 200% in 2016. Ahli United Bank topped the list of fastest-growing banks in individual loans, according to Business News indexes. The bank’s individual loan portfolio reached EGP 1.98bn at the end of December 2016, compared to EGP 675bn at the end of 2015, with a growth rate of 193%.

Misr Iran Development Bank (MIDB) came in second place, achieving a growth rate of 191.6%, with an individual loan portfolio of EGP 570m, compared to EGP 196m last year. The Saudi Investment Bank (SAIB) was the third fastest growing bank in individual loans, at a growth rate of 160.6%, bringing its total portfolio to EGP 4.14bn, compared to EGP 1.58bn.

The Egyptian Gulf Bank (EGB) came in fourth place in terms of individual loans, with a growth rate of 104.6% as its portfolio reached EGP 2.53bn, compared to EGP 1.23bn. Banque Misr grew by 54.81%, ranking fifth on the list of fastest-growing banks in individual loans, with a total portfolio of EGP 16.08bn, compared to EGP 10.38bn last year. The National Bank of Kuwait was the sixth fastest growing bank, with a growth rate of 52.54%, reaching EGP 1.96bn, compared to EGP 1.28bn.

The banking sector faced many challenges in terms of individual loans due to the Central Bank of Egypt’s (CBE) regulations issued last year, obliging banks to limit the total instalments of a loan to only 35% of a customer’s monthly income. In addition, high inflation rates affected customers’ ability to bear the burden of the debt.

However, most banks seek to overcome these challenges by expanding their base of individual customers through offering diverse products and technological programmes.

The effects of these challenges have been further reflected in the growth rates of banks with large individual loan portfolios. The growth rate of the retail portfolio in the NBE, the largest bank in this sector, was 20.1%, reaching EGP 38.1bn at the end of 2016 compared to EGP 31.5bn at the end of the 2015. The growth rate of the retail portfolio in the CIB, the largest private bank, was 28%, with a portfolio of EGP 15.9bn at the end of 2016, compared to EGP 11.9bn in 2015.
Barclays’ individual loans growth declined by 2.69%, as its total portfolio fell to EGP 2.208bn at the end of 2016, compared to EGP 2.269bn at the end of 2015.

On the other hand, the banks competed last year in providing technological services and products, such as Internet banking, in order to reach new segments of customers and maintain their customer base.

The banks seek to strengthen their technological infrastructure in conjunction with the geographical spread despite its high cost and the importance of providing high security and confidentiality of data. However, this service will lead to fewer expenses in comparison to traditional branches.

There are 18 banks out of a total of 24 monitored by Business News that offer Internet banking services.

There are only nine banks that offer online banking transactions, including Qatar National Bank (QNB), Alexandria Bank, EGB, Abu Dhabi Islamic Bank, NBK, Barclays, and Blom, while the SAIB has provided online inquiries for the first time last year.

Only eight banks have obtained mobile banking licences, which allows the transfer of up to EGP 500 via mobile phones.

There are five service banks that offered the full service, including the CIB, Alexandria, Credit Agricole, Emirates NBD, and Audi Bank, while Faisal Islamic Bank, Banque Misr, and the NBE limited their mobile services to inquiries only.

The expansion of the e-wallet service was slow, as only four banks offered the service last year, namely the NBE, the CIB, Bank of Alexandria, and Banque Misr. Banks operating in Egypt face many obstacles that force them to expand in traditional branches rather than relying on technology, mainly the dominance of the cash culture, which amounts to 97% of all transactions done in Egypt, according to Tamer Al Kashef, the regional manager of Mastercard.

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Nasa Space Apps Cairo can transform country into tech hub Thu, 18 May 2017 07:00:05 +0000 After several years marked by turbulence and uncertainty, Egypt’s economy suffers numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages, which led the government to adopt a reform programme to improve Egypt’s public finances. Innovation and economic progress go hand in hand; supporting SMEs and tech startups is a step …

The post Nasa Space Apps Cairo can transform country into tech hub appeared first on Daily News Egypt.

After several years marked by turbulence and uncertainty, Egypt’s economy suffers numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages, which led the government to adopt a reform programme to improve Egypt’s public finances.

Innovation and economic progress go hand in hand; supporting SMEs and tech startups is a step that is recommended by almost every financial expert and is part of Egypt’s economic reform programme, as they can absorb thousands who join Egypt’s workforce annually, using such human capital to boost the economy and increase exports.

The 2017 International NASA Space Apps Challenge Cairo Hackathon brought together developers, engineers, scientists, educators, and students. The Space Apps Challenge, which lasted 48 hours in cities around the world, played a role in empowering the participants with new knowledge and tools needed to face 21st century challenges.

Apart from the fact that the challenge has helped Egyptian innovators to begin to contribute to the global innovation ecosystem, it also afforded them the opportunity to share knowledge and solve tough challenges concerning the future of our local space and technology sector. The hackathon, which was held simultaneously in about 192 cities all over the world, was a unique platform that connected Egypt and Africa—in a new way—to the most cutting-edge technologies and economic drivers of tomorrow.

Yehia Ahmed Abdel-Aziz, the head of NRIAG’s space research lab.

Events such as these can pave the way into a larger tech startup and SME sector in Egypt, increasing knowledge and supporting young innovators financially and scientifically can be the cornerstone of such change.

“The International Space Apps is one of the greatest events that Egypt could host. Innovation is part of the youth’s characteristics. I encourage you all to delve into the topics of the International Space Apps, provide ideas, change perceptions, and keep on trying to think about space exploration and how we can improve life on Earth in the future,” said Farouk El-Baz, director of the Center for Remote Sensing and research professor at the Departments of Archaeology and Electrical and Computer Engineering at Boston University.

The small and medium enterprises (SMEs) form the backbone of any country, especially the emerging economies, and the growth of small and medium-sized companies is an important factor for any sector until the financial integration in the formal economy.

It is estimated that around 40-60% of Egyptians work in the informal sector, so absorbing this sector is integral to the growth of the economy, while providing support to short and medium enterprises (SMEs) was advised by the International Monetary Fund (IMF) and is a part of the Egyptian economic reform programme.

According to the Ministry of Planning, the communications and information technology (ICT) sector topped the state’s fastest growing economic sectors​ in the first quarter (Q1) of the fiscal year (FY) 2016/2017. The sector achieved a growth rate of 11.2% in this period. Improving this sector could play an important role in boosting Egypt’s economy.

This year’s Cairo NASA Space Apps​ Challenge was sponsored by IBM and various other parties, who together made it possible. IBM will provide internship programmes to the challenge’s winning teams, as well as provide technological support when needed.

The National Research Institute of Astronomy and Geophysics (NRIAG), which was the scientific sponsor for this year’s​ challenge, provided the technical guidance for the participants​. “The space research lab is in the final stages of the project of a telescope, which will allow us to track the debris of every satellite to avoid collision, in addition to studying the effect that space has on the material used in satellites. The research is done by creating plasma in our lab, which has the same properties as in space,” said Yehia Ahmed Abdel-Aziz, the head of NRIAG’s space research lab.

The challenge is organized by the Egyptian section of the IEEE, which is the world’s largest technical professional organization dedicated to advancing technology. The IEEE Young Professionals (YP) Egypt, which has members who graduated from engineering faculties in the last 15 years, organises various types of events other than the NASA Space Apps Challenge, such as “Egyptian Engineering Day” and the “Made in Egypt” competition, which supports graduation projects with business planning and analysis, according to Sally Hamady, secretary of IEEE YP Egypt.

Sally Hamady, secretary of IEEE YP Egypt, with the organizing IEEE team.

NASA Cairo Space Apps is a worldwide 48-hour hackathon, and Egypt started to participate in 2015. The participating teams try to resolve sets of challenges using different technologies.

This year’s challenge focus is empowering women in science and engineering and including school students in the challenges. 360 teams submitted applications for the 2017 challenge, but only 60 teams were selected, as this is the event’s maximum capacity for the time being. 20 of the 60 teams were school students.

One of the app ideas that was proposed was an app called “Solarify”, which is a mobile application that makes it easier to understand your power consumption and solar power production rates. By entering information about the appliances you have, Solarify will calculate your average daily power consumption, and depending on your location, it will display to you the recommended solar power system that would best fit your power usage and the geographical region that you are in.

Another app idea, which will greatly complement Solarify, is called Solar Output Calculator & Consumption Planner (SOCC-P). The app’s main purpose is to calculate the output of a solar panel and then predicts the output according to the location on Earth.

Despite Egypt being the largest non-OPEC oil producer in Africa, it is the largest consumer of oil on the continent. The country’s use of oil accounts for 20% of Africa’s total consumption. Moreover, Egypt has Africa’s largest oil refinery capacity. It faces numerous energy challenges. Ensuring reliable, affordable, and sustainable energy is still a major challenge for the Egyptian state, especially after the country’s shift in recent years from being an exporter of natural gas to an importer.

Furthermore, energy consumption increased in the first decade of the 21st century, and gas demand grew by almost 9%. Gas became the main source for Egypt’s energy needs, reaching 50% of the total energy supply, compared to 35% in 2000.

According to the American Security Project (ASP), non-hydro renewable energy makes up only 1% of the total energy consumption in Egypt. Since 2014, Egypt has redoubled its efforts to develop and use more renewable energy in order to address the growing energy challenges, with the goal of producing 20% of the country’s energy supply from renewable sources.

In January 2015, Egypt declared its objective of producing approximately 4,300 megawatts of energy from solar and wind power within three years.

Solar energy has much potential in Egypt, with has approximately 325 days of sun in a year and approximately 2,400 hours annually for potential solar operations, compared to Spain and Greece—the next sunniest countries—which have 1,900 hours annually.

One of the apps proposed was an app that will integrate all the satellite information about underground water locations into the app, so that it would be found by prospect farmers and agricultural investors. The app is designed by Bassam Sherif and Ahmed Nasr, two high school students.

It is worth mentioning that the competition of space applications for Cairo in 2016 was the largest event in the world for the second consecutive year, where 55 teams competed in Zewail City of Science and Technology. The competition in Cairo in 2015 at the Nile University campus was the largest event that year as well, where hundreds participated in the event in order to work together to find solutions to the challenges posed by NASA.

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The 1.5m-feddan project: challenges postpone implementing president’s megaproject Wed, 17 May 2017 09:30:42 +0000 Transparency, encroachments are the main issues of the project

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On 30 October 2015, President Abdel Fattah Al-Sisi inaugurated the 1.5m-feddan reclamation project, which is one of three important megaprojects he announced.

However, on Sunday, the president seemed not too satisfied about what the government had achieved with the project so far.

He stressed that if the New Egyptian Countryside Development (NECD) continued to work with the current rate, nothing would happen to the project, noting that he is “not happy” with the current system of allocating land areas and acres.

He added that by the end of the current month, the military and police will get involved to take the land areas back to the NECD if they are not licensed or growing any agricultural crops.

On 30 October 2015, President Abdel Fattah Al-Sisi inaugurated the 1.5m-feddan reclamation project

But what has the NECD implemented up until now for megaproject? And what do experts currently think about the project? Will it get established as the way the president promised?

Daily News Egypt asked experts about the project and the best ways of solving its current problems during 2017, the year of reaping the benefits of reforms, as the government called it.

President Abdel Fattah Al-Sisi has proposed the megaproject as a major idea for increasing the agricultural area in Egypt.

Al-Sisi added that the areas will be sold to people, which will make the project both an investment to the country in securing enough food for its people as well as an investment in the Egyptian economy.

The government was supposed to provide subsidised land areas to enable more purchases, and the president promised that the agricultural lands will give farmers more economic stability, as well as provide places of residence and services to them and their families.

However, on 21 October 2016, the head of New Egyptian Countryside Development (NECD), Atter Hannoura, announced the offering of 500,000 feddans as part of the project’s first phase, at a price of EGP 5,000 per feddan.

And in spite of the efforts Hannoura put into the project, some experts believe there are lots of questions about the project that must be answered.

The executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, said that the government did not study the  project well, adding that the government should have done so. He added that the government should have also published the results of the study to be accessible by anyone belonging to the society, experts as well as investors.

He explained that no one from the government has created or released any feasibility studies to the public, which does not reflect transparency from their end.

Tawfik said that if the government wants to grow wheat, it would not be the best idea, because importing it will save far more for the country, which it needs in the current situation. He also explained that the biggest wheat exporters rely on growing wheat by utilising rain, which reduces the costs of growing it and, consequently, its price.

No one knows what the government wants to plant on the 1.5m feddans, and the government has to tell us what it wants to gain from the project as a final result, either by helping to guarantee self-sustainability or by exporting to create a source of foreign currency, said Tawfik.

It is worth mentioning that the NECD is willing to sign an agreement with Wageningen University to plan for the 1.5m-feddan reclamation project, according to Hannoura.

He added that Wageningen University is the only higher education institution in the Netherlands that focuses specifically on healthy food and the living environment and that it should help the government to plan the project.

Hannoura said that the government has taken back approximately 40,000 unlicensed feddans in Al Moghra and in the governorate

Hannoura stated in November 2016 that planning the project is what the company will do in order to prevent the unstudied planting of unnecessary plants that will waste a lot of the groundwater used for irrigation, which the project is mainly relying on.

He believes that plants that consume high quantities of water should not be allowed. Instead, NECD will study which plants are suitable to be planted and which are not, according to available groundwater and people’s needs.

Hannoura also wanted to help the investors in financing their own projects. He said that the company asked the Central Bank of Egypt (CBE) to provide financing for small investors, explaining that the company will also negotiate with the Social Fund for Development (SFD) for the same purpose.

However, all of the previous efforts seemed not enough to help the project get finished at the rate Al-Sisi wants.

In his speech last week, Al-Sisi seemed upset about the current situation of the project. He added that the current rate of getting the work done is not enough, adding that if the current situation continues, the project will never see the light.

The president ordered the army and police to reclaim any unlicensed lands, adding that the people have to legalise the land areas they have taken.

He noted that the current month is the deadline for them to get licenses for their land areas.

Hannoura said that the government has taken back approximately 40,000 unlicensed feddans in Al Moghra and in the governorate of Al Minya.

He added that the company will ask the government to use satellites to identify unlicensed lands by the end of the current month.

Hannoura added that the government will provide some land for the people in Ramadan.

Hannoura said that the government will provide some land for the people in Ramadan

The company wants to guarantee the project’s sustainability before exiting as a governmental company, Hannoura noted.

From another point of view, Gamal Seyam, a professor of agricultural economics at Cairo University, has previously told Daily News Egypt that the project up until now is “characterised by chaos and is improvised to a large extent.”

He criticised the lack of transparency of the projects, adding that the project’s vision is not yet clear and does not have a specific target or goal.

He believes that the government must make sure the project is transparent and that it must have all of its studies available for experts and investors.

However, the former minister of irrigation, Nasr Allam, is not satisfied regarding the actions the government is implementing up until now.

In spite of presidential statements, the real situation of land is not as good as the government is telling the people, he added.

He stated that during the past decades, Egyptian presidents announced many huge and mega projects, especially in the field of agriculture since 1952, starting with the popular land reform under former president Gamal Abdel Nasser, the Salihiya under Anwar Al-Sadat, and the popular Toshka project under former president Hosni Mubarak.

He added that the previous projects did not meet their goals, explaining that in some cases, the projects even collapsed, such as the project of Toshka.

The previous media consultant at the Ministry of Agriculture Eid Hawash has emphasised that there is no historical problems that could face the current 1.5m-feddan reclamation project. He said that “this project can’t be compared to previous projects, such as Toshka, which failed due to the absence of rigorous control and supervision, as well as other political objectives. It is not the case this time.”

He believes that the government has done many feasibility studies for the project to ensure that it will be of great success and to prevent the same thing that happened to previous projects to happen again.

The 1.5m feddans is a megaproject proposed by Al-Sisi. This project came alongside other projects, such as the New Suez Canal and developing its zone; developing the golden triangle; and establishing the New Administrative Capital.

The megaprojects are supposed to improve the current economic situation, create job opportunities, and increase the GDP growth rate, as the president announced when he came to office—which, in his opinion, would meet the people’s calls for reforms that resulted in the January 25 revolution.

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Egyptian sugar production to increase by 7% in MY 2017/2018: GAIN Report Mon, 15 May 2017 09:00:17 +0000 The government increasing the supply price of sugarcane and beets will result in an expansion in total harvested areas to meet demands, according to GAIN

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The sugar crisis, which has been casting its shadow for several months over the Egyptian market, has been resolved at last. Now that the government has made sugar available in the Egyptian market, sugar reserves are forecast to increase in the country during the upcoming months of the new fiscal year. This is expected to result in higher sugar imports and more sugar availability in the market. The Egyptian government is now buying at higher prices, encouraging farmers to increase their production in order to avoid another year of short supply.

The annual report, issued by the Global Agricultural Information Network (GAIN) of the US Department of Agriculture’s Foreign Agricultural Services (FAS) for 2017, has forecast that total raw sugar production in Egypt is expected to increase by 7%, or 150,000 metric tonnes (MT), in marketing year (MY) 2017/2018, to eventually reach 2.42 million metric tonnes (MMT).

FAS Cairo attributes this increase to an expansion of the total areas to be harvested, which will be driven by an increase in the government’s supply price.

Total domestic consumption in MY 2017/18 is forecast to increase by 3.3%—that is, to 3.05 MMT, compared to 2.950 MMT in the previous year. Sugar imports are forecast to remain stable at 830,000 MT, while exports are expected to drop by 33% to 200,000 MT.

Current sugarcane cultivation in Egypt

According to the report by GAIN, the cultivated lands are distributed on sugarcane and beet crops.

When it comes to sugarcane, it is widely cultivated in tropical and temperate regions in Egypt, such as Upper Egypt. Sugarcane is planted on a narrow strip of land along the banks of the Nile, and it is specifically planted in spring and autumn. During spring, the crop is cultivated between February and March, while in autumn, it is cultivated from September through October. The crop takes 11 to 12 months to grow.

FAS Cairo forecasts that the cultivated areas of sugarcane will increase by 9% in MY 2017/2018. This means that cultivated areas will increase from 100,000 hectares (ha) to 119,000 ha. These areas are expected to produce about 12.580 MMT of sugarcane.

However, the government’s adoption of a policy to encourage farmers to grow beets over sugarcanes in order to rationalise the use of water has been apparently ineffective. The government’s attractive supply price of sugarcane makes it the cash crop of choice in Upper Egypt; hence, the economy of Upper Egypt is so heavily dependent on sugarcane production that disruptions to the areas planted with the crop would impact the living conditions of 150,000 families that depend on it. Also affected would be a plethora of ancillary businesses including input providers, irrigation providers, logistics, metallurgy, as well as all non-commercial activities, such as education and healthcare. The frame of mind of such an important economic pillar can be summed up by what a farmer remarked to FAS Cairo during a visit to the area: “we grow sugarcane because our fathers and their fathers used to grow it, and we cannot change this.”

Sugarcane refineries in Upper Egypt  

There are nine sugarcane refineries in Upper Egypt that have a production capacity of around 10,200 MMT of sugarcane, which requires a total area of at least 120,000 ha in order to operate.

The government has tried implementing policies to reduce the areas cultivated with sugarcane due to the crop’s high water consumption; however, these have been unsuccessful. Policies designed to move production away from sugarcane find themselves squeezed between the hammer of water scarcity and the anvil of sugar processors’ demand for raw material.

Beet production in Egyptian

FAS Cairo forecasts MY 2017/18 sugar beet area harvested to increase by 10%, or 20,000 ha, to reach 224,000 ha. With an increased area comes a concomitant increase in production, expected to reach 9.5 MMT, an increase of 3.4% or 313,000 MT. FAS Cairo estimates the area harvested in MY 2015/16 to stand at 204,000 ha. The increase in the area and the subsequent production is attributed to the increase in government’s subsidised supply price, which will encourage farmers to grow sugar beets over other crops.

Egypt does not produce beet seeds locally because of the requirements of temperature and sunlight. Among other conditions, seed production requires packing the roots at 8 degrees Celsius for three months and daylight duration of 16-18 hours. As a result, Egypt depends on seed varieties imported from Germany, Denmark, Netherlands, France, and Sweden.

FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.

FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the sugarcane harvest, sugarcane processors in Upper Egypt region reported an increase of 10% in the delivery of sugarcane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some of or all their crops to juice shops and molasses producers because of the higher prices offered, as compared to the government’s supply price.

Sugar production 

FAS Cairo forecasts refined sugar production in MY 2017/18 to increase by 7% or 150,000 MT to reach 2.42 MMT, as compared to the MY 2016/17 estimate of 2.27 MMT. Of this total forecast, 1.32 MMT of sugar will be derived from sugar beets, while 1.1 MMT will be sourced from sugarcane. Beet sugar production in MY 2017/18 is forecast to increase by 4% or 50,000 MT, reaching 1.32 MMT as compared to 1.27 MMT the previous year, as mentioned previously. Sugar from sugarcane is expected to increase by 10% or 100,000 MT to reach 1.1 MMT compared to 1.0 MMT in the previous MY.

FAS Cairo attributes the increase in production to an increase in total area planted in both sugar beets and sugarcane. The growth in planted area is driven by the government’s decision to increase the supply price for sugarcane and beets, which will encourage farmers, especially those who plant sugarcane, to increase their production and deliver it to the mills. In April 2017, two months after the onset of the cane harvest, sugar cane processors in Upper Egypt region reported an increase of ten percent in the delivery of cane to refineries as compared to same period in 2016. In MY 2015/16, some farmers preferred to sell some or all their crop to juice shops and molasses producers due to the higher prices offered, as compared to the government’s supply price.

Consumption and trade of sugar in Egypt

FAS Cairo expects total domestic consumption in MY 2017/18 to increase by 3.4% or 100,000 MMT to reach 3.050 MMT. Consumption in MY 2016/17 is estimated at 2.950 MMT. The increase is attributed to the annual population increase. Additionally, Egyptians are expected to increase their sugar consumption to meet caloric needs, substituting sugar for other key commodities, such as poultry and beef, as a result of an recent increase in the price of food.

Egypt continues to provide refined sugar to food subsidy beneficiaries at prices below the free market prices. Egyptian citizen beneficiaries are receiving a monthly cash transfer of EGP 21 ($1.17) per person through a smart card system. A family of four is expected get a monthly cash transfer of EGP 84 ($4.7), enabling them to meet their sugar needs, as well as purchase other food commodities. 

In terms of sugar trade, Egypt’s sugar imports in MY 2017/18 are forecast to remain stable at 830,000 MMT. In MY 2016/17, the majority of sugar imports were imported through Holding Company for Food Industries (HCFI) and the Ministry of Defence’s National Service Projects Organization (NSPO). FAS Cairo believes that HCFI and NSPO will continue to lead and import most of the sugar needed to bridge the gap between domestic production and consumption. The devaluation of the Egyptian pound to the US dollar made it harder for importers to buy from international suppliers. According to GAIN’s forecast, Brazil is likely to remain Egypt’s main raw sugar supplier in MY 2017/18, while Sudan and Kenya receive 50% of Egypt’s sugar exports and are expected to remain the main export destinations in MY 2017/18. It is worth noting that Egypt exports sugar to the majority of Arab and some African countries

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Egypt’s oilseed imports to increase with expansions in crushing capacity: GAIN Mon, 15 May 2017 08:30:14 +0000 Crushing capacity will total 15,000 MT per day in the course of MY 2017/18

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Egyptian oilseed imports are expected to grow in marketing year (MY) 2017/2018 as additional crush capacity is set to increase domestic edible soybean and soybean oil production, according to a recent report issued by the Global Agriculture Information Network (GAIN).

The report expected crushing capacity to stand at 15,000 metric tonnes (MT)/day in the course of MY 2017/18.

Crushing operations in Egypt are currently dominated by Cargill and Alex Seed Company, which account for more than 80% of the total crush. Thirteen other smaller operations make up the remainder.

MY 2016/17 domestic crush capacity is approaching 11,000 MT/day, the report noted.

The report forecast soybean imports to reach 3.1 million metric tonnes (MMT), while edible soybean consumption is expected at 3.2 MMT in MY 2017/18, up 6.6% from the current marketing year.

Total oil consumption, including food and industrial use, is expected to grow by 2.3% in MY 2017/18, due to the constant population increase.

Palm oil imports are expected to amount to approximately 61% of total oil imports on competitive pricing during MY 2017/18.

Soybean consumption on the rise

GAIN forecasts that soybean area and production will remain unchanged from USDA’s official forecast for MY 2016/17 at 9,000 hectares (ha) and 25,000 MT respectively.

Soybeans are planted on land south of Cairo along the Nile corridor during the first week of May.

The Agriculture Research Center (ARC) of the Ministry of Agriculture and Land Reclamation (MALR) is the authority responsible for the release and marketing of certified soybean seeds.

The ARC will release four new soybean varieties: Giza 21, Giza 22, Giza 25, and Giza 111 in 2018.

Soybean consumption in MY 2017/18 will stand at a record 3.14 million metric tonnes (MMT), up 40.1% from forecasts of 2.24 MMT for MY 2016/17.

The latter estimate was revised downward from USDA’s official projection of 2.44 MMT as a result of a 9% anticipated decrease in soybean imports.

The increase in consumption foreseen for MY2017/18 is a direct result of new expansion by the major private crushers Cargill and Alex Seed Company, which are doubling their crushing capacities.

The expansion at both companies’ plants adds 6,000 MT per day of production to the existing throughput.

Egypt’s domestic consumption of soybeans for food use will remain at 17,000 MT in MY 2017/18.

The food processing industry uses soybeans and soy-based ingredients to enhance the nutritional quality of bread, as well as two popular legume foods: lentil soup and falafel.

The increase in imports in the coming marketing year is expected to be a response to the increased local crushing capacity with the objectives of producing affordable, high-quality blended oil and high-protein edible soy products for the feed industry.

Import estimates in MY 2016/17 have been revised downwards from USDA’s official estimate by 9% due to the restrictive regulatory environment at the beginning of the marketing year and challenges in foreign exchange availability followed by the devaluation of the Egyptian currency.

In 2016, Ukraine was the largest supplier of soybeans to Egypt with 840,730 MT, Argentina coming in second with 632,500 MT, and the US third with 412,000 MT.

The current average price for imported soybeans is about $400/MT. The current price of an MT of soybeans in the local market is about LE 8,500, an increase in local currency of more than 100% after the devaluation of the pound in November 2016.

Sunflower eating consumption driving the market

Meanwhile, Sunflower seed plantation areas and production are forecasted to be 8,000 ha and 19,000 MT in MY 2017/18, higher than the USDA’s official MY 2016/17 forecast of 7,000 ha and 17,000 MT respectively.

The increase in area and local production is due to greater food consumption in urban areas.

This prompted local traders to sign contracts with farmers in Middle Egypt, roughly from Assiut northwards to Cairo, for the crop to be harvested in 2017.

Sunflower seeds are planted in the Delta in March and south of Cairo during June and July. The two main sunflower seed varieties currently planted are Sakha 53 and Giza 102.

Sunflower seed consumption for crushing is forecast at 70,000 MT during MY 2017/18, unchanged from MY 2016/17.

Imported sunflower seeds are largely processed by the public sector to extract sunflower oil used in Egypt’s food subsidy programme. In contrast, domestic sunflower seeds are crushed by local companies close to the production centres in Middle and Upper Egypt.

Consumption of sunflower seeds for food use is forecast to reach 10,000 MT in MY 2017/18 up from 9,000 MT in MY 2016/17, again driven by the population increase. MY 2016/17 the consumption figure of sunflower seeds for food use was revised upwards from USDA’s official estimates of 5,000 MT to reach 9,000 MT.

The increase in consumption is mainly attributed to its cheaper price compared to other snacks and increased awareness of health benefits of the product, especially with a certain segment of the population in big cities like Cairo and Alexandria.

Sunflower seeds are roasted, seasoned, and sold to consumers in shell.

Imports of sunflower for crushing in MY 2017/18 are forecasted to reach 65,000 MT, up by 5,000 MT from MY 2016/17 due to higher demand.

Most sunflower seeds in the Egyptian market are imported for human consumption, with minimal crush. China is the leading supplier, exporting almost 50,000 MT of sunflower seed to Egypt in 2016.

Poultry, fish, and milk suffer from feed price increases

The report attributed a jump in poultry and fish prices to higher Soybeans prices.

Soybean is the primary ingredient in animal feed in the poultry, aquaculture, and dairy sectors.

More than 80% of animal feed components are imported.

Currently Egypt has around 180 poultry feed mills, producing various types of feed for the poultry industry and supplying more than 95% of the domestic market’s demand.

The soybean percentage used in poultry feed usually ranges between 25% and 35% of the finished product.

As a result of the aforementioned devaluation, the price of poultry feed in the domestic market witnessed a 100% increase in local currency, from EGP 4000 per MT, or $222.2 per MT, to EGP 8000 per MT, or $444.4 per MT.

The high prices of feed have contributed to a 30% increase in prices of poultry in the local market.

The inflated price of feed and its components in the domestic market drove soybean food consumption down by 6.6% in MY 2016/17.

“Despite these challenges, the poultry industry remains one of the leading food industries in Egypt with investments of more than EGP 45bn, employing two million people, and annually consuming 10-12million tonnes of feed,” according to the GAIN report.

A number of vertical integration efforts are also expected to continue, as larger producers seek efficiencies through economies of scale.

In the aquaculture feed industry, 73 privately-owned feed mills provide 90% of marine feed, producing both conventionally pelleted feeds (80-85 percent) and extruded feeds (15-20%).

Most of marine feed, 85%, contains 25% crude protein.

The most common recipes for fish feed production use a percentage of soybean between 30% and 40% and fish meal between 5% and 22%.

“Not surprisingly, fish feed prices have also risen steeply, increasing by more than 100%. Price of extruded feed for tilapia increased from EGP 4,000 per MT, or $222.2 per MT, to EGP 8,500 per MT, or $472.2 per MT, while extruded feed developed for sea bass and other marine fish jumped from EGP 12,000 to reach EGP 23,000,” the report stated.

The potential use of meal soybean in the Egyptian dairy industry stands between 600,000 MT and 800,000 MT annually, while the potential use of soybean hulls is estimated at 500,000 tonnes annually.

The cost of feed mixes consumed by dairy cattle has slightly more than doubled to EGP 92 per day, up from EGP 45 per day.

As a result, raw milk prices have increased more than 50%. The surge in grain and feed prices has driven inflation to record levels, the report finished.

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Pressures mount on CBE as IMF calls for interest rate hike to tame inflation Thu, 11 May 2017 06:00:33 +0000 Inflation extends rise in April on higher food prices

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When the Central Bank of Egypt’s (CBE) Monetary Policy Committee holds its monthly meeting to make a decision regarding interest rates later this month, pressures are mounting on them to hike interest rates after the International Monetary Fund (IMF) called on such a step as a means to tame the rising inflation.

Egypt’s inflation extended its rally in April, standing at 32.9% year-on-year (y-o-y), the highest in almost 30 years, according to official data released on Wednesday.

On 23 April, IMF managing director Christine Lagarde said at a press conference that Egyptian policymakers need to put special focus on inflation.

“Here is clearly a question that needs to be addressed, I would say, head on, and that is inflation. The other reforms have to continue, but there has to be a special focus on inflation. I think that the Central Bank and the finance minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population,” Lagarde said.

“It is critically important that the Egyptian authorities and the Egyptian people actually endorse the proposals there in order to take the economy forward.”

The managing director of the International Monetary Fund (IMF), Christine Lagarde

The statement appeared to be a push by IMF officials to see Egypt increase borrowing costs to curb its high inflation rate.

Following Lagarde’s statements, IMF’s director for the Middle East and Central Asia, Jihad Azour, said in a press conference that “interest rates are the right instrument to manage Egypt’s inflation.”

Last week, an IMF delegate arrived in Cairo to conduct its first review of the reform measures and determine whether it would disburse the second tranche of the loan, which amounts to $1.25bn.

Most analysts surveyed by Daily News Egypt confirmed that raising interest rates isn’t the right way to tackle inflation and could result in more problems for Egypt’s already fragile economy.

On the other hand, some analysts believe that hiking interest rates could be the proper means to curb inflation.

Cost-push inflation

“I think the IMF’s push to raise interest rates as a tool to tackle inflation may miss the mark this time. This is a cost-push inflation, not a demand-driven one,” Reham Desouki, a senior economist at Arqaam Capital, told Daily News Egypt.

Cost-push inflation basically means that prices have been “pushed up” by increases in costs of any of the four factors of production (labour, capital, land, or entrepreneurship) when companies are already running at full production capacity.

“In Egypt’s case, the rising inflation is due to floating the pound last November, which resulted in the rise of production input costs, and companies have passed these hikes to consumers. Raising the interest rate has nothing to do with inflation,” she added.

“Austerity measures, which the government took after floating the pound, are weighing on the inflation too.”

When Egypt floated its currency last November, the government introduced a series of austerity measures, including tightening fiscal policies, reducing subsidies, and raising taxes, while also tightening its monetary policy by raising the interest rate by 3% to 14.75% for deposits and 15.75% for lending.

In an interview with Bloomberg TV last month, Finance Minister Amr El Garhy said, “This is all a result from supply shocks rather than a demand-driven kind of inflation.”

“The further rise in the Egyptian inflation last month, to 32.9% y-o-y, was driven entirely by stronger food price pressures. We think inflation is now close to a peak, and today’s figures are unlikely to prompt the Central Bank to hike interest rates at its Monetary Policy Committee meeting later this month,” Jason Tuvey, a senior economist at the London-based Capital Economics, wrote in a note issued on Wednesday.

Food prices, which account for 40% of the consumer price index (CPI) basket, rose by 43.6% y-o-y last month, compared with 41.8% in March.

“The sharp rise in inflation over the past six months can largely be attributed to the effects of a weaker pound. Since it was floated in the beginning of November, the currency has fallen by 50% against the dollar. This has pushed up the cost of imports, and firms have been quick to pass the hit on to consumers. Inflation has also been pushed up by subsidy cuts and the introduction of a value-added tax,” Tuvey explained.

Meanwhile, Mohamed Abu Basha, a senior economist at EFG Hermes wrote in a note that the CBE is likely to keep policy rates on hold at its next meeting on 21 May.

“Recent calls by the IMF to hike policy rates, focusing more on the medium-term impact of the recent inflationary shock, are likely to be subject to further investigation, with authorities looking for more effective tools to contain inflation,” he said.

“We note that we had argued that an appreciation of the USD-EGP, by allowing the market to have access to portfolio flows, would be a more effective way to ease inflationary pressures. We maintain, for now, our call for a minor, more symbolic rate hike, towards the end of year, pending more clarity on the IMF’s statement.

Limited tools

“I think raising interest rates could be an important tool that could be used by the CBE to curb inflation. They have limited tools to use here taking into consideration that there would be another wave of austerity measures,” Fred Haung, a Middle East senior economist, told Daily News Egypt.

Egypt is expected to introduce a fresh wave of new austerity measures starting next July, including cutting oil subsides and raising electricity prices.

“I think that the CBE will tighten its monetary policy until the end of the year, as it wants to absorb the liquidity in the market to curb inflation,” Haung added.

Egypt’s domestic liquidity rose by 4.68%, or EGP 123.1bn, to total EGP 2.75tn by the end of March 2017 when compared to February, the Ministry of Finance said, according to the latest data released by the (CBE).

The annual growth rate increased by 38.4% in March 2017, the ministry added.

“I think raising interest rate to tackle inflation is an important tool for the Egyptian Central Bank but it is all about the timing of using it. For the moment the tool proves less efficient to curb the inflation, but it should be used at least one time before the year’s end,” Joias Goknit, a senior economist, told Daily News Egypt.

Capital Economics said in a note issued on Wednesday that “we doubt today’s data will sway the Central Bank to hike rates. Instead, we think the next move in interest rates is likely to be down, albeit not until the end of this year.”

Debt piles up and cost borrowings are at stake

“Rising interest rates will weigh on the borrowing costs of the Egyptian government; monetary and fiscal policy makers are taking this matter seriously,” Ramy Orabi, a senior economist at Pharos Holding, told Daily News Egypt.

The government estimates debt servicing for the current fiscal year to reach EGP 292.5bn, representing 30% of total expenditures, compared to EGP 173bn in FY 2013/14, which represented almost 25% of total expenditures.

“The government has expressed its wariness about service debt cost, which should reflect in its monetary and fiscal policies,” Orabi added.

In its budget statement for the next fiscal year due to start in July, the government said that “the possible rise in US interest rates would make it more attractive to foreign investments from all over the world, which lowers Egypt’s chances of getting credit at reasonable borrowing costs.”

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After approving Investment Law, what’s next to attract new investments? Wed, 10 May 2017 07:30:49 +0000 Experts and investors believe that approving the new law is not enough to improve the investment atmosphere

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Minister of Investment Sahar Nasr said on Monday in a press statement that implementing the Investment Law now is the most important mission for her and her ministry.

She is responsible, according to the new law, for issuing regulations and organising the process of approving licences for establishing new projects.

Nasr stated that an important step has been taken by finishing the law’s approval and now the government will work on attracting new investments and solving all the problems that investors face.

The minister said that the current version of the law is the best one, because the parliament had long talks with the government about the added articles, especially about transparency and investment incentives, which shows that the government is serious about attracting new investments and it is also serious about supporting the private sector, especially in the poorest governorates, because it is the leading sector nowadays.

However, some economic experts do not seem fully satisfied with the law or believe that the problem of the current economic situation is a result of the old law.

In his opinion article in El Shorouk Newspaper, former deputy prime minister Ziad Ahmed Bahaa-Eldin named four major problems with the law.

He stated that the first problem is that the law allows working by investment incentives, after Egypt has suffered from such measures back in 2005 and ended them. He believes it opens the door for corruption and prevents taxes’ incomes that the country really needs today due to the huge budget deficit.

The second problem, in his opinion, is that the law institutes further bureaucracy in the system of licensing because it allows different ministries and institutions to get involved in this process as well as in the process of land allocations.

He added that the third problem is that the law makes the General Authority for Investment (GAFI) an organ of the Ministry of Investment instead of being an independent institution.

The final problem he stated was that the investment atmosphere problems cannot all be solved by this law, explaining that the problems that prevent investment inflows into Egypt are related to many laws and regulations of the Egyptian law, the unclear economic state of Egypt, and the severe, unnecessary involvement of governmental and military investments in the market, which create an atmosphere of unfair advantages.

From another direction, the vice president of 15th of May City’s business association, Abdel Ghany El Abassery, stated that the problem is not about the law, emphasising that the previous law was not that bad.

He believes that the problem is about the centralisation and bureaucracy that make investors struggle to establish their companies.

He said that the government has to simplify the process of licensing in order to make it easier to establish a company, adding that in Dubai, it takes only a couple hours to establish a company. “If the government allowed establishing a company in a month, I’ll call it progress,” he noted.

El Abassery said that the government must give every governorate the authority to approve licences on its own, like it was before 2011.

On the other hand, the former dean of Economics and Political Science at Cairo University, Aliaa El-Mahdy, said that Egypt has many other dimensions to look at besides implementing the new law.

She emphasised that the current inflation rate is very high, adding that the possibility of raising the interest rate once again above the current levels will lead to recession, which will not help in attracting any new investments to the Egyptian market.

She explained that it will raise the prices of all the goods and that it will make people spend less on unnecessary goods and services, which will not be a good indicator for new investments.

The managing director of the International Monetary Fund (IMF), Christine Lagarde, said during a conference held in April during the spring meetings of the IMF in Washington that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

It is important to mention that the International Monetary Fund (IMF) has officially asked the Egyptian authorities and the Central Bank of Egypt (CBE) to raise the interest rates for the banking sector to control the hiking inflation rate.

The managing director of the International Monetary Fund (IMF), Christine Lagarde, said during a conference held in April during the spring meetings of the IMF in Washington that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

Lagarde added that “the Egyptian programme that is underway has been very courageous and has led to major reforms for the country,” yet, she also believes that other reforms have to continue, but there has to be a special focus on tackling inflation.

“I think that the Central Bank and the Finance Minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population,” she noted.

It is important to note that Egypt implemented many serious reforms, such as floating the pound in November in order to make the IMF approve a three-year $12 billion programme, which includes ambitious economic reforms.

On the other hand, El-Mahdy stated that there are many other factors that could affect Egyptian abilities to attract more foreign investments.

She said that the declaration of the state of emergency by President Abdel Fattah Al-Sisi back in April has a seriously negative effect, because it tells investors around the world that Egypt is not safe or secure. She added that, unfortunately, it has outweighed all the efforts to convince American businesspeople to invest in Egypt back during the president’s visit to the United Stated of America at the beginning of April.

She believes that implementing security is a very important step that opens the door for new investments.

The Egyptian president declared a state of emergency for three months after explosions hit churches in Tanta and Alexandria on 8 April.

She also believes that the situation was already bad due to the numerous conflicts in the Middle East and North Africa.

Reham El-Desouki, an economist at Arqaam Capital said to Reuters, in an article published on Monday that “a large number of investors were waiting impatiently for the law in order to understand the investment environment in Egypt and its incentives, especially with regards to the cost of starting a project and incentives for land.”

Reuters stated that the government has approved an earlier version of the Investment Law in 2015, adding that the law would “bolster investor confidence, but the legislation was criticized for coming up short.”

“The new Investment Law includes a raft of new incentives, such as a 50% tax discount on investments made in underdeveloped areas and government support for the cost of connecting utilities to new projects,” the article read.

The law states that one provision will return to investors half of what they pay to acquire land for industrial projects if production begins within two years, according to Reuters. The law also “restores private sector free zones—areas exempted from taxes and customs—a provision that had held up the law’s passage because of objections over whether to forfeit tax revenues at a time of austerity.”

However, Reuters said that Egypt’s direct foreign investment jumped by 39% in the first half of the current fiscal year ending in June to reach $4.3bn.

“In light of current conditions, the investment incentives are needed,” according to Mohamed Abu Basha, an economist at EFG Hermes, who told Reuters that “the incentives will give a push to investors to come to Egypt.”

Reuters stated that the new law “is expected to boost badly needed investment by cutting down bureaucracy, especially for starting new projects, and providing more incentives to investors looking to put money in Egypt.”

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Porto Group Holdings considers further expansions as chief Mansour Amer quits Tue, 09 May 2017 08:00:05 +0000 Mohamed El Mekkawy replaces Amer as the company’s chairperson

The post Porto Group Holdings considers further expansions as chief Mansour Amer quits appeared first on Daily News Egypt.

Porto Group Holdings is eyeing new expansions in different fields as the Egyptian-listed company appoints a new chairperson and managing director to succeed Mansour Amer.

On Thursday, Porto Group’s board of directors approved appointing Mohamed El Mekkawy as the group’s new chairperson and managing director, replacing founder Mansour Amer, who stepped down.

“It is the proper time now for me to step down from Porto Group and leave the management for another trusted person,” Mansour Amer told a press conference at the company’s headquarters on Thursday.

“The company now can go on its own. We have paved its way to be an independent company with a new board,” Amer added.

In October 2015, Amer Group split into two companies, namely Amer Group Holdings, becoming the demerging entity, and Porto Group Holdings as the demerged entity.

Porto Group is capitalised on EGP 455.9m, distributed across EGP 4.5bn shares at EGP 0.10 per share.

The company’s market value hit EGP 1.1bn as of Monday 7 May.

Company’s projects are under way

Speaking about the company’s current projects, Mansour said that most of the developer’s projects are under way, noting that the company has new projects that value EGP 7bn.

“The first stage of our last project, Santorini, in Ain Sokhna is doing very well,” Mansour explained.

Porto Group Holdings signed the contract of establishing the Santorini project in Ain Sokhna last January, with investment costs likely to hit EGP 340m.

The project spreads across 32,500 square metres and comprises 500 touristic residential units.

“Our sales hit EGP 3.2 billion in the last couple of years. We also carried out projects that valued EGP 1.4 billion last year,” Mansour added.

According to Amer, the company’s land bank hit 5 million square metres.

“Our backlog stands at EGP 6 billion by the end of last year.”

Regarding the company projects abroad, Mansour revealed that Porto Agadir in Morocco is about to acquire the license needed to kick off the project.

“We are currently studying many plans to expand locally and abroad.”

Current income is on focus

We concentrate now on current income to maximise profits for our valued investors,” Mansour explained.

Current income is an investment objective for a moderately conservative portfolio of securities or companies that provide high dividends and annuity payments to satisfy an investor’s steady income requirements.

“We are now in the process of investing in such activities like education, health, and entertainment sectors,” he added.

“These activities could secure a quarterly income in addition to the real estate and hospitality income. This would be a good thing for the investors,” continuing that “our commercial sector is one of these important sectors which could generate regular revenue for our companies.”

Amer noted that the company’s commercial land bank could hit 352,000 square metres in 18 months.

“This would make Porto Group the market’s first commercial developer,” Amer noted.

Porto Group’s current commercial land bank stands at 30,000 square metres.

Securitisation and other debt options

Responding to a question from Daily News Egypt about the possibility to take to the debt market to finance further expansion, Mansour said that the company’s liquidity standing is at very good levels, but he noted that if there was a need to resort to the debt market, they would prefer securitisation and banks’ credit lines.

Securitisation is the process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. This process can encompass any type of financial asset and promotes liquidity in the marketplace.

Porto Group said at the beginning of 2017 that its board of directors gave the go-ahead to complete the studies regarding issuing securitisation up to a maximum of EGP 300m ($38.3m).

Company’s outlook

Speaking about the company’s outlook, Mansour noted that 2017 would be an exceptional year for his company, as it plans to expand in the local and international markets.

“This year we forecast a jump in our sales and net profits compared to last year,” Mansour said.

Porto Group’s consolidated financial statements showed a net profit of EGP 117.54m for the fiscal year 2016.

Consolidated net profit for the period from 30 August 2015 to 31 December 2015 amounted to EGP 37.25m.

Standalone profits declined 58.9% to EGP 39.74m from EGP 96.9m for the corresponding period.

“We have a land bank that could enable our company to achieve EGP 40 billion of sales in the few coming years,” Amer added.

“Any jump in our profit will reflect in our profit distribution policy,” he added.

The company’s board recommended distributing one bonus share for every ten shares in 2016.

In March, the general meeting of Porto Holding approved an increase of the company’s capital by EGP 45.59m, through the distribution of bonus shares at 10%.

During the meeting, it was also decided to transform part of the group’s capital to global depository receipts (GDRs).

Amer expected to get the Egyptian Financial Authority’s go-ahead in two weeks from now.

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Can Egypt become a net gas exporter again? Thu, 04 May 2017 06:00:06 +0000 With total proven reserves of 65 trillion cubic feet at the end of 2015, Egypt is the 16th largest gas reserve-holder globally, says BNP Paribas

The post Can Egypt become a net gas exporter again? appeared first on Daily News Egypt.

Egypt has laid out its vision to become a regional energy hub following discoveries of large offshore gas reserves in the Eastern Mediterranean. This vision is critical as the energy sector remains the major driver of the country’s balance of payments. Recent developments suggest that Egypt has a clear potential to become a trading and exporting hub, notably for natural gas. However, the realisation of this ambition will depend on the country’s capacity to mitigate geopolitical, financial, and regulatory risks. This should go hand-in-hand with energy diversification to reduce dependence on gas and sustain anticipated exports.

In a study issued on Tuesday, BNP Paribas bank tried to answer the question “can Egypt become a net gas exporter again?”

The study said that with total proven reserves of 65 trillion cubic feet (tcf) at the end of 2015, Egypt is the 16th largest gas reserve-holder globally and the second largest gas producer in Africa.

BNP PARIBAS stated in a study issued on Tuesday that Egypt is viewed as a world-class hydrocarbon area with active drilling in four basins, including in the Mediterranean, which holds 65% of the country’s total gas reserves.

The study added that the Exploration and Production (E&P) segment is critical for the Balance of Payments (BoP) as it typically contributes two-thirds of incoming gross foreign direct investments (FDI) with at least four oil majors among the top 10 foreign investors in Egypt.

The study stated that hydrocarbons also underpin Egypt’s trade balance and account for nearly half of total exports, mainly in the form of light crudes and naphtha. Furthermore, as the largest source of corporate taxes in Egypt, the energy sector strengthens fiscal stability.

BNP Paribas said that Egypt’s energy sector boomed in the early 2000s, driven by strong domestic demand and Liquefied Natural Gas (LNG) exports. Gas production increased more than three-fold between 1999 and 2009.

“Since 2010, however, sharp macroeconomic deterioration and structural natural resource trends have pushed the sector into difficulties. The first hit was the decline in offshore Mediterranean gas production as a result of reservoir maturity and stalled investments. The production of four of Egypt’s major offshore gas fields started to decline in 2012 as they had been discovered and developed at the same time in the mid-1990s. The second hit was the accumulation of Egyptian General Petroleum Corporation (EGPC) arrears to upstream investors peaking at $6.3bn in 2012 (2% of GDP) as a result of mounting fiscal deficits and deteriorating external liquidity during the political transition,” the study read.

According to the bank, the third hit came from the decline in crude oil prices in 2014/15, thereby discouraging foreign investment, especially in high-risk deepwater exploration.

Egypt became a net gas importer in fiscal year (FY) 2015/16 with a hydrocarbon external deficit of $3.6bn compared with a surplus of $5.1bn in FY 2009/10.

During that period, BNP Paribas said that the current account deficit was largely driven more by the negative hydrocarbon balance than by the decline in tourism. Real economic activity was also impacted as households and energy-intensive industries suffered from occasional fuel and power shortages.

Steps taken by the government

BNP Paribas said that a series of policy measures was undertaken to rebalance the energy sector. In the short term, the government secured concessional fuel supply agreements with GCC sovereigns and launched LNG imports fulfilling 25% of domestic demand. In the medium term, the government repriced gas offtake from new blocks by 40-120% and upwards to incentivise production and auctioned large exploration acreage at competitive terms to accelerate reserve replacement. On the financial side, the government allowed some onshore producers to export 50-75% of their equity oil, the share by which the state can claim entitlement right, in order to decelerate the build-up of arrears. That, combined with a series of material payments to targeted E&P operators, has indeed halved EGPC arrears to $3.5bn. However, the study showed that the outstanding receivables continue to be a major constraint for new E&P investments primarily in gassy portfolios.

“The turning point was the discovery of the Zohr jumbo gasfield in August 2015. This gasfield, with its recoverable reserves of 22tcf, has not only replenished Egypt’s total gas resources by one third, but has also been fast-tracked to start production in 2H 2017,” says BNP PARIBAS.

The bank believes that Egypt is currently replenishing most of its gas production with new discoveries and is likely to achieve self-sufficiency by 2019. These new discoveries are comprised of two large offshore projects, Zohr and West Nile Delta, in addition to the smaller Noroos and Atoll fields that should jointly produce 5bcf/d at plateau representing 1.1x of Egypt’s current total gas production. Further discoveries of small and fast-to-plug plays such as Noroos and North Alam El Shawish have boosted investor confidence and attracted new entrants to the sector such as frontier national oil companies and private equity funds, the study noted.

When can Egypt become a gas exporter?

While Egypt is on track to regain a gas surplus by 2019, BNP Paribas believes the challenging question is how long it can remain a gas exporter.

The prime consumer of gas is electricity generation, which burns 60-65% of Egypt’s gas output. Gas consumption is dependent on both structural trends in demand and availability of energy for end-users. While gas consumption markedly rose during the first half of the 2000s, it has been almost stable since 2011 given shortages.

The study expects that, in the short term, domestic consumption should rise substantially due to the commissioning of Siemens’ 14.4GW combined-cycle generation plants that would add 37% to the national installed power capacity.

The key factor driving electricity consumption is population growth because two-thirds of power output is consumed by residential and commercial customers. Population growth is one of the highest in the Middle East and North Africa (MENA) region, a trend that is likely to last beyond the medium term due to Egypt’s youth boom (one-third of the total population is under 14).

Another source of gas demand is gas-intensive industry (steel, fertilisers), which is expected to return to full utilisation in step with the economic recovery.

Here, Egypt has to choose between exporting surplus gas in either LNG in order to accumulate foreign exchange reserves or industrial forms in a way that maximises factors of economic development such as employment and industrial integration, the study noted.

Pursuant to demand management, Egypt is challenged to manage gas supply, says BNP Paribas

Some producing legacy gasfields suffer from high rates of decline in production (12% annual average). While the four key offshore discoveries are being fast-tracked, they have varying production plateaus ranging from 11-18 years (Atoll, Zohr) to much shorter 3-5 years (Noroos, West Nile Delta). Replacing declining offshore production necessitates further exploration investments to proactively sustain Western Desert production that should start naturally declining in 2-3 years, albeit at smoother rates.

The study believes that under the conservative assumption that gas consumption will grow by 4% per annum on average in the medium term and based on Wood Mackenzie’s gas production forecasts (production to peak in 2021 and decline afterwards).

“Egypt’s capacity to export gas may not last beyond 2022,” says BNP Paribas.

“We believe that Egypt can sustain gas exportation only if further discoveries are made and subsequently developed. That is partly achievable if EGPC arrears are repaid on a regular basis to provide the needed certainty for private E&P investments,” the study read.

However, BNP Paribas said that in order to free up gas capacity for export, Egypt has to diversify the energy mix away from fossil fuels. Hydrocarbons made up more than 95% of primary energy consumption in 2015. Although Egypt launched an ambitious renewables strategy aiming to increase the contribution of solar and wind resources to 20% of power output by 2022, progress has been rather slow and restricted to public projects rather than Independent Power Producers (IPPs).

“As renewables accounted for only 0.5% of Egypt’s power generation mix, it will effectively take a long time for the country to reduce its dependence on gas for power generation,” according to the bank.

However, Egypt is expected to become a net gas exporter by 2019, the study noted.

Can Egypt become an East Med gas hub? 

BNP Paribas said that simultaneous offshore gas discoveries in Egypt, Israel, and Cyprus have opened a new opportunity for regional integration as discovered volumes seem to exceed domestic market capacities in the respective countries. Egypt’s bid to become a regional energy hub is built on three pillars: strategic location on key trade routes, proximity to resource-rich countries with relatively saturated domestic markets, and advanced export infrastructure. This last factor, in BNP Paribas’ view, “is the defining pillar of Egypt’s regional hub strategy.”

The bank’s understanding of the gas hub approach entails trading and export dimensions.

The trading dimension positions Egypt as a deep and open gas market where sellers and buyers transact freely under efficient regulatory conditions. Although this is an important dimension to developing gas-intensive industries such as petrochemicals, BNP Paribas said that it would require ample time and continuous regulatory adaptation to evolve. The second dimension positions Egypt as a gas export hub, not only for its own surplus domestic production, but also for the excess output of other East Med basin countries.

The study shows that Israel became gas-rich as result of Tamar and Leviathan discoveries in 2009-2010. Tamar (10tcf reserves) is currently in production, supplying 100% to domestic buyers. Tamar’s production remains below full capacity, which is estimated to be 1.2bcf/d. Leviathan (22tcf reserves, the equivalent of Zohr’s) should start marketing its production by 2020. The two fields combined comprise a total Israeli production capacity of 2.5bcf/d. The consortium in charge of Leviathan development has signed a contract with Jordan’s National Electric Power Company to supply 45bcm of gas over 15 years, thus completing phase I of the project, according to BNP Paribas.

However, in Cyprus, Aphrodite (4.5tcf reserves) was discovered in 2011, but a development concept is yet to be introduced. Nevertheless, there is no clear timeline, and the political specificities of Cyprus could slow the development of the project. There is further potential for a Zohr-like “exploration tail” in the promising Block 11 that will be drilled in Cypriot waters in mid-2017, a few kilometres northwest of the Zohr formation.

Egypt’s existing LNG terminals on the two flanks of Nile Delta seem to be the answer to the East Med gas surplus question. The two plants, which are currently nearly idle due to gas diversion to the domestic grid have an aggregate export capacity of c.12mtpa and are capable of exporting 1.7bcf/d with limited mothballing requirements. That theoretical export capacity provides a platform to handle combined production of Leviathan (phase II) and Aphrodite at mature levels as well as Egypt’s peak exportable surplus in 2021 based on BNP Paribas’ forecast. Moreover, connecting Mediterranean discoveries to Egyptian infrastructure requires substantially lower investment than construction of greenfield LNG facilities in Cyprus or Israel.

Excess reserves in both countries are, nonetheless, not material enough to justify new LNG investments on a standalone basis.

Egypt’s hub position would bring the region substantial benefits, such as optimising resources and investments, alleviating external balances in Egypt and Cyprus, diversifying gas supply to Europe and deepening the global LNG market.

Nevertheless, there are three constraints for the development of the Egyptian gas hub. The first constraint to East Med gas integration is geopolitical sensitivity between Egypt and Israel on the one hand and Cyprus and Turkey on the other.

BNP Paribas singles out two specific political risks to the hub strategy. The first risk is classic political reservation between Egypt and Israel linked to limited bilateral economic cooperation since the Peace Accords as well as pending arbitrations on previous energy disputes. The second and emerging risk is the complexity of Turkey’s political situation in the region.

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Unpredictable future of IMF loan Thu, 27 Apr 2017 06:00:10 +0000 The IMF is to pay a visit to Egypt on 28 April after postponing it for the third time

The post Unpredictable future of IMF loan appeared first on Daily News Egypt.

Nobody knows what the IMF delegation will say or decide about Egypt, or whether they will approve the second tranche of the loan or ask for more reforms.

However, managing director of the IMF, Christine Lagarde, stated during a conference held on Thursday that there is “clearly a question that needs to be addressed, I would say, head-on, and that is inflation.”

Lagarde said that the government has implemented many reforms, adding that the government must keep the current rate of reform while giving special focus to the hiking inflation.

She said in the conference, “I think that the Central Bank and the finance minister of Egypt are both aware and will, I hope, tackle the inflation risk, which is weighing on the population.”

However, Lagarde stated that the IMF approved the Egyptian programme, which is the second largest financial programme globally.

Furthermore, Bloomberg published an article quoting Jihad Azour, director of the fund’s Middle East and Central Asia department, who stated that the “available monetary and fiscal policy instruments, including interest rates, can help to contain inflation.”

At a press conference on Friday, Azour said interest rates are “the right instrument” to manage Egypt’s inflation. “This is something that we are discussing with the authorities,” he said, according to Bloomberg.

In this regard, Aliaa El-Mahdy, a former dean of the Faculty of Economics and Political Science at Cairo University, believes that the government applied many steps in the way of implementing the programme approved by the IMF, such as cutting oil, electricity, and gas subsidies, and it will apply more subsidy-cuts in the next fiscal year (FY).

She also said the government wants to reduce its payments and set more austerity measures in the new budget; but, unfortunately, the new budget is getting bigger, even if they want to reduce it, although it is still lower than the rate of inflation.

Unrealistic goals, difficult reforms

El-Mahdy said that the government and the IMF expect a budget deficit of 9.5%, which she doubts the government could achieve.

The flotation was one of the most important decisions that was implemented, she noted; yet, the biggest problem is inflation.

She added that the current interest rate— 20%—is already very high, and if the Central Bank of Egypt (CBE) decided to raise the interest rate again in the current state of stagflation, there will be no new foreign or local investments.

“I believe that the main problem in the country is the inflation, and the rate of inflation is going higher, and the government cannot fix it by any decisions; the only way is to improve the way of attracting investments and encourage local investors to produce more,” she said.

However, she stated that achieving a general domestic product (GDP) growth rate of 5% is possible if the government worked on implementing solutions that improve the investment climate.

El-Mahdy added that fixing investors’ disputes is one of the main things that could help the government attract more investments, either by expanding local investors or by attracting foreign direct investments.

“The government has to find solutions for the disputes between the investors on one hand, and the government or the banks on the other,” El-Mahdy said. “Attracting foreign investments or promoting local investors are the only way to achieve the government’s goals of raising the GDP by 5%, which would also help reduce unemployment.”

However, it is worth noting that Lagarde said in February that Egypt is making good progress in the loan programme, adding that the currency is likely to stabilise after months of depreciation.

Lagarde added that the IMF sees good, noticeable progress by the Egyptian government, with a focus on Egyptian people and the most vulnerable segments of the society. She also noted that the IMF believes the state has been doing its best given the circumstances.

The government must be committed to the loan’s decisions

From another view point, the executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, said that the government has no other choice but to cut more petroleum subsidies, because that is what it has agreed to in order to receive the IMF’s loan.

He added that it is very serious to delay any decisions, because it shakes Egypt’s stability and international commitments, which could easily affect Egypt’s future loans or the process of attracting foreign investments.

If the government didn’t implement what it had agreed to, the IMF might freeze the next loan tranches, which would destabilise Egypt once again, Tawfik noted.

It is worth mentioning that the visit of the IMF delegation was postponed to April instead of March. This also postponed revising the progress that the Egyptian government achieved, consequently delaying the receipt of the second tranche of the loan.

Tawfik stated that if the government didn’t commit to its decisions, the country would face a lot of accusations about Egypt’s seriousness to implement economic reforms.

Moreover, Moody’s Investors Service said in a report last week that while Egypt’s IMF programme will support gradual improvements to the country’s fiscal and external position, its social and economic costs risk slowing the pace of fiscal reform.

“The implementation of the targets of the IMF programme—including reductions in fiscal deficits and government debt levels, as well as improvements in Egypt’s external liquidity position—will help address Egypt’s key credit challenges,” said Steffen Dyck, a Moody’s senior credit officer and co-author of the report.

“However, ambitious fiscal consolidation targets will be challenging to achieve and could face implementation risks in a scenario of mounting public discontent,” he noted.

Moody’s projects that Egypt’s fiscal deficit will decrease to 11% of its GDP in FY 2017 and 8.5% in 2019—down from 12.6% in 2016. Moody’s forecasts are more conservative than the IMF programme projections of 10% of GDP in FY 2017, reducing to 6.1% in FY 2019, driven by Moody’s somewhat lower growth assumptions and potential fiscal slippage, both in the near and medium-term.

Worries about the high debt

The managing director of Multiples Group, Omar El-Shenety, has different thoughts regarding the increasing foreign debt.

He stated that the IMF expects the foreign debt of Egypt to exceed $100bn by the year 2020.

He believes that during the near future, Egypt might fall into the trap of foreign debt, and it would easily exceed a rate of more than 150% of GDP, which is a very critical situation.

El-Shenety believes that the rates of public debt are not worrying; yet, it will reach the critical zone no matter what, because foreign debt is going to be greater than 50%.

He said that there are different types of loans that Egypt receives, but the main problem is about how the government will create other sources of foreign currencies to repay the main loans and interest.

El-Shenety added that Egypt’s government is planning to raise the GDP to the level where the debt represents a small rate of it, which is likely difficult to achieve, explaining that the government expects a growth rate of 6% in FY 2017/2018, but then decreased that expectation later to 4.6%, which is unlikely to happen in the real budget, due to the poor state of tourism, the region’s political turbulence, and many other factors.

The current rate of the public debt compared to the GDP is 130%, not including the debt of loans. According to the IMF, within three years, the rate will reach 150%, again without including loan debts, which will be used to fund national projects and institutions and will probably push the total amount to exceed 160-170%. This is a very high and dangerous rate, El-Shenety noted.

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The main economic results of wider US involvement in Syria Thu, 13 Apr 2017 07:00:42 +0000 Egypt is likely to participate in any conflict in the region, and there are different opinions regarding the possible effects it would have on Egypt and the region.

The post The main economic results of wider US involvement in Syria appeared first on Daily News Egypt.

In March 2003, the United States, United Kingdom, Poland, Australia, Spain, Denmark, and Italy began preparing for the invasion of Iraq, with a host of public relations and military moves. In his 17 March 2003 address to the nation, George W. Bush demanded that Saddam and his sons surrender and leave Iraq, giving them 48 hours. But the US began bombing Iraq a day before the 48 hours ended after a rejection of the ultimatum by the Iraqi government. Unlike the first US war against Iraq, however, this war had no explicit United Nations (UN) authorisation.

However, the invasion of Iraq resulted in global consequences, such as a hike in oil prices—which effectively raised the price of the products all around the world—and marked the beginning of more radical Islamist armed movements.

And now, 14 years later, the US, under president Donald Trump, has yet again hit another country without UN approval. But what are the possible consequences that could result from this course of action?

On Friday, the US launched 59 Tomahawk cruise missiles from two destroyers in the Mediterranean against Shayrat air base in Syria. However, many news reports predicted that the strike might not be the last and that the White House will do so again if it considers that necessary.

But what would happen economically if the US decided to increase its involvement in the Syrian crisis? Daily News Egypt asked several economic experts about this issue.

The economic expert and member of the World Federation of Exchanges Medhat Nafea believes that the war in Syria is far more complicated than most people think.

He stated that there are many scenarios that would have terrifying effects on the whole region, not only on main commodities such as petrol or gold, but on the world economy.

He said that during the cold war, the tension between the world’s two superpowers did not lead to real conflict between them. A conflict between Russia and the USA in Syria would turn the world’s economy to a mess, he added.

The strike against Shayrat base was something that was known and approved by both the US and Russia in one way or another and would probably not result in a more dangerous situation, he added.

The strike was something important to make the Syrian president reconsider his stance and think about finding solutions to the current crisis, because he was the reason that prevented any progress in the Geneva talks, he added. Nafea believes the US took action to achieve some progress.

Another scenario is that the American president might be sending a message that he is not cooperating with the Russian president, Nafea said.

It was probably a deal that was made with Saudi Arabia to strike Syria, because of the ethnical and religious differences between Saudi and Syria. That is why the kingdom was one of the first countries to approve the American strike. There is a lot of meddling in the Syrian crisis.

Unfortunately, the Egyptian role was not clear. However, a wider American conflict in Syria would not benefit Egypt in any way.

The only people who would benefit from the war are weapon manufacturers, who sell more weapons during times of war. However, Egypt will lose economically if America expanded its strikes on Syria, as is an important market that used to import a lot of products from Egypt.

If Syria was divided, it would not benefit Egypt; even if oil-rich countries promised to provide more support, it would be temporary help, which would not match the price of losing an important country as Syria.

Moreover, the world is waiting for a more effective Arab role that would end Syria’s crisis.

The Price of oil would increase

Nafea explained the price of oil might get affected if more US strikes were to hit Syria, because the parties of the conflict—namely Russia, Iran, Saudi Arabia, the United Arab Emirates (UAE), and the US—are the main oil producers. He believes the price of oil will increase.

However, none of the oil-producing countries will halt their oil production, as they would not want to lose a market share. He added that even in Libya, the conflicting parties are always looking for ways of selling their oil.

Moreover, Nafea believes that, usually, when a declaration of war is announced, demand grows more rapidly than supply, which means the price of all products would increase in the region and the whole situation becomes worse.

From another perspective, the executive chairperson of Union Capital Incorporated (UC), Hany Tawfik, stated that history does not repeat itself.

He explained that Russia, China, and Iran made it clear that there should be no further American involvement in Syria.

He stated that the US is the world’s largest economy and that it will not risk weakening its economic stance worldwide by being dragged into a new world war. The US is facing another problem, which is North Korea, Tawfik added.

From another direction, the managing director of Multiples Group, Omar El-Shenety, said one economic effect a war between the US and Russia in Syria will have is that the price of oil will rise again, which would create more fiscal surpluses in oil-producing countries, such as Saudi Arabia and the UAE, which are Egypt’s trading partners and would probably increase their support for Egypt such as what happened after of 30 June 2013.

He added that if any war in the region breaks out, Egypt is probably willing to participate in it.

Egypt might benefit of more conflicts in Syria

El-Shenety explained that back in 1987, the economic situation of Egypt was worse than the current period. Egypt’s participation in the first Gulf War made the US and Arab countries provide more aid and finances to Egypt, he added.

He believes that Egyptian authorities would be willing to place a bet on that. This is why the rate of Egypt’s imports of weapons has been on a rise since 2013.

El-Shenety stated that America’s involvement would make Iran reduce its role in the area, explaining that the last years of the former US president has showed that America is taking its hands off the Middle East, and now the strike shows that the US is probably back, which would reduce Iran’s influence.

“The importance of Egypt will increase,” he noted.

Regarding the price of oil, he believes it would increase along with the US dollar, because the war would automatically make the US pump more investments in its market, which would raise the value of its currency.

However, the former dean of Economics and Political Science College at Cairo University, Aliaa El-Mahdy, believes that more American involvement in Syria would have no more direct bad effects on Egypt, unless Egypt announces its participation in the conflict, which would probably affect Egypt negatively from political, economic, and social perspectives.

She added that a war might affect the whole region, because the region would become known as a war zone, which would effectively prevent any further investment or tourism to the region.

She added that Egypt has unfortunately wasted a precious opportunity when it announced a state of emergency this week, because that indicated that Egypt in fact is not secure for more investments.

She believes the region is in a dangerous and critical situation now.

Unlike other opinions, she stated that the US dollar price might not necessarily increase during a war, yet the American economy would definitely witness a higher growth rate.

She stated that both parties are likely to prevent more tension in the area, and the future of the country and its people is unpredictable.

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Robust economic policies needed to maximise private savings and finance growth in Egypt: World Bank Mon, 10 Apr 2017 07:00:52 +0000 The research by the World Bank said that trust and internet access are significant to savings behaviour, whereas physical access and distribution of banks do not have an effect on one’s probability of participating in bank savings and/or informal savings

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Savings is alternatively defined as income minus consumption, the change in wealth, or the supply of capital. Given the comprehensive and consistent definitions of each of these terms, each definition of “savings” would represent the same concept and give rise to similar empirical measures. A research prepared by the World Bank Group—undertaken by Khaled Hussein, Mahmoud Mohieldin, and Ahmed Rostom—under the name “Savings, Financial Development, and Economic Growth in the Arab Republic of Egypt Revisited” discussed the nature of economic growth in Egypt and several areas it involves, relating them to the citizens’ behaviours in savings and trust in the financial development of the country.

The study illustrates the mechanisms linking national saving and economic growth, with the purpose of understanding the possibilities and limits of a saving-based growth agenda in the context of the Egyptian economy. This is done through a simple theoretical model, calibrated to fit the Egyptian economy and simulated to explore different potential scenarios.

Understanding savings behaviour is critical when designing economic policies that promote investment and growth, according to the research. Most of the empirical literature that analyses cross-country savings behaviour concentrates on aggregate savings for a multitude of reasons. The first reason is due in part to the lack of consistent information on household behaviour, as well as possible differences in the household savings in developing versus industrial countries.

A 4% growth rate of General Domestic Product (GDP) per capita requires a national savings rate of around 50% in the first decade and 80% in 25 years

A study by Hevia and Loayza illustrates the mechanisms that link national savings and economic growth in Egypt. The study uses a simple theoretical model calibrated to fit the Egyptian economy and simulated to explore different potential scenarios. Their main conclusion was that if the Egyptian economy did not experience progress in productivity, then a high rate of economic growth would not be feasible at current rates of national savings and would require a saving effort that is highly unrealistic. To obtain a constant 4% growth rate of GDP per capita with no total factor productivity (TFP), improvement would require a national savings rate of around 50% in the first decade and 80% in 25 years. However, if productivity starts to rise to at least moderate levels, sustaining and improving high rates of economic growth becomes viable. Realistically, to achieve the goal of high economic growth, the national savings effort must be alleviated by forcefully and purposefully improving productivity.

The research includes a mix of a “simple permanent income” hypothesis as well as “life cycle” hypothesis determinants, which are used to interpret real private savings behaviours in Egypt. The study was able to present new empirical evidence related to savings behaviour, financial development, and economic growth in Egypt.

By using high quality and high frequency quarterly data covering 1991-2010, the study employed a robust vector equilibrium correction modelling strategy. The key long-term determinants of private savings in Egypt are the real interest rate and level of financial development, as shown by the data. The data also showed higher persistence of real private savings in the short run.

The real interest rate varies negatively with real private savings in the long term for the period under consideration, 1991-2010. This translates to the fact that higher consumption is becoming more attainable at a lower cost. Hussein and Mohieldin reached the same conclusion on the relation between private savings and real interest rates during 1960-1990. However, they referred to the fact that the financial repression of the 1960s cannot be alleviated by an increase in the real interest rate, as it further deepens the problem of excess liquidity of the banking system, which is indicative to the liquidity crisis in the late 1990s.

In the short term, real private savings vary positively with real interest rates, whereas financial development positively reflects on higher private savings on both horizons. This is a literal translation of the McKinnon-Shaw hypothesis on financial development and growth, which strongly holds for the case of Egypt. The effect of higher inflation on real savings negates the presence of a precautionary motive for savings in Egypt. This can be attributed to seeking alternative non-formal inflation hedges, particularly in real estate and gold. This is common in less developed countries that suffer financial market imperfections. Unavailability of robust data on real estate holdings and gold prices in the domestic market limit the interpretation of this result and raise a feasible research question for future development of this model. Exchange rate movements reflect on higher private savings. It provides signals of macroeconomic uncertainty to economic agents and triggers precautionary motives for savings. In the absence of data on domestic and foreign currency denominated private savings, devaluation would reflect on raising the domestic currency equivalence of foreign currency savings, leading to a net positive effect of devaluation on private savings, according to the data of the research.

Individuals with trust in deposit safety and financial stability are likely to save funds

Relevant policy recommendations are imperative to the betterment of the Egyptian economic narrative. A multitude of sources indicate that trust is a significant determinant of savings; in other words, it has been observed that individuals who perceive that the economic situation within their country will improve are more likely to save. Moreover, regression analysis illustrates that trust in deposit safety and financial stability is highly correlated with trust in one’s government; therefore, an individual who trusts the institutions within their country is likely to save.

That said, it is imperative for Egypt to build creditability as well as maintain integrity in their financial institutions in pursuit of building trust to ultimately increase savings. In addition to trust, internet access is significant to savings behaviour, whereas physical access and distribution of banks do not have an effect on one’s probability of participating in bank savings and/or informal savings. In many underdeveloped countries, information barriers are generally associated with higher costs. With that being said, improvements in internet access lower transaction and information costs for stock market participation, thus increasing the likelihood of savings as well as helping a consumer make better financial decisions. However, one must be financially literate to reap the benefits cultivated from access to the internet. Increasing internet access within Egypt could be pivotal to savings behaviour; however, it should also be noted that it would only assist a specific cohort of individuals. Furthermore, the inception of funded private pension system schemes within Europe and Central Asia have been pivotal to savings behaviour. Essentially, a pension system encourages savings within the workplace to ensure adequate income for workers during retirement.

Regulatory requirements and misguided strategies have reduced the yield of such investments and impeded the overall objective of private pensions. Appropriately positioning a mandatory pension system within Egypt could dynamically alter savings behaviour; however, it is recommended that more research should be conducted in regards to regulatory requirements prior to implementing such a policy.

Overall, macroeconomic measures heavily influence resource mobilisation and particularly savings behaviour in Egypt during the period under consideration in this study (1991-2010). Robust economic policies, including macroeconomic and monetary measures, are prerequisites to maximising private savings and financing growth in Egypt.


If the Egyptian economy does not experience progress in productivity—supported by and stemming from technological innovation, improved public management, and reforms in the private sector—then a high rate of economic growth is not feasible at the current rates of national saving and would require a savings effort that is highly unrealistic. For instance, financing a constant 4% growth rate of GDP per capita with no improvement in total factor productivity would require a national savings rate of around 50% in the first decade and 80% in 25 years. However, if productivity rises, sustaining and improving high rates of economic growth becomes viable. Following the previous example, a 2% growth rate of total factor productivity would allow a 4% growth rate of GDP per capita with a national savings rate in the realistic range of 20-25% of GDP.

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Egypt’s public debt is reaching critical level Thu, 06 Apr 2017 06:00:23 +0000 Experts believe there are no other options but to ask for more loans, while national and foreign debt is equally dangerous

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At the beginning of April, the Central Bank of Egypt (CBE) announced that the Egyptian public debt has increased significantly.

The CBE’s statement showed that the size of Egypt’s foreign debt increased by $19.522bn in 2016, recording $67.322bn by the end of December 2016, compared to $47.8bn by the end of December 2015.

Foreign debt amounted to 37.6% of Egypt’s Gross Domestic Product (GDP) in December 2016, compared to 13.6% in December 2015.

The reason for this increase is because of the government expanding its obtainment of direct foreign loans from several countries and international financing institutions, as well as its issuance of bonds in international stock markets during 2016 to bridge the gap in the general state budget.

On 10 November 2016, the Ministry of Finance issued bonds worth $4bn at the London Stock Exchange, with yields ranging between 4.62% and 7%, and maturity dates ranging from 10 December 2017 to 10 November 2028.

The reason for issuing those bonds is to gather the amount of money needed for the reform programme approved by the International Monetary Fund (IMF) last year, of which Egypt had received the first tranche, worth $2.75bn, last November.

Besides the IMF’s loan, Egypt has also received $1bn from the World Bank, $500m from the African Development Bank, $1bn from the United Arab Emirates, and $2bn from Saudi Arabia, during 2017.

National debt is more worrying than foreign debt

However, Egypt’s national debt has hiked by 28.9% within a year, reaching EGP3.052tn, compared to EGP2.368tn a year before. National debt is far more worrying than debt received from international bodies, according to the executive chairperson of Union Capital Incorporated, Hany Tawfik, who stated that local debt is a vicious circle caused by the current budget deficit.

He stated that, unfortunately, the national debt reached a critical amount, where the government has to pay a lot of interest, which increases the budget deficit, hence leading the government to ask for more local loans.

To fix the situation, the government has to increase its income of taxes through incorporating the informal sector into the formal economy, which would increase tax incomes to the right rate of 25% as many countries have. It might reach EGP1tn, instead of the current EGP400-500bn, according to Tawfik.

The local public debt has increased to 94.1% of the GDP, estimated at EGP 3.245tn at the end of 2016, according to the CBE.

He added that the main problem is that the government has a large number of employees, which would probably take a lot of time to reduce.

Regarding the foreign debt, he explained that there are three types of loans Egypt has received: a type, like IMF’s loan, that is allocated to supplying the budget deficits and other balances; the second type, like the World Bank’s loan, is the one Egypt uses to develop its infrastructure and other projects, all of which will probably not provide any profits.

The last type of loan, which is provided by the International Finance Corporation (IFC), is the one that is allocated to well-studied investment projects, Tawfik noted, adding that the foreign debt is not as worrying as the national debt.

It is worth mentioning that the Minister of Investment and International Cooperation Sahar Nasr said that the government uses all of the foreign debt for projects that will create income to pay back the loans, emphasising that the government will not create any financial burdens for future  generations.

Foreign debt will reach a critical level 

Furthermore, the CBE stated that Egypt’s debts to the Paris Club fell to $3.423bn by the end of December 2016. The CBE pays about $1.5bn to the Paris Club in two instalments annually—in January and July of every year.

However, last month, Daily News Egypt asked the Governor of the CBE, Tarek Amer, whether the CBE can pay its owed foreign debt—worth about $13bn—in the current fiscal year (FY) 2017/2018, which he affirmed.

Amer seemed confident in the state’s ability to repay its foreign debt, pointing out that the CBE expects cash flows in foreign currency in the coming period, in addition to the current, strong reserve of foreign exchange, which would help Egypt repay its dues on time.

The CBE’s reserve of foreign exchange amounted to $26.5bn at the end of February 2016, according to Amer. This amount of reserve is very good and will be sufficient to repay the CBE’s dues, whether or not the bank received more foreign exchange.

According to the CBE, the net foreign investment increased by 29% in the fourth quarter of 2016 to reach $2.415bn at the end of December 2016, compared to $1.872bn at the end of September 2016.

The foreign exchange flowing into the Egyptian market reached $3.981bn in the fourth quarter of 2016, while outflows recorded $1.566bn.

The CBE announced that foreign investments in treasury bills increased to about EGP 10.157bn in December 2016, compared to EGP 7.797bn in November, while they jumped to about EGP 21.686bn by the end of January.

Foreign investors were the fourth largest investors in the Egyptian treasury bills before January 2011, recording about EGP 56bn in December 2010. These investments fell to less than EGP 200m before increasing again after the liberation of the local exchange rate on 3 November 2016.

The managing director of Multiples Group, Omar El-Shenety, has different—and rather worrying—thoughts regarding the increasing foreign debt.

He stated that the IMF expects that the foreign debt of Egypt will exceed $100bn by the year 2020, explaining that the IMF does not even take into consideration the loans provided to establish local projects and institutions, such as the nuclear reactor of Dabaa, the power plants of Siemens, and military equipment. He believes that during the near future, Egypt might fall into the trap of foreign debt, and it would easily exceed a rate of more that 150% of GDP, which is a very critical situation.

El-Shenety believes that the rates of public debt are not worrying; yet it will reach the critical zone no matter what, because foreign debt is going to reach more than 50%.

He explained that the types of loans Egypt received are different, because international bodies provide loans with low rates and other international bonds with high rates. However, the main problem is not about the rates as such, but more about how the government will find sources of foreign currencies to pay back the main loans along with their interests.

He believes that any country in the world usually plans to increase its GDP to the point where the debt looks small in comparison, which is not guaranteed in Egypt’s case because the growth in its GDP is only slowly increasing. He explained that Egypt expected a growth rate of 6% in FY 2017/2018, and then decreased that expectation to 4.6%, which is probably not going to happen in reality, due to many factors, such as the situation of tourism and the political turbulence of the region.

The current rate of the public debt compared to GDP is 130% now, without the loans of other national projects and institutions. According to the IMF, within three years, the rate will reach 150%, again without the other loans to fund the national projects and institutions—which probably will push the total amount to exceed 160-170%. This is a very high and dangerous rate, El-Shenety noted.

However, El-Shenety believes that the interest rate of the loans represents approximately 35% of the budget, which is very high. He added that the government is working to reduce subsidies.

The public debt is going to increase and, unfortunately, there are no other options because Egypt is committed to its deal with the IMF, which makes Egypt apply for more loans so that it does not have any sources to pay it back, he noted.

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Egyptian food retail market grows stronger despite challenges Tue, 04 Apr 2017 06:00:59 +0000 Egypt continues to maintain its position as the Arab world’s largest consumer market. With an estimated 92 million citizens and one of the world’s fastest growing populations, the demand for food products will continue to grow. Although the country faced various economic challenges following the 2011 and 2013 regime changes and subsequent decreases in tourism …

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Egypt continues to maintain its position as the Arab world’s largest consumer market. With an estimated 92 million citizens and one of the world’s fastest growing populations, the demand for food products will continue to grow. Although the country faced various economic challenges following the 2011 and 2013 regime changes and subsequent decreases in tourism revenues, the economic reforms adopted in late 2016 are beginning to bear fruit and become more apparent over the course of 2017. Analysts expect an improvement in economic growth and an increase in purchasing power during the coming years, as well as increased disposable incomes, which in turn should translate into more demand for imported food products, according to the “2016 Annual Retail Foods Egypt” report published by the Global Agriculture Information Network (GAIN).

retail 1Egypt market trends

Since the formation of the Arab Republic of Egypt, a planned economy was maintained until the late 1970s, after which the different administrations made gradual market reforms. However, the state still plays a considerable role in the economy, as it continues to be one of the largest importers of many commodities, such as wheat, sugar, and oils, as well as an important vendor of subsidised food products.

Since 2011, political and regional instability have taken a significant toll on the Egyptian economy, much of which can be attributed to a decrease in tourism-related revenues. Egypt has been grappling with significant account deficits, which were counter-financed through foreign aid and loans. Throughout much of 2016, the authorities tried to manage the outflow of foreign currency by reducing imports through import restrictions and capital controls. Such measures had an impact on consumer behaviour, especially among low-income citizens.

Consequently, in order to correct the underlying structural issues of the Egyptian economy, the government adopted an economic reform programme aiming to improve Egypt’s public finances, which included the introduction of the value-added tax (VAT), the reduction of fuel subsidies, the flotation of the Egyptian pound, and the obtainment of loans from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme in the period between September and November 2016.

Such measures, in conjunction with a number of other policy shifts, have helped bolster investor confidence and reduce capital outflows.

However, inflation has increased as a result of the devaluation. Official estimates put inflation at 24.3% for 2016, which increased to 31.7% in February, compared to an inflation rate of 10.4 % reported in 2015.

retail 2Egypt’s retail food market overview

Despite the immediate inflationary pressures, the overall purchasing power is expected to increase, and with it, the ability to purchase imported food products. According to the Economist Intelligence Unit, food, beverage, and tobacco sales in 2016 were estimated at $92bn, or approximately $999 per person, and are expected to rise to $114bn by 2020, while the total retail food sales made up $70bn in 2015, but are forecast to rise to $98bn by 2020.

According to the report, the total value of retail food sales stood at close to EGP 226bn in 2016, in terms of retail food sales from local grocers, markets, supermarkets, and convenience stores—an increase of 11% from 2015. Private sector forecasts project a similar growth into 2017, with sales reaching EGP 250bn.

The report classified Egypt’s food retail sector into three main segments

By the end of 2017, food sales at supermarkets and hypermarkets are expected to have doubled from their 2011 levels. The growth in sales is accompanied by a large increase in the number of small-scale supermarket outlets, including the rapid expansion of Turkish retailer BIM, which started in 2014 with 46 stores and currently has 220 branches, and Egyptian Kazyon, which started at around the same time and now has 168 stores across Egypt.

However, despite the rapid growth, modern supermarket chains still account for less than 1% of the establishments and only 23% of the total sales in 2016; while the hypermarket segment remains small with a total of only 35 outlets operating in the country in 2016, which accounted for 4.5% of total retail sales.

The second segment, convenience stores, witnessed a strong growth in retail sales, with a notable increase of 21.5% in 2016, due to an increase in the number of outlets. The market has seen growth over recent years in stand-alone convenience stores (kiosks) and convenience stores associated with petrol stations—currently numbering 229 locations—and the number of locations is expected to grow by 10% in 2017. Exxon-Mobil is the leader in this sector, with 138 outlets, or 54.5% of the total.

Finally, the traditional small grocery stores and markets that dominate the Egyptian retail scene comprise around 97% of total retail food establishments and 70% of total sales. Their numbers are estimated to be around 116,000 across all governorates. Most of these stores are located in densely populated urban centres, and they include small grocery stores, butchers, fruit and vegetable markets, and bakers that supply subsidised bread. The segment’s main advantage is maintaining a loyal, neighbourhood customer base, as they are easily accessible and sometimes offer credit to local consumers. However, they are clearly constrained by retail and parking space and their inability to compete with larger retailers.

retail 3Market Outlook

The report cites that the retail grocery growth rate is forecast at 9%, and growth in the number of outlets at 1%. The highest growth rates are among modern retail chains, while on the other hand traditional grocery stores will continue to grow, but at slower rates. Analysts expect to see the larger supermarket chains continue to expand their market share at the expense of the traditional, small privately-owned grocery stores.

The main drivers behind the Egyptian retail sector’s growth are the growing young population and the gradually increasing purchasing power, which has been recovering from the impact of the political unrest in 2011 and 2013, registering an increase of 2.6% in 2015, which marks the highest rate since 2008.

Furthermore, the report indicates that as long as the political and economic situations remain stable, retail growth is expected to continue or increase. In the last two years, the government has consolidated political power and ensured a stable security environment within the population centres, which is positive for continued growth.

It is worth noting that the two largest retailers in 2016 were both newcomers to the Egyptian market.

The Turkish BIM and the local Kazyon stores have both registered massive growths since their initial start of operations in the Egyptian market.

retail 4Egypt’s food imports

Imported food products in the Egyptian retail market face heavy competition from domestic products. Egyptian snack producers fill much of the domestic demand for chips, crackers, and cookies, although imported brands are perceived as being of higher quality. Egypt produces a wide variety of horticulture products, most of which are sold in the domestic market as either fresh or processed products.

Furthermore, Egyptian meat production meets only approximately 60% of the domestic demand, while the remaining 40% are accounted for by imports. Despite growing milk output, Egypt still imports close to $1bn worth of dairy products annually. Domestic egg production covers almost all demand, while domestic poultry production meets about 90% of the demand, with US poultry products remaining blocked from the market. Egypt’s per capita consumption of chicken stands at about 11 kg/person, which is below the global average.

The report indicates that Egypt has trade agreements with the European Union, Arab countries (GAFTA), African Countries (COMESA), and Turkey, which allows these partners preferential treatment in the Egyptian market, while many US products face a competitive disadvantage to comparable products produced by suppliers from these countries. However, the US remains the most competitive in tree nuts and some beef products, most notably liver.

US exports to Egypt have noticeably decreased in recent years as a result of the strong US dollar, Egyptian capital controls throughout much of 2016, and stiff competition from the EU and others. In 2015, US exports of dairy products—excluding cheese—decreased by 65.6%, while US cheese exports decreased 90.4%, and apple imports decreased by 19.3% . These losses were generally offset by increased imports from the EU.

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The Egyptian real estate market: a future between skyrocketing prices and fear of recession Thu, 30 Mar 2017 09:00:21 +0000 Daily News Egypt has obtained data from Aqarmap, the real estate search engine, regarding land prices in Greater Cairo

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Egypt has suffered for over half a decade from turbulences and uncertainty. Since the 25 January Revolution, the economy encountered numerous challenges, from political unrest and declining tourism to foreign currency and fuel shortages.

Consequently, to adopt an economic reform programme aiming to improve Egypt’s public finances, the authorities decided to introduce the value-added tax (VAT) law; raise the price of subsidised fuel; free-float the Egyptian pound; and obtain loans from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme in the period between September and November 2016.

The real estate sector was one of the of the most affected sectors after the Central Bank of Egypt’s (CBE) decision to float the pound on 3 November 2016, when it lost around 52% of its value as a consequence. This resulted in uncertainty and doubts in the real estate sector, leading both investors and owners to postpone their decision until the value of the pound stabilises.

Moreover, the currency devaluation greatly increased costs of raw materials, and this had a negative impact of investors’ cash flows. The extra costs were transferred to the end customer, resulting in huge price hikes. Yet, some real estate developers decided to either offer more flexible payment plans or more price-efficient designs, according to JLL’s “Cairo Real Estate” report.

Within a month from the currency flotation, the prices of real estate have spiked. Most real estate developers had increased their prices between 15 and 20%. However, a lot of Egyptians started to buy properties at the new prices with longer payment plans of between 5 and 7 years—some real estate developers, such as ARCO, even offered 10-to-12-year payment plans—as a result of the fear of more price increases in the future.

Consequently, various top-tier real estate developers’ new projects were sold out within a very short period. With the rising uncertainty about the value of the Egyptian pound, many Egyptians tend to consider the real estate sector a safe haven to invest their savings. The longer and more relaxed payment terms allowed people to conserve current prices since they are paying in instalments according to the contract they signed.

2According to Aqarmap, a real estate search engine, the average price per metre for New Cairo’s Fifth Settlement has risen from EGP 5,450 for apartments and EGP 11,550 for villas in November 2016, to reach EGP 6,250, and EGP 13,050 respectively in March 2017, which marks a 12-15% increase.

However, the average price year-on-year increase of 30% in Egyptian pounds was not enough to overcome the decrease in the value of the Egyptian pound as a result of the currency flotation. Average sales prices for both apartments and villas decreased significantly in US dollar terms.

On the other hand, the resale market took a completely different turn. Property owners started to realise they have to increase unit prices, as keeping the same pre-flotation prices would mean losing 55% of the value’s property in dollar terms.

As a result, various property owners doubled the price of their properties after the pound flotation; others calculated the value of their properties in dollar terms previous to the currency flotation and sold their properties at that price. However, buyers cannot afford these prices, as there was no increase in income or savings to fill the gap between the new and old prices.

Furthermore, the difference in expectations between sellers and buyers has led to the reduction of transaction within the market, with the exception of high end luxury properties, which maintained their prices in US dollars.

6.Age2016 was a very busy year for the real estate residential sector, as it witnessed the completion of several new projects across both 6th of October City and New Cairo. In 6th of October City, significant apartment sales were recorded in Ashgar City, Palm Parks, and October Park. In New Cairo, significant sales were recorded by TMG’s Rehab and Madinaty, Emaar’s Mivida, and SODIC’s East Town, according to JLL report.

Yet, rentals within the residential sector have shown more resilience towards currency flotation than sales prices. One of the reasons that could be attributed to this is that some units for rent are targeting foreigners, where asking prices are usually in US dollars—even though the exchange rate used is generally capped at a lower rate than the market rate.

In regards to the office sector, Q4 2016 has witnessed the completion of Majarrah Business Complex in 6th of October City, which added 17,000sqm to Cairo’s office supply. Post flotation, smaller companies have abandoned their plans to upgrade their office spaces and are considering relocating to areas with lower rents as a result of the spike.

The office market has also been significantly impacted. As most lease contracts were formally quoted in US dollars, rental prices have effectively doubled for office occupiers in terms of Egyptian pounds. However, vacancy rates remained unchanged throughout 2016, which represents a sign of limited office activity across the market. New Cairo kept its lead as the most desirable destination for office occupiers, while the activity witnessed in Q4 2016 in 6th of October was very limited. Vacancy rates in the office markets JLL monitored currently stand at 27% and are expected to increase as new supply is added to the market and demand remains at its current levels.

Moreover, because of the witnessed increase in office rent prices, in addition to the increased prices of raw materials, workers demanded higher wages. Companies now naturally face difficulties in paying their rents, which drove some landlords to agree on exchange rates that are below the actual market rate.

7.Family MembersOn a year-on-year basis, office rents stabilised—at least in US dollar terms—as the market is still adjusting to the current business conditions; however, New Cairo was the exception, as a 7% decrease was witnessed. A further lowering of office rent prices might occur during the medium term. A stronger demand could, however, be generated by improved business conditions as a result of the structural and economic reforms being introduced.

No additional retail space was completed in 2016 for the retail sector, leaving the stock at 1.3 million square metres. But in March 2017, the opening of Mall of Egypt took place—a project worth EGP 6bn. The opening of Madinaty’s Mega Mall has been postponed from Q1 2017 to 2018.

On the other hand, vacancy rates have marginally increased year-on-year in 2016 on the back of limited new completions, and are still expected to increase in the short term. While rents for prime units remained stable at $1,600 annually per square metre, the number of units that are being developed and can achieve this level is stagnating.

Further decline in the average price of rent is expected as a result of diminishing purchasing power. A possible recovery in the second half of 2017 is expected in case sufficient foreign currency is available and the adopted economic programme bears fruit.

According to the JLL report, rent to the retail sector was doubled, also quoted in US dollars. Retail tenants faced import restrictions and a diminished demand from customers as a result of the skyrocketing levels of inflation post flotation. Some mall developers have capped the exchange rate in order to alleviate pressures faced by retail tenants while other developers changed their quoting currency to EGP.

During 2016, 500 hotel rooms were added to Cairo’s hotel sector. The opening of the refurbished and rebranded Steigenberger in Tahrir Square, the St. Regis Cairo, and the Radisson Blu Nasr City have been delayed and are now scheduled to enter the market in the first half of 2017.

According to the report, to create value from more efficient operations rather than investing in new buildings during the current volatile business climate, it is forecast that older buildings will be renovated in the short term.

Although Cairo’s occupancy rate was being forecast to be high in Q1 2017 and has increased in comparison to 2016, a pronounced drop in hotel revenues per available room (RevPAR) is expected as a result of the devaluation of the Egyptian currency in November, according to Colliers International’s “The MENA Hotel Forecasts” February report.

9.Purchasing objectiveEven though occupancy rates are increasing, average daily rates (ADRs) did not increase at the same rates due to the current reliance of hotels on the local market, and a ceiling to price increases was established to attract visitors. Once travel bans are lifted and foreign tourists and currency begin to flow, ADRs are expected to increase.

The hotel and tourism industry is the sector of the market that should benefit the most from the currency flotation. Demand in this sector is expected to increase as visiting Egypt has now become 52% cheaper. This has helped increase occupancies in the hotel market. However, the travel ban imposed by Russia and the UK took a significant toll on tourism inflows, especially in Hurghada and Sharm El-Sheikh.

What’s next? 

JLL has released data on construction costs for different asset classes in Cairo, with this data collected from their growing project and development management teams. The devaluation of the pound has resulted in a major spike in construction costs in 2016, and this is expected to result in double-digit increases in tender price inflation over the next two years.

Furthermore, there is a higher risk of approaching a real estate bubble, following the current boom witnessed within the sector, as a result of the incredibly high profit margins, decreasing demand, and increasing prices, Samih Sawiris, head of Orascom Development Holding, told Daily News Egypt.

One of the main issues facing Egypt’s real estate resale market is the fact that it is still underdeveloped, and most property owners ask for the requested amount as an upfront payment. During the current environment of volatility and uncertainty, buyers will avoid paying large amounts of cash. As a result, buyers tend to buy new properties with long-payment plans.

If Egypt’s real estate market indicators are measured in Egyptian pounds, prices will show a general increase. Yet in US dollar terms, prices will show a decrease. The decrease, however, does not equal the 52% devaluation of the pound caused by the flotation in November but is slightly lower due to the value indicators’ increase in pounds.

In the near future, real estate market prices are forecast to increase further to match the value lost by the Egyptian pound and rising inflation. However, in US dollar terms, prices of real estate properties have witnessed a significant drop, and they are not expected to reach pre-devaluation levels. While in regards to the resale market, it is expected to take a few months to stabilise but will eventually increase by percentages comparable to the new sale market.

The post The Egyptian real estate market: a future between skyrocketing prices and fear of recession appeared first on Daily News Egypt.

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