In Focus – Daily News Egypt https://dailynewsegypt.com Egypt’s Only Daily Independent Newspaper In English Wed, 26 Jul 2017 17:00:40 +0000 en-US hourly 1 Government to extend rice export ban to secure local market needs https://dailynewsegypt.com/2017/07/24/government-extend-rice-export-ban-secure-local-market-needs/ https://dailynewsegypt.com/2017/07/24/government-extend-rice-export-ban-secure-local-market-needs/#respond Mon, 24 Jul 2017 07:00:12 +0000 https://dailynewsegypt.com/?p=631984 The government rice mills pay EGP 3,000 per tonne of rice while private mills pay EGP 4,500 per tonne, so the farmer chooses the highest price

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Egypt’s Cabinet surprisingly decided to set the buying price of rice from the farmers in the new season starting in August based on supply and demand mechanisms.

“We will not determine the buying price of rice and will adopt the supply and demand mechanisms, allowing competition between public sector and private mills,” Minister of Supply and Internal Trade Ali Meselhi told Daily News Egypt.

The question is can the government succeed in implementing its plans to liberalise the price of rice, and set it based on the supply and demand mechanisms, especially that Egypt has never suffered from a shortage of supply of rice?

The government will extend the rice export ban to secure the local market needs

The Cabinet decided to extend the ban on exporting rice during the coming season, in a move to secure the needs of the local market.

So what is the problem in the rice market in Egypt?

The crisis emerges when the government offers low purchase price for farmers who refuse to sell their crops at such prices, forcing the government to import Indian rice that infuriated citizens because the private rice mills buy the rice crops at high prices.

The government rice mills offer to buy rice from the farmers at EGP 3,000 per tonne, while the private sector mills offer about EGP 4,500 per tonne, prompting the farmers to store their crops or sell them to the private sector. Farmers now demand rising the government selling price of rice in the new season to EGP 4,000 instead of EGP 3,000, to compensate the rise in production costs, mainly the increase in fuel prices.

Since 2008, Egypt sometimes bans the export of rice to maintain the local rice reserves and meet the needs of the local market. It also aims to discourage farmers from growing the rice and rationalise water consumption.

The private sector mills sell white rice at EGP 6,300 per tonne, so the government sells it at about EGP 6,500.

How can the government offer adequate price for farmers and still sell it at EGP 6.5 per kilo?

According to Ragab Shehata, head of the rice division in the Federation of Egyptian Industries (FEI), said that the local production of rice reached 3.7 million tonnes in this year while the consumption is estimated at about 3.3 million tonnes, securing a surplus of about 700,000 tonnes.

Shehata added that the Minister of Supply has decided to set the purchase price of rice from the farmer based on supply and demand, provided that both the government and private mills will sell the rice at EGP 6,300 per tonne.

Despite the high reserves of rice crops, the farmers refuse to sell their crops to the government, citing the government’s low price of EGP 3,000 per tonne, which led to shortage in supply at local outlets.

He noted that the farmers will not sell at low prices any more after they sold their crops last year at about EGP 2,400 and then the prices increased significantly.

Egypt Support Coalition in Parliament recently called on the government to raise rice prices to EGP 4,000; however, the farmers consider it low, especially since the price in the private mills reach EGP 4,500 – 5,000 per tonne.

Who controls the price of rice?

The high domestic rice prices crisis started in the second half of 2014, when the government could not store large amounts of the 2015 rice harvest, allowing traders to buy the entire harvest and store it until the prices rise again.

The previous governments used to store 200,000—500,000 tonnes of rice at the beginning of the season, to prevent traders from storing it and raising prices, but the former Minister of Supply, Khaled Hanafy, did not buy any strategic reserves in the last season.

Mustafa al-Najari, head of the Rice Committee in the Agriculture Export Council, said that the Ministry of Supply had to buy the rice crops from the farmers at the beginning of the harvest, so that it could provide the commodity to citizens at affordable prices.

“The state did not buy rice at a reasonable price from the farmers, and allow traders to monopolize the market,” says Najari.

He added that the price of rice in Egypt reached EGP 4,500 per tonne in 2016, compared to EGP 1,600 and 1,700 in previous years.

The farmers’ options

Some of the farmers in Kafr Al-Sheikh governorate, one of the most famous rice-growing areas, said that the government does not care about the farmers, and it only cares about maintaining prices especially in Cairo and Alexandria, regardless the farmer’s right to sell at an appropriate price.

They added that the remaining of the last season’s rice crops are sold at EGP 3,000 per tonne, wondering how can the government offer EGP 2,300 for each tonne. They stressed that no one will sell his crops to the government at this price.

Haitham Zalouk, a farmer in Sharqeya governorate, said the cost of production increased dramatically, noting that most of small farmers tend to borrowing to cover their needs and wait until they sell their crop so that they could repay their debts.

“The price offered by the government does not cover the cost of agriculture, after the rise of fertilisers and pesticides prices as well as wages of workers.”

He added, “Some of us can store rice for some time and wait for a better price, but most farmers sell at the best available price after harvest, to repay their debts.”

The whole rice crops have been sold to traders and the government does not have any rice.

The farmers had advised the former minister of supply to raise the price of rice so they can sell the rice to the government instead of traders, adding that the right price at this time was EGP 3,500 per tonne. The government raised the price to only EGP 3,000, while the traders bought the rice at more than EGP 3,200 per tonne, so the government does not get any rice at this price.

Rice in Figures:

1.8 million feddans of rice.

The feddan produces an average of 3.5 tonnes.

Private rice mills sell the rice at EGP 4,500 per tonne, while the government offered EGP 3,000 per tonne.

The new season production reaches about 6.3 million tonnes of rice.

The white rice production reached about 3.7 million tonnes, while the consumption amounts to 3.3 million tonnes with a surplus of 400,000 tonnes.

Last year, the farmers sold about 7 million tonnes of rice, producing about 4.2 million tonnes of white rice, and the consumption reached 3.3 million tonnes, leaving a surplus of 900,000 tonnes that can cover three months.

The growing of a single feddan of rice consumes 6,500 cubic metres of water per year, totalling 12 billion cubic metres.

Private rice mills supply about 90% of the government’s needs of white rice.

Solutions:

According to various experts and farmers, the export has been always accused of raising the price of rice, however it represents only 30% of the rice crop per year. When it reached its highest level up to 700,000 tonnes, the surplus was more than one million tonnes.

The best solution to the rice crisis is that the government should declare a “fair” purchase price of rice from farmers before the planting season, and set a clear mechanism to buy the rice crops either through the Principal Bank for Development and Agricultural Credit (PBDAC) or public sector mills. In addition, the government should intensify its observation of private companies to ensure their compliance with laws and regulations so as not to store and monopolise the product.

Actually the ministry has announced that it will not determine the purchase price of rice from farmers in advance and will leave it to the supply and demand mechanisms.

The new system can lead to further increases in rice prices, because traders control now the rice market despite the high production rate and achieving a surplus.

How can the government cover the expected shortages due to traders’ storage of rice?

In light of the traders and farmers’ refusal to supply rice to the Ministry of Supply, the government decided to import 500,000 tonnes of rice, especially since President Abdel Fattah Al-Sisi has instructed the government to have enough reserves of basic food commodities for at least six months.
The import of rice comes as an attempt by the government to force local traders and farmers to sell their stored reserves.

Shehata asserted that there is no problem in rice supply and the government has imported the necessary strategic reserves to reduce the demand for local rice and decrease its price.

The Ministry of Supply said it would compensate the shortage of rice in the supply cards, which resulted from the cancellation of the local rice tender, by offering a shipment of imported rice coming from India at lower prices than the local market. Finally, can the government succeed in liberalising the price of rice based on the supply and demand mechanisms, without increasing its price in the market up to EGP 6.5?

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Ongoing fiscal consolidation to help curb inflation: HC Securities & Investments https://dailynewsegypt.com/2017/07/24/ongoing-fiscal-consolidation-help-curb-inflation-hc-securities-investments/ https://dailynewsegypt.com/2017/07/24/ongoing-fiscal-consolidation-help-curb-inflation-hc-securities-investments/#respond Mon, 24 Jul 2017 06:00:00 +0000 https://dailynewsegypt.com/?p=631977 Gradual appreciation of the pound will eliminate overshooting, GDP growth forecast at 4.4% in FY2017/18

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Overshooting of the Egyptian pound against the US dollar continues 8 months after the Central Bank of Egypt’s (CBE) decision to liberalise the foreign exchange system in November, despite some $8.4bn of portfolio inflows, according to a report published by HC Securities & Investments.

HC Securities & Investments analysts calculate that the fair value of the Egyptian pound against the US dollar should be reduced by 27% from the current value of EGP18.12 for every US dollar. The estimates are based on the mean reversion of the real effective exchange rate (REER) index.

Moreover, the overshooting could have initially been explained by the short-term supply-demand dynamics. However, the sizable portfolio inflows in recent months, with $54bn of fresh funds flowing into the system since the flotation of the currency in November should have moved the value of the Egyptian pound closer to its fair value, said the report.

From HC Securities & Investments’ point of view, the CBE is favoring an undervalued, yet stable currency over a volatile exchange rate, as evident by an increase in non-reserve foreign currency deposits to $5.86bn by the end of May, the report indicated.

Although the negative implications that would be associated with a volatile exchange rate is understandable, the current CBE policy is not helping with containing inflation and partially limits the transmission mechanism of the bank’s monetary policy tools, said the report.

Consequently, HC Securities & Investments advocates a gradual appreciation of the Egyptian pound in order to eliminate the existing overshooting by the first quarter of FY 2018, when Egypt’s current account starts to reflect more sustainable foreign currency inflows, mainly driven by the oil trade balance and tourism receipts.

The current sky-rocket high inflation levels that registered at 30.9% in June can no longer be fully explained by cost-push factors. It is estimated that only 12% of the total 24% increase witnessed in the consumer price index (CPI) since October, which can be explained by the currency movement, according to the report. Such estimates are based on the percentage of imports to other GDP constituents, namely final consumption, gross capital formation, and exports.

On the other hand, total domestic credit growth has been largely flat since November. The Egyptian government has been expanding heavily on foreign debt, which HC Securities & Investments believes could have a similar impact on inflation.

Moreover, the report indicates that the single largest borrower in the market shows almost no elasticity to interest rate movements, thus any efforts to contain prices in the short term should be played through the exchange rate.

On the other hand, private business and household credit expansion have only been modest at 5% and 3%, respectively; consequently any further interest rate hikes would significantly risk growth, while on the long term, HC Securities & Investments forecasts that the government’s fiscal consolidation efforts will have a positive impact on inflation.

In regards to inflation estimates and forecasts, the report expects inflation to register an average of 24.0% in FY17/18, as a result of the budget-deficit to GDP dropping to 10.0% from 11.5% in FY16/17. Meanwhile for FY18/19, HC Securities & Investments expects inflation to reach an average of 12.0%, with the budget deficit further dropping to 8.3%. Persistently high inflation would keep private consumption growth depressed, as well as erode the Egyptian pound’s competitiveness, negatively impacting the country’s external position. The report estimates an average EGP/USD rate of 15.72 in FY17/18 and 15.38 in FY18/19.

Egypt’s total medium and long-term public and publicly guaranteed debt services stood at $32.7bn, which are divided into $2.88bn in the second half of FY 2016/17, $7.71bn in FY17/18, $12.76bn in FY18/19, and $9.35bn in FY19/20.

While excluding some $16.10bn of GCC deposits, medium and long-term public and publicly guaranteed debt services would stand at $16.59bn divided into $2.66bn in the second half of FY16/17, $5.23bn in FY17/18, $4.00bn in FY18/19, and $4.70bn in FY19/20.

Furthermore, the total short-term debt service stood at $12.16bn, of which $8.40bn is to be paid in the first half of FY17/18. Short-term debt includes $3.20bn loans from the African Export-Import Bank, the $2.00bn CBE repurchase agreement transaction, and the $2.59bn CBE currency swap agreement with China, all of which are fair to assume to be either public or publicly guaranteed.

This leaves total public and publicly guaranteed debt services in 2017 at $13.16bn.

The report concludes that in the short term, Egypt’s external position and investments are the key GDP growth drivers. HC Securities & Investments forecast that the current account deficit would drop to $14.3bn or 5.4% of GDP in FY17/18, compared to $16.6bn or 9.5% of GDP in FY16/17, before further narrowing down to reach $12.1bn or 3.8% of GDP in FY18/19, due to the improvement witnessed in Egypt’s oil trade balance, higher exports, and a partial rebound in tourism receipts to pre-revolution levels.

Moreover, GDP growth is estimated to reach 4.0% in FY16/17, corrected from the 3.5% that was forecasted previously, and to reach 4.4% in FY17/18, up from 4.0% previously. In FY18/19, HC Securities & Investments expects real GDP growth to accelerate to 4.9% on the back of a recovery in private consumption as inflation moderates and unemployment drops.

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IMF answers 10 key questions about Egypt economic reform programme https://dailynewsegypt.com/2017/07/17/imf-answers-10-key-questions-egypt-economic-reform-programme/ https://dailynewsegypt.com/2017/07/17/imf-answers-10-key-questions-egypt-economic-reform-programme/#respond Mon, 17 Jul 2017 06:00:36 +0000 https://dailynewsegypt.com/?p=631574 aims to make Egypt's currency more flexible, strengthen competitiveness, improve the availability of foreign exchange, support exports and tourism, and attract foreign direct investment

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Following The International Monetary Fund’s (IMF) Executive Board first review of Egypt’s economic reform programme, backed by the arrangement under the Extended Fund Facility (EFF) published on Thursday. Which will allow the authorities to receive the second loan tranche worth $1.2bn, of the $12bn loan approved in November 2016, IMF answered the main questions concerning Egypt’s economic reforms.

The EFF supports Egypt’s comprehensive economic reform programme, which aims to restore macroeconomic stability and return Egypt to strong and sustainable growth. The economic reform programme targets the improvement of the foreign exchange markets, bring down the budget deficit and government debt, as well as raising growth to create jobs, especially for women and youth, while protecting the most vulnerable groups in the society during the process of adjustment.

What is the amount of resources disbursed after the first program review on July 14, 2017? 

Completion of the first review allows the disbursement of SDR 895.48 mn (about US$1.25 bn), bringing total disbursements under the program to about US$4 bn.

What are the social protection measures adopted so far to shield the most vulnerable? 

The authorities have put in place several programs to help the most vulnerable people, through increasing the value of cash transfer allowances offered through food smart cards by more than 100%—from 21 to 50 Egyptian pounds per person—raising transfers for infant milk and children’s medicines, in addition to expanding the social solidarity pensions to include medical coverage, as well as widening the coverage of the Takaful and Karama programs to an additional 1.7 mn households.

Moreover, the authorities raised pension benefits for the lower pension categories, implemented a one-time pay allowance for public employees due to high inflation, provided school meals and new gas connections in poor districts.

The government is also implementing other programs specifically targeted to young people, including increased access to vocational training. It is also collaborating with the private sector on innovative programs to provide safe means of transportation, especially for women.

Why did the Central Bank tighten monetary policy and increase interest rates? Would this have negative effects on growth? 

The Central Bank of Egypt’s (CBE) decision to raise interest rates is consistent with the authorities’ objective of reducing inflation to safeguard the welfare of the Egyptian people. The CBE’s objective is to bring down the rate of underlying inflation to single digits over the medium term and IMF are confident in the CBE’s tools and policies to achieve this.

While higher interest rates do affect investment negatively, it is important to keep in mind that maintaining macroeconomic stability, of which low inflation is a key component, is just as important for investment and growth. Also, as communicated by the CBE in its public statement, it stands ready tp decrease interest rates as inflationary pressures subside

How can an IMF loan help the Egyptian people?

Financial assistance from the IMF can support the country’s finances while the authorities implement an economic reform program to restore financial stability and robust, job-rich growth. In other words, it can provide a financial cushion while the country adopts changes needed to help the economy grow again, bringing prosperity to all. By providing reassurance, it can also increase financial support from other development partners and facilitate access to international capital markets.

What measures are being considered for Egypt as part of a reform program? 

The Egyptian authorities have designed a comprehensive package of reforms to help the economy recover. Over the program period general government debt is expected to decline from about 98% of GDP in 2015/16 to about 88% of GDP in 2018/19 –via a review of expenditure and tax policies – while protecting the vulnerable. This set of measures includes, for example, introduction of the VAT, and taking a closer look at energy subsidies, which generally tend to be expensive and benefit disproportionately the well-off, and redirecting this kind of spending to immediate needs, like education and health. The reform program also aims to make Egypt’s currency more flexible, strengthen competitiveness, improve the availability of foreign exchange, support exports and tourism, and attract foreign direct investment.

Won’t this loan just add to Egypt’s debt and make the problem worse?

Countries generally turn to the IMF for financing when they have run into economic difficulties. These difficulties may come about because of an external shock—for example, a sharp increase in the price of energy or other key imports, or because domestic economic policies have led to growing economic imbalances and vulnerabilities—for example, unsustainable budget deficits have been financed through borrowing, which has led to a build-up of public debt to levels that pose threats to macroeconomic stability.

Dealing with these shocks and imbalances generally entails resolute decisions by the governments: a cut-back in government spending, an increase in interest rates, or structural reforms to improve business environment and support growth and job creation. The role of IMF financing is to help countries ease the adjustment by providing a cushion of support and more time to address the underlying problem

Why is a flexible exchange rate better for Egypt’s economy?

Egypt’s external situation was unsustainable under the previous exchange rate regime. It was leading to foreign exchange shortages that were hindering operation of businesses and constraining growth. It was making Egypt uncompetitive vis a vis rest of the world and it was also causing the Central Bank of Egypt (CBE) to lose reserves. The flexible exchange rate regime, where the exchange rate is determined by market forces, will improve Egypt’s external competitiveness, support exports and tourism and attract foreign investment. All of this will help foster growth, job creation, and stronger external position for the country.

Will a more flexible exchange rate increase inflation?

In the short term, the move to a flexible exchange rate could increase inflation as imports will become more expensive. However, we estimate this effect to be limited because to a large extent prices already reflect the more depreciated exchange rate at which many people buy foreign exchange. Moreover, the Central Bank is ready to adjust monetary policy to keep inflation under control, as evidenced by the increase in interest rates which it has just announced.

What is the IMF views on the increase in fuel prices announced by the government?

The Egyptian government’s implementation of the second phase of the fuel subsidy reform, which the government started in July of 2014, is an important measure in the authorities’ reform agenda. In the past, fuel subsidies have benefited wealthier people disproportionately. They have contributed to increased budget deficits and public debt, resulting in lower spending on key social expenditures such as health, education and infrastructure.

The implementation of the fuel subsidy reform is part of the Egyptian authorities’ comprehensive reform program. It will contribute to lower budget deficits and will free up public resources for much-needed social spending on health and education and growth-enhancing investments. Part of the savings from the reform will be used to strengthen targeted social programs such as “Takaful and Karama” to protect the most vulnerable. The subsidy reform will also make investment in labour-intensive activities more attractive, thereby contributing towards higher job creation.

Will the IMF loan help promote good governance and increase transparency in Egypt?

The IMF promotes good governance and transparency when lending to a country to support an economic program. Since poor governance can be detrimental to economic activity and welfare, specific measures to combat it can be part of a program, when warranted. Also, many of the structural reforms in programs supported by the IMF across the world focus on improving governance, including through better fiscal expenditure control, publication of audited accounts of government agencies and state enterprises, streamlined and less discretionary revenue administration, and better enforcement of banking supervision.

In addition, the IMF promotes good governance by enhancing transparency in the disclosure of documents, including the publication of all staff reports, as well as compliance with international transparency standards. The IMF also assesses the governance and transparency frameworks within central banks of countries to which it lends money. In the process, it promotes sound oversight, internal control, auditing, and public financial reporting mechanisms in these critical financial institutions. In the case of Egypt, public financial management and fiscal transparency will be strengthened to improve governance and delivery of public services, enhance accountability in policymaking, and combat corruption.

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Economy to recover in 2018 with expected inflation hikes: Arqaam Capital https://dailynewsegypt.com/2017/07/12/economy-recover-2018-expected-inflation-hikes-arqaam-capital/ https://dailynewsegypt.com/2017/07/12/economy-recover-2018-expected-inflation-hikes-arqaam-capital/#respond Wed, 12 Jul 2017 06:00:45 +0000 https://dailynewsegypt.com/?p=631122 The Egyptian pound is expected to appreciate by 10% or more in FY 2017/2018 as tourism improves

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A gradual recovery in the economy is expected in 2018, with 2017 being difficult but paving the way for a better year with both consumers and investors coping with the changes and absorbing the shocks of the past two years, according to Arqaam Capital.

Arqaam Capital banking group has recently issued a report to look into the status of the Egyptian economy and the expected events and circumstances over the upcoming period.

After the imposition of the 13% value-added tax (VAT) in November 2016, an increase of 1%  is expected to take place soon, taking VAT to 14% and causing inflation to jump to nearly 35%, alongside with energy hikes and the re-pricing of many government services, according to Arqaam’s report.

Inflation and interest rates should decline in 2018, and the New Investment Law’s regulations are nearly complete. The difficult preparations of 2016 and 2017 should reap their benefits for consumers and investors in 2018 if other bureaucratic impediments are removed. “The government, however, is notorious for imperfect communication, an incomplete vision, and following through with comprehensive reforms, all while restructuring public services properly to protect the poor,” Arqaam added. In terms of headline inflation, it is expected to decline as of November 2017 as the positive base effect kicks in. It will then prevail in 2018, gradually declining until it breaks the single digit level in late 2019 or early 2020.

Arqaam said that its expectations of inflation accounted for this policy change, and a jump is anticipated to anywhere between 35% and 38% in the summer, depending on the rise in pressures with the simultaneous implementation of other fiscal measures.

According to the Egyptian government’s economic reform agenda, the implementation of the second round of fiscal reforms continued in the first year of its International Monetary Fund (IMF) programme. The energy hike is the fifth in nine years since 2008, and the second in less than a year.

Arqaam Capital expects the Egyptian pound to appreciate by 10% or more in fiscal year (FY) 2017/18 as tourism improves, alongside improved remittances and investment flows. The appreciation, however, depends on when the ban on Russian and UK tourists is lifted.

As for the gross domestic product (GDP), Arqaam said, “we maintain our real GDP growth projections, expecting 3.8% in FY 2017, 4.5% in FY 2018, 5.5% in FY 2019, and 6.2% in FY 2020.”

Arqaam says there is substantial scope for the government to cut interest rates, provided inflationary pressures come down.

On 29 June, the government started the implementation of its plan to restructure energy subsidies, increasing petroleum products’ prices by 40% for gasoline (80, 92, and 95 octane), diesel (gas oil), LPG canisters, and mazut (fuel oil), in addition to natural gas for the household sector by 20%, to restructure government spending as the main aim for this reduction in energy subsidies. The government announced earlier that subsidies on petroleum products would need to be reduced from an expected EGP 145bn to EGP 110bn in the FY 2018 state budget and electricity from EGP 80bn to EGP 30bn. In less than a year (between November 2016 and June 2017), the government raised 92 octane gasoline by 92%, diesel by 103%, and mazut for cement companies by 56%.

“We had expected this step to happen in the third quarter (Q3) of 2017 to get the more difficult measures done in 2017 and clear the way for a recovery in 2018. The step shows continued commitment to reform and a deep understanding of the need to change economic direction, following decades of economic mismanagement,” the report noted.

Energy subsidies as a portion of total government expenditures will also decline to around 9% in FY 2018, from 20% in FY 2012.

More fiscal reforms underway

Another package of fiscal reforms is underway and is scheduled to be implemented over the few coming weeks. In fact, the Minister of Petroleum announced that savings expected from the energy hike could reach EGP 35bn, part of which will be directed to additional social spending.

In addition, the government has recently announced a social spending package worth around EGP 85bn. It includes a 15% increase in pensions, 7-10% exceptional annual bonuses for civil servants, with 7% being for those under the New Civil Service Law, and 10% for other civil servants, totaling 14% and 20% respectively, an increase in monthly food subsidies on ration cards from EGP 21 to EGP 50 per person, as well as an increase in the cash transfer programme beneficiaries.

A flurry of increments in prices of government fees and services is expected to take place, including on water, car registration fees, and fees on mobile phone tariffs; besides an increase in taxes on tobacco products expected in July. This follows an increase in prices of sugar and edible oil in the ration card system.

“In our research note “Paradigm Shift in Egypt” we had indicated that an energy price hike would likely happen in Q3 2017, as part of the government’s wider efforts to restructure its rigid expenditures and break the decade’s long vicious cycle of rising rigid expenditure items undermining the government’s ability to improve public services. Next steps are likely to include implementation of the fuel smart card system to better monitor consumption and the possible liberalization of prices in the medium term, whereby a subsidized quota could be sold, and additional consumption may be sold at cost levels. A wider reform program of the energy sector has been agreed on with the IMF,” Arqaam’s report said.

Forecast for the automotive and property sectors

On the auto front, GB Auto has felt the largest decline in passenger car volumes in Q1 2017 across the discretionary consumer space, and is now offering discounts to stimulate demand and improve cash flows. This suggests limited scope for any further upward pricing adjustments, though an improvement in demand for small engine vehicles (Hyundai, Geely, Chery) would likely result after the instatement of fuel price hikes.

In terms of the property sector, affordable residential product, which is typically purchased by specific users and not as a hedge against inflation/FX, will likely undergo a greater degree of margin compression relatively to high-end property, given the substantial growth in asking prices over the past two years.

“We see limited room for further pricing growth in the low-end segment of the property market. High-end property, in which expat demand has become a significant sales contributor, will likely exhibit margin immunity in an environment of subsidy cuts,” Arqaam’s report said.

Pricing growth has yet to stall as of the first half of 2017, in which high-end developers have achieved, on average, a 30% year-on-year increase in selling prices across launched projects.

“While expenditures are finally coming under some control, we expect a potential negative impact of the high inflation and interest rates on the economy. This could reduce the anticipated increase in tax revenues in the FY 2018 state budget. Tax revenues make up 70% of total revenues and with our expectation of revenue growth of 27%, compared to the projected 29.5% in FY 2018 state budget, we expect the overall budget deficit will exceed the government’s target of 9% to reach 10% of GDP,” Arqaam said.

In terms of Arqaam’s general projections for 2018, Arqaam said that it maintains its existing economic growth projections. “We had just revised real GDP growth downward after the 200bps hike and our inflation projections had already included the effect of the energy price hike on economic activity,” it said.

“We also believe that the apparent resilience of the informal sector and high-income group in dealing with the spike in inflation, coupled with the improvement in the contribution of investment (especially foreign) and net exports in real growth, would partially compensate for the pressure exerted by the inflationary pressures and high interest rates on consumers and local investors, respectively,” Arqaam added.

Impact on the industrial and automotive sectors

The second round of energy price hikes affects cement producers primarily via electricity costs, as most producers have moved away from diesel/natural gas to coal/RDF, according to Arqaam. Electricity represents 11% of direct expenses for cement companies. “Our calculations assume a 40% increase in electricity costs (expected to take effect in July 2017) for fuel-intensive industries. Furthermore, we expect Tourah Cement to switch energy usage from heavy fuel (mazut) to petcoke (not impacted by subsidy cuts) which should partially mitigate margin erosion resulting from fuel subsidy cuts. Increase in energy costs should be neutral on earning per share (EPS) at Sewedy Electric and Ezz Steel as both businesses retain strong pricing power, allowing for full pass-through of increases in direct costs (primarily imports of copper and iron ore post-EGP float, electricity post-subsidy removal, but to a lesser extent),” Arqaam said.

Arqaam said that it expects a minimal direct impact on Egyptian consumer names, as energy expenses typically represent 1-3% of operating costs; however, continued inflationary pressure should strain disposable income and further erode purchasing power, which would impede the gradual recovery in volumes.

On the other hand, the social aid package should counteract the pressure on volumes for mid-low income households. Food producers have fully passed on foreign exchange-related cost growth in FY 2017, which translated into an average of 30% volume decline for JUFO, DOMTY, and EDITA.

“We continue to play Juhayna as our top value/defensive pick in the sector and maintain our earnings and margin estimated unchanged across the board,” it added.

Arqaam expects very little price hikes in the food sectors at least in the near term as producers continue to prioritize the rehabilitation of volumes over margins in order to avoid inventory accumulation.

 

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Energy subsidy cuts, take its toll on the average Egyptians https://dailynewsegypt.com/2017/07/11/energy-subsidy-cuts-take-toll-average-egyptians/ https://dailynewsegypt.com/2017/07/11/energy-subsidy-cuts-take-toll-average-egyptians/#respond Tue, 11 Jul 2017 07:00:24 +0000 https://dailynewsegypt.com/?p=631041 Egypt, a country with a population of 90m, where more than 28% of them live below the poverty line, has been suffering following the 25 January Revolution in 2011 from economic challenges and political instability. These factors intensified Egypt’s already-existing structural problems. Since November 2016, when the authorities started to implement the economic reform programme …

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Egypt, a country with a population of 90m, where more than 28% of them live below the poverty line, has been suffering following the 25 January Revolution in 2011 from economic challenges and political instability. These factors intensified Egypt’s already-existing structural problems.

Since November 2016, when the authorities started to implement the economic reform programme backed by the International Monetary Fund (IMF), inflationary pressures have been building up because of the Central Bank of Egypt’s (CBE) decision to float the national currency, introducing the value added tax (VAT), and reducing fuel subsidies twice, in order to receive the International Monetary Fund’s (IMF) approval of the $12bn loan.

The road to rampant inflation

Following the November 2016 decisions made by the CBE, inflation rose sharply, primarily as a result of the devaluation of the Egyptian currency by almost 50%. In December 2016, inflation registered 23.27% and continued its increase to reach its highest level in 30 years—it was somewhere around 31.5% in April, considered to be the highest registered inflation rate of any of the world’s large economies.

Different points of view about the main driver behind inflation and how to deal with it emerged. Various economic experts argued that higher inflation rates were a result of the economic reforms that started by the end of 2016, which fueled a significant increase in prices as the costs of many factors of production are priced in US dollars since they are imported. They concluded that once these price shocks were absorbed, inflation will gradually decline on its own; thus, they were against the CBE’s decision of raising interest rates.

However, many experts, who share the same point of view with the IMF, believe that Egypt’s inflation rate was already among the highest in the world even before such price shocks, according to CBE’s historical data, Egypt’s inflation rate registered at 15.5% in August 2016. In their opinion, the primary driver behind Egypt’s soaring inflation is not the devaluation or fuel price hikes. But the rather rapid expansion of the money supply over the past few years.

Since the 25 January revolution, to prevent more anger among Egyptians, successive governments maintained an unsustainable huge budget deficit driven by weak revenues and large subsidy and wages bills, which they had financed, in effect, by printing money. This has resulted in too much cash accompanied by decline in production of goods and services, pushing prices up.

Moreover, such expansion of the money supply was one of the reasons behind the decline in the value of the Egyptian pound to fall against the dollar, leading to a currency crisis and to a huge gap between the value between the official and unofficial foreign exchange rates. This is why the CBE was forced to devalue in November.

Egypt’s domestic liquidity, which is the amount of Egyptian pounds in circulation or in-demand deposits, witnessed a 4.68% increase in March to a total of EGP 2.75tn. During the same period, GDP growth was lower than 4%. It is arguably a classic case of stagflation, and it needs to be addressed as quickly as possible.

Raising interest rates was the solution advised by the IMF and many other experts to tackle this problem. Consequently, the CBE decided to raise the interest rates in June for the third consecutive time, following the recently implemented energy subsidy cuts increasing its overnight deposit rate to 16.75% from 14.75% and its overnight lending rate to 17.75% from 15.75%, making the total interest rate hike of 7% since November an effort to curb the skyrocketing high inflation rates so that it would be in line with the authorities’ goal to reach a single-digit inflation rate in 2019.

In the CBE’s accompanying statement, the Monetary Policy Committee (MPC) explained that the move to raise rates came as a response to concerns over the inflation outlook, as the balance of risks surrounding the inflation outlook has tilted more strongly to the upside with the recent economic and monetary developments.

The move was welcomed by some and objected by many. HSBC published a report stating that this move is a source of comfort, as it shows the CBE’s solid efforts and commitment to contain inflation and to re-establish its credibility in targeting inflation in the context of the broader economic reform programme.

On the other hand, Prime Holding economist Eman Negm argued against this decision, explaining that such interest rate hikes can have a negative effect on inflation, as it will increase the borrowing costs for companies, leading to an increase in production costs.

Moreover, a soaring inflation rate has taken its toll on the consumer purchasing power. This, in turn, has led to a decline in demand rates, increasing the risk of recession with rising prices (stagflation). According to Emirates NBD Egypt PMI data, the Egyptian economy is a continued contraction route, with monthly readings registering below the 50-point threshold for the twentieth month in a row, through May 2017. This contraction, which sharply increased after the pound flotation, was due to the decline in output and new orders.

Nevertheless, there was a decrease in output and new orders in June 2017, but contraction has slightly eased as a result of the increased new export orders benefiting from the currency devaluation. New export orders have been on the rise since April 2017, recording an expansion for the first time in almost two years. This then rose in May at the fastest rate since the inception of the PMI in April 2011.

However, rising interest rates, by 7 pp after flotation, have led to a rise in both the cost of debt and the cost of equity. Thus, the weighted average cost of capital (WACC) has increased from 23.6% before the flotation to 26.2% after the flotation, reducing the investment attractiveness of the Egyptian market.

Moreover, one of the main criticisms of CBE’s Thursday interest rate hike is that it will make it more expensive for businesses to invest at a moment when the economy is suffering and desperately needs the stimulus. But this point view is objected by the fact that most Egyptian banks’ funding and lending have been directed to the government, helping in financing the huge deficit at hand through T-bills and government bonds, with low lending directed to private businesses.

To conclude, either way the average Egyptian citizen will carry the burden of the adopted reforms, with the expected increase in Egypt’s inflation rate by an approximate 3-4.5 percentage points following last week’s fuel price hike, according to Deputy Finance Minister Ahmed Kojak.

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Interest rate hike will impose significant fiscal burden: economic experts https://dailynewsegypt.com/2017/07/09/interest-rate-hike-will-impose-significant-fiscal-burden-economic-experts/ https://dailynewsegypt.com/2017/07/09/interest-rate-hike-will-impose-significant-fiscal-burden-economic-experts/#respond Sun, 09 Jul 2017 10:00:44 +0000 https://dailynewsegypt.com/?p=630803 HSBC believes that the CBE’s tightening cycle has peaked, Capital Economics forecast a 6% deposit rate fall by end of 2018

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In an effort to contain the effects of the recent subsidy cuts, the Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided in a surprise move on Thursday to raise the overnight deposit rate, the overnight lending rate, and the rate of the CBE’s main operation by 200 basis points (bps), or 2%, to 18.75%, 19.75%, and 19.25% respectively.

The CBE’s move hadn’t been anticipated by many of the surveyed economists, who had expected rates to be left on hold. At 19.25%, the mid-point of the policy corridor is now at its highest ever level, and has risen by 700bps since the fourth quarter (Q4) of 2016.

However, the accompanying statement suggests that the tightening cycle is now over and that the next move in interest rates is likely to be down, according to a Capital Economics report published on Friday.

Seven out of nine analysts and research centres at investment banks polled by Daily News Egypt before the MPC meeting predicted the interest on the pound to be kept unchanged by the CBE on Thursday.

According to Capital Economics, this prediction was based on various factors, including that the latest data shows that price pressures have eased, since the headline inflation had fallen from a 30-year high of 31.5% year over year (y-o-y) in April to 29.7% y-o-y in May, as the effects of the 50% drop in the value of the currency following the flotation started to fade.

Moreover, the recently released balance of payments data showed that Egypt’s external position has improved, the report cites. Egypt’s current account deficit continued to decline in fiscal year (FY) 2017/18, registering at $3.5bn in Q1, against $5.7bn in the same period in FY 2016/17.

According to the Capital Economics report, the improvement was due to the increased competitiveness of Egyptian firms due to the currency devaluation, which led to an increase in exports accompanied by a reduction in imports, as well as the fact that foreign investors have started to return.

In the CBE’s accompanying statement, the MPC highlighted that the move to raise rates came as a response to concerns over the inflation outlook, as the balance of risks surrounding the inflation outlook has tilted more strongly to the upside with the recent economic and monetary developments.

In late June, the government announced a hike of fuel prices by up to 55% as part of its ongoing fiscal consolidation efforts laid out in the adopted economic reform programme. On Thursday, a fresh rise in electricity tariffs was also introduced.

Consequently, the recent energy subsidy cuts prompted policymakers to take action and ensure that the inflation outlook is consistent with achieving the targeted disinflation path. The statement emphasised that the rate hike was aimed at tackling second-round inflation effects related to these subsidy cuts.

According to a report published by HSBC, there is some comfort to be drawn from the aggressive CBE stance to curb price growth and contain inflation, as it looks like the CBE is determined to re-establish its credibility in targeting inflation in the context of the broader economic reform programme, especially with inflation running at close to 30% y-o-y and likely to gain further when the June data is released next week.

“But we are not persuaded that the rate increase will have a meaningful impact on price growth driven by supply-side increases in administered prices, particularly given decelerating private consumption and negative real credit growth, which had already looked set to ensure that any pickup in inflation was short-lived,” said the report.

However, the hike will impose a significant additional fiscal burden—some estimate it to register at EGP 30bn—yet it may accelerate foreign inflows into the Egyptian debt market, adding to the upward pressure on Egyptian currency.

On the other hand, FX gains (increase of the US dollar value against the Egyptian pound) would have a more immediate impact on inflation than the rate hike, according to a report from HSBC. The analysts in the report restated their concerns that FX gains would risk impeding current account rebalancing that still has a long way to run and would be vulnerable to reverse, given the short-term nature of the portfolio inflows. However, they continue to believe that the CBE’s tightening cycle has peaked and look for rates to fall as headline inflation eases late this year and into 2018, and as the policy focus shifts to growth.

Moreover, though, the MPC also signaled in their statement that this latest rate hike is likely to be the last in the tightening cycle. According to the Capital Economics report, it envisages a “measured easing of the monetary stance” once “underlying inflation starts to moderate.”

The report cites that subsidy cuts mean that inflation is likely to rise in the very near term. By Capital Economics analysts’ estimates, they will directly add 1.5% to the headline rate. However, over the next six to nine months, this is likely to be more than offset by the unwinding of last year’s sharp drop in the pound.

The Capital Economics report concludes that from their point view, the headline rate will drop sharply towards the end of this year, close to the CBE’s end-2018 target of 13% (+/-3%). The report indicates that this is likely to prompt the central bank to start cutting rates, and that they envisage a prolonged easing cycle over the next couple of years. Capital Economics forecast that the overnight deposit rate will fall to 12.75% by the end of 2018.

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Egyptian pound fist to fist with US dollar yet again https://dailynewsegypt.com/2017/07/09/egyptian-pound-fist-fist-us-dollar-yet/ https://dailynewsegypt.com/2017/07/09/egyptian-pound-fist-fist-us-dollar-yet/#respond Sun, 09 Jul 2017 09:00:45 +0000 https://dailynewsegypt.com/?p=630797 Local currency began appreciating again by 21 piastres in four days, market awaits its trend until the end of the year

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The Egyptian pound has started a new confrontation with the US dollar since Monday, as the Egyptian banking market witnessed a new wave of appreciation against the dollar.

The price of the pound against the US currency increased by about 21 piasters during Monday, Tuesday, Wednesday, and Thursday to settle at EGP 17.8184 for buying and EGP 17.9412 for selling, compared to EGP 18.0276 for buying and EGP 18.1518 for selling on Sunday.

The pound had fallen sharply after the flotation of the pound on 3 November 2016, reaching as high as EGP 19 to the dollar. Yet, the local currency began recovering in late January 2017 to reach about EGP 15.73, before falling again to EGP 18.05-18.15 in March 2017. The exchange rate had settled at this rate until last Sunday.

Rumors of artificial appreciation

The banking market has been rife with rumors of a sudden surge in the price of the pound against the dollar since Monday. Bankers told Reuters that the rise of the pound after months of relative stability against the dollar appears to be “artificial” to ease citizens’ discontent after fuel prices were raised by about 100% two weeks ago.

The rumors were denied by a number of bank leaders and analysts, who told Daily News Egypt that the appreciation of the pound is natural. They attributed the move to the increase in foreign exchange offered in banks. “There are no administrative directives to raise the pound rate against the dollar,” they stressed.

Chairperson of Banque Misr Mohamed El-Etreby said that the presence of a large supply of dollars in the banks led to the occurrence of this large decline in the price of the dollar against the pound.

The branches of Banque Misr and its Misr Exchange Company witnessed last week a great deal of interest from those holding dollars to sell in favor of the Egyptian pound.

“There is a big difference between the interest rate on the EGP-denominated savings and that on the dollar,” El-Etreby explained. “Some dollar holders have transferred their savings into pounds, which has led to an increase in the supply of the dollar.”

He predicted the dollar to continue its depreciation wave in the coming period amid increasing supply.

Vice-chairperson of the National Bank of Egypt (NBE) Yehia Aboul Fotouh said that the decline in the dollar value against the pound is due to the increased supply of it in banks in the recent period. He added that all indicators point to the possibility of a further decline in the dollar against the pound during the coming period.

He pointed out that some $54bn has entered the market since the flotation, according to the Central Bank of Egypt’s (CBE) figures, which led to a large abundance of the dollar. In contrast, recent months have seen a decline in the volume of imports, which reduced the demand for the dollar.

CBE Governor Tarek Amer said in May 2017 that Egypt attracted $54bn over the six months after the flotation of the pound.

Deputy Finance Minister Ahmed Kojak said that Egypt attracted foreign investments worth $9.8bn in domestic debt instruments in the fiscal year (FY) 2016/2017, up from $1.1bn in 2015/2016.

Moreover, Egyptian remittances were up by 11.1% since November 2016 until April 2017, reaching $9.3bn, up from $8.3bn a year before, according to CBE data.

Strong revaluation of the pound

According to the research department of Beltone Financial, the pound is expected to witness a strong revaluation, while maintaining good levels of foreign exchange liquidity within the banking system on the back of a number of positive developments.

Beltone expects the local currency to strengthen to EGP 16.6-17.1 against the dollar by December 2017, recording EGP 16.8 to the dollar in FY 2017/2018.

It explained that the exceptional returns coupled with the depreciation of the currency supported stable investment flows, with a total cash flow of $54bn since the decision to liberalise the exchange rate on 3 November 2016, which supported net foreign assets in the Egyptian banking sector to record a surplus of $3.8bn in May 2017, compared with the highest deficit level of about $11bn in December 2016, and against the low deficit levels of about $0.4bn in April 2017.

Beltone also praised the CBE’s decision not to introduce current foreign exchange market flows in order to keep the exchange rate from fluctuating, leading to more inflationary pressures and challenges to the business climate.

The research centre expects the situation to take a positive turn after ensuring the ability to meet the current real demand, accumulating profit repatriation, and eliminating restrictions on capital transfers, noting that the high level of the cash reserve supports these expectations.

The monetary reserves of foreign currencies in Egypt have increased by $180m to reach $31.305bn at the end of June 2017, up from $31.125bn at the end of May of the same year.

Furthermore, Beltone also expects the pressure on the pound to gradually ease over the coming period with the stability of supply and demand variables, but pointed out that in light of the rise of foreign liabilities to $7.6bn and $12.2bn in FY 2017/2018 and FY 2018/2019 due to increased external borrowing, the pound is expected to rise slightly over the next three years.

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

The supply and demand mechanisms specify value

Mohamed Abdel Aal, a member of the board of directors of the Suez Canal Bank, said that the exchange rate of the Egyptian pound against all foreign currencies is determined based on the conditions of supply and demand since its flotation.

He explained that the CBE can intervene through the interbank mechanism to protect its currency, according to its interests and vision. Yet, he argued that this does not happen now, since Egypt does not have the luxury of selling dollars now for support.

Abdel Aal told Daily News Egypt in an interview that the exchange rate will go through three phases this year. The first phase, which ended with the beginning of the second quarter (Q2), is the phase in which the pound strives for resisting depreciation. During this phase, the pound should have moved in value between EGP 17.5-20.5.

The second phase, which runs from Q2 to the end of Q3, is when Egypt had received the rest of the agreed instalments from the international institutions, when natural gas fields had started actual production, and when Egypt would have completed the marketing of its US dollar denominated bonds—a prediction that has been proven correct. Abdel Aal had previously expected the pound to strengthen to EGP 15.5-17 to the dollar.

Moreover, the third phase, which is set to begin at the beginning of the last quarter of the year, will see the remittance inflows stabilise, coupled with a reasonable growth in tourism revenues, relative stability of other traditional sources of foreign exchange, and the emergence of surplus in the balance of payments. The value of the Egyptian pound, according to Abdel Aal, will hence rise to EGP 14-15.5.

“If we were to predict the changes and volatility of the exchange rate, we have to conduct an analysis of the strengths, weaknesses, opportunities, and threats facing foreign exchange demand and supply elements that will negatively or positively affect the pound’s pathways in the next phase,” Abdel Aal stressed.

He explained that one of the most prominent strengths that will inevitably lead to increased foreign exchange supply and support the pound, and hence its improved prices, is the continued growth of the CBE;s net foreign reserves, regardless of its sources.

He added that the strength of the pound will also be supported by the policy of relying on domestic production, increasing exports and reducing imports, which led to the shift of the trade deficit into a surplus. “This will certainly favour curbing the demand for the dollar,” he said.

Abdel Aal also noted that increasing banks’ foreign exchange resources, which emerged immediately after the flotation, allowed them to open and fund multi-billion dollars worth of letters of credit.

He added that the entry of Egyptian gas fields into actual production as of Q2 of this year, in order to achieving self-sufficiency of natural gas in 2019, will save around $1bn per year, noting that the new concession rights for gold mines and boosting their number will also support the exchange rate.

In addition, he explained that remittances will increase, offering further support to the value of the pound.

“The previous strengths confirm that the Egyptian economy will be better, that its macro indicators will improve, that the severe shortfall in foreign exchange sources will gradually disappear, and that foreign investment rates will rise,” he said. “Then, they will all support the Egyptian pound and will put it in a better price position.”

Domestic and external factors contribute indirectly to the pound’s improvement

At the same time, Abdel Aal highlighted other internal and external factors that could positively affect, indirectly, the improvement of the pound. These include the expectation of improving the macroeconomic indicators and improving the creditworthiness of Egypt, which will help the flow of foreign direct investment on the one hand, and marketing more bonds in the global market on the other.

However, most of the weak points that could have negatively impacted the pound, such as the open foreign currency positions of companies, have disappeared, through settling these positions. In addition, the value of the outstanding dues of foreign companies operating in Egypt has been reduced, especially in the oil sector, as well as the disappearance of psychological anxiety that fed the phenomenon of dollarisation.

Asked about the reasons for the recent rise of the pound against the dollar, Abdel Aal said that many reasons were behind this, including the continuation of the CBE in implementing a policy of deflation by raising the interest rate of the Egyptian pound by 7% three times: in November 2016, May 2017, and July 2017. “Hiking interest rate generated positive momentum for the pound,” he explained. “This also stimulated investment funds and foreign hedge funds to carry out successive and renewed transactions of futures and SWAP.”

He added that these transactions have achieved mutual benefits to their parties, where they have earned the profits of Forex and the interest rate, provided Egypt with short-term dollar liquidity, and supported the foreign exchange reserve until the gradual growth of other dollar resources.

He pointed out that the state’s announcement of a new phase of the privatisation programme by introducing some projects and institutions in the stock exchange is a positive factor for the improvement of the pound, both in terms of liquidity support and in support of the implementation of the economic reform plans, leading to the entry of new foreign investors, which will help increase the dollar’s supply.

Cancelling the cap on foreign currency expatriation  

“The cancellation of the ceiling imposed on expatriation, which would not allow the transfer of more than $100,000 annually, boosted the confidence of those who had stopped bringing their savings in foreign exchange to Egypt, and it was also a reason to increase the flow of foreign exchange to banks and, thus, rise in the value of the pound,” Abdel Aal said.

He added that Egypt’s success in implementing all its commitments in the International Monetary Fund (IMF) agreement so far has conveyed a message that Egypt is capable of coping with the economic challenges and passing the economic reform plan and granting the country the right to obtain the second tranche of the loan amount agreed with the fund. He pointed out that this will improve the outlook of international credit rating institutions towards Egypt, which is one of the most important catalysts for increasing the flow of foreign direct investment.

He stressed that the serious and transparent dealing in the subsidy file will reduce the proportion of deficit in the general budget and lead to the improvement of all economic indicators, which leads to the subsequent improvement of the exchange rate of the pound against the US dollar.

“The stability of the exchange rate of the dollar during the previous three months raised the degree of confidence among holders of the dollar and ensured that there will be no unjustified increases in the future, especially with the parallel market scaling down and the availability of surplus at the banks, which enabled them to open and pay all letters of credit that were pending. This is in addition to Egypt’s obligation in repaying the instalments and interest of loans in the dates of entitlements without any delay, which has reflected positively on the pound,” Abdel Aal elaborated.

He added that the success of the fiscal policy in reducing the import bill by 50%, increasing the export revenues by 30%, and its success in marketing and covering all the issues of European dollar bonds in the European dollar market at a reasonable cost has also contributed to improving the position of the pound.

He pointed out that the continued growth of CBE’s monetary reserve, despite the various payments borne by it, would also support the pound. He pointed out that it is not wrong that some of the components of these reserves are loans or the proceeds of the sale of bonds. “What we care about most is the stability of liquidity,” he stressed.

According to Abdel Aal, the recent improvement in traditional foreign exchange resources, such as remittances and tourism had a positive impact on the pound.

He added that the economic recession in the consumer sector because of price hikes helped ease pressure on imports that have domestic alternatives, which also cut down demand on the dollar.

Finally, he explained that the improvement of Egyptian-international relations, especially with the Gulf countries, Europe, and the United States, has put Egypt in a state of moral, literary, and political stability. “Egypt can capitalise on this globally and regionally in the economic aspects, thus increasing its resources of foreign exchange and further improving the value of the pound,” he concluded.

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Egypt achieves electricity surplus after years of deficit https://dailynewsegypt.com/2017/07/05/egypt-achieves-electricity-surplus-years-deficit/ https://dailynewsegypt.com/2017/07/05/egypt-achieves-electricity-surplus-years-deficit/#respond Wed, 05 Jul 2017 06:00:09 +0000 https://dailynewsegypt.com/?p=630507 Investment in the oil sector turned from importing into self-sufficiency

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The Ministry of Electricity has achieved a breakthrough in tackling the power outage phenomenon. The electricity production deficit has turned into a surplus for more than 11 months and is now up to about 5,000 MW.

The ministry expects to add to the surplus by May 2018, following the production of the Siemens power stations in Beni Suef, Borollos, and the New Administrative Capital, estimated at 15,000 MW.

Maher Aziz, an energy and environment consultant and member of the World Energy Council, said that the surplus of electricity production is known in all countries and is called the “revolving reserve”.

He added that Germany, France, and America have a 15% surplus in the electricity grid to achieve balance and continuity, noting that Egypt has a chance to export its electricity surplus.

“It is necessary to diversify the sources of energy production to achieve sustainability and ensure the electrical supply to all subscribers,” Aziz said.

The regulation law of petrol serves economic development plans

Minister of Petroleum and Mineral Resources Tarek El Molla said that the economic reform programme adopted by the state, as well as the new laws, such as the investment law and the petrol market regulation law, will serve the economic development plan and attract more investments to achieve sustainable development.

The draft petrol law would ensure the availability of networks and petrol facilities. It also aims to protect consumers, encourage investments, prevent monopolistic practices, provide information to consumers, and ensure optimal use of networks and facilities infrastructure.

Many opportunities to invest in the petrochemical industry

El Molla said that Egypt has many opportunities to invest in the petrochemical field, referring to the opening of the expansion of Misr Fertilizers Production Company (MOPCO), along with other projects in the field of petrochemicals that confirm the country’s expertise and capabilities in this sector.

He pointed out that Egypt has a promising petrochemical industry that exports to many international markets under the slogan “Made in Egypt”, achieving an economic and industrial return.

He pointed out that Egypt still has a lot to achieve in this vital field in light of its interest in maximizing the added value of natural resources and establishing transformation industries to achieve the highest return and added value.

Sukari mine: an Egyptian success story

El Molla stressed the importance of gold discoveries in Egypt, which are characterised by high revenues and intensive labour. They mainly exist in the central and southern regions of the Nile Valley, which contributes to the economic and social development of these areas

He added that the ministry currently studies, in cooperation with experienced international companies, the current state of Egypt’s mineral wealth and ways to promote it, parallel with the modernisation of the oil sector. The study aims to attract global investment to search for gold and rare metals to achieve optimal economic usage of Egypt’s mineral wealth. It also creates new jobs and contributes to the development of the South Valley area.

The Egyptian government has managed to eliminate the power outage phenomenon in the country. It also has adopted programmes to maintain and upgrade the efficiency of power stations, in addition to coordinating with the petroleum sector, to provide required fuel. The electricity reserve production capacity has reached about 6,000 MW per day.

President Abdel Fatah Al-Sisi stressed the state’s keenness to complete the sector’s urgent plan, including the establishment of new power plants, upgrading the capacity of the existing stations, enhancing the efficiency of the electricity transmission network, providing energy to new development projects, and reopening the stalled plants.

New electricity production projects worth EGP 525bn

President Al-Sisi has spoken about the challenge, effort, and unprecedented achievement in the energy sector over the last two years, in addition to the huge funds injected in the electricity sector to implement projects worth a total of EGP 525bn.

The president pointed out that the state is committed to provide electricity to all the people of Egypt, and seeks to improve the quality of service, especially as energy is a national security issue.

The president also highlighted the importance of completing the procedures of supporting the unified electricity grid within the year, through securing necessary funding for the project, amounting to about EGP 16bn.

Egypt contracts with Siemens to add 14,400 MW to the national grid

The Ministry of Electricity has contracted with Germany’s Siemens to add 14,400 MW to the national electricity grid by May 2018, with investments of €6bn, which represents about 50% of the total electricity production in Egypt.

Minister of Electricity and Renewable Energy Mohamed Shaker said that the ministry was negotiating with Siemens to add 13,200 MW, worth €6bn to be paid in installments with a three year grace period. These capacities were increased to 14,400 MW without any additional costs, after President Al-Sisi entered the negotiations and reduced the contract value.

He added that 256 Arab and international companies are involved in the implementation of the Siemens power stations in Beni Suef, the New Administrative Capital, and Borollos.

National Strategy for Electricity and producing 20% of energy from renewable resources by 2022

The National Electricity Strategy relies on five main axes: secure electricity sources, sustainability, institutional development, governance of electricity companies, create a competitive market for electricity, and reduce emissions taking into consideration climate change.

Shaker said there are five-year plans for the electricity sector until 2022, which have been developed in cooperation with the European Union. New and renewable energy is expected to reach 20% of the total energy production in Egypt by 2022, 30% by 2030, and 55% by 2050.

The ministry has also issued the feed-in tariff for renewable energy, which allows the private sector to invest in the establishment, ownership, and operation of power plants, as well as selling electricity produced from solar and wind energy.

Electricity law and the adjustment of the legislative climate for investment

Hafez Salmawy, former director of the Egyptian Electric Utility Regulatory Agency, said that the president has issued the Unified Electricity Law No. 87 of 2015, which aims to consolidate the legislation and laws related to the electricity facility in one law. The new law will encourage investment in production of electricity from renewable resources, improve energy efficiency, separate between the production transmission, and distribution of electricity.

It also maximises the role of the Egyptian Electric Utility and Consumer Protection Regulatory Agency, as well as creating a suitable climate for investment in the production, transmission, and distribution of electricity.

New High Dam water pumping and storage project to produce electricity in Ataka

In accordance with Al-Sisi’s vision to diversify sources of energy, the Ministry of Electricity has agreed, with Chinese Sinohydro, to establish a pumping and storage station in Ataka with investments of $2.5bn.

The new plant, to be implemented at Ataka, is the best technology for storing energy in the world and will have many benefits, especially in terms of network operation costs and storage safety factors. The technology also has the highest security rate of the electricity network. The new project will have the same production capacity of Egypt’s High Dam.

Head of the Hydro Power Plant Executive Authority, Mohamed Osama, said that pumping stations depend on the idea of moving water between two reservoirs at different levels.

Dabaa nuclear plant: a dream to be achieved under Al-Sisi

President Al-Sisi said that the establishment of the Dabaa nuclear plant for peaceful uses, in partnership with Russia, is a message of hope and work for Egypt and the world, stressing the strong relationship between the two countries.

Yusri Abu Shadi, chief inspector of the International Atomic Energy Agency, said that President Al-Sisi succeeded in concluding the negotiations on the Dabaa nuclear plant, noting that former presidents could not settle this issue.

For his part, Osama Ghazali, head of the Democratic Front Party, praised the steps taken by Egypt to establish the Dabaa nuclear project to produce peaceful energy and asserted that it will help Egypt make a big leap of progress in the coming years.

The discovery and development of Zohr petrol field in a record time

The Zohr field is one of the most important projects to develop natural petrol fields. It was classified by companies operating in the oil and petrol field as the largest petrol discovery in the Mediterranean and one of the largest discoveries on a global level.

“We have suffered for years from a gap between production and consumption, especially from natural petrol, and we have taken serious steps to eradicate this gap and achieve a balance between production and consumption,” said Tarek El Molla, minister of petroleum and mineral resources.

He explained that the discovery and development of the Zohr field was a huge challenge that has been achieved in record time since the signing of the agreement, in participation with Italy’s Eni.

El Molla added that Egypt aims to achieve self-sufficiency within two years and direct a part of the discovered petrol to the petrochemical industry to achieve added value.

The new field has reserves of 30tn cubic feet of petrol, equivalent to 5.5bn barrels of oil, on an area of 100 square kilometres.

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Egypt pound under fire as CBE shifts to remove limits on foreign currency transfers https://dailynewsegypt.com/2017/07/03/egypt-pound-fire-cbe-shifts-remove-limits-foreign-currency-transfers/ https://dailynewsegypt.com/2017/07/03/egypt-pound-fire-cbe-shifts-remove-limits-foreign-currency-transfers/#respond Mon, 03 Jul 2017 06:00:08 +0000 https://dailynewsegypt.com/?p=630308 Companies getting ready to transfer their profits could weigh on the weak pound

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As the Central Bank of Egypt (CBE) moves to fully remove any restrictions on foreign currency handling, the Egyptian pound seems to be under new pressures that could spark another downward spiral in the currency’s value.

In mid-June, the bank decided to move limits on international currency transfers, scrapping a $100,000 monthly limit on individual bank transactions in a long-awaited reform intended to lure back much needed foreign investment.

The bank will also remove restrictions on dollar deposits in the coming months, the International Monetary Fund’s (IMF) mission chief for Egypt, Chris Jarvis, told the country’s Al-Borsa newspaper on Sunday.

“The central bank’s policy also includes removing remaining restrictions, including limits on dollar deposits, which we understand will take place in the coming months,” Jarvis added.

The changes include removing restrictions on using debit and credit cards in foreign currency.

Egypt, which put in place strict controls on the movement of foreign currency after its 2011 political uprising, could face a currency dilemma in the few coming months for the above mentioned reasons, analysts told Daily news Egypt.

These moves formed a part of a package of economic reforms Egypt has to implement to bring back foreign investment, in return for a $12bn IMF loan.

As part of the three-year IMF deal, Egypt is also obliged to end those controls, which include a limit of $50,000 per month on deposits for importers of non-priority goods.

“I think that the Egyptian currency will be under pressure again, when the companies are going to transfer their profits. Another weigh on the local currency is that investors are overvaluing the dollar,” Jason Tuvey told Daily News Egypt.

“Look at the historical moves of the pound. You can feel the pressure is coming,” he added.

After keeping the pound way overvalued for more than five years, the bank in November announced it was “floating” the currency. It set a target price of 13 pounds to the dollar, far weaker than the previous official rate of 8.88. It also said it would let the pound move according to supply and demand.

Since then, the pound began sliding, more than expected and confounding the central bank. By 20 December, it hit 19.63, dangerously close to the barrier of 20 to the dollar.  The CBE seemed, at this point, to have quietly started wrestling the pound back up.

The IMF also said it was surprised by how far the pound had weakened. “The exchange rate appreciated quite a bit, more than we expected,” Jarvis said in an 18 January press briefing.

The CBE took the IMF statement as a green light to strengthen the currency back up again in the belief that it had been unfairly weakened. By 22 February, it had strengthened the local currency against the dollar to 15.80.

The CBE took the IMF statement as a green light to strengthen the currency back up again in the belief that it had been unfairly weakened. By 22 February, it had strengthened the local currency against the dollar to 15.80.

Unfortunately, the market did not agree with that price and soon the black market, which had largely disappeared since flotation in November, began flourishing once more.

Since mid-March, the pound has been stuck at around 18.10 to the dollar, with almost no fluctuation.

“It could be the moment of truth of Egypt’s currency. Egypt’s money supply has been growing by about 20% per year, while GDP has hovered below 4%. That means the pound is losing approximately 16% of its value every year,” Focus Economy said in a research note.

The report added that “the risks to investors posed by a floating currency, in which currency value is largely determined by the market, comes from the potential for investors playing the market to lose their capital, should the currency swing dramatically. But, in the case of Egypt, the convergence of the currency’s official exchange rate and its black market rate should give investors the confidence that the worst of the fluctuations are over.

“Devaluing the pound was part of a broader package of reforms made by the Egyptian government in response to the country’s nearly depleted foreign currency reserves. States need a source of foreign reserves to engage in international trade, but emerging markets like Egypt are generally net importers and thus lack a stable source of foreign currency entering the country,” the note explained.

“For Egypt, two of its most important sources of dollars—tourism and foreign investment—dried up amid the violence and instability that plagued the country following the 25 January Revolution.”

According to the report without a steady supply of foreign currency entering the country, the CBE was forced to auction off scarce dollars to finance what the government deemed to be high-priority industries, such as wheat and medical equipment importers.

“Between 2011 and July 2016, Egypt used up $10bn of its foreign reserves, leaving only $50m. Businesses without access to dollars could not import needed inputs, forcing many to pay a premium on the black market or shut down altogether. Government budget deficits ran over 10%, among the highest in the Middle East, and public debt expanded to over 90% of GDP. Wealthy Arab neighbours, like Saudi Arabia, supported Cairo with cash infusions and subsidised oil in the years following the Arab Spring, but the drop in oil prices starting in 2014 caused fiscal problems in Gulf countries that forced them to pull back their support,” the report noted.

In 2015, the CBE imposed strict limits on dollar deposits to discourage demand on the dollar in the black market, and it also imposed 50,000 as a limit for maximum monthly depositing; however, a large part of these constraints were removed by March 2016.

The bank still keeps the maximum limit for individuals who work in importing products and non-basic goods at 10,000 daily, 50,000 monthly for depositing, and 30,000 for withdrawal.

“The central bank wouldn’t have taken such a step unless it was backed by a solid recovery in the foreign-currency situation,” said Hany Farahat, an economist at Cairo-based CI Capital Holding.

“It’s proof the currency crunch is dissipating, but challenges are still to come if companies decide to repatriate their profits,” Arafat added.

CBE Governor Tarek Amer said the removal of the restrictions will not affect foreign currency reserves.

“This comes as the central bank continues to take steps in the framework of economic reform, which it began to implement last year, and in order to strengthen confidence in the Egyptian economy,” a CBE statement said.

“The lifting of controls also contributes to attracting more foreign investment inflows and deposits from Egyptians abroad, given their ability to re-transfer them outside the country without any restrictions,” it said.

The CBE had already allowed commercial lenders to repatriate a part of dividends and have eased restrictions on the use of debit and credit cards abroad.

The government is trying hard to lure foreign investors in a way to build up its international reserves.

Egypt international reserves rose 9% in May from the previous month to $31.1bn, the highest level since February 2011.

Egypt’s economy has been struggling since the 25 January Revolution drove foreign investors and tourists away. The government is hoping a $12bn IMF loan signed last year will put it on the road to recovery, together with a rebound in investment.

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Diplomatic disputes with Qatar: 20 years of on and off relations https://dailynewsegypt.com/2017/07/01/diplomatic-disputes-qatar-20-years-off-relations/ https://dailynewsegypt.com/2017/07/01/diplomatic-disputes-qatar-20-years-off-relations/#respond Sat, 01 Jul 2017 18:00:36 +0000 https://dailynewsegypt.com/?p=630191 How the 1995 coup in Qatar sparked tensions with the country’s neighbours 

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Less than a month ago—specifically on June 5, shortly after sunrise—the world woke up to separate statements by three Gulf states and Egypt cutting diplomatic ties with their neighbouring country Qatar and shutting down airfields and ports to all Qatari means of transport, accusing the latter of “supporting and financing terrorism” as well as interfering in the internal affairs of Gulf states.

A few days earlier, the four countries were attending the US-Arab-Islamic Summit among more than 50 Arab and Islamic leaders and US president Donald Trump.

During the summit, several leaders condemned “countries that finance terrorism”, while after the decision to cut ties with Qatar, Trump tweeted: “so good to see the Saudi Arabia visit with the King and 50 countries already paying off. They said they would take a hard line on funding extremism, and all reference was pointing to Qatar.”

Egypt expressed its reasons behind the decision as due to the Qatari “persistence to adopt a stance against Egypt,” support the Muslim Brotherhood (MB) terrorist group, lodge MB leaders, target Egypt’s security, promote Al-Qaeda’s and the Islamic State’s (IS) ideology, and interfere in interior issues of Egypt and other countries in the region, asserting that all attempts exerted to stop Qatar from supporting terrorist organisations did not succeed.

Tensions between Egypt, Gulf countries, and Qatar reached a peak following alleged statements by the Emir of Qatar

Tensions between Egypt, Gulf countries, and Qatar reached a peak following alleged statements by the Emir of Qatar, which were published in May on the country’s state-owned news agency QENA, accusing Egypt and the Gulf states of holding campaigns against Qatar’s image and promoting the idea that it supports terrorism, adding that these countries should “reconsider their antagonistic stance against Qatar.”

Although Qatari authorities claimed that QENA was hacked, denying the statements, various Arab media outlets questioned the validity of the statements, especially since Qatari relations between these countries were not on best terms recently.

Egypt’s Minister of Foreign Affairs Sameh Shoukry responded to the alleged statements during a televised interview on privately-owned TV, saying that Egypt is capable of affecting Qatar, adding “patience has limits”.

On the other hand, Saudi Arabia expressed a different reason in the statement published in Saudi news, which read, “since 1995, the Kingdom of Saudi Arabia and its brothers have made strenuous and continued efforts to urge the authorities in Doha to abide by its commitments and agreements; yet, they have repeatedly violated their international obligations and the agreements they signed under the umbrella of the Gulf Cooperation Council (GCC) for Arab States to cease the hostilities against the Kingdom and stand against terrorist groups and activities, of which the latest one was their failure to implement the Riyadh Agreement.”

Circa 1995 

Emir of Qatar Sheikh Khalifa Al-Thani was on a trip to Switzerland in 1995 when Qataris were watching a televised statement by his son, Crown Prince Hamad bin Khalifa Al-Thani, announcing a coup on his father, saying, “I am not happy with what has happened, but it had to be done and I had to do it,” according to The Independent.

However, Hamad did not clarify why “it had to be done.”

The world had speculations about Gulf States’ reaction to the ouster of the Emir of Qatar, as Hamad had long expressed different political views than that of the region, particularly from Saudi Arabia. In fact, he had good relations with Iran, Saudi Arabia’s political and ideological rival, and Israel.

In 1996, Hamad ended a coup attempt by his cousin and accused Saudi Arabia, Egypt, and Bahrain of plotting against him, starting a loop of accusations of interference.

Friends and foes

The political stances of Hamad and his son, current Emir of Qatar Tamim Al-Thani, often did not align with Qatar’s neighbours, resulting in the witnessed political disputes.

In 1997, Qatar hosted a regional conference attended by an Israeli delegation to enhance economic relations between Arabs and Israel, which Egypt’s then-president Hosni Mubarak refused to attend because of Israel’s attacks on Palestinians at the time, according to state-owned newspaper Al-Ahram.

Boycotting the conference sparked more tensions between Egypt and Qatar in the form of statements by both countries accusing the other of interference, treason, or supporting terrorism.

However, about a decade later, Mubarak said in a televised interview that the reason behind political disputes between Egypt and Qatar was his criticism to Hamad’s coup, as the latter’s father was in Egypt before heading to Switzerland.

Furthermore, Qatar’s close ties with Iran link it with supporting Houthi rebels in Yemen.

Saudi Arabia often accuses Qatar of arming the Al-Nusra Front in Syria, a jihadist rebel group linked to Al-Qaeda, while Egypt has long accused Qatar of supporting and financing the Muslim Brotherhood (MB) group both in Egypt and internationally.

Since 2013, Egyptian-Qatari relations have witnessed several diplomatic tensions, as Qatar expressed its support for Egypt’s ousted president Mohamed Morsi, who was affiliated with the MB.

In 2014, Saudi Arabia, the United Arab Emirates (UAE), and Bahrain recalled their ambassadors to Qatar, accusing Qatar of supporting extremist groups and individuals, threatening the stability and security of the region. But Qatar did not withdraw its ambassadors.

Clash of the satellites 

The conflict between Arab states and Qatar was often sparked by media publications and published statements.

In 1997, former Deputy Minister of Foreign Affairs Adel Al-Safty was assigned to travel to Qatar to review the reasons for the disputes.

“Qatari officials were mad that the Egyptian Rosalyousef magazine had published a cartoon of the Emir back then changing the diapers of his son, the current Emir,” Al-Safty told Daily News Egypt, adding, “I immediately contacted the magazine’s editor-in-chief, who, by his turn, denied the Qatari claims, adding that no cartoon was published with such content.”

Al-Safty added that Qatari officials condemned the alleged statements by Mubarak against the Emir.

The Qatari Minister of Foreign Affairs then also criticised Egyptian media, accusing Egyptian journalists of “attempting to ruin Qatari-UAE relations,” according to Al-Hayat newspaper.

On the other hand, in 2002, Saudi Arabia withdrew its ambassador to Qatar due to Qatar’s news channel Al-Jazeera’s reporting on the former.

Hamad founded the Qatari state-owned news network Al-Jazeera in 1996, which has been criticised by Arab governments since.

The news network has been accused of “promoting terrorism, disseminating false news, and distorting the image of Arab states,” among other accusations made by Arab states over the years.

In 2006, another dispute took place between Qatar’s first lady, Sheikha Mozah bint Nasser al-Missned and Saudi newspaper Al-Sharq Al-Awsat for “a propaganda campaign against Qatar and its leadership.”

Egyptian and Bahraini authorities have blocked all Al-Jazeera outlets in both countries following the latest disputes.

Furthermore, Egypt has reportedly arrested and detained a number of Al-Jazeera reporters over the past four years.

Citizens’ fate

During the political disputes in the late 90s, several Egyptian residents in Qatar were let go of their jobs.

Al-Safty said that he originally travelled in April 1997 to Doha, after knowing that during six months, the number of Egyptian labour in Qatar was cut to half.

“It is their decision after all to employ Egyptians or not, but we wanted to explore their reasons for such decision,” he added, explaining that the reason turned out to be political disputes.

However, in 2017, the Qatari Ministry of Interior announced that nationals of countries that cut diplomatic ties with Qatar this week are free to remain in Qatar in line with existing regulations, according to a statement carried by Qatari state news agency (QNA).

“There was no change in policy towards the nationals of brotherly and friendly countries that cut or reduced diplomatic relations following the malicious and hostile campaigns against Qatar,” the Qatari Ministry of Interior added.

The number of Egyptians currently residing in Qatar is about 300,000, according to Egypt’s Minister of Immigration and Egyptian Expats Affairs Nabila Makram’s statements.

Now versus then

The reasons for each wave of tension over the years remained the same: statements of accusations by officials from both sides, Qatar’s support to rivals of the Arab states, and both sides’ state-owned media publications.

While the disputes in the 90s were mainly because Arab states were not approving of the power ruling Qatar, the current disputes are different because it is linked directly to terrorist groups and the Arab spring events, political science professor Hassan Nafaa told Daily News Egypt.

“My analysis is that Qatar wants to be perceived as a strong country in the region, between other strong political powers, such as Saudi Arabia and Egypt, and it has nothing else to utilise to reach this perception,” Al-Safty said.

Several attempts were made to ease the tensions over the years, often by Saudi parties; however, dissension rises shortly after the mediation.

“Mediation is different now, because in the 90s, Qatari officials were willing to discuss the issues and reach a solution,” Al-Safty said, explaining that several talks were held between both countries to reach a solution in the past.

Currently, countries, including the US and Kuwait, are mediating to end the latest disputes, although Qatar has reportedly announced its refusal of such attempts.

 

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Egypt ranks 105 in Global Innovation Index 2017, Switzerland in top spot https://dailynewsegypt.com/2017/06/22/egypt-ranks-105-global-innovation-index-2017-switzerland-top-spot/ https://dailynewsegypt.com/2017/06/22/egypt-ranks-105-global-innovation-index-2017-switzerland-top-spot/#respond Thu, 22 Jun 2017 08:00:43 +0000 https://dailynewsegypt.com/?p=629909 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 https://dailynewsegypt.com/2017/06/15/raw-commodity-prices-accelerate-food-companies-likely-reprice-products/ https://dailynewsegypt.com/2017/06/15/raw-commodity-prices-accelerate-food-companies-likely-reprice-products/#respond Thu, 15 Jun 2017 06:00:02 +0000 https://dailynewsegypt.com/?p=629151 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  https://dailynewsegypt.com/2017/06/14/egypt-food-security-wake-climate-change-water-scarcity/ https://dailynewsegypt.com/2017/06/14/egypt-food-security-wake-climate-change-water-scarcity/#comments Wed, 14 Jun 2017 08:00:01 +0000 https://dailynewsegypt.com/?p=628983 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 https://dailynewsegypt.com/2017/06/12/new-controls-importers-record-will-lead-30-importers-exit-market-importers/ https://dailynewsegypt.com/2017/06/12/new-controls-importers-record-will-lead-30-importers-exit-market-importers/#respond Mon, 12 Jun 2017 06:00:11 +0000 https://dailynewsegypt.com/?p=628724 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 https://dailynewsegypt.com/2017/06/06/egypts-energy-future-reality-fantasies/ https://dailynewsegypt.com/2017/06/06/egypts-energy-future-reality-fantasies/#comments Tue, 06 Jun 2017 08:10:16 +0000 http://dailynewsegypt.com/?p=628006 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 https://dailynewsegypt.com/2017/06/04/cbes-decision-raise-interest-rate-continues-stir-controversy/ https://dailynewsegypt.com/2017/06/04/cbes-decision-raise-interest-rate-continues-stir-controversy/#respond Sun, 04 Jun 2017 06:00:15 +0000 http://dailynewsegypt.com/?p=627702 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 https://dailynewsegypt.com/2017/06/01/formation-media-regulatory-bodies-lights-press-freedom-dim/ https://dailynewsegypt.com/2017/06/01/formation-media-regulatory-bodies-lights-press-freedom-dim/#respond Thu, 01 Jun 2017 07:00:16 +0000 http://dailynewsegypt.com/?p=627475 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 https://dailynewsegypt.com/2017/06/01/borrowing-rate-will-not-slow-debt-set-increase/ https://dailynewsegypt.com/2017/06/01/borrowing-rate-will-not-slow-debt-set-increase/#respond Thu, 01 Jun 2017 06:00:59 +0000 http://dailynewsegypt.com/?p=627466 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 https://dailynewsegypt.com/2017/05/31/peoples-right-campaign-retrieves-thousands-feddans-state-property/ https://dailynewsegypt.com/2017/05/31/peoples-right-campaign-retrieves-thousands-feddans-state-property/#respond Wed, 31 May 2017 09:00:50 +0000 http://dailynewsegypt.com/?p=627421 4656 incidents of encroachments of state properties in the northern lakes were recorded in 2015 and 2016, according to the GAFRD

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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% https://dailynewsegypt.com/2017/05/31/food-beverage-companies-decreased-size-products-20/ https://dailynewsegypt.com/2017/05/31/food-beverage-companies-decreased-size-products-20/#respond Wed, 31 May 2017 06:00:42 +0000 http://dailynewsegypt.com/?p=627401 Shrinkflation grips Egyptian companies hit by rising production costs

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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 https://dailynewsegypt.com/2017/05/30/parliaments-insignificant-debates-interfere-personal-lives-legislative-tasks-linger/ https://dailynewsegypt.com/2017/05/30/parliaments-insignificant-debates-interfere-personal-lives-legislative-tasks-linger/#respond Tue, 30 May 2017 09:00:06 +0000 http://dailynewsegypt.com/?p=627267 MPs have been talking about a number of "illogic" issues, lack understanding of responsibilities, say experts

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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 https://dailynewsegypt.com/2017/05/28/5-alternatives-left-no-option-maspero-triangle-residents/ https://dailynewsegypt.com/2017/05/28/5-alternatives-left-no-option-maspero-triangle-residents/#respond Sun, 28 May 2017 11:00:05 +0000 http://www.thedailynewsegypt.com/?p=626989 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 …

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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.

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Are the high prices affecting Egyptians’ cultural way of celebrating Ramadan? https://dailynewsegypt.com/2017/05/25/high-prices-affecting-egyptians-cultural-way-celebrating-ramadan/ https://dailynewsegypt.com/2017/05/25/high-prices-affecting-egyptians-cultural-way-celebrating-ramadan/#respond Thu, 25 May 2017 08:00:13 +0000 http://www.dailynewsegypt.com/?p=626717 The Egyptian Fanous, Kunafa, and Qatayef prices increased, affecting the way they celebrate the holy month

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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

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.

Qatayef

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 https://dailynewsegypt.com/2017/05/25/high-prices-affect-holy-month-ramadan-egypt/ https://dailynewsegypt.com/2017/05/25/high-prices-affect-holy-month-ramadan-egypt/#comments Thu, 25 May 2017 07:00:34 +0000 http://www.dailynewsegypt.com/?p=626720 The inflation affects the price of all products at the time of Ramadan

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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 https://dailynewsegypt.com/2017/05/22/pound-flotation-posed-challenges-banks-financial-positions-2016-business-news-index/ https://dailynewsegypt.com/2017/05/22/pound-flotation-posed-challenges-banks-financial-positions-2016-business-news-index/#respond Mon, 22 May 2017 07:00:26 +0000 http://www.dailynewsegypt.com/?p=626356 SAIB, Audi, NBE recorded the lowest ratios of unregulated loans portfolios

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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 https://dailynewsegypt.com/2017/05/22/banks-offering-e-services-best-retail-banking-business-news-index/ https://dailynewsegypt.com/2017/05/22/banks-offering-e-services-best-retail-banking-business-news-index/#respond Mon, 22 May 2017 06:00:21 +0000 http://www.dailynewsegypt.com/?p=626359 Limited growth in retail banking portfolios of major banks due to the CBE's regulations

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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 https://dailynewsegypt.com/2017/05/18/nasa-space-apps-cairo-can-transform-country-tech-hub/ https://dailynewsegypt.com/2017/05/18/nasa-space-apps-cairo-can-transform-country-tech-hub/#respond Thu, 18 May 2017 07:00:05 +0000 http://www.dailynewsegypt.com/?p=625903 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 …

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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 https://dailynewsegypt.com/2017/05/17/1-5m-feddan-project-challenges-postpone-implementing-presidents-megaproject/ https://dailynewsegypt.com/2017/05/17/1-5m-feddan-project-challenges-postpone-implementing-presidents-megaproject/#respond Wed, 17 May 2017 09:30:42 +0000 http://www.dailynewsegypt.com/?p=625763 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 https://dailynewsegypt.com/2017/05/15/egyptian-sugar-production-increase-7-20172018-gain-report/ https://dailynewsegypt.com/2017/05/15/egyptian-sugar-production-increase-7-20172018-gain-report/#respond Mon, 15 May 2017 09:00:17 +0000 http://www.dailynewsegypt.com/?p=625412 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 https://dailynewsegypt.com/2017/05/15/egypts-oilseed-imports-to-increase-with-expansions-in-crushing-capacity-gain/ https://dailynewsegypt.com/2017/05/15/egypts-oilseed-imports-to-increase-with-expansions-in-crushing-capacity-gain/#respond Mon, 15 May 2017 08:30:14 +0000 http://www.dailynewsegypt.com/?p=625414 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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