Interviews – Daily News Egypt https://dailynewsegypt.com Egypt’s Only Daily Independent Newspaper In English Mon, 25 Sep 2017 18:45:11 +0000 en-US hourly 1 Concept to complete selling Siela North Coast second phase in 2018 https://dailynewsegypt.com/2017/09/25/concept-complete-selling-siela-north-coast-second-phase-2018/ https://dailynewsegypt.com/2017/09/25/concept-complete-selling-siela-north-coast-second-phase-2018/#respond Mon, 25 Sep 2017 08:00:17 +0000 https://dailynewsegypt.com/?p=636761 The second phase of Siela North Coast sales reached 65%, says Concept chairperson

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Concept Real Estate Group sold more than 95% of the first phase and achieved sales of 65% of the second phase of the project since its launching four months ago, chairperson Ehab Abou El Magd told Daily News Egypt.

Abou El Magd said in an interview that by November 2018, the company would have competed the selling of the project’s two phases.

The company participates in several real estate exhibitions internally and externally. Does the company achieves the target sales through these exhibitions?

We participate in exhibitions not to sell our units, but to be present in the market. In other words, we seek to brand (to be known in the market), not to sell. We are doing well in selling the units online through our social media outlets.

Furthermore, selling in exhibitions varies from one to the other. Sometimes, we sell in an exhibition, while we don’t do so in another. However, we achieve very good sales in exhibitions in Kuwait and Qatar. We only had one outdoor campaign to market our project, and the results were really good. To that, we are planning to launch more outdoor campaigns in the beginning of next year.

We may participate in a UAE real estate exhibition in November.

What are the sales of the first and second phases of Siela North Coast?

Siela project is located on an area of 10 feddans in Kilo 57 Alexandria-Matruh Road. It includes 650 units with an area of between 50 and 85 sqm. The allocation of the 10 feddans is divided as follows: 28% construction, 20% water, and 52% to green spaces and roads.

We sold more than 95% of the first phase and achieved sales of 65% of the second phase of the project since its launching four months ago.

By maximum November 2018, we will compete marketing the two phases of the project.

When will the company deliver the two phases?

The first will be handed over in July 2019, which includes 216 units with sizes ranging between 50 sqm to 85 sqm. The second phase will be delivered in January 2020. The whole project will be completed in 2022.

When will the company start construction of the third phase?

The construction in the third phase will start after delivering the second phase in 2020.

What is the price per square metre?

The price per square metre is EGP 4,500.

What is the company’s expansion plan?

Our target is launching coastal and residential projects. Thus, we seek acquiring land in 6th of October City or Fifth Settlement in New Cairo for residential projects. Moreover, for coastal projects, we are searching for a plot of land in the North Coast with a close proximity to the sea.

When will the company acquire land in the North Coast?

First, we are trying to reach an agreement with the squatters on the land, and then we will buy it from the government. However, for residential projects, we search for lands in 6h of October and New Cairo, which became difficult, especially in New Cairo, because there are few lands to be sold.

How much of Siela has been built?

The land of the Siela project was a mountainous one. We started digging works in 2016, and we continued in 2017. The company removed 300,000 cubic metres since the beginning of 2017.

Franco-Tech for Engineering Works is developing the infrastructure of the project. Concept was founded a year ago to develop Siela, and its founders own Franco-Tech for Engineering Works, which is specialised in the infrastructure works of water, sewage, and electricity networks. It carries out annual works worth more than EGP 10mn and has implemented a number of projects for SODIC, New Giza, and Amer Group, and will take over the infrastructure work of the Siela project, thereby reducing the cost of implementation.

What is the construction cost of Siela project?

The project’s investments reached EGP 350mn.

What are the services the project provides?

The project includes artificial lakes (lagoons) and basins, and an aqua park will be implemented by the company E.MAK. Besides, there will be playgrounds, a mall, and entertaining area for kids, as well as an artificial waterfall and a range of other services developed in three phases.

Moreover, the project includes five plants: desalination plant, drainage station, treatment plant, water plant, and electricity plant.

What payment facilities does the company provide?

The down payment is 15%, and we facilitated to the customers through paying 10% as a down payment and the remaining 5% over a year. The rest of the price of the unit is paid over the course of 6 years.

By how much in terms of percentage did the company’s units increase?

In November, since the flotation of the Egyptian pound, we increased prices by 25%. However, since the beginning of the current year, the company has increased prices by 20-22%. I expect unit prices to increase again by 10% by the beginning of November.

What is the size of the mall in Siela North Coast?

The size of the mall is 1,600 sqm and will include 40 units with space of 40 sqm. The mall is developed on two phases. The first will be inaugurated with the delivery of the first phase of the project. The second phase of the mall will be opened after delivering the project’s second phase.

What are the problems facing newly established real estate companies?

The main problem is that the new companies are not well known; however, we have another company that has a good reputation and experience; thus, we depend on this company in marketing ourselves.

The other project is cash flow as we receive the unit’s price within six years, and the company has to deliver the unit within two years only. Besides, the problem of raw materials’ price hikes.

Do you have to pay any dues to contractors?

No, we don’t.

Do you think real estate companies face problems in acquiring lands?

Of course. We do not have enough information regarding available lands in coastal or residential projects.

For example, some of the land in the North Coast is affiliated to the Tourism Promotion Authority, some is affiliated to the General Authority for Investment and Free Zones (GAFI), and others belong to the Ministry of Agriculture and the Matruh governorate. Besides, squatters illegally own part of that land.

Furthermore, land prices have gone up wildly. The government sells a square metre of land now at EGP 4,000 or more, without connecting the lands with utilities.

Do you think the government is a competitor with real estate companies?

No, I do not think so. For instance, the government is developing projects for tranches whom are not a target of real estate companies.

Do you think liberalising the exchange rate and increasing interest rates affected the market?

I think that liberalising the exchange rate of the pound and increasing interest rates are great decisions.

Although the decisions were good, all construction raw materials increased. Nevertheless, the sales weren’t affected by the liberalisation decision.

I don’t have any concerns regarding the increase in interest rates, because the increase will be absorbed by the inflation after three years. Real estate units’ prices are constantly increasing; therefore, real estate property is a great investment opportunity.

How much was the increase in construction costs after the EGP flotation?

For the project’s plants, raw materials increased by 300% since the acquisition of the land in 2015. Moreover, steel and cement prices also increased by 200%.

Why doesn’t the company plan to launch a project in Ain Sokhna?

Lands in Ain Sokhna are very expensive. A square metre there is estimated at $300 (approximately EGP 6,000).

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Higher Education Ministry examines 10 requests to establish private, national universities  https://dailynewsegypt.com/2017/09/25/higher-education-ministry-examines-10-requests-establish-private-national-universities/ https://dailynewsegypt.com/2017/09/25/higher-education-ministry-examines-10-requests-establish-private-national-universities/#respond Mon, 25 Sep 2017 06:00:28 +0000 https://dailynewsegypt.com/?p=636697 Total missions until the past fiscal year reached 371, including 950 students with a cost of EGP 691m

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The Ministry of Higher Education and Scientific Research has examined about 10 requests to establish private and national universities before the end of this year. The ministry also plans to transform about 45 technical institutions affiliated to technological colleges into specialised technical colleges before the end of June, according to Minister of Higher Education and Scientific Research Khaled Abdel Ghaffar.

About 17 new hospitals were established during the period from 2014 to 2017, taking the number up from 89 to 106 by 18% and a cost of EGP 10bn. Total missions until the past fiscal year reached 371, including 950 students with a cost of EGP 691mn.

Abdel Ghaffar said in an interview with Daily News Egypt that the ministry is holding negotiations with a number of local and foreign investors to establish private universities.

In May, you announced that you will open your doors to receive offers to establish private and national universities. Are there any offers the ministry is currently examining?

Yes, there are 10 offers that the ministry received and is currently looking into within the framework of expanding in the establishment of universities, whether public or private, in different geographic areas.

There is a presidential decision to establish three private universities; however, until now, they are not completed.

Universities like Suez Canal, Assiut, Beni Suef, and Benha have submitted offers to establish national universities. The offers were looked into and approved by the Council of Private and National Universities. The procedures to complete the construction works are continuing.

The 57357 Foundation has also submitted an offer to establish a national university for medical sciences and technology. Examining the construction file is underway.

The constitution stipulates that the allocations of higher education and scientific research form 3% of the total national GDP, where higher education and scientific research constituting 2% and 1% of that respectively. Allocations of the Higher Education Ministry reach EGP 35.8bn.

We aim to increase the admission rate of students coming from Arab and African countries by 10% annually in order to restore Egypt’s leadership.

Those who are concerned with education and its development say that it is necessary to expand in university technical education to meet the needs of the market. What is your opinion about that?

The ministry aims to expand the establishment of government and national higher education institutions in the governorates that need them the most. It also aims to transform 45 technical institutes affiliated to technological colleges into specialised technical colleges based on the needs of the market with a four-year educational system to provide high technical certificates.

The ministry has a plan to expand the establishment of the community’s technical colleges to accommodate larger numbers of technical education students as well as better education in order to eventually meet the needs of the labour market.

What about old universities, such as Cairo and Ain Shams. Will they be approved to open new branches?

 

The ministry seeks to establish branches of public community universities in crowded areas. This includes the universities of Cairo, Ain Shams, Zagazig, Alexandria, Benha, Assiut, Minya, and Helwan.

 

We seek to reduce the density and increase the quality of the educational process and to accommodate and provide more educational opportunities.

There are current preparations for the establishment of five community universities to enroll 20,000 students at appropriate tuition fees or middle classes, like the new programmes in universities. The government will retain an appropriate percentage of stocks and channel the revenues to spend on free institutions.

The ministry’s strategy is to encourage the establishment of private investment universities, provided that the government supervises and organises the activities of universities to ensure the quality of the educational process.

The ministry also plans to link university admission systems with a balance between students’ abilities and the nature of study programmes and courses.

 

Want to know the ministry’s plan for foreign missions?

 

The ministry aims to double the number of foreign missions in rare specialties and increase grants and joint projects with development partners, as well as completing the accreditation of 50% of education and scientific institutions.

We are keen to continue to nurture the outstanding scientific and talented students by standardising their standards in accordance with international standards, and working to establish incubators for the creative talents in each university, research centres, and scientific communities and the allocation of places to stay in university dorms of each university for the most talented students, as well as increasing the allocation provided to support the outstanding scientific and talented students by 25%.

The ministry sponsors students who excel in sport so that participants in the national and international sports competitions increase by 25%. We are also working to take the necessary measures to improve the ranking of higher education and scientific research institutions.

We have special interest in the care of disadvantaged students in education from poor families and remote areas by exempting them from tuition fees based on the case study and directing the budgets for the care of students to purchase educational supplies and grant them free of charge to eligible students and to give financial and in-kind support to deserving students according to the nature of each case. Priority will also be given to them for staying at the dorms.

 

The government is also seeking to increase the support allocated to educational and research facilities in universities to suit the needs of people with special needs, expand in twinning between the Egyptian and specialised and advanced international universities with the aim of continuing to upgrade the system of university education and linking it to the developed world.

What are the areas of focus of the ministry during the coming period?

 

According to the Sustainable Development Plan 2030, the ministry will focus on seven major sectors in scientific research, such as energy, water, agriculture, and food, development of border regions of Egypt, international cooperation, infrastructure and capacity building, science, and society.

 

 

There is an increase in the number of foreign envoys during the past four years, especially in Japan, Britain, France, America, and Germany to obtain post-graduate university degrees in several scientific majors, including new and renewable energy, nuclear power, water desalination, agriculture, and engineering.

 

How many scientific missions have been abroad during the past year?

 

The total number of missions until last fiscal year amounted to 371 missions consisting of 950 students at a cost of EGP 691mn. This was adopted by the Executive Foreign Missions Committee, which relied on the competitive system to meet the needs of universities and research centres.

 

The ministry is keen to link the mechanisms of education and scientific research to the industry through cooperation with the Ministry of Industry and the Federation of Egyptian Industries (FEI). The ministry is also keen to work on the issuance of new legislation to provide more incentives to investors to support scientific research with unconventional sources of funding.

 

There is great interest in encouraging entrepreneurship and small projects to transform innovation and creativity into economically feasible projects and to develop the curricula of agricultural faculties to attract students to join them and encourage them to invest in the 1.5-million-feddan project.

 

We are already reaping the fruits of linking scientific research to industry through meeting the needs of society and deepening local industrialisation and market scientific research in several fields, including petroleum, alloys, vaccines, water desalination, new energy, fertilisers, petrochemicals, and food.

 

A technological incubator has been established with 15 departments covering most majors. We are also working to complete the network of technology transfer offices in universities and research centres and institutions to reach 40 offices so far with funding of EGP 25mn.

 

Has the ministry contributed to the financing of technological alliances during the last period?

 

The Ministry contributed to the funding of 12 alliances to deepen local industrialisation in several fields, including desalination of water, medicine, electronics, petrochemicals, new energy, and satellites with total funding of EGP 112mn.

 

Moreover, 12 technological startups have been registered in this alliance. The ministry seeks to boost the number to 50 companies by the end of the coming fiscal year, next to applying technologies that disperse oil patches in the Suez Canal.

 

What is the ministry’s plan to develop university hospitals?

 

We established 17 new hospitals between 2014 and 2017 to reach 106, up from 89 (an 18% increase) at a cost of EGP 10bn.

 

The budget of university hospitals for the last fiscal year amounted to EGP 7.9bn, up by EGP 1.1bn (a 16.4% increase). The ministry aims to boost the budget to EGP 9.9bn in the current fiscal year.

 

Furthermore, four university hospitals have been established and prepared and are ready to be inaugurated at a cost of EGP 1.5bn. This includes the National Liver Institute Hospital at Menoufia University, Kafr El Sheikh University Hospitals, Al Rajhi Hospital in Assiut, and the New Children’s Hospital at Ain Shams University.

 

 

These hospitals operate on a service basis of 16 million patients—both Egyptians and foreigners—per year. This accounts for 69% of the total medical service in Egypt.

 

 

The total number of workers in these hospitals amount to 16,800 staff members, 6,987 assistant professors, and 4,291 resident doctors. They also include 28,900 beds for patients and 3,500 intensive care beds.

What about receiving accreditation from the National Authority to ensure the quality of education and accreditation?

We funded 140 faculties to receive accreditation between 2014 and 2017.

The number of government faculties that obtained accreditation increased from 46 in 2016 to 87 in 2017, up by 89.1%. This came at a cost of EGP 800mn. We are now also working to accredit 21 new faculties to reach 95 accredited faculties.

Will the rank of Egypt improve the quality of education and scientific research during the coming period?

 

Egypt during the last period has remained within the 36 best countries, among 231, in terms of international scientific publishing. We produced 48,300 research papers in the past three years.

Egypt is among the top 15.6% countries in scientific publishing, with 18,100 papers published in 2016/2017 alone.

Egypt also won the chairmanship for two years of the Association for the Development of Education in Africa at the end of 2015. This is a subsidiary of the African Development Bank.

We also won the chairmanship of the Office of Education, Science, and Technology of the African Union Commission at the end of 2015 until 2017. This is the body responsible for planning scientific research at the level of the countries of the continent.

 

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We negotiate with EGA, BMAC to export components to Volkswagen Group: CEO of Kayan https://dailynewsegypt.com/2017/09/20/negotiate-ega-bmac-export-components-volkswagen-group-ceo-kayan/ https://dailynewsegypt.com/2017/09/20/negotiate-ega-bmac-export-components-volkswagen-group-ceo-kayan/#respond Wed, 20 Sep 2017 09:00:41 +0000 https://dailynewsegypt.com/?p=636462 Talks with ARTOC Auto, Skoda's former importer, failed

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Kareem Al-Naggar, the CEO of Kayan Company, the Spanish brand SEAT’s and Skoda’s agent in Egypt, said that the company is negotiating with the Egyptian German Automotive Company (EGA) and the Bavarian Auto Manufacturing Company (BAMC) to sign agreements to manufacture components, such as brake pads in Egypt and export them to Volkswagen International Group.

Al-Naggar, who is also the head of the Egyptian Automotive and Trading Company (EATC), the local dealership agent for Volkswagen and Audi, said that Skoda has sent a delegation a few days ago to negotiate with ARTOC Auto, the former dealership, and try and solve the dispute—yet, the negotiations were fruitless.

He told Daily News Egypt in an interview that the previous agent sought to obtain a big compensation, while the international company retained its position, saying that the agreement with ARTOC Auto is merely a business relationship.

Yet he said that the Egyptian market is promising and described it as one of the cheapest markets in the world in terms of the value of currency and the wages of labour. However, he criticised the timing of the Automech Formula Exhibition this year.

Why is Kayan absent from 2017 Automech Formula?

Factors, such as the change in monetary policy, the exit of a strong segment of consumers and the significant decline in market sales that are influential in not joining the exhibition. Moreover, the timing itself was bad, since international companies are all busy with the world’s largest exhibition: the Frankfurt International Motor Show.

All this made it difficult for the parent company to send us a model for a new car or a premises to be set up. How can we have an automotive exhibition in Egypt when the whole world is focused on another bigger exhibition in Germany?

But I would like to emphasise that we will be present at the 2018 Automech Formula. We will be representing the four brands of Volkswagen, Audi, Skoda, and SEAT.

You have already announced that Skoda International will send a delegation this September to negotiate with ARTOC Auto to end the dispute. What are the updates?

The company did send a delegation a few days ago to negotiate with ARTOC Auto and try to solve the conflict. But it failed.

The aim of the negotiation was to bring their views closer together.

The former agent demanded huge compensation, while the global company was adamant that its relationship with ARTOC Auto was a business relationship, beginning with the contract and ending at the end of the contract term.

As a company, we found a divergence in the two positions. We tried to resolve the crisis by bringing the points of view closer, but the negotiations failed.

What did you reach with the company’s international delegation regarding Skoda’s plans?

Future plans have been put in place to be the largest importer of cars in Egypt. Skoda will be one of the bestselling European cars in Egypt in the coming year, but we have found that all the Ateca units are fully sold. I wanted to introduce the Kodiaq during the current Automech, but we found it hard to supply at the time. We will introduce the brand next year. We are also negotiating to introduce the Ayeti and the Ateca and found them to be hard to be supplied by next year.

Currently, we are negotiating with EGA and BAMC to sign agreements to sign partnership for the manufacturing of spare parts, such as brake pads, in Egypt and export them to the international Volkswagen Group.

What do you think of the investment climate of the state at the moment?

The investment climate is strongly linked to the country’s monetary policy.

Yet, this monetary policy is unclear to the automotive sector, and it is unclear what is required of it.

What is clear is the state’s tendency to reduce imports, and with the reduction of imports, state revenues from the customs of cars are cut down, even though it is one of the largest of the state’s customs resources.

Austerity policy to import cars has led to a 50% drop in market sales compared to last year, and thus insufficient liquidity to provide spare parts to meet customer needs.

The final problem is the lack of liquidity, which was caused by the monetary policy of the country, which raised the interest rate significantly on the pound, which led to the shortage in the market, because of the tendency of many to put deposits with high interest rates exceeding 20%/ There is no business at the moment that can make profits.

Meanwhile, the state is interested in national projects—and this is a good thing, but the return will be tangible in the future, not at the present time.

The state is interested in the poor class, but left the middle class suffering, which ousted a large segment out of the market.

What measures have the state taken to make the local market attractive for investment?

The Egyptian market is promising and is one of the cheapest in the world in terms of employment and currency exchange worldwide.

The state is working to attract new investments. The enactment of the new Investment Law will put Egypt on the global investment map. But the real problem is not in the laws, but the problem of the state lies in the application, not in the orientation.

The application is hampered by corruption that is spread across all the state, other than the obstacles facing any investor, which is dealing with the public servants.

The human element in Egypt does not have sufficient know how to deal with the investor and does not have the right to take a decision or sign the papers without fear of assuming responsibility. The ministers should review the system of consultants and employees.

In your opinion, what are the most prominent concerns of any investor entering Egypt?

The lack of vision, change of policies by changing the minister, and the security aspect, as well as the way how officials see foreign investors, which must change.

The foreign investor is always looking for profit and does not come courtesy of the state.

The investor first and foremost looks for profit, and if they find another market that provides them with more profitable means they will go, so the officials have to change their outlook towards the investors.

What is required of the government to attract new investments for the automotive industry?

To eliminate customs protection and give the investor incentives.

The protection programmes mean not moving forward in the industry, and this has been the approach of the state for decades to this time, and did not result into any real automotive development.

The state should set international standards for the automobile industry in Egypt and establish real rates of the local component according to the international rates in order to allow the exporting of products.

We have a company in Egypt that has monopoly over the market of a specific category. The company only manufactures for the local market. This is because we are the only country in the world that makes cars without accounting for the lowest safety standards.

As long as there are no specifications, and there are no specific percentages of the local component according to international standards, no car manufactured in Egypt can be exported.

In the bill on the development of the automobile industry submitted to the parliament, the state removes any customs protection against the imposition of an additional tax.

The draft law includes exemptions for those who meet the requirements of export or production quantity or increase the local component.

However, these proposals were met with objection, most of them came from European cars importers.

What was behind that objection?

Unfortunately, the bill, submitted to parliament for approval, extended the protection and did not remove it.

The strategy was based on protecting the local manufacturers at the expense of the importer by collecting the tax from the importer and giving it to the local manufacturer in return for their production.

The most prominent objections are that they are already a problem with the European partner, and we must know that Egypt’s largest trading partner is the European Union, not America, and the Egyptian-European partnership agreement aimed at opening the European markets to the Egyptian product and vice versa.

And the number of cars we import from Europe is nothing compared to the agricultural crops exported by the local market to the Union countries.

But when some see that tariffs will reach 0% on European cars in 2019, they seek to put in place other obstacles, and that drives us to lose our European partner.

We also need to set guidelines for European car prices, especially on the largest car importers to Egypt: Volkswagen, Mercedes, and BMW. We imported 3,300 units, including 1,500 from Volkswagen, 1,500 from Mercedes, and 300 from BMW during the first eight months of 2017.

Imports are expected to reach 5,000 by the end of the year.

The problem is that the Egyptian Customs Authority has refused the invoices submitted by the parent company to these vehicles and is making a new pricing for the vehicle.

The authority got the price of the car in Europe and deleted the tax there, considering that the result is the real price of the car and the tax is calculated on that basis.

The authority does not take into account the parent company’s tax bill, which represents a major dispute with the European partner. The price represents a relationship between the parent company and its agents.

What are the main objections to the draft strategy of the automotive industry?

The most prominent notes was that the state should put its policy towards the industry, not towards one of the car manufacturers, or serve certain people.

This objection was taken into account by the state, in addition to taking into account international standards in order to export cars manufactured in Egypt.

Furthermore, we should develop incentive programmes for factories, as the state did not provide any protection programmes to any party. They took those objections in the consideration of the government, and it is already preparing a new formulation of the strategy, taking into account these observations, as well as notes for the feeding industries.

The absence of a base for feeder industries in Egypt cannot create a real car industry, and we cannot export cars or export the products of the feeder industries.

The strategy is currently within the corridors of the Ministry of Industry and Trade and will be submitted to parliament during the month of November, which is a good thing.

But Egypt is setting a strategy for a car industry that the world will stop manufacturing within eight or ten years, and the whole world is turning to the electric car industry.

What do you think of the statement of the Minister of Industry in his visit to China, that Egypt aims to produce 500,000 cars annually?

The minister’s declared numbers of targeting 500,000 cars and 100,000 exported units are imaginary figures. We, who are involved in the market, hope to see this materialise. But the truth is that we are thousands of years away from achieving them.

The state of optimism revolves around the sale of 100,000 to 120,000 cars imported and manufactured locally. How can we produce 500,000 units and sell them amid the despairing purchasing power?

Was the delayed adoption of the auto industry strategy the main reason for the low market sales? Has the delay in issuing the strategy affected your company?

No, the real reason for the low sales is the disappearance of purchasing power and the sudden surge in prices.

For example, on 3 November 2016, with the decision to liberalise the currency rate, the debts of the companies doubled. My indebtedness to the suppliers were at $9m since I import cars in hard cash at an exchange rate of EGP 8.80 before the flotation, which hiked to EGP 17-18 to the dollar in one day. This more than doubled my indebtedness and caused sales to drop by 50%.

Clients no longer like the prices and they cannot buy cars. As long as the exchange rate at customs remain at EGP 16 and the cost of getting hard cash amounts to EGP 25 (after calculating the commission of the bank) the prices will remain t the same rate and clients will remain unable to buy.

What are your expectations of car market sales this year?

Our real problem in car sales statistics in Egypt is that they are unrealistic.

The Automobile Market Information Council (AMIC) considers the sale of the car is done between cars’ dealer and the distributors, which is unrealistic.

The sales process must be calculated when the car is licensed and arrives to clients. So the current statistics cannot be true. This was the reason we exited AMIC, as they do not have any real power or credibility in front of any government authority.

If we predict sales according to the right method, they will be between 80,000-100,000.

Based on monthly reports, we import 3,000-4,000 units per month. All of these cars are not selling.

The year 2017 saw many companies reconsider their sales plans. Are you doing this too?

We have already done so.

First, for Volkswagen, it is divided into two categories: we have zero sales in the commercial sector (not a single car was sold) due to a decision by Volkswagen to ban the entry of its commercial vehicles to Egypt, because its cars are diesel-powered with a lead ratio of 1700 BB, but Egypt imports diesel and mix it with other components, so the lead ratio reaches over 4000 BB. This causes the burning of vehicle motors. For Mercedes, they issue cars with engines matching that ratio. For Volkswagen passenger cars, we target sales of 5,000 cars by the end of 2017 and currently we aim to reach 2,000 cars.

Audi cars have been targeted selling 1,000 cars since the beginning of the year. Currently, with the market in place, we have reduced our target to 800 cars only after the return of Mercedes to compete again in sedan sales next to BMW’s competition with Audi in the SUV category.

Our goal was to sell 2,000 SEAT cars in the beginning of 2017, and we have reduced this figure to 1,000 since then.

As for Skoda, we aim to sell 600 cars after we got the agency during the second half of this year. Skoda is the winning horse for us next year, and it is supported by the fact that the Volkswagen Group decided, after bearing the fuel crisis alone, to protect the rest of its other brands.

Skoda and SEAT can compete with Korean and Japanese cars. For example, Korean, Japanese, and Chinese cars account for 75% of the total market sales in Egypt. The group aims to reach 5% of imports of Egypt and make Skoda the biggest supplier of cars in Egypt.

The Volkswagen Group, with all its brands, plans to make 50% of its cars electric by 2030.

How do you see 2018, and what is the target of sales?

I am optimistic about 2018, and we hope to see the exchange rate appreciate and the automotive sector revive.

What are the company’s expansion plans during the coming period?

We opened the Seat Center in Abu Rawash in 2017 and are targeting the establishment of a new SEAT and Skoda Center in Abu Rawash. It is strange that we have not yet been able to determine the volume of investments in the two centres because of the fluctuating of prices and lack of required equipment, as we need 34 cranes.

But we set aside $12m for the two centres, including $5m to SEAT and $7m to Skoda.

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Economic reform programme was Al-Sisi’s bold decision to put Egypt back on global investment map: Abou El-Enein https://dailynewsegypt.com/2017/09/20/economic-reform-programme-al-sisis-bold-decision-put-egypt-back-global-investment-map-abou-el-enein/ https://dailynewsegypt.com/2017/09/20/economic-reform-programme-al-sisis-bold-decision-put-egypt-back-global-investment-map-abou-el-enein/#respond Wed, 20 Sep 2017 07:00:22 +0000 https://dailynewsegypt.com/?p=636446 There is great potential European demand on investment in Egypt; massive capital to flow in soon

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Businessman Mohammed Abou El-Enein knows the demands of European investors and the incentives to attract them to the local market, given his current stature and long experience as chairperson of the Egyptian-European Business Council, as well as the head of the Arab Investors Union. This vilifies his assertions that there is a great potential European demand for investments in Egypt, which proves the validity of economic measures taken by the state.

“The economic reform programme boosted confidence in the domestic economy and put Egypt back on the global investment map,” Abou El-Enein said. “We are already reaping the fruits of the reform: we received huge investment demands from local and foreign investors to implement projects in Egypt.”

In an interview with Al-Borsa, Abou El-Enein said that investors are keeping a close eye on the reforms in Egypt, expecting a great deal of European investments inflow to the local market in the near future.

He added that the meetings organised by the council with European investors showed the conviction of European companies that the efforts of President Abdel Fattah El-Sisi and the government put Egypt on track and restored confidence in the economy and in the investment climate.

He pointed out that the council had put forward ideas to European investors to promote joint investment and export, including the establishment of a comprehensive and deep free trade zone.

“We presented a package of available investment opportunities in the market to many European companies, and we stressed the importance of restoring European tourism to its previous levels, as well as requested to cooperate to address the campaign launched in Egypt in the wake of the 30 June Uprising to distort the facts,” he noted.

Abou El-Enein said that the council is in constant contact with investors to inform them of the reforms that are taking place and the new laws and investment opportunities available, aiming to create stable channels of communication between the business community and officials in Egypt and Europe.

He added that Europeans are the main investors in Egypt, acquiring 60% of all foreign direct investment (FDI) in the country, next to being the biggest trade partner to Egypt and the largest source of incoming tourism.

He said that Egypt and the European Union (EU) are linked by the unity of destiny and the common challenges that affect their collective security, such as terrorism and illegal immigration. Therefore, investing in Egypt enhances the security and stability of both sides.

He added that the council presents Egypt to investors in Europe as the largest market in the region for European companies and as the gateway to Africa and the Arab region.

He pointed out that the economic decisions taken by the government and the Central Bank of Egypt (CBE) in the past few months encourage investment substantially, and that the current period is witnessing a huge demand for investment in Egypt from local and foreign investors.

Abou El-Enein described the economic reform programme implemented by the government as bold and courageous decisions taken by El- Sisi, and said the plan was inevitable to correct the path of the economy and restore confidence in solving chronic problems and make Egypt more attractive to investors.

He stressed that the country is already reaping the fruits of the programme by restoring confidence in the economy, adding that there are many investment demands from local and foreign investors, in addition to the restoration of indirect foreign investment in the Egyptian Exchange (EGX) and government debt instruments.

“The foreign exchange reserves reached $36bn, which is similar to the level before 2011. We also have seen the abolition of restrictions on foreign exchange transfers abroad, the growth of non-oil exports, the decline in the balance of the trade deficit, and the gradual increase in FDI, especially in sectors such as oil and energy, and improved macroeconomic indicators,” he highlighted.

He said that the economic reform programme has a large tax that will be borne by the consumers, investors, producers, and the general budget of the state, especially since it raised the costs of investment and production, as well as the prices on the consumer.

Yet, he said that all these burdens are accepted by the public—being the path needed for the recovery of the economy.

“The Egyptian people have exemplified the awareness and confidence in their leadership and its decisions. We all have to work to reduce the duration of this transitional period and to address the negative effects. This is mainly related to reducing costs and encouraging investment to achieve the main objective of these reforms, which is realising the vision of Egypt 2030, surging growth rates, doubling the income of Egyptians, and improving the quality of lives in Egypt,” he said.

He added that improving the Egyptian economy to become one of the top 30 economies in the world requires improving the investment climate in general, including facilitating entry of capital and operation procedures at low cost, next to providing a safe exit for investments.

He pointed out that the priority now must be to complete the programme of improving the investment climate by issuing a stable package of legislation and clear, consistent and attractive policies that guarantee the ease and speed of dispute settlement and implementation of decisions. They should also ensure balanced work relations and advanced infrastructure, and complete the institutional reform which deals with investment in all governorates and regions, to eliminate bureaucracy and provide land at affordable prices. The legislation package will be complete through issuing the bankruptcy law, the unified corporate law, the labour law, and amending the social insurance and local administration laws.

He asserted that Al-Sisi is the main promoter of investment in Egypt. “He addresses problems radically and exerts efforts, with the Minister of Investment and International Cooperation, to solve problems,” he added.

Moreover, Abou El-Enein said that the economic reform programme has led to restoring confidence in the Egyptian economy, re-placing Egypt on the global investment map, and solving many of the major problems facing investment, especially the availability of foreign exchange, the possibility of repatriating profits, the stability of the exchange rate, and the abolition of the black market.

He added that the recent package of legislation issued by the government, particularly the new investment law and industrial licences, had made significant progress in improving the investment climate.

“For the first time in 15 years, Egypt established an economic zone of a second special nature after the Suez Canal: the Golden Triangle,” he noted, adding that Egypt has a strong investment portfolio in the agricultural and industrial sectors in the canal region, the golden triangle, and the New Administrative Capital, as well as 15 new cities.

He pointed out that the economic reform programme had major effects on the cost of investment and production.

He called on the Minister of Investment and International Cooperation, Sahar Nasr, to prepare a comprehensive study on the cost of investment in Egypt compared to the competing countries and submit her recommendations to the Cabinet for discussion so that Egypt can gain a good competitive position in attracting investments.

Abou El-Enein explained that Egypt is in a global market where countries strongly wrestle to attract investment, and therefore, we must adopt bold and unconventional measures that can put the country on top of the investment-attractive list and prove it has the intention, the will, and the determination to attract investment.

“Investors look at the world and put their money on the stable countries that provide incentives, guarantees, and high profitability,” he added.

He suggested following a new method for promoting investment, namely offering 100 investment opportunities in all sectors and regions, including high-tech and renewable energy projects, basic industries, and pharmaceutical industries combined with a package of financial and non-financial non-traditional incentives and advantages for each opportunity. These opportunities, in his opinion, should also come with pre-obtained permits and licences so that investors can immediately begin operation and production. He described the plan as “a sale for opportunities”.

He added that the investors at this phase can be considered pioneers, which gives them advantages, as their success will bring in further investments in the sectors and the areas they work in.

He said that the reform of the investment system requires the good and honest implementation of the package of legislation issued in the past period, adding that the point is not the clear text or the good formulation, but rather understanding it correctly and implementing it correctly, along with the speed of procedures and respect for contracts and liabilities. “With good promotion for these laws and explaining their philosophy and importance, Egypt will become a better place,” he noted.

He pointed out that an investment map is needed based on specialisation, whether sectoral or geographical, and that these lands and investment opportunities should be free of problems and with prior licences to prompt investors to begin working and producing immediately.

Furthermore, Abou El-Enein said that attracting foreign investors and matching them to sectors and areas of priority to the state and encouraging them to re-invest their profits and increase their exports, requires the state to provide an attractive environment by providing a specialised economic zone in which feeding industries are complementary and services are available from schools, universities, specialised markets, accommodation, hotels, and banks.

He noted that such zones attracted brands to China, India, Malaysia, and Vietnam to produce at lower costs and export products to the rest of the world.

“It is this thought that will double FDI in Egypt to tens of billions, which will make Egypt part of the new fast-growing countries or what they call the new BRICS, such as Indonesia, Vietnam, and Turkey,” he noted.

He called for the need to set off the development potential in all provinces and to provide an industrial development centre in each of them, which should include the agriculture and commercial sectors. He noted that this will require the law to provide governors with the authority to compete in attracting investments, while at the same time put new criteria for performance appraisal based on the size of the investments that each governorate is successful in attracting.

He also stressed the importance of addressing the “shaky hands”. “All bodies should be as strong and responsible as Al-Sisi,” he explained.

He urged to solve all problems of local investors and implement the decision of the ministerial arbitration committees since the comfort and success of local investors will attract foreign investors.

He called for the provision of land to the industrial sector at competitive prices, addressing the multiple jurisdictions and authorities of the land, creating structured channels of dialogue between the government and investors, especially foreigners, and establishing an advisory board for foreign investment to be a continuous channel of dialogue between the government and investors to solve any problems and clarify the vision of the state.

He praised the new investment law and stressed it has been anticipated for years.

He added that the law has many unprecedented advantages in terms of procedures or incentives, but it will not solve all the problems alone and must be accompanied by a package of other legislations, as well as have a final solution to the arbitration problems.

He noted that investment promotion in Upper Egypt is not only dependent on tax incentives, but it is important to develop good infrastructure and link its provinces with the Red Sea.

He stressed the need to coordinate investment policies and procedures so that they all go in the same direction of encouraging investment, and that no action affecting investments should be taken without discussing it with the Ministry of Investment and International Cooperation.

He called for encouraging investment in services such as high quality education and health services, targeting countries such as Japan, Italy, China, Germany, and the United States (US) to encourage them to set up specialised industrial zones for their companies in the Suez Canal region – not only for production in the local market but for export to markets with which Egypt has trade agreements.

As for the flotation of the Egyptian poung, Abou El-Enein described the decision as inevitable, despite its contribution to raising the cost of importing production input. He explained that it had a positive impact on investment through providing US dollars and eliminating the informal market, as well as increasing foreign exchange reserves and facilitating the repatriation of revenues in hard cash, which brought back direct and indirect investments.

At the same time, he criticised the decision to hike interest rates, saying it harmed new investment and the expansion of existing enterprises. He hopes that the decision will be reversed soon so that these deflationary policies do not lead to further restricting demand and thus, reduce the ability to grow.

He asked banks to provide the largest part of their funds to encourage the private sector credit, not financing the budget deficit, and to set the goal of fiscal and monetary policies towards encouraging more work and investment.

He urged the importance of involving the armed forces in the Egyptian economy, saying that Al-Sisi made them the main contributors due to his keenness to develop the economy at the lowest possible cost and in the shortest time.

He noted that the armed forces do not compete with private investors on investment opportunities, and that their presence is necessary to help the government achieve development.

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6 new Indian companies to pump new investments in Egyptian market: Indian ambassador https://dailynewsegypt.com/2017/09/19/6-new-indian-companies-pump-new-investments-egyptian-market-indian-ambassador/ https://dailynewsegypt.com/2017/09/19/6-new-indian-companies-pump-new-investments-egyptian-market-indian-ambassador/#respond Tue, 19 Sep 2017 08:00:29 +0000 https://dailynewsegypt.com/?p=636361 The Indian embassy is preparing for a visit of a group of large Indian investors to Egypt by the end of the year, says ambassador

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Daily News Egypt interviewed the Indian ambassador to Egypt, Sanjay Bhattacharyya, to get a better understanding of the new Indian investments that will be pumped in Egypt’s market and of his opinion regarding the recent economic reforms in the country.

What are the results of Egyptian President Abdel Fattah Al-Sisi’s visit to India?

President Al-Sisi’s visit to India last year was very significant, and the visited focused on the three pillars of our bilateral relations in terms of political security cooperation, in terms of our economic and scientific engagement and also in terms of our culture cooperation and people to people exchanges. Thus, the visit was very important.

President Al-Sisi himself laid a lot of emphasis on the economic engagement. On the eve of the president’s visit, we had just under $3bn worth of investments in Egypt.

During his visit to Delhi, the Egyptian president met with a very large number of businesspeople. He met with the joint business council as a group and also with top Indian businesspeople.

There have been two types of investments that have been taking place. The first are companies that already have a strong foothold in Egypt, one important one being TCI Sanmar, a chemical company in Port Said with investments estimated at $1.2bn. After the Egyptian president’s visit to Delhi, the company added an additional $280m for an expansion phase to expand their product range and output.

The second company that has undertaken significant expansion measures is Monginis. This is very well known in Egypt, and it has established another factory outside of Cairo, which will enable them to expand their production and distribution network, and they are also planning to set up more distribution outlets in Upper Egypt.

The third Indian company, which is already present and is also going in for additional investment is Alexandria Carbon Black (ACB). They have a very large production facility, which is the largest in the Middle East and North Africa (MENA) region to produce carbon black. They are going in for greater efficiency and environmental upgrading, something that will prove very significant.

What are the new investments that will be pumped in the Egyptian market?

Apart from the ones that are already here and which have been expanding, six new companies will be investing in Egypt. The first one that I would like to mention is Lava, a company operating in the field of mobile telephones.

Lava has come in with its range of products, and they already had their test launch in the delta region. They are expected to launch in Cairo very soon and will start production next year.

The second large company that is already coming is the Mahindra Group, a huge conglomerate. It is already coming in with investments in the farm machinery and implements sector. It is expected that by the second half of next year, their production facility should be up and about.

The third company is Godrej. It is a very old and reputable Indian company with a product range that is very wide, and they have come in to the personal care segment.

The fourth Indian company came in the agro-processing sector, and they are establishing their presence in the new schemes for developing the deserts. That company is yet to announce its major project. They have already concluded the agreements, and they hope to be established by next year as well.

Furthermore, there is a company operating in the oil-processing sector, which is now established in Alexandria, and they have outlets in different parts of the country.

I would expect to see some more possibilities come up in the field of textiles. In fact, the sixth company that is coming is in the textiles sector and has already concluded the agreements over here for the establishment of its plant in Egypt.

The other sector in which I expect more to come is that of pharmaceuticals, and we will see some development of that sector over the next year.

There are also many IT companies coming because there is a need in Egyptian market for such companies.

I think there are very exciting opportunities in the chemical sector and in petrochemicals.

Shall we expect a visit of Indian businessmen delegation to Egypt?

We are currently preparing for the visit of an Egyptian group. There were two business groups that had travelled to India earlier, one from the FEI and one from the textile and leather sector. Now we’re expecting another group of Egyptian investors association to travel to India because of the prospect of investing there; for Egyptian investors in India, we are currently preparing for one such delegation to go.

We are also preparing for a very small group of large investors from India to come to Egypt towards the end of the year. We are currently preparing the schedule of their arrival.

We are working with Confederation of Indian Industry (CII) as they are the largest confederation in India to look for some big industry players to come.

What is your opinion of the current economic reforms taken by the Egyptian government?

We are very excited about the reforms the Egyptian government has undertaken so far. We ourselves went to similar reforms in India.

Egypt is a very large economy. It is also a very complex economy. There have been two imbalances in the Egyptian economy lately. One was the fiscal imbalance in the domestic sector, the other was the external imbalance, the latter in the form of the lack of foreign exchange. We had noticed that the Egyptian government, particularly since the beginning of last year, had been taking a number of steps to correct these imbalances. The reforms in terms of reduction of subsidies was remarkable and must be congratulated. As for the reduction of subsidies, it has been complemented by the focus on the poorer sections of the community through packages in which the rationing system has been made more effective. Therefore, I think some of these measures are truly remarkable.

The moves on the external sector, particularly for currency reforms are most commendable, and I think the business sector will welcome this greatly.

The third component of this is the legal framework in which business can operate because, ever since, Egypt’s parliament has undertaken a number of legislative measures on investment, labour laws, land acquisition. Thus, all these are very positive signs from the perspective of an investor because the investor wants that there should be an assured regime, which will be fair to everybody—and I think that the legislative measures in Egypt have moved in that direction. Therefore, many Indian businesspeople are coming to Egypt.

What other new investments is India negotiating with the Egyptian government to pump?

We are also looking at wider opportunities with the ministry of the public business sector. We have had earlier discussions with the ministers of transport and electricity. I have met with Minister of Investment and International Cooperation Sahar Nasr, and we have had discussions that we will start looking at these in detail because what we need are projects. Furthermore, Indian Exim Bank, which basically looks at granting credit line for funding companies, will look at the feasibility of that being done under Indian financing. In most cases, we can do any project, but we also like the country to have the advantage of seeking the best partner—so, once we get what was called the detailed project report, we will share that with the Indian government and the Exim Bank, and then start the process.

A $10bn facility was initiated in 2015 during the India-Africa Forum Summit. President Al-Sisi had attended that meeting as well. Since then, we have dispersed a little over $3bn in projects in other countries in Africa.

What are challenges that face foreign investment in Egypt?

Every economy has its challenges. We are also in a very challenging times if you look at the kind of decline in growth in developed countries. These are very difficult times because a lot of growth is connected with the growth of the global oil prices. Hence, if developed countries slow down their ability to fund or invest in our economies, that also reduces the flow of technology, so we need an environment of growth and development.

I agree that times were difficult, and I think last year was probably the turning point. But we have seen very good management of the problems, and I think today Egypt can proudly say that it is on the path of recovery. Consequently, the message that I give my business community back in India is that the difficult times are now behind us, and you can look forward to a very productive period of cooperation.

What is the number of Indian tourists in Egypt?

We are organising a seminar on tourism during the current month and is being coordinated between the Indian tourist office based in Dubai. Through the seminar, we will increase the number of Indian tourists coming to Egypt and vice versa.

We have seen a good growth in number of tourists in Egypt. Last year, Indian tourists exceeded 120,000 tourists in 2016, a smaller figure when compared to that of 2010, when the number of Indian tourists reached 110,000.

We need more contact with tour agencies so that people can receive better packages. Holy lands are more popular destination, as can be seen by the number of people visiting Jerusalem, Jordan, and Sinai.

Indian tourists are interested in historical tourism, such as visiting the Giza necropolis, Luxor, and Aswan.

How to promote the trade exchange between the two countries?

We had seen very significant growth in trade until 2012 as the bilateral trade amounted to $5.5bn, but the trade volume fell after that year. In 2016, the bilateral trade registered $3.3bn, which is below the potential of what it could reach.

Our trade with other countries in Africa or the Gulf region is much higher, so we should do more in terms of trade with Egypt.

We have analysed that the reasons for the fall in the trade volume came as a result of the fall in the global price of oil; besides, international trade has gone down too. However, I think that India and Egypt can work much more to diversify the trade basket such as agriculture commodities and manufacture and other items help in boosting trade exchange between the two countries.

We are working very closely with business community to promote trade. I think that outcome of these efforts will be seen in the coming years.

Shall we expect a visit of the Indian prime minister to Egypt?

The Indian Prime Minister met Al-Sisi on the sidelines of the BRICS summit, which was held in China in the beginning of the current month. The prime minister expressed his very deep desire to visit Egypt.

 

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Egypt has a solid financial system: GM of Visa in North Africa and the Levant https://dailynewsegypt.com/2017/09/19/egypt-solid-financial-system-gm-visa-north-africa-levant/ https://dailynewsegypt.com/2017/09/19/egypt-solid-financial-system-gm-visa-north-africa-levant/#respond Tue, 19 Sep 2017 07:00:39 +0000 https://dailynewsegypt.com/?p=636318 Building a culture of electronic payments across society has a direct impact on the economy

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The Egyptian government is planning to increase financial inclusion of the informal sector into the formal economy, in addition to the plan to gradually transform into cashless society, with the electronification of government disbursements like payroll, pension, and food and bread subsidies. To understand how the government goals can be achieved and their impact on the economy, Daily News Egypt interviewed Tarek Elhousseiny, general manager of Visa in North Africa and the Levant.

What is your outlook for the Egyptian economy?

We are seeing encouraging progress by the Egyptian government in its work to speed up financial inclusion, which will in turn impact the economy positively by increasing the transparency of the financial system and the efficiency of services provided to citizens.

In particular, the government is making significant headway in key areas, such as the electronification of government disbursements like payroll, pension, and food and bread subsidies. Visa is currently working with the government to facilitate the implementation of these projects. Once they are activated and become operational, the payment landscape in Egypt will change for the better as more people benefit from the formal banking sector and the acceptance footprint for electronic payments is expanded as more merchants come onboard.

In March 2016, Visa released a study conducted with Moody’s Analytics that analyzed the impact of electronic payments on economic growth across 70 countries between 2011 and 2015. The study found that increased use of electronic payment products, including credit, debit, and prepaid cards, added $296 billion to gross domestic product (GDP), while raising household consumption of goods and services by an average of 0.18 percent per year. In addition, Moody’s economists estimate that the equivalent of 2.6 million new jobs were created on average, annually, over the five-year period as a result of increased use of electronic payments. The 70 countries in the study make up almost 95 percent of global GDP. In Egypt, increased electronic payment usage added $10 million to the country’s GDP from 2011 to 2015 and created the equivalent of an average of 2,300 jobs in Egypt per year in the same period.

What are the current strengths of the Egyptian economy?

From a payments standpoint, the financial system in Egypt is solid, and there is a clear government impetus towards increasing levels of financial inclusion. Additionally, we believe there is much the payment industry can do to support the SME sector in Egypt, which plays an essential role in stimulating the economy, generating jobs, and increasing exports. This is why Visa is cooperating with stakeholders like the Ministry of Communications and Information Technology and the Federation of Chambers of Commerce to assist the sector by creating a comprehensive online marketplace through which the government can procure goods and services from Egyptian SMEs. The e-marketplace will also enable SMEs to benefit from service providers like mobile network operators, banks, and Egypt Post, to name just a few. It will also provide an opportunity for SMEs to increase their exports, develop their businesses, and hire more people, by linking with other cloudBuy e-marketplaces, which in turn will help the country to generate foreign exchange reserves.

We are also working with SMEs to help them streamline their expenses by using business cards. This is an easy way for SMEs to separate company and personal expenses, manage business and travel spending, and simplify bookkeeping. Managing outgoings on a business card allows them greater control of their business spending, as they can track expenses by category, issue cards to key employees, set spending limits, and better manage their company’s cash flow. Fuelling growth for their business by transitioning from business cheques to business cards not only comes through faster, more cost-effective ways to pay, but also as purchasing flexibility through online purchasing and business travel bookings. Automating payments and leveraging the internet as a tool for business makes business easier to do.

Access to funds whenever and wherever an SME needs it gives businesses more malleability to scale up and increase revenue and cost efficiency. Other benefits that offer savings in cost and time with business cards include offers for business travel and accommodation through to business support services and products.

What is required to push the Egyptian economy forward and enable growth?

As the Moody’s study commissioned by Visa demonstrated, building a culture of electronic payments across society has a very direct impact on the wider economy. Electronic payments, for instance, require more stringent identification documentation, making it difficult for ghost recipients to remain undetected, which improves traceability and increases transparency in the financial system. Moving to electronic payments can also lead to significant cost savings over the long term, particularly in relation to large-scale government-to-public payments, such as social transfers. Additionally, electronic payments are often the first entry point into the formal financial system for individuals, and a step towards providing accounts, either traditional bank accounts or e-wallets, to unbanked people.

What activities or projects can assist with helping the Egyptian economy to grow?

Visa’s network continues to grow as more consumers and businesses are drawn to the convenience of digital payments. We connect more than 3 billion Visa cards and millions of merchant locations in 200 countries and territories. Each transaction is enabled by a global network of 16,300 financial institution partners and VisaNet, one of the world’s most secure, reliable, and interoperable global payment networks. Today, VisaNet processes more than 160 billion transactions a year. Importantly, every Visa transaction on our network is secured by the industry’s most advanced analytics and fraud detection technology to ensure consumers and businesses can transact with trust and confidence.

We believe that projects aimed at driving financial inclusion can help the Egyptian economy to grow. Financial inclusion brings many benefits, the most significant of which is the potential to transform a person’s life by enabling them to save, send, receive, and borrow money securely, conveniently, and reliably, which is essential to breaking the cycle of poverty.

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Egypt to provide Russian Industrial Zone land for ‘symbolic fee’, deferred payment: Orlov https://dailynewsegypt.com/2017/09/19/egypt-provide-russian-industrial-zone-land-symbolic-fee-deferred-payment-orlov/ https://dailynewsegypt.com/2017/09/19/egypt-provide-russian-industrial-zone-land-symbolic-fee-deferred-payment-orlov/#respond Tue, 19 Sep 2017 06:00:32 +0000 https://dailynewsegypt.com/?p=636293 Reliance on the local currencies of both countries is not possible for technical reasons

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Daily News Egypt interviewed Chairperson of the Russian-Egyptian Business Council Mikhail Orlov to talk about the opportunities and challenges of Russian business in Egypt and the development of establishing the Russian Industrial Zone in Port Said.

What is the update regarding the Egyptian-Russian-Emirati fund, which was declared in the conference?

So far, no fund has been launched yet. The Russian-Egyptian Business Council was not involved in this project.

How much money is designated for the fund?

The volume of the joint investment fund was planned to amount to $500m in the first stage.

Are Russian companies participating in this fund?

The Russian Direct Investment Fund (RDIF) is the only participant from the Russian side—in this stage at least.

What is the role of the council in developing the business market in Egypt and Russia?

The council is working out initiatives aimed at improving bilateral cooperation; organising business-to-business meetings for potential Russian and Egyptian partners; and participating and/or organising conferences, business missions, round tables, etc.

We are also participating in the preparation and realisation of the Russian-Egyptian agreements and programmes in the field of trade and economic relations, establishing contacts and joint work with the public structures of Russia and Egypt, and providing information services to Russian and Egyptian businesspeople.

Furthermore, the council is preparing analytical materials in different fields of Russian-Egyptian cooperation and improving cross-cultural competence among Russian and Egyptian businesspeople.

Do you think it is possible to rely on the local currencies of both countries in the future economic exchange between Russia and Egypt?

The Russian-Egyptian Business Council has been raising this question since the very beginning of its relaunching in 2014.

For technical reasons, the full conversion is not possible, but interbank and other settlement mechanisms should be put in place as the first priority.

What do Russian companies demand from the Egyptian government to boost investments?

The Russian-Egyptian Business Council put forward the following initiatives, which will promote the strengthening of Russian-Egyptian trade and economic relations and boost investments: first, the renewal of direct flights between Russia and Egypt; and, second, the transition into settlements in national currencies between Russia and Egypt, which is the direct conversion of currency without being bound to the US dollar or the euro.

In addition, the council recommends putting the Russian Federation on the “List of Reference Countries”. Those countries are allowed to have a simplified procedure for registration of veterinary drugs by the Egyptian Ministry of Agriculture and pharmaceutical drugs by the Egyptian Ministry of Health.

Also, we established in Egypt a unified customs and logistics centre, including a joint service for veterinary and phytosanitary surveillance and different forms of tax alleviation.

What are the challenges that Russian companies face in the Egyptian market?

The major challenge is systematic. Russian companies very often do not understand the roadmap of operating in Egypt.

Another challenge that Russian companies face in the Egyptian market is the cultural difference in doing business.

What is your opinion regarding the recent economic reforms taken by the Egyptian government?

The challenges are enormous, and the Egyptian government is making gigantic efforts to reform its economy. It deserves a lot of respect and support.

How do you see the liberalisation of the exchange rate in Egypt and its effect on the investment climate?

The process has been very well managed, and it is significantly improving the investment climate.

What was the size of Russian investments in Egypt by the end of 2016?

The size of the Russian investments in Egypt, as well as the size of Egyptian investments in Russia, is still very low.

However, before investment flows increase, we need to massively increase trading volumes first.

To achieve this, we believe that more has to be achieved in improving the trading framework between two countries.

What is the size of Egyptian investments in Russia?

So far, we have seen no major Egyptian presence in Russia.

The only noticeable sign is the fact that Banque Misr opened a small representative office in Moscow recently.

What stands in the way of Russian investment in the industrial zone?

According to the declaration of the Russian Ministry of Industry and Trade, the implementation of the project of the Russian Industrial Zone in Egypt will take 13 years and will be divided into three stages.

The management company “Russian Industrial Zone in Egypt” is planned to be established in the beginning of 2018. The projecting of the first stage of the industrial zone with dimensions of 197.68 feddans will start after that.

According to the declaration of the Russian Ministry of Industry and Trade, the total cost of the project is announced to be $6.9bn, among which $6.4bn are the investments of the residents and investors and $500m are the infrastructure investments of the management company. It is expected that by 2026, the gross output of the residents of the Russian Industrial Zone will be about $3.6bn per year.

The infrastructure of the area will include both prepared industrial buildings for the production location and prepared plots of land. Within the framework of the project, the Egyptian side is planning to provide preferences for state orders for the residents of the zone, privileges in the form of land use rights for the period of a minimum of 50 years for a “symbolic fee”, deferred payment, reduced tariffs for utilities, and an increase in the limit of foreign employees in the companies – residents. Corporate income tax should be set at 10%, income tax for individual entrepreneurs at 10%, and income tax duty at 5%. Sales tax on the local market will be 0%.

Shall we expect an official Russian delegation visiting Egypt in the coming period?

Egyptian President Abdel Fattah Al-Sisi recently invited Russian President Vladimir Putin to the ceremonial signing of the contract for the construction of the first nuclear power plant in Dabaa, Egypt. President Putin accepted the invitation.

The dates will be coordinated through the two countries’ diplomatic channels.

Regarding Egyptian fruit exports to Russia, do you think it the export shipments join photo-sanitary permits? 

The creation of a joint phytosanitary service would significantly boost this segment of trade.

Did the Egyptian government discuss the issue of increasing wheat imports from Russia or new wheat shipments?

The Russian-Egyptian Business Council maintained its opinion that the supplies and demands between Russia and Egypt could and should be significantly more vertically integrated, both in terms of infrastructure and trading mechanisms.

Do Russian banks have potential to enter the Egyptian market?

We have no information that Russian banks are actively considering launching operations in the Egyptian market.

Some of them, though, can consider opening a small representation office to start studying the market.

What other non-western markets has Russia entered into?

After the breakdown of the Soviet Union, Russia has consolidated its market presence in several former Soviet states.

Moreover, Russia has significantly intensified its trading relationships with China, India, and Vietnam.

Also, it consolidated the activities of the Eurasian economic zone with the perspectives of new countries to join.

What is the size of the trade exchange between Egypt and Russia? Furthermore, how can trade be promoted?

In the first quarter (Q1) of 2017, trade between Russia and Egypt amounted to $947m, a decrease of 24.5% in comparison to the same period of the year 2016. Russia’s exports to Egypt amounted to $810m, a decrease of 27.97% in comparison to the same period of 2016. Russian imports from Egypt amounted to $137m, an increase of 5.32% in comparison to the same period of the year 2016.

In Q1 2017 and Q1 2016, the essential share of supply in the structure of Russian exports to Egypt was the following:

  • Food commodities and agricultural stuffs: 57.07% of the total volume of Russian exports to Egypt (in Q1 2016: 36.78%).
  • Mineral commodities: 17.6% of the total volume of Russian exports to Egypt (in Q1 2016: 1.33%).
  • Metals and metal objects: 16.08% of the total volume of Russian exports to Egypt (in Q1 2016: 14.19%).
  • Wood, cellulose, and paper products: 7.17% of the total volume of Russian exports to Egypt (in Q1 2016: 7.51%).
  • Chemical industry products: 1.39% of the total volume of Russian exports to Egypt (in Q1 2016: 0.93%).
  • Machinery, equipment, and vehicles: 0.53% of the total volume of Russian exports to Egypt (in Q1 2016: 5%).

In Q1 2017 and Q1 2016, the essential share of supply in the structure of Russian imports from Egypt was the following:

  • Food commodities and agricultural stuffs: 86.18% of the total volume of Russian imports from Egypt (in Q1 2016: 82.87%).
  • Textiles and footwear: 8.64% of the total volume of Russian imports from Egypt (in Q1 2016: 9.54%).
  • Chemical industry products: 2.85% of the total volume of Russian imports from Egypt (in Q1 2016: 4.7%).
  • Machinery, equipment, and vehicles: 1.05% of the total volume of Russian imports from Egypt (in Q1 2016: 0.6%).

To what extent did the downing of the Russian aeroplane affect Russian tourism to Egypt?

Russian tourists like Egypt because it is a cheap country and because its close location and excellent climate. That is why when all flights to Egypt were cancelled, Russian tourists faced the problem of where to go for a holiday.

Many people are asking us about when Russians will open up flights to Egypt. It indicates that Russians still want to go there and are waiting for the renewal of direct flights between the two countries.

Nevertheless, it is important to notice that security is more and more of a major issue, especially taking into account the fact that more than 200 people lost their lives in the aeroplane crash.

What are your expectations to end the crisis?

NO ANSWER

What are the council’s efforts to support and promote tourism to Egypt after the Russian aeroplane accident?

It is more politics than anything else. That is why the Russian-Egyptian Business Council is unable to influence or promote anything.

Nevertheless, we have organised several business missions and leisure trips, both to Egypt and Russia. But we also would like to see more promotion for Egyptian tourists to visit Russia.

What are the latest developments regarding the return of Russian flights?

According to recent announcements, there are hopes that it might happen soon.

The latest inspection of the airport in Cairo showed, in general, the compliance of the new terminal of Cairo Airport with the international and Russian requirements for aviation safety. Therefore, there are no obstacles for the renewal of direct flights connecting the two countries.

The Russian Ministry of Transportation sent a report to the Russian cabinet following the results of the security inspection of the airport in Cairo.

Russian Minister of Transportation Maxim Sokolov specified that there is no need for additional security inspections of Cairo Airport. Flight connections between Russia and Egypt might be renewed after dealing with regulatory and documentary formalities.

Supposedly, the first direct flights will start running between Moscow and Cairo this autumn, and, later on by winter, the charter flights to Sharm El-Sheikh and Hurghada will be renewed.

 

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Sustaining high levels of growth and investment is important for raising people’s incomes: Elwy https://dailynewsegypt.com/2017/09/18/sustaining-high-levels-growth-investment-important-raising-peoples-incomes-elwy/ https://dailynewsegypt.com/2017/09/18/sustaining-high-levels-growth-investment-important-raising-peoples-incomes-elwy/#respond Mon, 18 Sep 2017 12:30:51 +0000 https://dailynewsegypt.com/?p=636253 The government initiated structural reforms to welcome greater levels of investment and business activity

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Sherif Elwy, Arab Bank’s regional Egypt country manager, addressed in an interview with Daily News Egypt the reforms taken during last year and its influence on the market.

Between the Euromoney Conference 2016 and that of 2017, the government and the Central Bank of Egypt have taken several measures as part of the economic reform programme. How do you evaluate these measures and their impact on the Egyptian economy?

In this year, the government and the Central Bank of Egypt have embarked on a comprehensive and integrated reform programme in several areas. First, the programme addressed the imbalances in the foreign exchange market. Second, it implemented ambitious steps in a medium-term fiscal consolidation programme to reduce the debt burden. Third, the government initiated structural reforms to welcome greater levels of investment and business activity.

These reforms have been eagerly anticipated and widely welcomed by the business community. This is evident in the reaction of the stock market and in the large inflows of investment and workers’ remittances, which reflect a vote of confidence in these measures. These reforms are necessary and important for restoring confidence, energising investment, improving growth, and creating more jobs. Moreover, these reforms are also expected to lead to much larger levels of exports and foreign direct investment over time. At the same time, it is important to recognise that these measures have costs in the short run, particularly in higher levels of inflation and somewhat subdued economic activities while interest rates are elevated. The hope is that inflation is brought down within a few quarters, and that the benefits from the reforms start materialising more broadly, particularly in terms of increased job creation.

At the moment, what is your vision for the Egyptian economy?

We view the Egyptian economy as a large market with substantial potential, following several years of sub-par economic growth. Realising this potential would entail substantial investment, efficiency improvements, and job creation, and would lead to sustained improvement in living standards and reduced unemployment. To achieve such results, the private and public sectors have a lot of work to do.

What are the main challenges facing the Egyptian economy right now?

The main immediate challenge facing the Egyptian economy is the need to bring down the high level of inflation. It is natural for the inflation rate to rise following the large currency depreciation in late 2016, in addition to the fiscal measures adopted. However, clarity on the expected course of inflation is important for businesses and people in making current decisions.

In addition to reducing inflation, there are other significant challenges. Sustaining high levels of growth and investment is important for raising people’s incomes. Reducing unemployment from its current level of 12% to less than 10% is also another challenge, particularly given the need to rely on job creation by the private sector. The public sector also has the challenge of reducing the fiscal deficit in order to lower the public debt. This is expected to entail additional hardships, particularly those stemming from raising taxes and containing expenditures. Given the overall level of hardship already impacting the Egyptian public, ensuring broad and sustained support and tolerance for the multi-year economic reform programme is also important for reforms to remain on track.

How can those challenges be overcome?

The currently high inflation challenge can be overcome through tight monetary policy and improved visibility on the future course of inflation, to absorb the impact of the currency depreciation while also managing inflationary expectations. These actions are currently being done by the Central Bank of Egypt (CBE). The currently tight monetary policy is a result of the Monetary Policy Committee’s decisions of raising interest rates three times, in November 2016 by 300 basis points, and in May and July by an additional 200 basis points each time. Moreover, the deposit auctions of the CBE aim to absorb short-term excess liquidity. Also, the Monetary Policy Committee’s statements have improved visibility and clarified its target path of lowering the inflation rate to 13% in the fourth quarter of 2018, and to single digits afterward.

Sustained increases in private investment over several years are needed to raise the growth rates. In this regard, adopting the New Investment Law in May 2017 was an important step, and we look forward to easier facilitation of business activity and higher levels of domestic and foreign investment. Moreover, higher levels of exports, which already started materialising after the currency depreciation, are expected to lead to greater investments in export-oriented activities.

On the fiscal challenge, the government has already implemented a sizable share of the measures in its fiscal consolidation programme. These measures should reduce the budget deficit and lower the public debt.

Higher levels of growth, investment, and export would create jobs and reduce the unemployment rate. It is also important to maintain and sustain popular support for the ongoing reform efforts. This requires ensuring that the standards of living of broad segments of the population increasingly improve over time.

What is required to push the Egyptian economy forward and enable growth?

We already discussed the broad measures needed for enabling higher levels of growth, including the adoption of the New Investment Law. What can be emphasised here is that timely and consistent implementation of the laws and measures can be just as important as the adoption of good laws and measures. The new executive regulations of the Investment Law, adopted by the cabinet in August 2017, are important to clarify implementation issues. As such, the reaction of domestic and international investors will be an important barometer of the success of the policy measures and of the need for fine-tuning implementation.

In addition, effective public-private partnerships will improve needed infrastructure and enhance economic growth, without adding to current demands on the budget. Renewable energy is an important area for adopting these public-private partnerships.

What activities or projects can assist with helping the Egyptian economy to grow?

I like to emphasise the importance of the broad-based actions that offer clear rules for businesses, along with a fair and competitive environment for businesses. These actions entail making the bureaucracy more business-friendly and more transparent. Such an environment would also be expected to support small and medium enterprises (SMEs) and start-ups, which are important for job creation.

How did the flotation of the Egyptian pound impact the performance of banks?

The flotation had several effects. There are banks with a good performance, but the currency depreciation adversely affects the reported results if the bank’s financial statements are reported in foreign currency. On the other hand, some banks with financial statements in local currency benefited from the depreciation of the pound to the extent that they have revenue sources in foreign currency.

The flotation substantially improved the availability and liquidity of foreign currencies. This helped banks reduce the cost of lending in foreign currency, as banks are in a much better position to meet the various foreign currency demands of the clients.

The flotation also increased market maturity in general as both corporations and banks had to deal with a larger and more dynamic number of variables. The flotation and a more competitive exchange rate created new business opportunities for banks. These opportunities include supporting businesses with expansion plans to replace imported inputs with more competitive locally produced goods. Other opportunities include businesses that produce local outputs that have become more competitive with imported goods or have a potential for export.

Moreover, some corporations may become stressed as a result of the currency depreciation, which in turn may affect their banks through their ability to maintain loan payments. Such banks will need to watch the performance of these loans and maintain the quality of their portfolio.

What role could banks play in assisting the Egyptian economy?

Over the next few years, banks can increase their business focus on SMEs. This would beneficially dilute the banks’ concentration of credit exposure to large corporations. It would also help small businesses to grow to become medium-size firms, while medium-size businesses grow to become large firms. This process will help economic activity and will assist the SMEs in job creation. This is indeed a key driver in the Central Bank of Egypt’s campaign to increase bank lending to SMEs.

Over the longer run, banks can become an additional strategic source of foreign exchange, in addition to the current key sources: the Suez Canal, remittances of Egyptian expatriates, tourism, and exports. In addition, with a sounder fiscal policy and less reliance on banks to finance the budget deficit, banks can finance more dynamic infrastructure projects. This will encourage economic growth and job creation.

What projects and activities does your bank focus on financing in order to assist the economy?

Generally, the Arab Bank-Egypt has an appetite for financing most economic activities. Our exposure covers mainly industrial and infrastructure projects, in addition to services and trading. It’s worth noting that we support the expansion plans of the private sector across the board, including large corporations and SMEs, in addition to key and strategic government projects.

What are the most important indicators of the performance of your bank in the recent period?

As of end of the first quarter of 2017, Arab Bank-Egypt achieved a 45% growth rate in net revenues and 46% growth in net interest income, and these are considered among the highest in the market. This is primarily a result of the healthy growth in loans by 11.3%, which is higher than the market’s growth rates for the same period.

What activities do you intend to focus on in the coming period?

Again, the focus of Arab Bank-Egypt is basically on most of the local economic activities, subject to their commercial viability. We believe that a focus on industrial related projects will be of increasing importance in the coming period.

We have been expanding selectively across the different market segments with increased focus on SMEs and the lower tiers in the large and middle markets.

We have also supported expansion plans of local companies that decided to replace imported products with similar locally produced products. Supporting such companies, especially SMEs, which produce locally competitive products, is a new window that has expanded following the currency flotation, as stated earlier.

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Economic reform programme results exceeded all expectations of success in very short span: Elkosayer https://dailynewsegypt.com/2017/09/18/economic-reform-programme-results-exceeded-expectations-success-short-span-elkosayer/ https://dailynewsegypt.com/2017/09/18/economic-reform-programme-results-exceeded-expectations-success-short-span-elkosayer/#respond Mon, 18 Sep 2017 12:00:20 +0000 https://dailynewsegypt.com/?p=636248 Our national economy is now much stronger as a result of government reforms and bold decisions taken

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Chairperson of the Agricultural Bank of Egypt (ABE) Elsayed Elkosayer stressed that the results of the economic reform programme exceeded all expectations of success in a very short period of time.

Elkosayer told Daily News Egypt that our national economy is now much stronger as a result of the government reforms and the bold decisions that have been made. Egypt is now more attractive to foreign investments. It is expected that these investments will increase further after the issuance of the executive regulations of the investment law.

He also stressed that the banking system is strong and has liquidity that meets the needs of various projects, but we need to increase the savings rates so that we can increase the rate of investment.

Between 2016 and 2017, the government has taken several measures under the economic reform programme. What is your assessment of these measures?

The reform measures taken by the government come within the framework of its national task to correct the course and revive the Egyptian economy.

The results of these reform measures have exceeded all expectations of success in a very short period of time, with the testimony of many international financial institutions, including the World Bank, the International Monetary Fund (IMF), and the international rating agencies.

For example, the foreign exchange reserves of the Central Bank of Egypt (CBE) jumped for the first time in years to more than $36 billion, in addition to the remarkable stability in the exchange rate and the improvement of the Egyptian pound against foreign currencies. In addition to increase of cash flows in banks, the elimination of the black market for currency trading, and the rise of foreign investments to historical figures.

In order to reach a growth rate of 5 or 6%, investment rates must rise above 20%. To increase the investment rate, the savings rate must increase, and thus there have been measures to enhance saving rates, which has recently occurred.

How do you see the current situation of the Egyptian economy?

Our national economy is now much stronger as a result of the government reforms and bold decisions taken.

Egypt has achieved great successes in several major projects, including the New Suez Canal, the giant road network that was inaugurated, major investment projects such as the one and a half million acre project, the Marsa Matrouh project, and the national project for social housing.

Egypt is now more attractive to foreign investments, as evidenced by the rise in foreign investments in the recent period, and investments are expected to rise further during the coming period, following the issuance of the executive regulations of the investment law.

Additionally, the Egyptian market will be a strong destination for European investments under the global acclaim of the reform programme and the country’s economic development.

But there are those who suffer because of these procedures?

It is natural that the measures taken by the government regarding the economic reform programme cause crises, and we emerged from these crises easily and in a very short period of time, and now we have started to reap the benefits of those measures.

It is no secret that the Egyptian people have many, many, and the president has thanked more than once for his patience and endure those difficulties. There is a strong awareness of the Egyptians in the actions taken, and without popular support for decisions, we would not have succeeded.

If we compare ourselves to the challenges we faced, we must look at the neighbouring countries. We find that Egypt is a stable country politically, security wise, and economically. We are in complete stability compared to the neighbouring countries.

In your opinion, what activities or projects can help the Egyptian economy move quickly?

There are major projects being set up that will have a major impact on the economy.

The most important of these projects are the development of the Suez Canal axis, the New Administrative Capital, the Golden Triangle Economic Zone, the development of the North Coast, the cultivation of 1.5 million acres, the technology valley, the road projects, the electricity projects, and other large projects that absorb large employment and alleviate the unemployment crisis, which have a significant impact on GDP.

What role can banks play in helping the Egyptian economy to rise?

I always emphasise that the banking system is a powerful device, that has the liquidity to meet the needs of different projects, expertise, and competencies.

Nonetheless, we need to increase savings rates so that we can increase investment profiles, and the banking system, with the confidence gained over the past years, is able to attract more savings.

What about the role of the Agricultural Bank, which it heads in serving the economy?

It is enough that the bank can access its services to 50% of the Egyptian people. The number of the bank’s customers now reaches about 2 million. The number of farmers and farmers is about 6 million, in addition to temporary agricultural labour estimated at 4 million. Millions of people belong to the agriculture sector.

If we assume that each of the 10 million counts between 4 and 5 people, this means that the bank can extend its services to about 40 or 50% of the population of Egypt if it is activated and played better.

We are currently preparing the bank’s infrastructure so that it can participate in the initiatives of the Central Bank of Egypt, which is launching from time to time to stimulate the economy, especially the small and medium enterprise (SME) financing initiative.

In the past, the bank focused its activities on a range of services in the context of its interest in farmers and Egyptian farms, such as agricultural loans and products for the food sector, like the Al-Batelu project, as well as services related to agriculture-related industries.

In the next stage, we hope to develop these products and the variety of services offered by the bank and its agricultural company to maximise their role in the field of service to the Egyptian farmer, and thus the Egyptian economy as a whole, especially under the bank’s network of 1,210 branches spread across the country. Thus, the spread is achieved that is not enjoyed by any other bank in Egypt.

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Egyptian economy to reap reform fruits by 2019 https://dailynewsegypt.com/2017/09/18/egyptian-economy-reap-reform-fruits-2019/ https://dailynewsegypt.com/2017/09/18/egyptian-economy-reap-reform-fruits-2019/#respond Mon, 18 Sep 2017 11:45:06 +0000 https://dailynewsegypt.com/?p=636245 The banking sector always support the economy with money and expertise at any time

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Amr Tantawy, the managing director of Misr Iran Development Bank (MIDB), predicted that 2019 would be the year of the Egyptian economy where it will start to reap reform fruits.

Tantawy stressed that the banking sector will always support the economy with money and expertise at any time, calling on the Egyptian youth to benefit from the CBE’s initiative to finance SMEs. He also demanded top businesspeople to expand their social activities by funding small projects that serve their major projects.

How do you see the economic reform measures adopted since the end of last year?

Initially, we should admit that we were in a hard situation that required more than painkillers for treatment, and it was necessary to take decisive actions and face our problems openly to solve these problems radically.
It is known that any radical solution to a long-time problem is often costly and painful, and that is what we are suffering from now.

However, this treatment put Egypt on the right track, and we are quite ready for a fresh start.

How do you evaluate the Central Bank of Egypt’s (CBE) decision to float the exchange rate less than a year on?

The flotation of the exchange rate came to put things in perspective and was one of the most courageous and important decisions in the country.

In the pre-flotation phase, there was a significant difference between the formal and informal prices of the dollar against the pound. Such situation made it impossible for any foreign investment to enter the Egyptian market, not to mention its impact on various economic activities and the citizens.
We did not expect that any investor would accept to lose at least 40% of their capital before they starts their activity because of the huge difference between the formal and informal prices of the dollar. Any foreign investors would not even be sure if they could leave the Egyptian market or even transfer part of their profits abroad.

Therefore, it was necessary to resolve this problem and eliminate that phenomenon through liberalising the exchange rate completely.

We can judge this decision through checking whether the phenomenon of two prices of the dollar still exists or not. The results confirm that this step has certainly succeeded since the informal market completely disappeared, and there is now a flexible exchange rate in banks relying on the mechanisms of supply and demand. However, I believe the current price of the dollar against the pound is higher than its real and fair value against the local currency.

I also believe that the CBE played its part efficiently and the government should continue the mission.

How do you see the rise of interest rates on the pound’s effects on investment?

Raising the interest rate on the pound came as a temporary measure by the CBE to absorb inflation resulting from the prices hike following the economic reforms. I believe it is a temporary measure because it is not attractive for investment.

However, we need in this phase that investor who comes to us with his money and does not rely on borrowing from banks, and such investors will not be affected by raising interest rates.

At the same time, raising the interest rate accompanied by the flotation of exchange rate have played a major role in attracting investments to the Egyptian market for its high returns compared to other countries. Moreover, assuring investors that they can exit from the local market at any time was very helpful as the CBE’s foreign exchange reserves reached unprecedented levels compared to previous periods.

Many experts believe this increase in foreign reserves came as a result of external borrowing only. How do you see that?

Even if this is true, the foreign debt reflects the confidence of foreign countries and institutions in the future of economic performance in Egypt, because no one would lend you either directly or through investing in debt instruments, if they were not sure of your ability to pay your dues.

We need to protect the CBE’s foreign reserves and ensure providing strategic and basic goods for as long as possible, so as not to fall under any pressure in any circumstances, as well as having the ability to pay our debts.

It was necessary to borrow from abroad to support our foreign currency reserves until our natural resources of foreign exchange return to flow again. That has already started, and we expect more in the coming period.

After the flotation of the exchange rate and the issuance of the new Investment Law, there was no obstacle to foreign direct investments (FDIs), which once reached $12-13bn in 2010.

Tourism will also return better than ever after the decline of external pressures. It is also expected that the Suez Canal’s will achieve more revenues after the return of global trade movement. Egyptians’ remittances are also expected to return to their natural channels after the informal market has disappeared.

How do you see the lift of subsidies and the decision’s impact on citizens?

The lifting of subsidies had to happen a long time ago. There is no dispute that subsidies do not reach their intended beneficiaries, and even if there was a part of them that does, then the rest were benefiting many people who do not deserve them.

Do you think the recent reforms adopted by the CBE and the government are enough for a new start, or do we need other measures?

I believe the government is playing its role effectively, but the people should change their way of thinking, lifestyle, and living conditions so that we can cope with our new circumstances.

Syrian refugees, who have fled from war, have set a good idol for Egypt’s youth, as a large number of young Egyptians sit in cafes awaiting government actions.

The Egyptian youth should move and benefit from the initiatives launched by the CBE to support small and medium enterprises (SMEs). They can form small groups and launch their own projects, provided they have a genuine desire to do so.

Businesspeople should expand their social activities by funding small projects that serve their major projects.

I hope the government imposes a temporary progressive tax for two or three years, so that the proceeds of the high income tax will be directed to support the lower-income segments.

When do you expect the Egyptian economy to start reaping fruits of all these measures?

I think we will start reaping the reform fruits by 2019.

We have set the accurate fundamentals. There is a noticeable improvement in the pound exchange rate compared to the phase following the flotation directly. There is a plan to reduce the inflation rate by the end of 2018.

From your point of view, what is the role of the banking sector in the economy? 

The banking sector always supports the economy with money and expertise at any time, but there are some periods where demand for borrowing from banks declines. We hope the economy moves forward so the banks can do so too.

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Egypt’s economic reforms re-attract global investments https://dailynewsegypt.com/2017/09/18/egypts-economic-reforms-re-attract-global-investments/ https://dailynewsegypt.com/2017/09/18/egypts-economic-reforms-re-attract-global-investments/#respond Mon, 18 Sep 2017 11:30:27 +0000 https://dailynewsegypt.com/?p=636242 Continuing reform policies and measures with the aim to increase FDIs and domestic investments is the most important challenge facing the Egyptian economy at present

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Recent economic reforms have helped the Egyptian market regain the global investment’s attention, said the deputy chairperson of Banque du Caire, Soha Soliman.
Daily News Egypt held an interview with Soliman where she pointed out that the continuation of reform measures with the aim to increase foreign direct investments (FDIs) and domestic investments are the two most important challenges facing the Egyptian economy at present.
She stressed that the Central Bank of Egypt’s (CBE) decision to float the exchange rate was important and represented a qualitative leap for the Egyptian economy. She added that the banks operating in the local market have played a vital role in supporting the Egyptian economy during hard times experienced by the state, not to mention their community responsibility.

How do you see the progress of the economic reform programme since the last Euromoney Conference in September 2016?
The economic reforms taken by the Egyptian government, most notably the CBE’s decision to float the pound exchange rate against foreign currencies in November 2016, have helped the Egyptian market regain the global investments’ interest.
The Euromoney Conference plays a significant role in presenting the investment opportunities in the Egyptian market, which, at the same time, attracts foreign capitals.
The conference also represents a good opportunity for the global business community to follow up the current state of investment in Egypt after the brave economic decisions taken recently by the Egyptian government. The conference also increased the interest of private sector in Egypt and the strong return of the bonds market.

How do you see the state of the Egyptian economy at present, and what do you expect in the future?
The Egyptian economy is witnessing a noticeable improvement in terms of economic performance indicators related to foreign investment flows.
These indicators are expected to continue rising in terms of GDP growth and demand on domestic product, both of which have witnessed a development of its competitiveness in the domestic and foreign markets. In addition, the local product has now the ability to replace imported products, whose prices increased significantly after the CBE’s November decision.
The GDP growth is expected to reach between 4.6% and 4.8% during the current fiscal year, compared to 4.1% in the last one.

Do you think there are challenges still facing the Egyptian economy to recover, and how can they be overcome?
Continuing reform policies and measures with the aim of increasing FDIs and domestic investments are the two most important challenges facing the Egyptian economy, especially with the beginning of the return of tourism inflow to some tourist areas, which contributes to the growth of the GDP and creates new jobs. It also provides incentives to investors through legislative amendments and laws that support investment in Egypt.
The latest report issued by the United Nations Conference on Trade and Development (UNCTAD) said that FDIs in Egypt increased by 17% in 2016 reaching $8.1bn.
A total of foreign exchange reserves of $36.1bn is considered a strong message to everyone that Egypt is a country capable of honouring its promises and sends a message to foreign investors to come to Egypt.
In addition, the increase in tourism revenues to about $1.3bn from January to March 2017, a growth rate of 128.3% compared to the same period in last year.
In your opinion, what is required to push the Egyptian economy to grow strongly? What activities or projects can help the Egyptian economy to revive quickly?
The revival of Egyptian economy requires the increase of economic resources and implementation of many national projects as a tool to achieve the goals of sustainable development.

The Egyptian government currently adopts several policies supporting micro, small, and medium enterprises (MSMEs). These projects have the ability to absorb a large number of workers through the provision of competitive financing systems, providing the necessary training and qualification for the owners of these projects.

The small and medium enterprises (SMEs), which attract the attention of all state institutions, have a great importance on the road of achieving comprehensive economic renaissance.
We should also benefit from other countries’ experiences in achieving comprehensive social renaissance, such as Kenya and Malaysia, which their small industries represent 70% of the economy.
The micro-credit product is vital in many countries, including Mexico, the US, Taiwan, and China, where the proportion of exports produced from small enterprises account for 60% compared to 4% in Egypt.

How did the flotation effect the performance of banks?
The flotation of the exchange rate was an important decision, and it would ensure a qualitative leap for the Egyptian economy to put it among the world’s largest economies.

This decision was a challenge that should have been faced with no delay, because the economy did not have the luxury anymore of continuing under the old form of foreign exchange management.
The flotation was a challenge for the state that should have been faced with no delay, especially after the decline of the local product’s competitiveness against the imported product. This is not to mention the decline of Egyptian exports’ competitiveness in global markets. This position was expected to lead to further decline in economic growth and the standard of living of the people and the increase of unemployment rates.

What is the expected role of banks in supporting the Egyptian economy?
The banking sector plays an active role in supporting the national economy, especially during the hard times experienced by the state.
This role became clear after the 25 January Revolution, when banks did not stop filling their automated teller machines (ATM) in all governorate branches despite the absence of security at the time. In addition, the banks issued the Suez Canal certificates to complete the national project.

The banks also play an important role in community development, such as financing projects of drinking water supply and roofing houses of the neediest villages, in addition to supporting all national projects to push the economy and increase employment rates.
The banking sector focuses on improving the investment climate and the development of MSMEs, which is an important development locomotive in emerging economies.
Banks also offer their help to serve companies and entities that intend to invest in a certain project in terms of preparing economic studies to determine the capital to be invested and expected return on investment.
Financial inclusion is one of the most important fundamentals in the spread process of financial and banking culture in the Egyptian society. It requires spreading awareness about some concepts, mainly to maximise banks’ role in the comprehensive development through attracting the informal economy to enter the official economy.

With regards to Banque du Caire, what projects and activities are focused more to serve the economy?
Since its establishment, Banque du Caire has been serving the Egyptian economy and working to increase its profits and achieve good performance indicators.
Banque du Caire is keen to inject more funds into various vital sectors in the country. The bank is keen to finance the oil and gas, electricity, food industry, real estate, and construction sectors, as well as financing operations in many sectors including energy, transportation, logistics, and construction. The banks also initiated a sector to serve SMEs.

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Egypt’s economic reforms necessary engines of growth: Chinese ambassador to Egypt https://dailynewsegypt.com/2017/09/18/egypts-economic-reforms-necessary-engines-growth-chinese-ambassador-egypt/ https://dailynewsegypt.com/2017/09/18/egypts-economic-reforms-necessary-engines-growth-chinese-ambassador-egypt/#respond Mon, 18 Sep 2017 11:15:14 +0000 https://dailynewsegypt.com/?p=636239 China is negotiating with Egypt to establish an integrated industrial area in the New Administrative Capital, says the ambassador

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In mid-August, China and Egypt signed an agreement regarding launching a railway project, which will link the railway lines between central Cairo, 10th of Ramadan City, and the New Administrative Capital.

During Egyptian President Abdel Fattah Al-Sisi’s visit to China to attend the 9th round of the BRICS summit, was held from 3 to 5 September in Beijing, both sides reached an agreement regarding the electric train project that links 10th of Ramadan City with the New Administrative Capital through Chinese financing, at a total cost of about $739m.

Moreover, they reached an economic and technical cooperation agreement, in which China will provide a $45m non-refundable grant for the implementation of the Egypt Satellite 2 (Egypt Sat-2) project to serve research projects and remote sensing.

Furthermore, financial arrangements are expected to be signed and carried out between Egypt and China after Egypt’s participation in the BRICS summit, according to Chinese ambassador to Egypt Song Aiguo.

Daily News Egypt interviewed Aiguo to get more insight into the new Chinese projects in Egypt in new cities and also his vision regarding the recent economic reforms that the government of Egypt took within its economic reform programme 2030.

What is your opinion regarding the current recent economic reforms taken by the Egyptian government?

I think it is encouraging and is still improving.

Do you think that the tough decisions undertaken by the Egyptian government will participate in economic recovery?

According to China’s experience, you have to take very hard decisions; otherwise, the country will remain in difficulties. Reforms are necessary and are engines of growth.

Indeed, in the first years after the reforms, there are some difficulties, but, in the long run, there will be a lot of opportunities that will be good for the country.

What is your opinion regarding the liberalisation of the Egyptian pound exchange rate?

I think a steady value of the Egyptian pound is important. Otherwise, businesspeople would be a bit worried or hesitant to invest because of the devaluation of the local currency; therefore, we would like to see the pound enjoy stability.

Do you think the liberalisation will play a vital role in promoting trade exchange between Egypt and China?

Of course, the devaluation in the pound’s value will make a revolution in increasing Egypt’s exports to China. In addition, I expect an increase in the volume of trade exchange between the two countries by the end of the year, especially as China intends to increase its imports of agriculture crops and food from Egypt.

The volume of trade in 2015 amounted to $12.8bn, while in 2016, this amount fell to $10bn. It is, however, expected to increase in 2017.

China is negotiating with Egypt to launch new projects in the New Administrative Capital and Ain Sokhna. What is the nature of these projects?

Negotiations are ongoing between Chinese companies and the government of Egypt to participate in developing projects in the New Administrative Capital and Ain Sokhna.

In the New Administrative Capital, Chinese companies are interested in infrastructure and construction projects. With the development of the plan to build the New Administrative Capital, the vision will be clearer, especially since a large number of Chinese companies want to invest in this capital.

Furthermore, the New Administrative Capital will not only be established for administrative affairs, but also for all areas and sectors.

Egypt is in the process of building new commercial areas in which China can participate.

What are the details regarding the big project China is negotiating with the Egyptian government to be launched in the New Administrative Capital?

China is negotiating with the Ministry of Investment and International Cooperation to establish an industrial area, which will be an integrated area of services that includes a good number of industrial facilities, schools, and hospitals. The area will be a new project that includes both production activities and services that will benefit all other businesses in the New Administrative Capital.

When will the project be carried out?

It depends on the progress of the construction of the New Administrative Capital. Besides, the private Chinese company that will carry out the project is now in the negotiations phase with the ministry. I do not know when they will reach an agreement, but it seems that the negotiations are going well.

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Egypt’s real estate sector undergoing transformation: SODIC managing director https://dailynewsegypt.com/2017/09/18/egypts-real-estate-sector-undergoing-transformation-sodic-managing-director/ https://dailynewsegypt.com/2017/09/18/egypts-real-estate-sector-undergoing-transformation-sodic-managing-director/#respond Mon, 18 Sep 2017 11:00:39 +0000 https://dailynewsegypt.com/?p=636237 Higher land prices create more partnerships among developers 

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For Magued Sherif, the managing director of local development at SODIC, Egypt’s real estate sector is undergoing transformation following the currency flotation and the new pricing policy for the government in land plots it offers for investors.

“The market is reshaping at the current stage. After the currency flotation, the prices are getting higher, but the demand is on the rise, too, to hedge from higher inflation rates,” Sherif told Daily News Egypt in an interview last month.

Magued, who was earlier the Egypt country head and properties chief executive officer at Majid Al Futtaim Properties from 2008 to 2011, expects more partnerships among developers in the coming period.

How do you see the real estate sector at the current stage?

I think the market is reshaping in the current stage. There is a stiff competition among developers to get new customers with soaring prices due to higher costs after the currency flotation.

We could see more partnerships between developers to overcome the problem of land prices.

How can the land pricing policy be improved so that costs are kept under control?

To completely tackle the issue, the government must also bring more land to the market in each auction. This, along with the new policy, should bring prices to a more reasonable level.

Land prices are becoming a real issue. There is simply more demand than property, and no regulations are in place to stop bidders aiming too high. The new real estate policy is expected to regulate this by classifying developers according to track record and development capacity, allowing them to bid on plots that match their abilities.

What factors are driving demand for the real estate sector?

Demand is driven by strong demographics. Egypt has a population of more than 90 million, half of which are under the age of 25. There are also more than 800,000 graduates and a similar number of marriages every year looking for new units.

Private developers collectively bring 20,000 units to the market annually.

Egyptians are also pouring money into the real estate sector to hedge against rampant inflation.

Are you concerned about a possible bubble in the real estate sector?

I think this concern is overblown. The insurmountable demand makes addressing this segment a very lucrative investment. However, the going rates for land and the size of the plots being offered by the government do not make addressing middle-income housing feasible for private developers, who must deliver profits for their shareholders.

What changes can be made to mortgage regulations to make them accessible to lower segments?

A strong mortgage finance system that makes home ownership more accessible to a wider segment of the population is essential. The current off-plan sales system, where the developer plays the role of financier, is a result of a lack of mortgage financing and adequate options for home buyers. This must be changed, and a more effective system put in place.

The main issues with mortgages are interest rates—naturally high in an inflationary environment—and rigid policies on land registration as a prerequisite for home loans.

The economy needs to continue growth, and inflation must be controlled. This will lead to an environment where affordable mortgage rates appear. Policies need to be revisited to allow for more units to be part of the mortgage market.

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USAID Egypt provides technical assistance to enhance capacity of new expanding export-ready enterprises https://dailynewsegypt.com/2017/09/18/usaid-egypt-provides-technical-assistance-enhance-capacity-new-expanding-export-ready-enterprises/ https://dailynewsegypt.com/2017/09/18/usaid-egypt-provides-technical-assistance-enhance-capacity-new-expanding-export-ready-enterprises/#respond Mon, 18 Sep 2017 09:30:51 +0000 https://dailynewsegypt.com/?p=636215 USAID Mission Director in Egypt Sherry Carlin, in an interview with Daily News Egypt, avoided talking about the US aid cut and the other options to finance the gap of the USAID’s programmes due to the aid cut. Carlin said that USAID/Egypt supports the government of Egypt’s reform agenda on a number of fronts to …

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USAID Mission Director in Egypt Sherry Carlin, in an interview with Daily News Egypt, avoided talking about the US aid cut and the other options to finance the gap of the USAID’s programmes due to the aid cut.

Carlin said that USAID/Egypt supports the government of Egypt’s reform agenda on a number of fronts to establish a good macroeconomic foundation for growth.

How is USAID working to improve the skills of the labour force to address the current skills mismatch in the labour market?

Working with the government of Egypt, the private sector, and other stakeholders, USAID, through its Workforce Improvement and Skills Enhancement (WISE) project, works to improve technical secondary education to meet the needs of Egypt’s job market. The project establishes partnerships between businesses and technical schools in order to better coordinate the skills needed for employment. USAID directly addresses the current skills mismatch, creating a pool of qualified candidates and linking graduates with jobs. This partnership has already resulted in the addition of two new curriculum specialisations—logistics and renewable energy—which respond to the private sector’s need for workers with skills in these areas.

Since August 2016, USAID’s WISE project established school units to help students’ transition from education to employment. The project has facilitated training for 1,800 teachers and school staff in 28 schools in five governorates, who have provided career guidance to 10,000 students over the past year. These students are meeting the demands of the local labour market. In the first year of the project, 5,500 students have secured employment, and 4,800 have participated in internships. This fall, twice as many schools will establish transition to employment units, for a total of 60 schools in 11 governorates.

How does USAID work to address factors that constrain labour market efficiencies?

Working in coordination with the government of Egypt and the private sector stakeholders, USAID works to address factors that constrain labour market efficiencies by building partnerships, assessing the environment, and fulfilling key stakeholder recommendations.

Sustainable solutions come only when stakeholders work together to support the end goal. To increase the quality and number of employable graduates that can help propel Egypt’s economy forward, USAID’s WISE project is partnering with the Egyptian National Competiveness Council (ENCC) to establish a mechanism to encourage dialogue between public and private sector stakeholders at the national level to address the major problems in the labour market and recommend reforms that can improve labour market efficiency. Additionally, in partnership with the Ministry of Local Development, USAID’s WISE project is establishing economic partnership councils to identify and address constraints to labour market efficiency at the local level.

In partnership with the ENCC, USAID commissioned a comprehensive survey of Egypt’s labour market to assess the economic context, the supply and demand of skills, and the role that gender plays in securing and maintaining employment. The study represents a major step in aligning technical skills with labour market needs. It also paves the way to identifying and addressing the areas of concern that restrict labour market efficiency and supplies needed information to business associations to build partnerships with the government and advocate for reforms related to labour market efficiency.

USAID is fulfilling several key recommendations from the report. This includes helping students gain needed skills by improving technical secondary education to meet the needs of the market, as well as offering training on soft skills, like communication, work discipline, and work ethics—those that are necessary to succeed in the workplace.

How is USAID helping micro, small, and medium enterprises take full advantage of expanded market opportunities resulting from the government of Egypt’s economic reform programme?

The US government, through USAID, is helping micro, small, and medium enterprises (MSMEs) take advantage of commercial opportunities by improving business development services and supporting entrepreneurs to launch new businesses. As more Egyptians are able to connect to new economic opportunities, their demand for goods and services will expand, hence creating an engine for sustained growth of the country’s economy.

To stimulate entrepreneurship, USAID’s project to strengthen entrepreneurship and enterprise development (SEED) has held nine startup and business plan competitions, connected nearly 1,500 young entrepreneurs with a network of accomplished mentors, and helped 250 entrepreneurs connect with incubators to further refine their business models and develop the capacity to launch viable business ventures with the potential to create jobs and contribute to Egypt’s economic growth. In the past 18 months, 72 USAID-supported startups have introduced new products to the market, including mobile applications, jewelry, and hygienic food packing machinery for small and medium food producers in the Delta region.

The SEED project has improved the capacity of five financial service institutions through training on product development and social performance management systems. These institutions have since provided funding and/or support to over 8,700 clients. The SEED project has organised the first of many forums to link MSMEs with non-traditional financing (e.g. crowdsource funding, angel investment, venture capital) and is currently developing a mobile application to inform and connect MSMEs with a range of financial products.

The success of the government of Egypt’s reform programme hinges implementing sound macroeconomic policies. How is USAID supporting the government of Egypt achieve this goal?

USAID is supporting the government of Egypt’s reform agenda on a number of fronts to establish a good macroeconomic foundation for growth. On structural reform, USAID is providing technical assistance to streamline business registration and trade and investment facilitation to hasten enterprise formation and growth. USAID is providing technical assistance to 1) improve public investment planning, implementation, and monitoring to enhance the productivity of public capital assets and the efficiency and effectiveness of public services; and 2) upgrade effectiveness of public financial management to improve fiscal management, budgeting, and expenditure control, as well to promote greater budget efficiency, transparency, and accountability.

On export promotion, USAID is providing technical assistance to 1) enhance the capacity of new and expanding export-ready enterprises to increase sales and reach new markets in selected sectors; and 2) strengthen public and private trade-support institutions (e.g. trade associations, export councils, etc.) that assist small and medium enterprises (SMEs) to compete in the international marketplace.

USAID is also supporting the industrial sector by providing technical assistance to promote MSME growth through 1) stimulated entrepreneurship, 2) improved efficiency and effectiveness of business development services, 3) improved financial products and services, 4) integration of MSMEs into progressive value-chains, and 5) provision of a skilled workforce.

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There is optimism regarding future of Egypt-US bilateral relations: CEO of AmCham Egypt.Inc https://dailynewsegypt.com/2017/09/18/there-is-optimism-regarding-future-of-egypt-us-bilateral-relations-ceo-of-amcham-egypt-inc/ https://dailynewsegypt.com/2017/09/18/there-is-optimism-regarding-future-of-egypt-us-bilateral-relations-ceo-of-amcham-egypt-inc/#respond Mon, 18 Sep 2017 09:15:27 +0000 https://dailynewsegypt.com/?p=636213 The flotation of the Egyptian pound was a milestone to US investors, says Hisham Fahmy CEO of AmCham Egypt

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The Egyptian government has adopted a series of economic reform measures during the past period. Both countries have entered into a new phase of bilateral relations. In spite of that, the inflow of new US investment is not growing at the same level. Why is that the case?

I would disagree. I strongly believe that the interests of US companies in the Egyptian market have been really expanding during the past year. We’ve seen new investments and expansions of existing operations within different sectors. The US private sector has shown a lot of interest in the Egyptian market, given the economic reforms adopted by the government, especially since November of last year, following the flotation of the Egyptian pound, which was a milestone for US investors. We have many examples of these successes, including PepsiCo, P&G, IBM, Cargill, Mars, etc. We have also seen many companies moving their regional manufacturing hubs to Egypt to make use of low production costs and free market access to neighbouring countries. In addition, the enacting of the new investment law sent out waves of optimism among investors and we do expect to witness a flow of new investments into the country within the coming months.

The US has decided recently to cut military aid to Egypt. How will this step impact the future of bilateral relations?

The relationship between the two countries has many facets. Although aid was reduced, we’ve seen the resumption of the Bright Star joint military training for the first time since 2009. Moreover, President Abdel Fattah Al-Sisi met with President Trump twice since his election less than one year ago, with an important visit to New York scheduled within days.

On the margins of this important visit, the US Chamber of Commerce’s US-Egypt Business Council, jointly with AmCham Egypt and the Egypt-US Business Council, are hosting a high-level roundtable meeting for President Al-Sisi with CEOs of major US investors. This has become an annual tradition.

Through the years, the bilateral relationship has witnessed many ups and downs. It is worth mentioning that the recent cutting of aid is not significant; however, it signals that both sides need to take active steps and engage in constructive dialogue to resolve issues of bilateral significance.

 

What are some of the investment concerns expressed by US firms? 

Each sector has its needs and concerns. At one point, the electricity shortages and black outs were one of the main concerns of companies working in Egypt, but the government resolved this issue last year. Also the shortage of foreign currency was another major concern, which was overcome following the flotation of the pound last November. Other longstanding hurdles are related to the government bureaucracy, which I think will gradually become less prevalent.

There has been no progress with regards to the Free Trade Agreement (FTA). Is this still on the table for future discussions? 

The new US administration expressed its position very clearly, stating that bilateral trade deals are better for America than regional or multilateral agreements. More importantly, several sources have expressed that the new administration would welcome the start of FTA negotiations with Egypt. However, the United States Trade Representative (USTR), the primary entity in charge of trade negotiations, is currently engaged in NAFTA negotiations, which could delay any possibilities for beginning the negotiations with Egypt within the coming months.

Are there any private sector business missions to Egypt scheduled in the near future? 

A large US business mission is scheduled for early 2018. Prior to that, there could be visits by small delegations and institutional investors to Egypt to explore opportunities and partnerships. Investors need time to evaluate the business environment and to conduct their feasibility studies prior to entering a new market. The economic reforms that came into effect recently have certainly given incentives to many investors to seriously consider Egypt as a favourable destination, and we are yet to reap the rewards of these reforms.

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EBRD investments in 2017 worth €665m https://dailynewsegypt.com/2017/09/18/ebrd-investments-2017-worth-e665m/ https://dailynewsegypt.com/2017/09/18/ebrd-investments-2017-worth-e665m/#respond Mon, 18 Sep 2017 09:00:04 +0000 https://dailynewsegypt.com/?p=636209 EBRD is currently working with 9 banks in Egypt with a total exposure of approximately €700m to finance SMEs

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Daily News Egypt sat down with Janet Heckman, the managing director of the southern and eastern Mediterranean (SEMED) region at the European Bank for Reconstruction and Development (EBRD), to talk about the bank’s strategy in Egypt and its opinion regarding the Egyptian economy.

What projects has EBRD financed in Egypt?

Since the beginning of our operations in Egypt, we have invested over €2.6bn in 51 projects across all the sectors. In 2017 alone, we have invested €665 million so far.

Our landmark this year is the approval of a $500m framework to finance renewable energy projects in Egypt, which includes 16 photovoltaic plants, expected to deliver a photovoltaic capacity of 750 MW. The plants will be constructed on one large site near the village of Benban in Upper Egypt and will bring significant investments and job creation to this region. They are also expected to reduce carbon dioxide emissions by 900,000 tonnes a year.

Another project I’m proud of is a €290m loan to support the Egyptian National Railways (ENR) for the renewal of the locomotives in its fleet, which will benefit millions of commuters across Egypt.

Furthermore, for the first time, one million inhabitants in the Fayoum governorate will have access to sanitation services with the support of a €186m loan to the Fayoum Water and Wastewater Company. In addition, reducing the level of pollution in Lake Qarun will help restore tourism and boost agricultural and fishing activities.

Will you increase the portfolio regarding Egypt in 2018?

We are a demand-driven bank, so we invest in viable projects through which we can add value and create benefits to the people of Egypt.

Which sectors is the EBRD most interested in?

Based on our country strategy, which is the result of a thorough assessment of sectors throughout the economy and dialogue with the authorities and other key stakeholders, we have identified key challenges and opportunities in Egypt. We have also determined the priority sectors to develop.

Supporting the competitiveness of Egypt’s private sector is one of our main priorities. The bank is committed to supporting the private sector by improving access to finance for small and medium enterprises (SMEs), better economic integration, and increased opportunities for women and young people.

Modernising the country’s infrastructure and services by improving the quality and sustainability of Egypt’s public utilities, including through the private sector’s participation, is also a main priority. This includes the development of a more efficient power sector and the promotion of gas market reforms, contributing to the country’s energy security.

Under the bank’s Green Economy Transition approach, we will support Egypt in its efforts to diversify its energy resources by financing renewable energy projects and energy efficiency investments across sectors, including energy efficiency credit lines for SMEs. We will also work on improving water efficiency through modernising water supply and wastewater management.

We have also launched our Green Economy Financial Facility for Egypt, a programme that combines loans, grants, and technical advice to promote investments in energy efficiency and renewable energy projects in cooperation with local banks.

Creating a favourable business climate requires good governance and regulations. To achieve this goal, we will cooperate with international financial institutions to improve governance in the public and private sector.

The EBRD will continue to provide capacity building for relevant institutions to improve competition and promote investment and policy delivery.

The EBRD supports some Egyptian banks in financing SMEs. What are the recent requests you received, the bank’s decision, and how many loans did you give?

We work with nine banks in Egypt at the moment, with a total exposure of approximately €700m. The facilities we have with these nine banks include trade finance facilities, SME financing facilities, Women in Business financing facilities, energy efficiency credit lines, and subordinate debt. We hope to expand our cooperation with banks in Egypt.

In addition, what is the volume of the SME financing portfolio?

Supporting SME’s is one of the bank’s main priorities, as we consider them the backbone of the economy and a source of employment. We have provided six dedicated credit lines to the local banks for on-lending to small businesses, in addition to advisory services to over 600 small enterprises. Of these, 140 are headed by women. Besides, we have the Women in Business programme, which helps female entrepreneurs access financing and energy efficiency credit lines.


What are your expectations about Egypt’s economic growth by the end of the current year?

Following the implementation of reforms, we have seen continuous strengthening of investment and improved competitiveness, and we are expecting a 4.5% growth in the current fiscal year.

What is your opinion regarding the current economic reforms taken by the government of Egypt related to the liberalisation of the exchange rate, oil subsidy cuts, and raising the interest rates at banks?

The liberalisation of the exchange rate is a step in the right direction. Of course, it is a painful step, but in the long run, it will improve the functioning of the foreign exchange market and help unlock private sector activities. This will also increase the economy’s flexibility in response to external shocks, and it will builds buffer, strengthen the official reserve position, and boost investor confidence.

Do you think that Egypt’s rating will improve from B in the coming period due to the recent economic reforms?

This is a question for the rating agencies. However, continuing on the reform path will help improve the environment for international investment.

Egypt is committed to repaying its debts. Do you think the country has the creditworthiness to repay loans from the EBRD, while the public debt currently stands at 110% of GDP?

Significant progress has already been made by the Egyptian authorities, indicating commitment at the highest levels to structural reforms to unlock the Egyptian economy’s potential.

Supporting Egypt and the private sector in their efforts to improve the investment climate is important for us; it is a pillar of our strategy in Egypt, and successful implementation of reforms is key to moving forward.

What are the criteria of selecting projects to fund? Does it depend on the EBRD’s agenda or does the government of Egypt request funds for specific projects and sectors?

The selection process of projects follows various steps. Our projects are selected based on the priority sectors to be developed that we have identified in the country strategy. We work on developing the private sector.

Is the bank interested in funding projects and sectors characterised by intensive employment in Egypt?

Almost all the projects that the EBRD finances in Egypt have positive effects on employment. This is particularly the case for infrastructure projects, which create many jobs during the construction phase.

Furthermore, will the bank hold new promotional conferences for investment opportunities in Egypt?

I’m happy to announce that we are organising the second business forum for the southern and eastern Mediterranean region in Cairo this year on 14 November. This event will bring together key policymakers, government officials, investors, and prominent businesspeople to discuss business in the region and to consider the obstacles impeding increased foreign investment.

Through your promotional activities, what are the main challenges for the investment climate in Egypt, and what are the main complaints you receive from foreign investors? How can the government of Egypt overcome the problems related to the investment environment?

It is important for investors to have a good business environment in a country. The government’s decision to create the investment services complex, implementing a single window, and reducing bureaucratic obstacles facing investors are very important steps.

In addition, what is your opinion regarding the merging of the ministries of international cooperation and investment? Did it serve the investment profile in the country?

The merger of the ministries will likely have an effect on the attraction of foreign investment to Egypt, since it will be one port of call for investors. It will facilitate the process for foreign companies entering Egypt, and this is a positive development.

Excerpts

EBRD is organising the second business forum for the southern and eastern Mediterranean region in Cairo on 14 November

EBRD has provided six dedicated credit lines to the local banks for on-lending to small businesses, in addition to advisory services to over 600 small enterprises

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EIB provides €920m of finance to Egypt’s traditional, renewable energy since 2011 https://dailynewsegypt.com/2017/09/18/eib-provides-e920m-finance-egypts-traditional-renewable-energy-since-2011/ https://dailynewsegypt.com/2017/09/18/eib-provides-e920m-finance-egypts-traditional-renewable-energy-since-2011/#respond Mon, 18 Sep 2017 08:45:01 +0000 https://dailynewsegypt.com/?p=636204 EIB welcomes the country’s actions to make reforms that have long term objectives, says Vice President

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European Investment Bank (EIB) is looking forward to finance more infrastructure projects, either in the energy sector or other sectors in Egypt, and the bank is also in the process of approving more projects in the waste water sector, according to Vice-President of EIB Dario Scannapieco.

Scannapieco said that, on average over the last two years, the bank has almost reached €2bn.

Daily News Egypt sat down with Scannapieco to talk about the bank’s financial strategy in Egypt.

During your visit to Egypt, you signed a couple of waste water projects. Is it a priority sector for EIB? Will you finance more projects?

Waste water and sanitation projects are pretty important in any economy. They have a strong impact on health, living standards, and also on economic activities. The two projects that were declared during my visit to Cairo are good examples. I signed a memorandum of understanding (MoU) to finance the Fayoum waste water expansion project. EIB will provide €172m of the total cost of the project to improve the wastewater infrastructure and access to it in Fayoum governorate. The Fayoum waste water expansion project, which comes under EIB’s new Economic Resilience Initiative, aims at improving health and living standards of 800,000 people, as well as stimulating economic activities in Fayoum governorate.

I also signed an agreement of €4.7m to support the implementation of the Kafr El Sheikh waste water development project. EIB’s financing will support the implementation of the project,

Looking ahead, we will provide €400,000 to support the preparation of the Alexandria waste water project. We also are in the process of approving more projects in the sector.

What is the size of funds provided for SMEs?

We have increased our financing to small and medium enterprises in the past two years. More than €600m was allocated to SMEs, either through our local partners in Egypt or through regional and local investment funds.

For example, we recently signed a new $15m investment in the Egypt mid cap fund. The fund targets growth capital investments in Egyptian SMEs that are seeking to grow their business at above average growth rates. The fund investments are expected to create a considerable number of direct new jobs—between 1,200 to 1,600 jobs. The fund has a target size of $100m with a hard cap of $120m. Current investors include European Bank for Reconstruction and Development (EBRD), CDC UK, FMO, and local investors.

Also, we are in the process of approving a new credit line with Banque Misr to support SMEs in Egypt.

What about funding energy projects in Egypt?

Energy projects have been a priority for the Egyptian government. For this we provided €920m of finance to many projects—both traditional and renewable energy—since 2011.

We are looking forward to financing more infrastructure projects, either in the energy sector or other sectors. This is what we discussed with Sherif Ismail, the Prime Minister of Egypt. We discussed EIB investments in the transport sector, especially railways. And we believe there is a potential to improve the transportation system in Egypt.

What is the size of the EIB’s investments in the Egyptian market?

We have a long standing partnership with Egypt. Since our first operation, we have provided €8.22bn. We are looking forward to investing more in Egypt under the bank’s new Economic Resilience Initiative. The initiative seeks to improve the resilience of the Egyptian economy by investing in priority sectors.

 

Will you increase funds allocated for Egypt in the future?

We are not driven by numbers but projects; we have demand, but we need projects. However, on average over the last two years, we have almost reached €2bn. And as I explained, the Economic Resilience Initiative will allow us to step up our financing. The initiative aims at raising €4.5bn of additional funding to the southern Mediterranean countries, where Egypt is an important beneficiary.

How will the Economic Resilience Initiative support the southern Mediterranean region?

Our available finance to the region will increase by around 50-60%. The total amount of investments in the region up to 2020 would reach €12.5bn. EIB finance is always linked to high social and economic impact, such as improving health standards, reducing levels of pollution, improving business infrastructure, and, most of all, creating more jobs for the youth.

What is your opinion of the Egyptian economy after the economic reforms have been taken recently?

Egypt is following a reform agenda to improve the business environment in the country and to create strong economic foundations with a package of structural reforms and new investment programmes.

As a project-driven bank, EIB particularly welcomes the country’s actions to make reforms that have long-term objectives. In the short term, reforms look difficult; however, they are the right measures and are going in the right direction. With more streamlined measures and procedures, the government will facilitate the development of new investments and will thus contribute to increased EIB financing in Egypt.

What is your opinion of the liberalisation of the exchange rate of the Egyptian pound?

Economic reforms and new policies take time to achieve their goals. We see positive signs of recovery in Egypt. For example, the exchange rate of the Egyptian pound is tending to settle down, and investment figures are on the rise. On our side, we are present in Egypt to support the private sector, including small and large enterprises. It is our commitment to the country.

Excerpts

More than €600m were allocated to SMEs, either through our local partners in Egypt or through regional and local investment funds

We are in the process of approving a new credit line with Banque Misr to support SMEs in Egypt.

The Economic Resilience Initiative aims at raising €4.5bn of additional funding to the southern Mediterranean countries, where Egypt is an important beneficiary

The total amount of investments in the region up to 2020 would reach €12.5bn

The government will facilitate the development of new investments and will thus contribute to increased EIB financing in Egypt

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Egypt to receive third tranche of AfDB loan by February 2018 https://dailynewsegypt.com/2017/09/18/egypt-receive-third-tranche-afdb-loan-february-2018/ https://dailynewsegypt.com/2017/09/18/egypt-receive-third-tranche-afdb-loan-february-2018/#respond Mon, 18 Sep 2017 08:30:59 +0000 https://dailynewsegypt.com/?p=636201 The government of Egypt has never defaulted on its debt payments to the international financial institutions, says AfDB’s resident representative

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Daily News Egypt sat down with Leila Mokaddem, resident representative of the Egypt field office at the African Development Bank (AfDB), to talk about the bank’s vision towards the Egyptian economy.

What is the update regarding receiving the third tranche of the loan to support Egypt’s economic and social programmes? When will Egypt receive the fund?

AfDB is committed to supporting the government’s reform programme and social contract actions and measures. Therefore, the bank remains committed to fulfilling its mandate to provide the third tranche of the budget support operation. The bank expects to release the funds once all the necessary conditions are met, like parliamentary approval, and so we expect this all to be concluded by February 2018, by which time the funds can be released.

What projects has AfDB committed to in Egypt? What is the AfDB’s current portfolio volume in Egypt in 2017?

The bank’s ongoing portfolio in Egypt consists of a total of 29 operations. The portfolio is divided into seven public sector ADB loans (89% of ongoing commitments), two private sector projects (10%—one loan and one equity), and 20 grants (1%). The total commitment value is $2.3 billion, out of which 90% has been disbursed since 7 September 2017. The bank has approved a total of $551 million covering a line of credit for trade finance to Afrexim Bank ($500 million), three private sector projects for solar photovoltaic power under the government’s second feed-in tariff (FIT) programme ($48 million), and one grant to support the Administrative Control Authority (ACA) for anti-corruption. The remaining projects for 2017 include a loan of $150 million to expand the Abou Rawash wastewater treatment plant.

Will you increase the portfolio regarding Egypt in 2018?

We plan to maintain our lending programme to Egypt going into 2018, subject to available headroom (resources that can be made available from the AfDB), which is based on various factors, such as country risk, the bank’s own internal credit risk assessment, exposure of loans to the North Africa region, and other operational issues. We currently have identified a project’s pipeline exceeding a lending amount of $500 million going into 2018.

Which sectors is the bank most interested in?

The bank’s current focus is framed in the 2015-2019 Country Strategy Paper to address core development challenges based around two pillars:

Pillar 1: Developing infrastructure to foster sustainable and inclusive growth, as well as improve the business environment, through better access to basic goods and services. We also focus on skills development in critical infrastructure sectors to improve competitiveness and create jobs for both men and women.

Pillar 2: Strengthening governance by enhancing transparency, efficiency, and fairness to improve public sector efficiency and the capacity to deliver better projects. In addition, we support reforms to improve the regulatory environment and help promote skills development to spur job creation.

What is the size of the loans the AfDB plans to fund in Egypt by the end of 2020?

The bank will be guided by the government’s priorities and the priorities of the bank as identified in the Country Strategy Paper. We will plan to provide support to Egypt through public sector loans, grants, and private sector loans, as well as lines of credit for private sector growth. The average size of loans has been in the range of $100 million, and this will be maintained for all loans. Grants will be in the range of $1 million to 4 million. The main sectors include renewable energy, youth employment, informal settlements, agriculture and irrigation, water sanitation and wastewater treatment, and lines of credit to commercial banks for onward lending to SMEs.

What is the volume of funds allocated for the energy sector, whether traditional or renewable?

At this moment, and based on the government’s continued priorities on renewable energy, the bank will continue to explore opportunities of private sector financing for solar and wind power projects. For traditional energy generation, the bank will keep options open through its dialogue with the Ministry of Electricity and Renewable Energy.

What are your expectations for the Egyptian economy’s growth by the end of the current year and for 2018?

We are optimistic that with the economic reforms that the government has undertaken and plans to undertake going forward will lead to positive economic growth. The recent figures on foreign direct investment (FDI) flows, foreign reserves, and export growth are all promising. The bank forecasts of GDP growth will be around 4 percent by the end of the year. The crucial challenges will be to ensure that this growth is inclusive and supports strong job creation.

What is your opinion regarding the current economic reforms taken by the government of Egypt related to the liberalisation of the Egyptian pound, the oil subsidy cuts, and raising the interest rates at banks?

The government’s comprehensive reform programme aims to address the current macro imbalances and the deep-seated problems that hold back the economy. The key objectives of the programme are to restore macroeconomic stability, strengthen fiscal and external sustainability, and lay a solid foundation for inclusive and robust growth and employment creation. The government of Egypt is implementing strong and front-loaded adjustment of fiscal and monetary policies to stabilise the economy and place public debt on a clearly declining path. It has also launched broad-ranging structural reforms to support private sector development, strengthen the financial sector, promote exports, and improve governance and the business climate. The efforts made by the authorities will help restore confidence, attract investments, and continue to catalyse international financial support that is essential to ensure adequate financing of the programme.

Do you think that Egypt’s rating will improve from B in the coming period due to the recent economic reforms?

The major rating agencies have their own criteria and methodology, and it is hoped that with the improvement of many of the criteria, the outlook remains stable.

Egypt is committed to repaying its debts. Do you think that Egypt has the credit worthiness to repay loans from AfDB, in light of the public debt exceeding 110% of GDP?

The government of Egypt has never defaulted on its debt payments to the international financial institutions, and so this is not a concern. The foreign debt sustainability is positive, and so Egypt has enough headroom to borrow on the international capital markets and borrow resources from international financial institutions. The growing public debt is of concern, as this is high and can also stifle private sector credit.

Is the bank interested in funding projects and sectors characterised by intensive employment in Egypt?

The bank is deeply committed to the area of job creation, which is one of the key pillars of the bank’s overall strategy as highlighted in the “High 5s” (the bank’s priorities to light up and power Africa, feed Africa, integrate Africa, industrialise Africa, and improve the quality of life for the people of Africa). We plan to support a project related to job creation in informal settlements in 2018. Through our interventions with lines of credit to commercial banks, we plan to ensure that job creation is at the forefront of all our planned interventions.

In your opinion, how can the government of Egypt overcome the problems related to the investment environment?

The government is intensively focusing attention on attracting higher FDIs with a focus on job creation across all sectors. This push has come through both structural reforms that the government has undertaken, including the depreciation of the currency, as well as new legislation, such as the new investment law and industrial licensing. The Ministry of Investment and International Cooperation is taking a leadership role in ensuring the right conducive environment for private sector growth through FDIs.

 

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Power generation projects in SCZone could generate $100bn per year: El Nahrawy https://dailynewsegypt.com/2017/09/18/power-generation-projects-sczone-generate-100bn-per-year-el-nahrawy/ https://dailynewsegypt.com/2017/09/18/power-generation-projects-sczone-generate-100bn-per-year-el-nahrawy/#respond Mon, 18 Sep 2017 08:00:26 +0000 https://dailynewsegypt.com/?p=636192 It is proposed to establish trade and logistics areas east of the Suez Canal

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There should be an area for the manufacture and maintenance of containers and vessels, and a city for the research of international trade and shipping services

The Suez Canal Economic Zone (SCZone) is expected to become a development locomotive for the Egyptian economy. Ayman El Nahrawy, the head of training and programmes department at the Arab Institute for Leadership Development at the Arab Academy for Science Technology and Maritime Transport, believes that the zone is full of investment opportunities in all sectors.

El Nahrawy suggested establishing power plants based on gas turbines and other wind-based and geothermal power generation plants to achieve revenues of $100bn per year.

How do you see the investment opportunities in the SCZone?

The project is set to begin through three main development points. The first is the development of Port Said with the East Port Said area. The second is Ismailia and Al Amal district, along with the Valley of Technology and New Ismailia.

The third is the development of the northwest Gulf of Suez, with the port and the Ain Sokhna Airport, as well as development plans in different sectors.

In agriculture, land reclamation, and aquaculture, there are projects for reclamation of 77,000 feddans east of the Suez Canal, next to completing the reclamation and cultivation of West Salam, East Salam, West Suez, East of Lakes, East Suez, and Port Said canal.

In addition, the plans include the new expansions: East Salam, Shabab Extension, and West Suez, next to fish farming for high-value products in the governorates of Suez and Port Said.

What about the industrial sector and investment opportunities?

In the industrial sector, the first phase includes the construction of the Valley of Technology on an area of 3,500 feddans out of a total amounting to 16,500 feddans. This is next to investment opportunities in the manufacturing and packaging of fish in East Qantara and East Port Said, as well as the centre for the manufacture and maintenance of ships and containers in Port Said and northwest of the Gulf of Suez, along with a major industrial zone in the east to the sub-canal.

At the service level, there are two projects. The first is the establishment of a technological university in the canal area in the Valley of Technology in Ismailia, and the second is the establishment of a scientific city in cooperation with international universities, and a medical city in East Port Said.

Do you have suggestions to make better use of the region?

There is a proposal to establish trade and logistics areas east of the Suez Canal and east of Ismailia, along with the development of the port of Port Said (expansion of the container terminal) and the establishment of a free zone east of the Suez Canal.

In addition, there are plans for the establishment of an area for the manufacture and maintenance of containers and ships, and a city for the research of international trade and shipping services, and the development of the industrial zone in the city of East Qantara.

On the tourist level, it is possible to establish a distinct tourist centre on the Mediterranean Sea east of Port Said, and recreational and sports areas on the Mediterranean coast east of Port Said and the Suez Canal.

This comes along the establishment of Bedouin centres in the south of Ras al-Barqa, Ras Shaytaan, and al-Qulaia in the Taba region in southern Sinai.

Egypt has plans to rely on alternative energy solutions. Do you have any suggestions in this regard?

At the level of the new and renewable energy sector, there are proposals to establish two solar power stations and combined-cycle gas turbines in the northwest of the Gulf of Suez.

In addition to the establishment of a wind power plant project in the northwest Gulf of Suez, and the establishment of a power plant with capacity of 50 MW through geothermal power on the Gulf of Suez.

This project is expected to generate revenues of up to $100bn per year.

What are the main development centres of the Suez Canal Development Plan?

There are several main centres through the establishment of a global logistics service area, through the development of Port Said with East Port Said area on 70,000 feddans, along with East Qantara and the Plain of Tina, with the creation of a new tunnel beneath the canal.

The plan also includes the identification of areas of agricultural reclamation, establishment of fish farms, in addition to the establishment of industrial and free zones, and the implementation of tourism and maritime activities.

The development of Ismailia and the Al Amal suburb comes with the Valley of Technology and New Ismailia on an area of 66,000 feddans, along with a tunnel beneath the canal there too. The development plan for this area also includes establishing a logistics area with import and export, manufacturing and distribution, warehousing, and shipping and container manufacturing, in addition to the establishment of an industrial zone and a technological university, and the implementation of tourism and medical activities.

In the west of the Gulf of Suez, the area is of 46,000 feddans. It will include a logistics area that includes a marine and shipbuilding centre, container handling, transit trade, repair and maintenance services, and a shipping and technical inspection centre.

There are also proposals to establish a zone for petrochemical industries, ship fuel services and marine general services, marine equipment and metal structures centres, and feed and fish processing and packaging, along with the packaging and export of chemical fertilisers and cement.

The development of this area included the implementation of tourist activities by establishing tourist and hotel housing, recreation areas, restaurants, theatres and cinemas, and international sports activities, as well as maritime activities by establishing a centre for marine research and studies, the boat and yacht industry, floating unit construction, aluminum, scraping, and ship cutting.

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Unified Investment Law to further increase Egypt attractiveness: OBG Africa managing editor https://dailynewsegypt.com/2017/09/18/unified-investment-law-increase-egypt-attractiveness-obg-africa-managing-editor/ https://dailynewsegypt.com/2017/09/18/unified-investment-law-increase-egypt-attractiveness-obg-africa-managing-editor/#respond Mon, 18 Sep 2017 07:15:36 +0000 https://dailynewsegypt.com/?p=636183 US aid cuts will unlikely deteriorate economic ties

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Oxford Business Group (OBG) is a global publishing, research, and consultancy firm that publishes economic intelligence on the markets of the Middle East, Africa, Asia, and Latin America. OBG offers comprehensive and accurate analysis of macroeconomic and sectoral developments, including banking, capital markets, insurance, energy, transportation, industry, and telecommunication.

To learn more about OBG’s views of Egypt’s economy and the recently adopted economic reform programme, Daily News Egypt interviewed Robert Tashima, OBG Africa managing editor, who reviewed the economic performance of Egypt during the last period and the impact of economic reforms on the life of the average Egyptian.

How do you evaluate Egypt’s economic reform programme after a year?

Given the breadth and depth of the reforms being undertaken, from the Egyptian pound’s flotation to subsidy cuts, it is difficult to say how successful the reforms have been after just one year. The sheer scale of some of the changes means that it will take time before the impact can accurately be measured.

However, one thing is clear: the reforms are necessary. Take the pound’s flotation, for instance. Without that, foreign exchange reserves would continue to drop, Egypt’s exports would be increasingly uncompetitive, and imports would be difficult to source. It’s a similar situation with subsidy cuts: without them, the ability of the government to maintain its spending commitments and thus its ability to do everything from paying workers to investing in roads and schools would be continuously weakened.

But this does not mean that passing the reforms is equal to the hard work being done. The government needs to walk a fine line between maintaining its fiscal health and macro stability, while ensuring that the most vulnerable are not adversely affected by the resulting price rises.

As a result, in many ways, the hard work still remains, because these reforms inevitably come with downside risks. Unfortunately, for Egypt, which has a large low-income population, those downside risks are significant. As a result, passing specific legislative reforms can only be the starting point for any comprehensive overhaul of the economy.

How do you view the unified Investment Law?

The new Investment Law of 2017 brings about a number of substantial and encouraging changes to Egypt’s investment environment. The reforms run the gamut, from increased protections and rights for foreign investors to improved processing administration to potentials for discounts on land and an expansion in certain types of tax reliefs. The changes help further burnish Egypt’s attractiveness as a destination for foreign capital and reduce some of the key hurdles that investors used to grapple with, such as the burdensome bureaucracy and high-land costs.

This has already yielded some reassuring results. For example, in OBG’s last “Egypt Business Barometre”, which came out during the debate on the Investment Law, but, prior to its implementation, we found that nearly 80% of Egypt’s CEOs are positive or very positive about local business conditions. You would have been hard-pressed to find such a sizable response just a few years ago. Perhaps, even more impressively, many of those investors are willing to put their money where their mouth is, as 75% planned to make a major capital investment.

We can see evidence of that increased willingness in the Central Bank of Egypt’s (CBE) latest round of foreign direct investment (FDI) figures from the most recent fiscal year, which show a double-digit increase in inbound investment to around $8bn. That may not have quite reached the government’s target, but it is a notable rise in the face of global headwinds, such as low oil prices, Brexit, and the US presidential elections.

How will the US aid cuts affect economic relations between the two countries?

Discerning the guiding principles of US foreign policy has become increasingly difficult under the Trump administration. However, in spite of the recent aid cuts and the uncertainty in the White House, given the historically close governmental ties between the US and Egypt, and the strength of private sector links between the two countries, a marked deterioration in economic relations seems unlikely. Ultimately, the aid cuts are relatively modest—nearly $400m out of a total of $80bn since the late 1980s—and in light of the emphasis the US places on security cooperation in Egypt, the prospect for more significant cutbacks is slight.

How do you view Egypt’s tourism sector?

Tourism isn’t only a key source of foreign revenue or the second largest, but it is also a key employer. I mean it is a very labour-intensive sector. Supporting the tourism sector or encouraging it is crucial for the country to meet its targets. Obviously the sector has been hit hard by the revolution and the turbulence that followed, in addition to the more recent incidents, such as the downing of the Russian aeroplane. If you asked me if I would recommend visiting Egypt, I would for so many reasons. I go to Egypt four times a year, and it’s a fantastic place.

I believe the warnings issued by the British and US governments are overcautious. If you look at the average touristic destination in the world, you will find a similar risk, if not a more elevated risk in some places, such as Kenya, Taiwan, or even Paris and Brussels. Currently, in Washington DC, where I am right now, there is probably a higher security risk of being shot than there is in Egypt. There are certainly some parts of the country where there is more risk, but there is no apparent reason for a tourist to go to some of these parts—in Sinai, for example.

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Egypt economy at last reviving, government should press ahead with reforms: Angus Blair https://dailynewsegypt.com/2017/09/18/egypt-economy-last-reviving-government-press-ahead-reforms-angus-blair/ https://dailynewsegypt.com/2017/09/18/egypt-economy-last-reviving-government-press-ahead-reforms-angus-blair/#respond Mon, 18 Sep 2017 07:00:47 +0000 https://dailynewsegypt.com/?p=636181 We expect some appreciation for the EGP, but inflation levels to remain as they are

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Angus Blair, the CEO of Pharos Holding, who has been studying the Egypt economy for the past 25 years, sees that the biggest economy in North Africa is on track to revive after years of turmoil.

In an interview with Daily News Egypt, Blair said that the government should press ahead with more reforms and to bring inflation to single digits to spur growth.

Let’s start with the macro picture. How do you see Egypt’s macro indicators after the current reforms?

I have been working on and forecasting the Egyptian economy for around 25 years (including leading the CIB global depository receipt (GDR) in 1996) and this is the third economic reform programme in that time. Some of the bravest and toughest decisions have now, at last, been taken, including the currency devaluation and the beginning of real cuts in unsustainable subsidies, among others. So many issues remain to be addressed, including working hard to cut inflation to single figures, since the rate has risen too far, but I like the overall shift in addressing the issues, while there remains no room to be complacent as other countries are also transforming.

 

Do you think Egypt’s fiscal progress falls short of the IMF goals, or will they be able to meet it, and why?

 

With the rise in interest rates (which I think was unnecessary) the interest burden of the high levels of debt means the government’s budget deficit targets will be tougher to meet. I would like to see interest rates come down very quickly (to boost domestic bank lending). However, the rise in taxation is a positive indicator and will help meet the targets.

 

Let’s move to FDIs, how do you think the new Investment Law could work to attract more foreign investors, should Egypt introduce more to entice them?

The Investment Law and its executive regulations should help to focus investment attention on the areas where the government would like to see investment. However, it is in the working of the law and regulations that the market will look for too, and I hope that the overall processes of investment and continuing governance are quicker than in the past.

 

What are your expectations for the US dollar against the Egyptian pound in the coming period? Will it be in a downtrend, or an uptrend, and why?

We expect some appreciation of the Egyptian pound, but with inflation levels as they are, this will be tough to achieve, so it is imperative that the government looks at every way to reduce inflation quickly and keep it low.

 

What are your expectations for the CBE’s monetary policy? Will it continue its tightening policy?

I think the next move will be to see interest rates coming down—and the sooner, the better.

 

Finally, do you think that the Egyptian economy is on track to revive, or should the government introduce more reforms?

The economy is, at last, reviving; but, as all governments globally know, this is a task that is never ending. Egypt should continue to press ahead, ensuring that there is a secure social safety net for the poor, while looking to make Egypt the most attractive destination for investment for domestic investors and then for foreign investors. I would recommend that to create an Egyptian economy that can compete in an increasingly high tech/AI world, education in Egypt has to become world class. Greater effort must be made to make growth sustainable and inclusive.

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Foreign investors confident about outlook of Egypt economy: Fitch senior director https://dailynewsegypt.com/2017/09/18/foreign-investors-confident-outlook-egypt-economy-fitch-senior-director/ https://dailynewsegypt.com/2017/09/18/foreign-investors-confident-outlook-egypt-economy-fitch-senior-director/#respond Mon, 18 Sep 2017 06:45:20 +0000 https://dailynewsegypt.com/?p=636178 The rating agency expects Egypt’s economy to grow 4.5% in 2018

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For Jan Friederich, a senior director at the credit rating agency Fitch, Egypt’s economy is now on track to attract more foreign inflows, with investors more confident about the outlook of the $300bn economy.

“Investors seem to be more confident at the current stage. The reform programme is underway in full swing, and the results have already started to boost the country’s economic indicators,” Friederich told Daily News Egypt in an interview.

“Fuel subsidy reform is a key element of Egypt’s $12bn IMF programme,” Friederich added.

Let’s first take your comment about the performance of Egypt’s economy at the current stage.

I think the economy is reviving, with the government insisting on carrying out its reform programme. On the other side, investors are tracking the progress to inject more cash in the most populous Arab country.

How should these reforms affect the fiscal consolidation for the country?

The new budget and lower electricity and fuel subsidies demonstrate a continued commitment to fiscal consolidation and economic reform, backed by the country’s IMF programme.

Narrowing the fiscal deficit supports Egypt’s sovereign credit profile, but significantly reducing the public debt ratio is a multi-year task.

The government had earlier cut fuel subsidies, in a move that will save around EGP 35bn ($2bn) compared to fiscal year (FY) 2017, when subsidy spending increased owing to the sharp currency depreciation.

Fuel subsidy reform is a key element of Egypt’s $12bn IMF programme.

The government has also followed through on its plan for a fourth round of electricity subsidy reform, lowering the electricity subsidy bill to EGP 30bn, although it has extended the deadline for phasing out electricity subsidies to 2021 from 2019.

Do you think these reforms are enough to persuade investors to come back to the country after years of turmoil?

Cutting energy subsidies at the beginning of the fiscal year gives us greater confidence in the authorities’ willingness to control expenditure and hence in the credibility of fiscal targets.

What about your expectations for Egypt’s finance in the current fiscal year?

The FY 2018 budget aims to reduce the budget sector fiscal deficit to 9.1% of GDP (with a primary surplus of 0.3% of GDP), from an estimated 10.9% of GDP in FY 2017.

Fitch’s forecast of 9.3% (and a primary deficit of 0.3%) implies modest slippage against the target while maintaining deficit reduction.

We think there is scope for stronger-than-budgeted revenues given high inflation and following the introduction of the value-added tax (VAT) last October. The VAT should be a significant source of revenue in FY 2018 due to an increase in the rate to 14%, the full-year effect, and the improved administration of VAT on services.

What should affect you credit rating for the country in the coming period?

Public finances are a key weakness in Egypt’s sovereign credit profile. We estimate that the general government debt/GDP ratio exceeded 100% at end of FY 2017 following the flotation of the Egyptian pound. We forecast a decline to 87.9% in FY 2019, but this is highly dependent on securing a small primary surplus and increasing economic growth.

We think politics presents the key risk to consolidation, which stalled in FY 2016 around the parliamentary elections.

There may be a similar risk ahead of the presidential elections due by May 2018. Measures already legislated for, including civil service reform and the introduction of VAT, together with the IMF programme, provide a stronger policy anchor.

But political sensitivity to the social impact of spending cuts and high inflation still presents implementation risk.

What about your expectations for foreign inflows?

Egypt’s removal of foreign currency transfer limits will help to restore confidence in the economy and attract foreign investments, increasing the availability of foreign currency and helping banks provide more lending needed by foreign currency borrowers, particularly importers.

We expect a greater inflow from foreign investors now that the Central Bank of Egypt (CBE) has ended the $100,000 annual cap on the amount that account holders can transfer outside Egypt.

The removal of the cap, a requirement of Egypt’s lending programme with the International Monetary Fund, should reduce foreign investors’ concerns that investments could be trapped in Egypt.

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Egypt’s economy embarks on recovery, but challenges remain: Capital Economics senior economist https://dailynewsegypt.com/2017/09/18/egypts-economy-embarks-recovery-challenges-remain-capital-economics-senior-economist/ https://dailynewsegypt.com/2017/09/18/egypts-economy-embarks-recovery-challenges-remain-capital-economics-senior-economist/#respond Mon, 18 Sep 2017 06:30:50 +0000 https://dailynewsegypt.com/?p=636169 The Central Bank of Egypt will leave rates on hold until further evidence of falling inflation

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Capital Economics senior economist Jason Tuvey seems to be optimistic about the economic future of the biggest economy in North Africa.

He has been writing forecasts about Egypt’s economy for almost five years in the London-based consultancy group.

In an interview with Daily News Egypt, Tuvey said that Egypt’s economy has embarked on the path to recovery, but challenges remain.

“If the government stops at this point, bad results are expected. They should finish what they started,” Tuvey said.

He also expected the Central Bank of Egypt (CBE) to leave rates on hold until further signs of taming the rampant inflation.

Let’s talk first about the economy’s performance at the current stage?

I think the economy is on track to revive at the current stage, with reform measures starting to pay off. Fiscal consolidation has begun; however, progress is slow-going.

How do you see the fiscal progress, and does it meet the IMF goals?

Egypt’s budget deficit has narrowed sharply over the past year, and the high public debt-to-GDP ratio should start to fall back soon. However, the authorities have already missed some of the fiscal targets outlined by the International Monetary Fund (IMF) back in January. For now, Egypt has managed to secure a reprieve, but further slippage could yet see tensions between Cairo and the IMF come to the fore.

The improvement in the budget position can be attributed to expenditure restraint, rather than higher government revenues. Indeed, government receipts have been broadly stable as a share of GDP. The introduction of a value-added tax (VAT) late last year, which replaced the previous goods and sales tax, has supported a pick-up in tax revenues, but this has been offset by a drop in non-tax revenues.

In contrast, government spending has dropped by around 2% of GDP. This has been supported in large part by weaker spending on public sector wages. As part of its IMF programme, the Egyptian authorities agreed to trim the size of the public sector workforce and start indexing bonuses. There were doubts about whether the government would be able to stick to its commitments given its concerns about potential social unrest, so this data is encouraging.

The one disappointment is that the authorities have made limited progress in cutting the large subsidy bill. Regulated energy prices were hiked in November last year; however, the 50% drop in the pound against the dollar raised the cost of imported fuel products in local currency terms, meaning that the impact on overall subsidy spending was broadly neutral.

What about the business climate at the current stage?

Egypt’s new Investment Law is a positive step towards improving the dire business environment. But greater efforts, particularly in raising domestic savings, are needed if investment is to reach the levels that have historically supported strong and sustained growth in other emerging markets.

Egypt is one of the toughest places in the world to conduct business. The country ranked 122 out of 190 in the World Bank’s latest “Doing Business” report. The poor business environment is one factor behind the country’s extremely low investment rate of just 15% of GDP.

Low investment is a concern, as it results in poor infrastructure and means that the country is slow at adopting new technologies—all of which hinder productivity growth and increases in living standards. Over the past decade, labour productivity (or output per worker) in Egypt has fallen.

Overall, the new law appears to be a move in the right direction. “Certification offices” will be set up to review applications and supporting documents for licences, allowing investors to side-step slow bureaucracy. Meanwhile, the authorities have granted investors the right to repatriate profits without restriction and to establish private free zones (private projects which enjoy the benefits of free zone status).

Nonetheless, I don’t think the new Investment Law goes far enough. The establishment of “certification offices” merely masks the bloated bureaucracy, which investors are still likely to come up against. Meanwhile, the right to repatriate profits and establish private free zones is merely a reversal of previous policy decisions that prevented these. And there are also concerns that the new law could foster corruption. In particular, the ability for the authorities to allocate free plots of land for “strategic business activities” is a worrying hark back to the land deals that, among other things, tainted the Mubarak regime.

Moving to inflation, when it should start to fall?

The increase in inflation has been driven by one-off factors. The most important has been the devaluation of the pound last November, but a series of indirect tax hikes and subsidy cuts over the past year have also accelerated the rise in inflation. The key point is that these one-off boosts to inflation have now peaked and should start to unwind in the coming months.

We estimate that the fading impact of the pound’s fall will cut inflation by as much as 10 percentage points by early 2018. Similarly, the contribution of fiscal measures to headline inflation will decline by a further 3-4 percentage points over the same period.

Beyond that, there are good reasons to think inflation will fall further. For one thing, the period of weak growth since the Arab Spring revolution appears to have created some spare capacity in the economy. That should keep a lid on wage and price pressures at the same time.

Overall, we think inflation will fall below 20% around the turn of this year. It may then decline to about 11% by the end of 2018 and into single digits in 2019.

Then, how should the CBE react to falling inflation?

The CBE should loosen its policy. We expect the benchmark overnight deposit rate to be lowered by 100bp to 17.75% at the MPC meeting in December of this year. The easing cycle should then gather pace. We expect the policy rate to drop to 12.75% by the end of 2018 and 10.50% by the end of 2019.

How do you see the performance of Egypt’s tourism sector?

Egypt’s tourism sector has embarked on the path to recovery. The government is overly optimistic, as the rebound should help to narrow the current account deficit and boost GDP growth.

The past six years have been a terrible time for Egypt’s tourism sector. Civil unrest surrounding the Arab Spring n 2011 and the second revolution in 2013, combined with a multitude of terrorist attacks, drove tourists away from the country. At their trough late last year, visitor arrivals were 65% below their peak and at their lowest level since 2003.

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Egypt back on investment map: IFC https://dailynewsegypt.com/2017/09/18/egypt-back-investment-map-ifc/ https://dailynewsegypt.com/2017/09/18/egypt-back-investment-map-ifc/#respond Mon, 18 Sep 2017 06:15:43 +0000 https://dailynewsegypt.com/?p=636175 IFC’s commitments in Egypt close to $1bn, says IFC director for the Middle East and North Africa

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In an interview with Daily News Egypt, Mouayed Makhlouf, the International Finance Corporation’s (IFC) director for the Middle East and North Africa (MENA) region, said that narrowing infrastructure gaps in Egypt is one of the IFC’s priorities.

What is your opinion regarding the recent economic reforms that are part of the Sustainable Development Strategy: Egypt Vision 2030, such as the liberalisation of the exchange rate of the pound and the fuel subsidy reduction? 

The flotation of the local currency and the cut in fuel subsidies, although difficult decisions, are steps in the right direction. They are part of a bold economic reform programme that is already bringing investments back into the country and supporting economic growth.

The reduction of fuel subsidies, while painful, helped the government reduce its budget deficit amid a shortage of foreign currency. Meanwhile, the devaluation of the currency made Egypt appealing to investors, putting it back on the radars of some for the first time in years. While the reforms are quite recent, they are having an impact. A recent issuance of treasury bonds on international markets, designed to help alleviate a foreign currency shortage, was oversubscribed. We have also seen foreign financial institutions, like the World Bank Group, step up with critical funding for infrastructure projects. Those include a massive solar plant being planned for the Aswan area.

At IFC, we believe in the long-term potential of Egypt and will continue to support its reform efforts.  After several difficult years, it is good to see the country back on the investment map.

Will you increase the portfolio regarding Egypt in the coming period? If yes, please tell us the amount of increase, and when?

The recent reforms have definitely made Egypt a more attractive country for investors. Recently, our executive board of directors approved an investment of up to $635m in the world’s largest solar project, Benban, Aswan. The financing will be geared towards constructing and operating 11 solar plants with a combined power of 500 megawatts as part of the country’s solar feed-in tariff (FIT) programme.  This, along with other investment projects in our pipeline, could bring our commitments in Egypt close to $1bn.

What are the current projects that the IFC is committed to in Egypt? In addition, what are the mega projects that the IFC is participating in funding with other international financial institutions? 

Narrowing infrastructure gaps in Egypt is one of our priorities. We will continue to look for opportunities in this sector, with focus on energy generation and renewables. As mentioned before, we approved investing $635m in the country’s ambitious FIT programme. Last fiscal year, which ended June 2017, we provided $20m to Hassan Allam Holding, which specialises in developing mega infrastructure projects, like power facilities and sanitation plants. In fiscal year 2016, we invested $144m in Sonker Bunkering Company to help the company build Egypt’s first privately owned liquid fuel terminal at Port Sokhna to capitalise on Egypt’s central location and help the country develop as a logistics and energy hub.

What is the size of loans allocated for funding SMEs in Egypt? Additionally, what are the recent requests you received, and what are the IFC’s decision in this regard?

Our support to small and medium enterprises (SMEs) extends far beyond financing. At IFC, we take a more holistic view. We see SMEs as key drivers for growth, not only in Egypt, but also in several other developing economies. Yet, they face a host of challenges, like securing capital and financing, paying for high energy bills, finding skilled labour, and dealing with burdensome regulations. Our investment and advisory work is geared towards addressing these challenges.

On the financial side, we have provided long-term loans to several Egyptian banks, allowing them to scale up their lending operations to SMEs, while simultaneously supporting the banking sector amid the foreign currency shortage. This included a $100m loan to the Arab African International Bank and a financing package of $50m to the National Bank of Kuwait-Egypt. These investments will also help both banks promote a sustainable energy financing programme that will enable firms to reduce energy bills by adopting green technologies.

At the IFC, we also support entrepreneurs, including those in the technology sector. These entrepreneurs often struggle to get financing for their ideas and advice from others who have walked the startup path. To change this, we provided up to $11m to startup accelerators and venture capital firms, like Cairo-based Flat6Labs and Algebra Ventures.

On the advisory side, we are doing a lot to support SMEs. We are working on promoting our women banking programme in Egypt, which aims to support banks in providing female entrepreneurs with both financial and capacity building of business skills, which are much needed by women, in order to help them expand their businesses.

We are also helping information and communications technology (ICT) companies find skilled workers. We are working with ITIDA to improve the abilities of ICT graduates. The aim is to equip them with the skills in demand by employers, ultimately contributing to the reduction of unemployment, which has long been a problem in Egypt.

What is the volume of funds allocated to the energy sector, both traditional and renewable?

The IFC is looking to expand its programme in the energy sector, as evidenced by the recent approval to support Egypt’s FIT programme. In previous years, we provided a $100m loan and helped arrange up to $400m for natural gas producer Petroceltic, allowing it to ramp up operations in Egypt. We also provided a $34m loan to Transglobe Energy, helping the oil company increase exploration in Egypt and Yemen.

In your opinion, what are the challenges that face investors, and how may they be overcome?

Economic and political reforms go hand in hand, and investors in general look at a number of factors before entering any given market. For example, they seek high-growth potential, low economic and political risks, clarity of regulations, credibility of the government, and a competitive edge in the market. Egypt has been able to address many of these issues with its economic reform programme. We see many positive changes in the newly ratified Investment Law. It provides a range of guarantees and rights for investors. For example, it codifies the fair and equitable treatment of investors and provides access to freely convertible currency. It guards against the expropriation of assets without compensation. It also sets up transparent procedures for allocating land for investment and bars discrimination against foreign investors.

Despite the recent reforms, more could be done to attract investors. The new Investment Law does not explicitly cover every industry. Instead, it includes a “positive list”, which defines the sectors it covers. That could limit its scope and make it difficult to implement.

Meanwhile there is a need to make it easier for companies to enforce contracts. Currently, it takes an average of three years to resolve a commercial dispute through courts. By automating more court procedures, the country could speed up the settlement of cases, which would boost investor confidence.

Also, Egypt could make it easier for companies to trade internationally. The country, strategically located between east and west, could be an important logistics hub. But red tape and high customs fees discourage cross-border commerce. The country ranks 168th on the Doing Business’ “Trading Across Borders” indicator. Cutting back on bureaucracy would be relatively simple and lead to major gains.

 

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Palm Hills founder sees a breakthrough in confidence crisis between government, private sector https://dailynewsegypt.com/2017/09/18/palm-hills-founder-sees-breakthrough-confidence-crisis-government-private-sector/ https://dailynewsegypt.com/2017/09/18/palm-hills-founder-sees-breakthrough-confidence-crisis-government-private-sector/#respond Mon, 18 Sep 2017 05:45:29 +0000 https://dailynewsegypt.com/?p=636163 Strengthening the pound on the short term threatens the Egyptian economy

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The confidence crisis between the government and the private sector in Egypt has witnessed a major breakthrough after years of scepticism and injustice, said businessperson Yasseen Mansour, the founder and chairperson of publicly-traded Palm Hills Developments, one of Egypt’s biggest real estate developers.

Mansour, who has not spoken for media in many years, said in an interview with Daily News Egypt that Egypt’s economy is on the right path thanks to recent difficult political and social decisions.

The interview focused on the current economic situation and his advice to the government. He explained why the production economy has not witnessed recovery so far, while only financial indicators keep improving, including reserves, remittances, and borrowing from abroad.

How do you see the confidence crisis between the government and the private sector?

There is no doubt that we are witnessing a major breakthrough in the confidence crisis between the government and the private sector, which began in 2011, where all investors and their families were affected, some of which were imprisoned. Losing confidence in the private sector may destroy the economy.

The private sector has suffered from injustice in the past years. The investors and their families will not forget quickly their suffering. The restoration of the private sector’s activity does not require only reform of the business environment and investment climate, but also a psychological treatment of the investor.

The local investors are the biggest catalyst for foreign investment since they convey a sense of confidence and credibility of the economic reforms carried out by the government.

We are witnessing a great improvement in the state’s dealings with the private sector. The investment climate became better now thanks to the recent legislative reforms, activating the dispute resolution committees, and the state’s respect of its contracts with the private sector. Hence, the private sector became more confident in its government contracts than ever before. We live in a healthy, competitive climate.

What do you mean by the healthy competitive climate, while the flow of foreign direct investment is still weak despite reforms?

The investors have resorted to international arbitration and the state has lost not only money, but its reputation in the global financial and business circles. Now we are in front of an economic administration that stimulates the private sector, assures it, and contracts with it in a serious and respectful manner.

The allowance of foreign companies to transfer their profits raises the competitiveness of the Egyptian market, in addition to the commitment of the state to maintain economic legislation to enable investors to conduct feasibility studies that calculate return and risk for a long time.

But what about foreign direct investment that has not been as active as hoped?

Developing countries in the time of economic transition are undergoing several cycles, and the results of reform are not always fast. Egypt has now taken a series of difficult economic decisions, including the flotation of the currency, cutting subsidies, applying the value-added tax (VAT), and coming to an agreement with the International Monetary Fund (IMF).

But now we are in the process of maintaining reforms to reassure business communities. We are now being tested by all investors in the world, and investors usually have three stages in investing in such periods. The first stage is investing in government debt instruments internally or externally, then the stock market, and then long-term direct investment, which creates jobs, contributes to development, and lowers prices.

The Central Bank of Egypt (CBE) announced last week that the balance of payments (BoP) recorded a surplus and the foreign direct investment (FDI) increased to $7.9bn by the end of last fiscal year, compared to $6.9bn in the fiscal year 2015/2016—an increase of $1bn.

However, most of these investments are directed to the petroleum sector, which accounted for about $4bn of total FDI at the expense of the industrial sector.

So when do you think Egypt can attract FDI? And what can the government do to speed up the process?

I expect that the economic performance of companies and indicators will stabilise during 1.5-2 years. The government needs to reassure domestic and foreign investors about the stability of economic legislation and the foreign exchange market, as well as the state’s respect for contracts with companies.

How do you see the current economic situation? And do we need amendments to the reform programme?

Certainly, Egypt’s economy is on the right path. I believe the economic reform measures are going very well—notably the restructuring of the subsidies system, which represents a huge burden on the general budget.

The restructuring of the fuel subsidies system was necessary. The owners of luxury yachts benefited from the subsidised fuel at the expense of the limited- and non-income people. The subsidised fuel was even smuggled to other countries at international prices!

Commodities and services must be sold at their real price, in accordance with the supply and demand mechanisms and in parallel with making an inventory of the beneficiaries of the subsidy in order to protect it.

The bitter reform also affected the wealthy classes, which deal with foreign currency regularly; however, the largest impact of reform lies on the burden of the middle class.

Do you think the government was ready for the post-flotation period?

There is no doubt that the economic decisions made by the government are 100% accurate, and the turbulence experienced in the markets in the first stage was natural. I think that the markets absorbed this shock very well and the government is dealing with these imbalances professionally.

What about the industry sector, exports, and the future of tourism?

The recovery of the productive economy will take time, since the past years have witnessed a complete paralysis of all industries, as well as an expansion in imports at the expense of production and manufacturing. After the flotation, the local manufacturing was supposed to become competitive, which is currently happening, but requires more time.

I know that the BoP did not see much improvement during the first year after the flotation, but it is natural, because it is still in the stage of absorbing the shock.

The increase in exports is not only related to the devaluation of local currency, because the low pricing of exports is not the only factor for increasing exports. Thus, the Egyptian industry should work hard to ensure the high quality of local products.

What about the tourism sector?

The tourism sector is witnessing a great improvement, since the flotation has definitely contributed to making the Egyptian market a competitive tourist destination due to its very low price.

Some experts still believe that the recent recovery was only financial (i.e. foreign investments in debt instruments and remittances)?

I totally agree, because Egypt is currently following the IMF agenda, but the country needs an influx of foreign currency in order to cover the profit transfers of foreign companies, secure foreign trade, and pay foreign oil companies’ dues.

In fact, the fastest supplier of dollars is the debt market, both domestic and international, in addition to the exchange market. There is no doubt that the CBE’s foreign reserves of $36.14bn strengthen the ability of the country to meet its obligations and raise the credit rating.

The high interest rates and the devaluation of the local currency are behind foreign investments in the debt market, which affects the FDI?

The increase of interest is very controversial. The CBE has raised the interest rates by 10% over the past year in order to reduce inflation; however, it is still rising, because it is related to other decisions, such as raising the fuel prices and the pound’s flotation.

We certainly need to reduce the interest rate, and I expect it to fall by 2%-3% within six months, especially as the inflation is expected to decline.

The high interest rates destroy the private sector and raise the cost of economic activity because the citizens will be prompted to put their money in banks instead of investments.

It is time to review interest rates to protect the domestic industry, and it should be done gradually, because the high interest rates attract foreign investments in the debt market. So we should avoid affecting the most important source of foreign currency now.

I advise monetary policy makers not to hasten in the strengthening of the pound, because such a move could damage the economy on the short term. It would repel FDI, reduce foreign investment in the debt market, and reduce the competitiveness of Egyptian exports and tourism.

What about the impact of high interest rates on the government programme of offering public companies on the stock exchange?

Certainly, the offering of the government companies on the stock market will be difficult in light of the high interest rates, since no one will invest in the stock market in the presence of 20% certificates and 19%-20% government debt instruments.

So we should review the interest rates to ensure the success of the government exchange programme.

Do you see that the state is contending with the private sector?

I would like to say that any businessperson in the private sector will go for the free market in which the state regulates its rules and ensures that prices are set in accordance with the supply and demand mechanisms.

I believe that the state intervention in economic activity during the post-2011 period was inevitable, due to the decline of the private sector. The country was going through an exceptional situation, and the state had to produce and establish, or else the country would be paralysed.

How do you see the call for imposing progressive taxes to increase state resources?

When Youssef Botros Ghali was the minister of finance, Egypt reduced taxes. As a result, the tax proceeds increased and the tax evasion declined significantly.

I do not support the progressive taxes. Imposing any additional tax will force foreign investors to go to other countries that can provide more stable and less expensive markets.

But there is another interesting file that will add a lot to the country’s treasury.

What is that?

The legalisation of the informal economy, which does not pay taxes at all. There are many different estimates on the size of this economy, but it will not be less than the size of the formal economy.

The country should deal carefully with this sector, because it always has concerns in dealing with the government, but the state could grant them a tax exemption for a number of years until they start producing and expanding under the umbrella of the formal market.

I refuse the progressive taxation because it will repel investors and make the formalisation of the informal economy impossible.

What about the reflection of regaining confidence between the private sector and the government on Palm Hills?

Palm Hills recently signed a partnership agreement with the Ministry of Housing to develop 3,000 feddans in 6th of October City and to build a new city, called “Oasis of October”, with investments of about EGP 150bn.

The company has allocated about EGP 70bn to complete existing projects in the coming period.

The company will work with major engineering consultants, such as Albert Speer, McKinsey, and Ernst & Young.

The project aims to provide about 300,000 job opportunities, and this is the largest workforce at the level of such projects.

The investment of the project is estimated at EGP 150bn, which means that the company is committed to injecting about EGP 13bn annually in the Egyptian market until the completion of the project, and after the completion of the procedures and requirements to start the activity and design drawings required within 18 months.

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Flotation toughest, most daring decision between Euromoney 2016, 2017: Fayed https://dailynewsegypt.com/2017/09/18/flotation-toughest-daring-decision-euromoney-2016-2017-fayed/ https://dailynewsegypt.com/2017/09/18/flotation-toughest-daring-decision-euromoney-2016-2017-fayed/#respond Mon, 18 Sep 2017 05:30:48 +0000 https://dailynewsegypt.com/?p=636166 The economic reform programme is a new breakthrough for economic growth and financial stability

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CEO and managing director of Bank Audi Egypt Mohamed Abbas Fayed said that the flotation decision was the most difficult and boldest decision between Euromoney 2016 and 2017.

Fayed told Daily News Egypt that the economic reform programme, which the government started to implement is a new start for economic growth and financial stability, stressing that although the Egyptian economy is characterised by diversity, “we have not exploited our potential to the optimal form so far.”

He added that high inflation, lack of a specific investment map, streamlining investment procedures, and confronting bureaucracy are the most important challenges facing the Egyptian economy.

Fayed pointed out that the banking sector has never ceased to support the economy even in the most difficult circumstances and has a strong liquidity to enable it to continue its role to the fullest, highlighting that food and beverages, contractual agreements, building materials, oil, gas, and pharmaceuticals are the most attractive sectors of banking finance.

Between the Euromoney Conference in September 2016 and the new version in 2017, the government and the Central Bank of Egypt (CBE) have taken a number of measures within the framework of implementing the economic reform programme. How do you evaluate these measures and their implications for the Egyptian economy?

The decision of the CBE on 3 November 2016 to float the Egyptian pound and leave its price to supply and demand was the toughest and most daring decision. It contributed to boosting the support of financial institutions to Egypt. Thanks to that decision, Egypt was able to obtain the approval of the International Monetary Fund (IMF) on a $12bn extended loan facility spanning three years. Egypt has already obtained two tranches of the loan.

In addition, Egypt successfully promoted international bonds offerings worth $7bn on two tranches, one of $4bn and the other of $3bn. The offerings were met by international demand, which is a recognition of the reform plan adopted by the state.

These decisions also contributed to the elimination of the black market and bringing back the foreign exchange liquidity to the banking sector. Banks have now collected some $40bn from clients and the banking sector was once again able to meet all the outstanding needs of the importers, in addition to providing dollar financing to their customers from the private sector. The dollar has become available within the Egyptian market and is governed by the strength of supply and demand.

What is your vision of the Egyptian economy at the moment? What about its future in the coming period?

The decisions of the economic reform programme of the Egyptian government, foremost of which is the liberalisation of the exchange rate, represents a new start for economic growth and financial stability, the return of domestic and international confidence, and the elimination of the parallel market and the provision of the dollar for different sectors. The reform also paves the way for an increase in Egyptian exports, proceeds of remittances, and volume of foreign investment in government debt instruments.

The improvement of the investment climate, with the new Investment Law passage and adoption of its bylaws will contribute to controlling the business environment, attracting foreign investment to Egypt and encouraging the private sector. The Egyptian economy is characterised by diversity and a lack of dependence on a particular economic sector. The Egyptian market is considered a big one, thanks to its large population. The country is at the centre of the world, but so far, we have not exploited these possibilities optimally.

Do you think there are challenges still facing the Egyptian economy now?

There are many challenges facing the Egyptian economy during the current period, namely its ability to achieve growth and attract investment, in light of high inflation rates, which the CBE targets to tame using all its tools. The inflation is hence expected to decline by the beginning of 2018.

The absence of a specific investment map so far is also a major project. Such map will showcase all the opportunities available in all fields, especially after President Abdel Fattah Al-Sisi ordered the establishment of the Supreme Investment Council under his presidency. The council has since passed 17 decisions that eliminate bureaucracy and encourage local investors to pump more investment.

The simplification of procedures for investment in Egypt and facing the bureaucracy are among the most important challenges that are facing the Egyptian economy today, which is on the way to kick off, supported by the economic reforms adopted by the state.

What activities or projects can help the Egyptian economy move quickly?

Small and medium enterprises (SME) are the mainstay of the national economy for all developed countries, as they are capable of leading growth and development.

It should be noted that the CBE’s launching of an initiative for these projects reflects the great attention paid by the political administration of the country to this vital sector, which has the ability of revitalising the Egyptian economy in the coming years by boosting the size of funding to the sector to EGP 200bn in the course of four years.

Bank Audi is very interested in financing this sector, which represents the growth engine. We have a specialised management team for this sector. We will achieve good growth rates in its finance portfolios in the coming years. We will not only stop at financing the projects but will also serve as the financial adviser to the clients of this sector so that they can achieve profitability that can be reflected on the size of their businesses and support the growth rates of the Egyptian economy.

How did the decision to liberalise the exchange rate affect the performance of banks?

This decision has had a positive impact on the banking sector, which succeeded in taking responsibility for managing the exchange rate file after the CBE’s decision in November 2016. The banking sector was able to attract dollar liquidity again, which enabled it to meet all the needs of dollar needs and cover the imports from abroad. I expect that the sector will continue to play its role in support of the national economy in the coming years.

What role could banks play to assist the Egyptian economy and help it move?

The banking sector has never ceased to support the Egyptian economy even in the most difficult circumstances. It has effectively contributed to the provision of all the financing needs of the public and private sectors, as well as being the biggest financier to the state and bridging the budget deficit through investment in treasury bills and bonds, next to supporting SMEs and mortgage, in line with the CBE’s initiatives.

The sector has strong liquidity, and this enables it to continue its role to the fullest by providing all necessary funding for development projects that support the growth of the Egyptian economy.

It is also important to emphasise that financial inclusion is one of the important axes that can maximise the role of banks if they increase and raise citizens’ awareness of the importance of dealing with the banking sector, because increasing the awareness of consumers (as well as their numbers) inspires banks to come up with new ideas for products and develop branches to meet different needs.

And what is the benefit to the state from financial inclusion?

Financial inclusion is the lifeline for Egypt because it is able to raise the level of the economy in Egypt through the integration of the informal economy within the formal sector, and thus increase the size of the GDP. Through financial inclusion, the state can control the movement of funds, be ready for changes, fight corruption, and increase tax revenues, which constitute 12% of the country’s total revenues—the world average is 40-50%. If we manage to reach this ratio in Egypt, we will no longer have a deficit in the budget.

Moreover, the state has a role in motivating citizens and SMEs and spreading banking culture to promote financial inclusion. In terms of banks, they have also prepared the infrastructure and upgraded their information technology in branches around the republic to offer a diversity of products to all clients.

With respect to your bank, what projects and activities are you focused on financing in service of the economy?

We follow the diversity policy in the finance portfolio in order to avoid credit concentration in a particular sector, which reduces the risk and increases the base of customers with the bank. Hence, we are keen on this diversity and give a certain percentage to each sector.

There are sectors attractive to finance because of the growing demand for their products, such as food, beverages, construction, construction materials, oil, gas, and pharmaceuticals.

We also care about the industrial sector, especially the businesses in it that manufacture products that replace imported ones, and the export industries are considered attractive sectors of finance.

 

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Shell positioning itself as Egypt’s preferred future partner of choice: Gasser Hanter https://dailynewsegypt.com/2017/09/18/shell-positioning-egypts-preferred-future-partner-choice-gasser-hanter/ https://dailynewsegypt.com/2017/09/18/shell-positioning-egypts-preferred-future-partner-choice-gasser-hanter/#respond Mon, 18 Sep 2017 05:15:49 +0000 https://dailynewsegypt.com/?p=636148 The Apollonia project can boost Egypt’s unconventional oil/gas exploration and production

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In the wake of the ongoing economic reform programme adopted by the authorities and the plans to transform Egypt into a major energy hub, Daily News Egypt sat with Gasser Hanter, chairperson and managing director of Shell Egypt, which is responsible for around 20% of Egypt’s gas production and 10% of the country’s oil production to discuss the prospects of Egypt’s oil and gas sector, in addition to reviewing the company’s latest projects and updates in the Egyptian market.

How do you describe Shell’s presence in Egypt?

We have a unique partnership with Egypt and we are a leading player in both the upstream (onshore and offshore) and downstream in Egypt.

Upstream, we have a diversified and an interesting footprint, producing a significant percentage of the country’s oil and gas, with approximately 20% of the country’s gas production and 10% of its hydrocarbon liquid production, making us one of the two biggest operators in the western desert at a daily production of over 130 kilo barrel of oil equivalent (Kboe). Through our three joint ventures, Badr El-din Petroleum Company (Bapetco), Rashid Petroleum Co. (Rashpetco), and Burullus Gas Company (Burullus), we continue to provide production and development activities in Egypt—our onshore presence in the Western Desert spans over nine Production Sharing Contracts (PSCs), with stakes in 22 oil and gas production licences in the Badr El-Din, Northeast Abu El Gharadig, Sitra, West Sitra, Obaiyed, and Alam El Shawish West (AESW) areas.

This is in addition to four onshore exploration blocks—North Matruh, North East Obayied, and North Alam Elshawish, besides the recently awarded block of North Umbaraka (NUMB). We also have near-field exploration activities within our existing development concessions and are proud to be the largest infrastructure operator for pipelines and processing plants in the western desert. Our offshore portfolio includes two operated gas-producing concessions—Rosetta and West Delta Deep Marine (WDDM)—and two operated non-producing concessions—North Gamasa NGO and El Burg Offshore EBO.

Our midstream business in Egypt, our world-class Egyptian LNG (ELNG), is a joint-venture with the Egyptian General Petroleum Corporation (EGPC) and the Egyptian Natural Gas Holding company (EGAS), among others. We have the ability to produce and export 7.2 mtpa (2 trains) and up to 120 LNG cargoes per year. This year marks a major achievement for the ELNG, the successful full loan repayment for financing the establishment of the Egyptian LNG project.

Moreover, we have a thriving downstream business in Egypt with a growing lubricant-market share, at approximately 19% and an oil-blending plant, which is currently undergoing expansion.

Our people are our core assets. We are optimally delivering performance through building local staff competencies. Through our joint-ventures, we employ around 3,500 people in Egypt and over 80 located globally.

As you can see, Shell is here to stay and grow its investments and operations in Egypt, supporting the country to meet its energy needs.

Can you tell us more about ELNG’s success in loan repayment?

When the financing was secured in 2003, it was the largest financing project in Egyptian history.

Today, Egyptian LNG is beginning a new chapter, one of greater financial stability. The Egyptian LNG can look to the future. It is a world class asset that can help Egypt to meet its economic goals and its aspiration of becoming a major gas hub in the years to come.

It was a very proud moment for this joint venture. This would not have been possible without the strong support from the government and from the creditors.

What are Shell’s latest updates?

On the Onshore: we see the western desert as a rich basin and look forward to maximising the hydrocarbon potential there through our JV Bapetco, which is operating at full capacity. Plans include an aggressive near-field exploration using the latest seismic reprocessing techniques, in addition to continue drilling exploration wells within the exploration licences of North East Obayeid and North Matruh. We are also looking to the fast-paced development of brown field infill drilling, sustained water-injection and well-workovers of restoration and optimisation. This is in addition to unlocking difficult gas opportunities. Our recent onshore discovery in the North East Alam Al Shawish concession has an estimated 0.5 Tcf gas in place, and we have commenced our development and planning activities. Such a discovery is the deepest and is one of the largest gas discoveries in the western desert in the past years and is set to have a material contribution to the overall onshore production in Egypt.

We are pleased to have signed last month the concession agreement of the recently awarded North Um Baraka (NUMB) block with the Egyptian Ministry of Petroleum and Mineral Resources, which was part of the 2016 onshore bid round. The NUMB block is adjacent to the Obaiyed development lease in the western desert, which is operated by Bapetco—our joint-venture with the Egyptian General Petroleum Corporation (EGPC)—covering an area of approximately 5,624 square kilometres. The proximity to the Obaiyed concession allows for quick tie-in and production from future discoveries. We intend to use high-resolution 3D seismic and deep drilling technology in our new North Um Baraka block and plan to commence drilling at the end of this year and proudly have one of the largest onshore exploration teams in Egypt with high-technology capabilities and strong support from the global Shell Technology Centre.

We have paved the way with the largest and first high-resolution 3D seismic survey over North Matruh/North East Obaiyed in 2015 and drilled the second deepest well in the western desert, the BTE-2 discovery, to almost a 6,000-metre depth in August 2016.

As for offshore, we are continuing to maximise production from existing wells in our two operated concessions: Rosetta and the West Delta Deep Marine, which once had the capacity to produce 2bcf/d. We are also resuming our technical studies for further development and realisation of exploration potential, which looks promising given new avenues (such as deeper horizons). On phase 9B, we are also discussing with the relevant authorities the potential future investment opportunities, and such discussions are progressing well.

What is Shell’s view on Apollonia?

Innovation and successful partnership are what comes to my mind when talking about Apollonia. This is a very exciting project, and we are glad to be taking part in it as it is done for the first time in Egypt. Our pilot, Apollonia, is a formation of the Northeast Abu El Gharadig (NEAG) licence area, a joint venture between Shell (52%) and Apache (48%) in the western desert.

We test the potential of stranded gas fields through this pilot using state-of-the-art technology, where we work with our partners EGPC and Apache to assess the future viability of tight gas reserves, using horizontal multi-stage fracking.

Two horizontal multi-stage fracked wells were delivered successfully as part of the pilot phase, where the wells are currently delivering relatively sustained gas rates. The outcomes from the first multi-stage frack pilot project in Egypt are being reviewed to be reflected in the planning of the next phase of development. Based on the outcome of such pilot, we would evaluate further opportunities within the unconventional space.

The Apollonia project is quite strategic because, if proven successful, it can open up new avenues for the country within the unconventional oil/gas exploration and production. We are keen to be leading on this with our partners and successfully contributing to Egypt’s energy demand and to also set an industry precedent to attract further foreign direct investments (FDIs) into the country. Egypt is in the very early stages of assessing its tight oil and gas potential where this is considered a key game-changer for Egypt in the coming period, and Shell is proud to be taking part in such a transition.

This is also in line with our global strategy on unconventionals as a viable energy resource, and as a future growth opportunity. We continue to make progress in our shale business, which is an important piece of Shell’s integrated business model.

What is your vision of the industry in light of the latest discoveries? 

Egypt’s economic potential is closely tied to its ability to develop a robust energy industry. As you know, the Egyptian government is working hard to lay these foundations. And there is great progress. Investment is coming in, and production of oil and gas is growing again. That is helping the government to move towards its goal of transforming Egypt into a regional energy hub.

In tandem, Shell is playing its part and is positioning itself as the preferred future partner of choice to Egypt. Our company has invested heavily in Egypt’s energy infrastructure through the acquisition of the BG Group last year, including its assets in Egypt. This deal builds on Shell’s 100+ years in Egypt. During that time, we have continued to invest in projects. We have created strong partnerships that underpin successful joint ventures. And those have created thousands of jobs and built great expertise.

Partnerships, safety, and strategic growth are what make up Shell’s strategy in Egypt. We are proud of our role in helping shape Egypt’s energy future through the development of skills and supporting the Ministry of Petroleum’s modernisation programme. What I have personally found impressive was the determination with which the government has been driving the economic reform programme forward, also reflected in the modernisation programme. The key pillars highlighted for reform clearly show that the industry has been consulted, as they directly address various issues that players are facing within the Egyptian market today.

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Considerable opportunities for investments in industrial modernisation, energy efficiency: Katcharov https://dailynewsegypt.com/2017/09/18/considerable-opportunities-investments-industrial-modernisation-energy-efficiency-katcharov/ https://dailynewsegypt.com/2017/09/18/considerable-opportunities-investments-industrial-modernisation-energy-efficiency-katcharov/#respond Mon, 18 Sep 2017 05:00:21 +0000 https://dailynewsegypt.com/?p=636160 Edison has 3 concessions in East Mediterranean, with $80m of investment for the first exploratory deep water well

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Egypt is one of the largest oil and gas producers in Africa, and the second largest producer of natural gas; however, it is also the continent’s largest consumer of energy, especially natural gas, as more than 75% of the country’s electricity comes from gas plants.The country does have multiple areas of undeveloped reserves, which had not been able to afford their development, but with new discoveries in the Mediterranean, the question is raised of Egypt’s potential to be a regional energy hub.

To answer this question and review Egypt’s oil and gas future, Daily News Egypt sat with Nicolas Katcharov, Edison’s Egypt branch general manager and vice president of North Africa and Middle East operations.

How do you see the future of investments in the energy sector after the economic reforms taken by the government?

With the increased growth in energy demand and the newly introduced rules and regulations, we expect, based on the market conditions, a significant rise in investors’ appetite. However, while we welcome the proposed aims to support a more efficient legislation, we remain observers to better understand in what way and how fast the new rules will effectively give non-discriminative access to final customers on the downstream, and how and for whom the energy products will be accessible on the upstream.

So far, the system is locked within the previous single buyer model with oil, gas, and electricity production falling under full state control that is generally subsidised and experiencing payment problems. The liberalisation is certainly the right direction; however, the current issues require caution, slowing down, or even compromising the existence of a functional market.

We believe there are considerable opportunities for investments in industrial modernisation and energy efficiency. I personally strongly believe an overall improvement of 30% is reachable in the medium-term if the new regulation considers that saving existing gas is as important as producing new ones (which may not necessarily be the case today, unfortunately). Furthermore, reducing the consumed volumes is potentially the best way to increase customers’ immunity against the reduction of energy subsidies.

How much is the company’s investments in the Egyptian market? Is there an intention to expand investments during the coming period?

The largest and most prominent commitment that we currently have is the exploration in the East Mediterranean, where Edison currently has three concessions. We believe this region is very promising, and we are already committed to drill a first exploratory well in deep water with an estimated investment of $80m. If there is a discovery, the development will attract more than $2bn within 3-5 years. As we have done in other large and promising discoveries, Edison will at that point search for partners to join this project.

We have also recently acquired two concessions off-shore on the West of Abu Qir, for which the $150m development will be initiated in the second half of 2018. We continue to explore in our two on-shore concessions—Gindi and South Idku—where two additional wells are to be drilled in 2019. Here again, we will welcome partners in the different phases of investment.

Finally, we hope that the final investment decision regarding our 170 MW combined cycle gas turbine power plant in Alexandria, directly supplied with Abu Qir gas and commercialising on the market, will come before the end of the year.

What are the most important challenges facing the company in Egypt?

Whilst we have been recently reimbursed a significant sum of the outstanding overdue amount owed to us, we would like to see the full reimbursement of the remaining overdue amount in the very near future. We believe a swift settlement of the remaining amounts would show the oil and gas investor base a strong sign of goodwill and would incentivise further development and investments from Edison and other international partners.

What are the projects implemented by the company in the current period?

Edison has successfully started up the Abu Qir PIII platform on schedule and within budget, with an outstanding performance increasing the gas and oil output of the field by the 50%, with investments of $300m during the last three years.

Is the company seeking to participate in the national projects implemented by Egypt, including the Dabaa nuclear station and the development of the Suez Canal?

Edison is today the oldest European multi-utility operating in all sub-sectors of power and gas. Based on our own experience, and with the support of all competencies available in EDF Group, we are willing to be in the front line for any project of national importance by bringing the group’s know-how in all energy and environment-related aspects. Egypt can leapfrog quickly in its development by a faster and more cost-efficient route through companies like Edison that can bridge the gap by introducing and deploying modern technologies following the European track records.

How do you see opportunities for investment in Egypt in the oil sector after the liberalisation of the gas market?

As previously mentioned, a major obstacle to further investments is Egypt’s $2bn overdue towards oil and gas international oil companies (IOC). The liberalisation intends, among others, to facilitate the progressive resorption of this debt. Everything depends on how the application rules of the new gas act will be designed, and particularly how it will be made possible for an investor in the Egyptian oil and gas to use its existing assets to recover.

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Worst finally over for Egypt business environment: Raouf Ghabbour  https://dailynewsegypt.com/2017/09/18/worst-finally-egypt-business-environment-raouf-ghabbour/ https://dailynewsegypt.com/2017/09/18/worst-finally-egypt-business-environment-raouf-ghabbour/#respond Sun, 17 Sep 2017 22:45:26 +0000 https://dailynewsegypt.com/?p=636157 Economy reforms start to pay off after years of uncertainty

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Optimistic about the future, Egypt business guru Raouf Ghabbour thinks the worst is finally over for Egypt business environment as the economic reforms start to pay off after years of turmoil and uncertainty.

Speaking at his office on the outskirts of Cairo in an interview with Daily News Egypt, Ghabbour seemed to be fully confident about the outlook of his businesses in Egypt despite the hard times his group experienced.

“I think the worst is over. I am not saying that 2018 would be a significant year in terms of growth and business climate, but for sure it will be better than 2017,” Ghabbour, who has been a CEO of the company since the young age of 35, told Daily News Egypt.

Ghabbour has been the CEO of GB Auto SAE since 1990 and served as its managing director.

Ghabbour’s tenure with GB Auto SAE began in the tyre sales department in 1977 and served as its managing director of commercial vehicles since 1982.

“It has been tough times for all business activity in Egypt. Now we could say it is time to reap the reforms’ fruits,” he concluded.

Let’s start with your opinion about the results of the economic reforms?

I think reforms starts to pay off. We could say that the worst is over for the business environment in Egypt. We have experienced hard times since the currency flotation last November, but now the circumstances are getting better. The current political administration has the will to complete what they have started.

How does the current monetary policy affect the business environment in Egypt?

Surely, the current high interest rates are denting the business community. But let’s be honest with ourselves: after the currency flotation, the Central Bank of Egypt (CBE) had no option but to raise interest rates. If the CBE didn’t tighten its policy, the local currency would suffer from speculations.

So, also, the higher interest rates environment is harming our business and investment climate in Egypt, but this was a must.

So when do you think the CBE will ease its monetary policy?

I think the CBE wants to tame the rampant inflation first. Higher inflation rates are harming also the business environment. When the headline inflation hover around 35%, the CBE should move, and that is exactly what happened.

I think the bank will start an easing cycle of the monetary policy by the end of current year or at the beginning of 2018, as soon as the inflation starts to take a downtrend.

The FX crunch is over. How does this matter reflect on your business?

It’s quite true that the FX shortage is now over. Before the flotation, we had to wait for weeks to get our needs from the hard currency. Now, we get all of our needs in just a few days.

Local lenders are making hard currency available for all. Sometimes before pound devaluation, our requests for dollar were refused as we are importing non-essential goods. Now that this is over, the supply and the demand is well-balanced.

When should the dollar start to fall against the pound?

At the current stage, the dollar is overvalued against our local currency. This could be attributed to a late decision to float the pound. The downtrend for the dollar should embark towards its fair value by the mid of next year.

Let’s move to the new Investment Law. How should it affect the business climate in Egypt?

I think the new Investment Law would attract foreign investors to Egypt again. I didn’t read the law, but I knew well that the government has introduced lots of incentives to investors to lure back foreign investors after years of turmoil.

Let’s move on to Egypt’s automotive sector and talk about the sector’s outlook.

The sector is one of the most badly affected, due to the higher inflation and interest rates. But with all we hope speedy recovery is underway in full swing, with the rates to be cut soon, and inflation to take a downtrend trajectory.

The new initiative introduced by the government should spur growth in this vital sector.

What scope is there for improving the incentives on offer for auto manufacturers in Egypt?

Major manufacturing destinations have rolled out large-scale incentive programmes, including vocational training assistance and fiscal breaks to auto and component manufacturers.

In the case of Egypt, there needs to be a greater push for local manufacturers to export their goods. One way this goal can be accomplished is to mandate a minimum volume above what can be absorbed by the local market.

Alternatively, a certain percentage of the total production could be allocated for exports.

What potential exists to increase production of spare parts and components from within Egypt?

The potential is there. However, we need more support from the government to increase production of spare parts and components.

A proper regulatory environment that encourages investment is needed.

Moreover, exemptions or subsidies should be put in place for manufacturers that reach a level of production that exceeds the demand of the local market.

This would boost the exports of spare parts and components, and thus the country’s competitiveness in the region. It could make Egypt a regional a hub for manufacturing cars.

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Investment opportunities in energy sector increasing after economic reforms: Minister of Electricity  https://dailynewsegypt.com/2017/09/18/investment-opportunities-energy-sector-increasing-economic-reforms-minister-electricity/ https://dailynewsegypt.com/2017/09/18/investment-opportunities-energy-sector-increasing-economic-reforms-minister-electricity/#respond Sun, 17 Sep 2017 22:30:34 +0000 https://dailynewsegypt.com/?p=636154 Investments of production, transmission, distribution will amount to $25bn until 2020

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The electricity sector is considered one of the most promising investment sectors in Egypt. The sector succeeded in overcoming the shortage of production capacities and transforming them into surplus. In the coming period, the sector aims to improve the quality of service provided to consumers and attract international companies to invest in production, transmission, and distribution.

Daily News Egypt interviewed the Minister of Electricity, Mohamed Shaker, to review the investment opportunities in the sector and learn more about the ministry’s strategy in the coming period.

How do you see the future of investment in the energy sector after the economic reforms taken by the government?

Investment opportunities in the energy sector after economic reforms are increasing, especially in new and renewable energy projects, where the door is open to foreign investors to set up power plants and sell the energy produced to the government. The incentives and legislation attracted international companies to invest in production, transmission, and distribution of energy in Egypt.

The Ministry of Electricity received offers from foreign and Arab companies to invest in solar energy projects. A committee was formed to study these offers and contract with the best one provided technically and financially.

The electricity sector seeks to improve the quality of service in cooperation with private companies, under the Electricity Law, which allows the private sector to participate in the production and distribution.

How much investment is needed for production, transmission, and distribution projects to improve the quality of electrical feeding and meet the needs of all sectors?

The cost of production, transmission, and distribution projects through to 2020 amount to $25bn. This includes $17bn for power plants and $5bn for transmission and distribution.

The electricity sector needs significant investments to implement the expansion and sustainable development plans.

How does Egypt benefit from surplus production and electricity reserves?

We aim to export electricity to several Arab countries, reduce dependence on gas, and strengthen the electrical network of reserves. We agreed with Saudi Arabia to exchange 3,000 MW during peak hours in the two countries. We are conducting a feasibility study on linking the network with Greece to exchange 2,000 MW. There are other ongoing negotiations with other countries.

When will the agreement of the electrical connection project with Saudi Arabia be signed?

The Ministry of Electricity will sign the agreement with Saudi Arabia by October after removing all obstacles related to negotiations over several terms. The pilot phase will begin at the end of September 2020. The project will be launched with full capacity (3,000 MW) by September 2021.

The project costs $1.6bn, of which Egypt will pay $600m. The Kuwait Fund for Arab Economic Development, the Arab Fund for Economic Development, and the Islamic Development Bank, and the internal resources of the Egyptian Electricity Transmission Company (EETC) are contributing to the fund.

What is the latest development of a green energy corridor with African countries?

There are a number of axes of the clean energy corridor initiative with Africa. The first axis includes the assessment of renewable sources of energy and zoning them according to sources. This axis includes the development of renewable energy technologies. The second axis includes three key items: the study of readiness assessment for the deployment of renewable energy applications to enable the countries’ consultative frameworks; an electronic platform that outlines the funding mechanisms; and policies that should be adopted for the deployment of renewable energy applications.

The third axis includes local and regional planning and capacity building. The fourth axis includes raising awareness of the challenges of climate change, and the timetable for implementation of the corridor requires long-term planning up to 25 years.

The agency for the construction of Africa’s clean energy corridor will cooperate with its partners in preparing a draft agenda of the requirements to be taken over the period of five to twenty years to build and support a clean energy corridor.

Will the electricity sector implement new production plants? What is the situation if energy demand is not increased?

The electricity sector plans are dynamic and linked to the growth of national output, considering the review of load and required energy forecasts to different sectors of the state in light of the contract to implement the three Siemens power stations in Borollos, Beni Suef, and the New Administrative Capital.

In addition, we also consider the projects implemented within the urgent plan and transforming them to work on combined cycle schemes, next to completing the five-year plan projects, such as converting Shabab, West Damietta, South Helwan, West Cairo, and Assiut power plants. This amounts to a total of 27,400 MW to be added.

The reviews and studies carried out showed that there is no need to add new production capacities until 2020. All production plans were postponed to the 2022-2027 plans, including Aquapark, BenchMark, Nowais, Qena, and Hamrawein.

What are the most important electricity projects to be implemented next year?

This includes the completion of Siemens power plants in Beni Suef, Borollos, and the New Administrative Capital, as well as completing the five-year plan to convert Shabab, West Damietta, South Helwan, West Cairo, and Assiut to work on combined cycle to improve efficiency without needing more fuel.

The feed-in tariff renewable energy projects will also be completed, in addition to the wind farms in Jebel El Zayt and boosting the capacity of Jebel El Zayt 1. Besides, two of the important projects to be completed are the 220 MW wind farm (in cooperation with JICA) and a wind station (in cooperation with the Spanish government) with a capacity of 120 MW.

We will also implement transmission and distribution networks projects through two loans worth EGP 37.4bn and complete establishment of the 500 KV control station.

How many loans have the Ministry of Electricity received to implement projects?

Many international institutions offered loans to the electricity sector on favourable terms, including the International Finance Corporation (IFC) the European Bank for Reconstruction and Development (EBRD), and JICA, in addition to a number of local banks, including the National Bank of Egypt and Banque Misr. We signed an agreement with both banks to arrange the EGP 37.4bn loan, which will be the largest loan in the history of the ministry.

Will you establish a specialised company for the maintenance of power plants or rely on private companies?

We are studying the establishment of a specialised company for the maintenance of the stations in cooperation with the ministries of petroleum and military production as well as Siemens, in order to save the large funds paid for maintenance.

Moreover, when we signed the Siemens and General Electric contracts, we did not only sign establishment projects, but the contracts included operation, finance, and maintenance.

What is the contractual system to be adopted by the Ministry of Electricity in new and renewable energy projects during the coming period?

The feed-in tariff system for the first and second phases is being followed in the current period. The deadline for financial closure of projects is in October. There will not be a third phase, but we will offer solar and wind power plants through competitive tenders scheme and Build, Operate, Own (BOO) scheme, as well as auction—which is new in the contractual schemes.

Will projects be implemented to produce energy from recycled waste?

We are ready to contract with any Arab or foreign company to buy electricity produced from recycled waste in the event of an appropriate technical and financial feasibility study. The strategy of the Ministry of Electricity is to diversify the sources of energy production.

When will the contract of the nuclear station be signed?

We have agreed with Russia on all items. The contracts were sent to the State Council for revision. Egypt has obtained several concessions, including the total cost of the project, the Russian loan for building the plant and training Egyptian experts in Russia on the operation of the plant.

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