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A new capital for Egpyt

27 July 2016 Comments (0) Business, Featured, Middle East

Egypt's new capital city (plan)

The Middle Eastern nation builds a new capital near Cairo as it seeks to boost its economy and house a growing population.

Egypt is moving forward with plans to build a massive $45 billion new city east of Cairo that will function as the nation’s government and business capital.

Planners said the new city, which does not yet have a name, would be home to 2,000 schools and colleges, 600 health care facilities, a central business district with hotels, shopping centers and offices, and 20 residential districts with housing for at least five million residents.

Covering more than 250 square miles, or an area slightly larger than the City of Chicago, the new city will also have an international airport larger than London’s Heathrow, an amusement park four times the size of Disneyland and a public park larger than Central Park in New York City.

The plan for a new city is a centerpiece in President Abdel Fattah Al Sisi’s efforts to boost Egypt’s struggling economy. Sisi, who seized power three years ago in a bloody military coup, has proposed several mega-developments amid a slowing of tourism and direct foreign investment in the Mideast nation.

Cairo’s population will double

Planners say the project will create more than one million jobs and take about 12 years to complete.

Egyptian Housing Minister Mostafa Madbouly said one goal of the development was to ease congestion and crowding in Cairo. The city of 18 million is expected double in 40 years.

The Egyptian parliament and its government departments and ministries, as well as foreign embassies, would move to the new city, he said.

“We are talking about a world capital,” Modbouly said.

China aids development

Model for new proposed airport

Model for new proposed airport

The project got a boost earlier this year when Chinese President Xi Jinping visited Cairo to boost economic ties and announced the Asian nation’s willingness to support construction of the new city. China agreed to support the new capital project with loans, grants and other support that state media reported were worth $15 billion.

China also agreed to loan Egypt’s central bank $1 billion to increase its reserves, which stand at $16 billion, less than half the reserve at the time of the ouster of former President Hosni Mubarak during Arab Spring in 2011.

The new city is a showpiece for China’s “One Belt One Road” strategy to strengthen the country’s global position with foreign aid and investment. The strategy has prompted China State Construction to accelerate its international contracting work, building apartment houses, stadiums, roads and hotels in Africa and the Middle East.

Construction began in April

The first phase of construction of the new capital city began in April, including development of roads and communications and sanitation infrastructure on the desert site 30 miles east of Cairo.

An Egyptian-Chinese partnership that includes Arab Contractors, the Petroleum Projects and Technical Consultations Company and the China State Construction is working on the initial construction.

Modbouly said the country would also be seeking bids from private companies for portions of the first phase. Chinese companies will provide financing for the construction of a number of new buildings, including 14 government buildings and a large conference center. Estimated cost of the initial phase is $2.7 billion.

According to China State Construction, the initial phase will include a parliament building, a national meeting center, exhibition halls and offices.

Prior to Chinese involvement, the development bogged down last year over disagreements about costs and how long it would take to complete the new capital. A United Arab Emirates company that had been announced as the lead developer pulled out as Egypt cancelled its contract citing “lack of progress.”

According to The Wall Street Journal, some experts are skeptical of the project.

“Egypt needs a new capital like a hole in the head,” said David Sims, an economist and urban planner who has studied development in Egypt.

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Egypt says close to securing 3-year IMF loan programme

27 July 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt said on Tuesday it was close to agreeing an International Monetary Fund (IMF) lending programme to ease its funding gap and restore market stability and was seeking to secure $7 billion annually over three years.

Prime Minister Sherif Ismail ordered the central bank governor and minister of finance to complete negotiations for the programme with an IMF team that will visit Egypt in the next few days, the cabinet said in a statement.

“We are resorting to the IMF because the budget deficit is very high, between 11 and 13 percent within the past six years,” finance minister Amr el-Garhy, said in a phone interview with presenter Lamis El-Hadeedi on a private TV channel late on Tuesday.

In Washington, the IMF welcomed Egypt’s request for financial support and said it would send a mission to Egypt for about two weeks from July 30.

The cabinet statement, after a five-hour meeting, was the first official confirmation that talks with the IMF were under way. The statement said talks had been ongoing for three months.

“The prime minister stressed the need to cooperate with the IMF through the support program to enhance international confidence in the economy and attract foreign investment, and therefore achieve monetary and financial stability … targeting $7 billion annually to fund the program over three years,” the cabinet statement said.

The government is seeking $12 billion from the IMF, $4 billion a year, which will carry an interest rate of 1 or 1.5 percent, el-Garhy said. The package includes issuing $2-3 billion in international bonds which will be offered as soon as possible, between September and October, he added.

Economists welcomed the news, which came after a turbulent few weeks for Egypt’s currency, the pound, which has plummeted to new lows on the black market as confusion mounted over the direction of monetary policy.

“It’s great. Finally,” said Hany Genena, head of research at Beltone Securities Brokerage. “Confidence will be restored in the government and central bank. Secondly, we will see flotation of the pound, if not tomorrow, next week, the week after.”

Genena said he expected the Cairo stock market to surge after the news and for the currency to strengthen on the black market. The black market had already strengthened slightly from lows near 13 to the dollar on Monday.

Two black market traders contacted by Reuters said they were selling dollars at about 12.80 to 12.85 pounds after the IMF deal was announced.

“I think the stock index will hit 8,000 in the next couple of days,” Genena added. The benchmark EGX30 <.EGX30> closed up 0.3 percent at 7,540 on Tuesday.

Egypt’s economy has been struggling since a mass uprising in 2011 ushered in political instability that drove away tourists and foreign investors, both major earners of foreign currency. Reserves have halved to about $17.5 billion since then.

The dollar shortage has forced Egypt to introduce capital controls that have hit trade and growth, while the value of the Egyptian pound has plummeted on the black market in recent weeks as expectations of a second devaluation this year mount.

The government has pushed ahead with its reform programme, including plans for a value added tax (VAT) and subsidy cuts that were put on hold when global oil prices dropped.

A VAT bill is in its final stages of preparation but has faced resistance in parliament due to concerns over inflation, which has touched seven-year highs since the currency was devalued by 13 percent in March.

Egypt’s ambitious home-grown fiscal reform programme formed the basis of a $3 billion three-year loan deal with the World Bank that was signed in December. But the cash has yet to be disbursed since the World Bank is waiting for parliament to ratify economic reforms including VAT.

A cabinet minister told Reuters last month that Egypt had started negotiations with the IMF and that the central bank was leading the talks.

A statement released by Capital Economics, an independent economic research company, also welcomed the news.

“If approved, this would help to plug Egypt’s external financing requirement and improve the economy’s growth prospects,” it said. “This would make a sizeable dent in Egypt’s gross external financing requirement, which we estimate to be around $25 billion over the coming year.”

 

(Reporting by Amina Ismail and Lin Noueihed; Additional reporting by David Lawder in Washington; Writing by Lin Noueihed; Editing by Tom Heneghan and James Dalgleish)

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Morocco annual inflation rises to 2.3% in June

22 July 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

RABAT (Reuters) – Morocco’s annual consumer price inflation rose to 2.3 percent in June from 1.9 percent in May, due to higher food prices, the High Planning Authority said on Friday.

Annual food inflation jumped to 4.4 percent from 3.6 percent in the previous month as June coincided with the holy fasting month of Ramadan. Non-food price inflation rose slightly to 0.6 percent in the 12 months to June from an annual 0.5 percent in May.

Transport costs fell 0.6 percent, but hotels and restaurants were 2.4 percent more expensive, the agency said without giving details.

On a month-on-month basis, the consumer price index eased to 0.4 percent in June, down from 0.5 percent in May as food price inflation was steady at 0.8 percent.

 

(Reporting By Aziz El Yaakoubi; Editing by Catherine Evans)

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After six months, Egypt finally settles wheat fungus row

5 July 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

ABU DHABI (Reuters) – Egypt’s agricultural quarantine authority settled a months-long dispute on Monday over wheat import specifications that have hampered the country’s massive state purchasing programme ahead of an anticipated new buying season.

Egyptian quarantine authorities’ earlier refusal to let in wheat infected with even the slightest amount of ergot, a fungus that can lead to hallucinations and irrational behaviour in large quantities but at trace levels is deemed harmless to humans, wreaked havoc in the market for supplying the world’s largest wheat buyer.

The quarantine authority said a new ministerial decree would allow it to accept imported wheat shipments containing up to 0.05 percent ergot, finally ending a long-standing zero tolerance policy that has puzzled global trade.

“A ministerial decision was taken and 0.05 percent ergot tolerance will now be endorsed,” Ibrahim Imbaby, head of the quarantine authority told Reuters by phone.

Imbaby did not give more details.

The decision comes a day after the country appointed a new head for its state wheat-importing body — one of the most influential positions in the global wheat market, ahead of the impending import season set to start this month.

The resolution to the ergot row also comes as Egypt’s domestic wheat purchases are being questioned and the earlier announced 5 million-tonne Egyptian wheat procurement figure for the season could be revised, leading to a greater import need.

The country is in the middle of a government-led recount of locally purchased wheat after the unusually high local procurement figure of 5 million tonnes, as opposed to around 3.5 million tonnes in earlier years, prompted allegations of fraud from industry officials, traders and lawmakers.

If the local purchase numbers were misrepresented Egypt might have to buy more foreign wheat to meet domestic demand while contending with a dollar shortage that has already sapped the country’s ability to import, making a resolution to the ergot squabble ever more pressing.

The quarantine’s zero tolerance policy was at odds with the more commonly accepted international standard of up to 0.05 percent already endorsed by the ministry of supplies and state grain buyer, the General Authority for Supply Commodities (GASC).

“The ministerial decree was issued after a committee in the import and export surveillance authority was formed and pressurised the agriculture ministry to issue a new decree,” one Cairo-based trader said.

The affair, which resulted in several shipments of wheat turned away at ports, a sharply lower participation at GASC tenders and higher wheat prices, was thought to be finally nearing a resolution when Prime Minister Sherif Ismail intervened in late June and said the country would adhere to the common 0.05 level.

His comments were expected to be followed by a decree changing the old regulations that governed agricultural quarantines and stipulated a zero tolerance policy.

But a decree failed to materialise until Monday’s decision and the agriculture ministry has told Reuters it had been hampered by a months-old judicial order from the prosecutor general that had banned all ergot from entering the country.

The order had followed the rejection of a French wheat shipment belonging to trading firm Bunge late last year. The firm subsequently filed a lawsuit contesting the decision.

Imbaby did not make clear how that legal hurdle had been overcome.

And after months of conflicting statements from various Egyptian agencies, some European traders remain skeptical.

“We are being cautious….they’ve changed their position so many times over ergot,” one European trader said.

 

(By Maha El Dahan. Additional reporting by Gus Trompiz in Paris; Editing by Veronica Brown and Greg Mahlich)

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Egypt’s central bank says no ban on using debit cards abroad

30 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Debit cards linked to Egyptian pound bank accounts can be used outside the country in a “regular” way, the central bank said on Thursday, after instructions it sent to banks on Wednesday appeared to ban customers from using them abroad.

Although Wednesday’s letter suggested a blanket ban, the central bank said its instructions “only apply to individuals misusing debit cards to acquire large amounts of foreign currency without a clear reason for doing so, which saps banks’ foreign reserves”.

“The Central Bank of Egypt affirms the continued use of all cards, debit or credit, under existing limits set by each bank,” it said in a statement.

In the letter sent on Wednesday and seen by Reuters, the central bank had told bank chiefs: “Please ensure that debit cards, including pre-paid cards, issued in local currency by Egyptian banks are only used within the country.”

Central bank Governor Tarek Amer had initially denied the Wednesday directive existed, telling state news agency MENA on Thursday the rules on using debit cards abroad were unchanged.

“It is up to each bank to set limits on its clients’ usage of foreign currency abroad through debit cards linked to local currency accounts, but we need vigilance because some clients use debit cards to get large dollar amounts not intended for travel, tourism, or shopping,” he said.

The bank’s later statement acknowledged the instruction had been sent but said it applied only in some cases. Wednesday’s letter did not indicate that was the case, however.

Egypt depends on imports for everything from food to fuel but has suffered from a shortage of dollars in the banking system to pay for them since a 2011 uprising drove away tourists and foreign investors, crucial sources of hard currency.

Many import businesses now rely on the black market, where they can get hard currency for a higher price. The pound’s rate on the black market has weakened since the central bank devalued the Egyptian pound in March, at which time it was roughly in line with the official rate.

 

(By Ehab Farouk and Ahmed Aboulenein. Additional reporting by Mostafa Hashem; Writing by Ahmed Aboulenein; Editing by Catherine Evans)

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Egypt could secure $10 bln loan from IMF: central bank

27 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

By Ehab Farouk

CAIRO (Reuters) – Egypt’s central bank said on Monday it could secure some $10 billion from the International Monetary Fund (IMF) by agreeing a structural reform programme but has yet to make any formal request to do so.

Talks over a possible loan half that size have faltered in the past and analysts say an IMF deal might require reforms that the government could find politically difficult to implement in a country where tens of millions live hand to mouth.

The central bank statement came in response to comments by a cabinet minister, who told Reuters on Monday that Egypt had started negotiations with the IMF last week for a $5 billion loan. The minister said the central bank was leading the talks.

“There is a delegation from the IMF that might visit Egypt next month to continue the negotiations,” the minister, who holds an economic portfolio, said by telephone.

The central bank said in a statement that while it had not formally made a request to negotiate a structural reform programme, it was in constant contact with the IMF and could secure $10 billion should it opt to apply.

“The numbers mentioned are incorrect. If there was a need to request a reform programme, Egypt would be capable of obtaining twice the figures mentioned,” the statement said.

The IMF said that its officials “maintain close dialogue with the Egyptian authorities” and that the lender stood ready to help should Egypt make a financing request.

“The size of any financial arrangement would depend on Egypt’s financing needs and on the strength of its economic program,” IMF Mission Chief for Egypt, Chris Jarvis, told Reuters in emailed comments.

Egypt’s economy has been struggling since a mass uprising in 2011 ushered in political instability which drove away tourists and foreign investors, major foreign currency earners. Reserves have halved to about $17.5 billion since then.

The dollar shortage has forced Egypt to introduce capital controls that have hit trade and growth.

The central bank said in its statement Egypt was pushing ahead with its existing reform programme, which includes plans for Value Added Tax (VAT) and subsidy cuts which were put on hold when global oil prices dropped.

A VAT bill is in its final stages but could face resistance in parliament on concerns over inflation that has hit seven-year highs since the currency was devalued by 13 percent in March.

Egypt’s reform programme formed the basis of a $3 billion three-year loan deal with the World Bank that was signed in December. But the cash has yet to be disbursed as the World Bank waits for parliament to ratify economic reforms including VAT.

“Egypt will have to proceed with some painful reforms to guarantee that the loan will work this time,” CI Capital economist, Hany Farahat, said.

“We still haven’t approved the FY16/17 budget, or the VAT. We need another devaluation round for the Egyptian pound … we need the investment environment to be reformed and capital controls to be eased for foreign investors.”

(Additional reporting by Lin Noueihed; Writing by Asma Alsharif and Lin Noueihed; Editing by Louise Ireland)

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Egypt’s Beltone files lawsuit against heads of bourse and watchdog

26 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

CAIRO (Reuters) – Egypt’s Beltone Financial has filed a lawsuit against the heads of the Cairo stock exchange and Financial Supervisory Authority over the repeated cancellation of trades on its stock, according to two sources and a court document seen by Reuters.

Shares in asset manager Beltone jumped by more than 550 percent in three months after it was acquired by billionaire businessman Naguib Sawiris’s OTMT in November for 650 million Egyptian pounds ($73 million).

The price spike lifted Beltone’s market value to 4 billion pounds before the stock exchange, at the end of February, began to stop trades in the shares on an almost daily basis. The exchange referred to rules allowing such cancellations in cases where the head of the bourse considered that trades had taken place at unjustified prices.

Beltone’s share price stood at 7.34 pounds on Sunday, compared with 21.97 pounds in mid-April.

“Beltone filed a lawsuit before the Administrative Court against the head of Egypt’s stock exchange, in person, and against the chairman of the financial regulator,” said two sources who are close to the matter.

The lawsuit contests that the head of the stock exchange’s decisions were incorrect and an illegal abuse of authority.

The head of Egypt’s stock exchange, Mohamed Omran, was not immediately available for comment.

Sherif Samy, chairman of the Egyptian Financial Supervisory Authority, said that Beltone had filed a grievance with the regulator earlier this month.

“The decision of the commission did not come in its favour and that is why they are resorting to court, and that is the right of any party,” Samy said.

($1 = 8.8799 Egyptian pounds)

 

(Reporting by Ehab Farouk; Writing by Asma Alsharif; Editing by David Goodman)

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Morocco enters free trade pact with China

24 June 2016 Comments (0) Business, Featured, Middle East

morocco china trade

The north African nation seeks to diversify its trading partners through agreements with the Asian giant as well as India and Brazil.

Morocco has signed a free-trade agreement with China, the North African nation’s largest trading partner in Asia.

While the overall effect on the Moroccan economy is under debate, experts say the agreement will create more purchasing power for Moroccans, who will have access to Chinese goods that are typically less expensive than those produced in country or elsewhere.

The move underscores China’s growing role in the economy of the continent as well as Morocco’s determination to diversify its trading partners. Morocco has also entered trade agreements with Russia and India and an agreement with Brazil is under negotiation.

China is Morocco’s fourth largest trading partner after Spain, France, and the United States. Morocco is China’s seventh largest trading partner in Africa. While trade between Morocco and China has grown in recent years, it is still dwarfed by Chinese trade with neighboring Algeria. Trade between China and Algeria reached $8.6 billion in 2013 compared to $2.3 billion in trade with Morocco.

Experts debate impact

Analysts say the new agreements could have mixed results.

Moroccan textile factory

Moroccan textile factory

On the plus side, competition from Chinese goods could force Moroccan industries to better serve consumers in their country and Moroccan businesses will gain greater access to one of the largest markets in the world.

At the same time, they say, more than half of Moroccan exports are minerals, fertilizers and metals produced by large industries while small businesses struggle to compete.

Some argue that the opening of trade will cost jobs in Morocco, but others note that Moroccan and Chinese workers seldom compete for the same jobs. China’s economy is based on heavy and light industry, while agriculture, food processing and precision manufacturing dominate Morocco’s. The two countries do have some direct competition in textiles and leather.

The agreement will create more wealth in Morocco. With access to cheaper goods, even poor Moroccans will gain spending power.

Economic progress

With a gross domestic product of $252 billion and a population of about 33 million people, Morocco has made significant progress in integrating its economy into the global market through efforts including streamlined procedures for operating a business and launching a nascent aeronautics industry, according to the Heritage Foundation.

After a strong performance in 2015, with growth in the gross domestic product of 4.4%, the Moroccan economy has slowed this year, according to the World Bank. Drought has reduced cereal production, and GDP growth is expected to be less than 2% in 2016.

While Morocco has been a U.S. trading partner, as well as a key ally in the war on Islamist terrorism, the nation in recent years has sought to expand its trading partnerships, notably with members of the BRICS coalition of emerging economies that seeks to break Western domination of the global economy.

BRICS is made up of the emerging markets of Brazil, Russia, India, China and South Africa.

Agreements with India, Russia

In October, Morocco and India signed agreements designed to encourage more trade between the two nations. Morocco’s major exports to India are rock phosphates and phosphoric acid.

In November, Morocco announced a free trade agreement with Russia. Morocco is Russia’s main trade partner on the continent and its exports include citrus fruit, vegetables and frozen sardines.

In June, Moroccan representatives met with trade officials of Brazil to discuss a possible free trade agreement. Brazil is another importer of Moroccan phosphates and its derivatives.

Chinese influence grows

Meanwhile, China is a major trading partner with other African nations including South Africa ($20 billion), Nigeria ($15 billion) and Angola ($36 billion).

China in recent years has been developing relationships with many African countries through investment, aid and trade relationships, driven largely by China’s energy needs.

Morocco, a net oil importer with strong ties to the United States and Europe, has not been of great interest to China until recently. However, Morocco has sought allies in its territorial dispute with the separatist Polisario Front in the Western Sahara.

Given China’s strong trade ties to Algeria, it seems unlikely, however that the Asian nation would support Morocco in that dispute.

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Tunisia struggles to attract foreign investment

23 June 2016 Comments (0) Business, Featured, Middle East

tunisia oil

Tunisia reports slowed growth as international companies show concern about the difficulty of extracting oil and phosphates as well as high taxes.

Growth of foreign investment in Tunisia has slowed amid concerns about a lack of government incentives and the difficulty of extracting the North African nation’s oil and phosphates.

Direct foreign investment in Tunisian industry amounted to $81 million in the first four months of 2016, an increase of less than 5% over the same period in 2015. A year earlier, direct foreign investment had doubled as the country adopted its first constitution and formed a government in the aftermath of Arab Spring.     

Tunisia lacks appeal to investors for a number of reasons, according to experts.

“Insecurity, high taxation and the difficulty of extraction of potential reserves are the main obstacles that prevent Tunisia from being attractive to foreign investors,” said Radhi Meddeb, chief executive officer of the engineering company Comete.

Tax policy cited

Only 15% of oil company executives believe Tunisian tax policy encourages investment, according to Global Petroleum Survey 2015.

Under the nation’s tax policy, the state gets 80%of the revenue on the sale of oil while the operating companies receive only 20%, even though they bear all of the costs with no help from the government.

Tunisia also has more limited reserves than other sources of oil and phosphates. The Global Petroleum survey estimated the country’s oil reserves amount to the equivalent of about 850 million barrels, compared to nearly 24 billion in Texas. Reserves of phosphates amount to 100 million tons, 20 times less than in Algeria.

While relatively stable compared to other nations that were part of Arab Spring, Tunisia is not immune to political and economic upheaval. For example, Gafsa Phosphate posted nearly $10 million in losses in 2014 amid recurring strikes by transport workers.

Production drops sharply

While 50 foreign companies were operating in the extraction industry in 2010, when the Arab Spring began, fewer than half that many operate in Tunisia today.

Nationally, phosphate production has dropped by nearly 60%, from 8.5 million tons in 2010 to 3.5 million tons. Oil production has fallen by half, from about 90,000 barrels a day in 2009 to 45,000 this year, according to Trading Economics.

On the plus side, Tunisia has announced it will join the Initiative for Transparency in the Extractive Industries, a global standard that promotes accountability and fights corruption in the use of revenues from extracted resources.

Tunisia first applied to join the initiative in 2012, but political instability prevented its membership, according to Kais Mejri, head of governance at the Ministry of Industry.

Tunisia believes that the initiative will make the nation more attractive to foreign investors compared to rivals who are not part of the initiative. “We hope to return next year to the same (foreign investment) rates as before 2011,” said Ridha Bouzaouada, Tunisia’s Director General for Industry.

Part of larger, regional struggle

Tunisia is not alone in its economic challenges.

More than five years of turmoil across the region has created a negative economic outlook, according to Hamdi Tabbaa, president of the Arab Businessmen Association.

Tabbaa estimated regional economies have lost about $1.2 billion in the past five years as Syria, Iraq, Yemen, Libya, Egypt, Lebanon and Tunisia saw an average decrease of 35% in their gross domestic product.

Direct foreign investment in the region was also dropping. It declined from $48 billion in 2014 to $44 billion last year, well under half of the record high of $96 billion in 2008, according to the Arab Investment and Export Credit Guarantee Corporation.

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BP approves investment in Egypt gas field 15 months after discovery

20 June 2016 Comments (0) Business, Latest Updates from Reuters, Middle East

LONDON (Reuters) – British oil major BP has approved investment in the first phase of developing the large Atoll gas field offshore Egypt, only 15 months after it first announced its discovery.

BP, which declined to give an investment figure for the project, said the field was on track to deliver its first gas in the first half of 2018, set to pump 300 million cubic feet a day of gas to the Egyptian market.

BP decided in November to fast-track the development of Atoll, estimated to contain 1.5 trillion cubic feet of gas and 31 million barrels of condensates.

The company is in a tight race with other oil and gas explorers in the region to develop the Mediterranean’s huge untapped fossil fuel reserves.

Italy’s ENI discovered the Mediterranean’s largest gas field, Zohr, last year and plans to bring the field on stream by the end of 2017.

BP’s decision to invest in the Atoll field is one of only a handful of go-aheads the oil major is expected to give this year as it seeks to save cash amid weak oil prices.

 

(Reporting by Karolin Schaps)

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