DAILY NEWS. Egypt on the recovery track EGYPT Economic sectors in focus : opportunities, challenges

Transcription

1 DAILY NEWS MONDAY, SEPTEMBER 18, 2017 NEWSSTAND PRICE EGP 7.00 NATION S VOICE TO THE WORLD EGYPT ISSUE NO Egypt s Only Daily Independent Newspaper in English Palm Hills founder sees a breakthrough in confidence crisis between government, private sector 10 Worst finally over for Egypt business environment: Raouf Ghabbour Egypt on the recovery track The New Administrative Capital a real estate project and seat of government 21 EBRD investments in 2017 worth 665m How can the SCZone lead the development? Egypt s economic outlook in eyes of international financial institutions Egypt to receive third tranche of AfDB loan by February Economic sectors in focus : opportunities, challenges 20 Special issue on the occasion of There is optimism regarding future of Egypt-US bilateral relations: CEO of AmCham Egypt.Inc

2 2 Legislative reforms pave way for foreign investments: Nasr DIRECT LINES OF COMMUNICATION WITH INTERNATIONAL INSTITUTIONS TO ATTRACT PRIVATE SECTOR FINANCING By Mostafa Fahmy and Hussein Hassan OUR DISCUSSIONS WITH INVESTORS ARE AIMED AT REACHING FINAL AND FUNDAMENTAL SOLUTIONS TO INVESTMENT DISPUTES Minister of Investment and International Cooperation Sahar Nasr said that Egypt is ready to receive Arab and foreign investments after legislative and administrative measures taken in the previous months to create a conducive business climate. Nasr added that the government recently issued a package of legislation supporting the business environment, in conjunction with the implementation of the economic reform programme launched last October. The government passed the law on the regulation of movable guarantees and the new investment law, which ended the last weeks of the preparation of its executive regulations, and completed the preparation of a bill for bankruptcy that will be presented to the House of Representatives in the second session next month, in addition to the companies law. The minister said that the government is constantly looking to solve the problems facing investors in Egypt, which is part of its investment promotion plan. Our discussions with investors are aimed at reaching final and fundamental solutions to investment disputes because we are well aware that the problems that remain outstanding for more than a year give a negative message about the investment climate in Egypt, she said. The Ministry of Investment and International Cooperation is keen to solve the problems of investors, ensuring the preservation of the right of the state and citizens to land and natural resources, said Nasr. The Ministry of Investment and International Cooperation is reviewing the new investment agreements to ensure the rights of the state, and provides all support to the serious investor who supports productivity and provides jobs. The government attaches special importance to foreign investment for its strong contribution in the transfer of modern technology and excellent management methods to the local market, as well as the transfer of international expertise to the Egyptian investor. The economic reform programme implemented by the Egyptian government depends on improving the business environment and increasing foreign and domestic investment rates, she said. She said that the increase of domestic and foreign investments in Egypt supports economic growth and continuity in achieving sustainable growth rates pursued by the state. Nasr pointed out that the new investment law does not differentiate between domestic and foreign investors or between males and females. It eliminates the bureaucracy that Egypt has suffered over the past years and allows companies to obtain equal opportunities. The lesson is not in the investment law, but the most important thing is to apply the law properly and that s what we aspire to, she said. The investment law supports the industry and gives incentives to investors in labour-intensive industries located in remote and disadvantaged areas, she said. She said that the government, in conjunction with the legislative and economic reforms, is seeking to implement strong infrastructure projects, which the investor needs in addition to good legislation. She pointed to the cooperation of the Ministry of Investment with all the governmental bodies and agencies to implement the investment law. The new law stipulates the presence of a representative of the government bodies in the General Authority for Minister of Investment and International Cooperation Sahar Nasr DNE Photo MORE THAN 600 OPPORTUNITIES WILL BE OFFERED IN THE STATE INVESTMENT MAP SOON THE MINISTRY HAS STARTED THE RIGHT STEPS IN THE APPLICATION OF THE INVESTMENT LAW THE NEW INVESTMENT LAW SUPPORTS ALL INDUSTRIES AND DOES NOT DIFFERENTIATE BETWEEN AN EGYPTIAN AND A FOREIGNER Investment and has the powers to make the decision to facilitate investors. In addition to that, it is expected to issue the executive regulation of the new investment law soon, especially as the Legislative Department of the State Council is currently being drafted. Nasr pointed out that the Ministry of Investment is in contact with the private sector financing arm of international financial institutions to support projects implemented by investors in Egypt. We have direct lines of contact with the International Finance Corporation (IFC) of the World Bank, the Islamic Development Bank (IDB), and the European Bank for Reconstruction and Development (EBRD) to provide private sector financing, she said. Additionally, Nasr stated that the ministry has started the right steps in the application of the investment law, through the establishment of the company for entrepreneurship, to support small investors in the coming period. The Ministry of Investment established Egypt s Entrepreneurship Company a few months ago with a capital of EGP 451m, in partnership with the Saudi Development Fund and NA Capital. The new company announced the establishment of two new companies to finance entrepreneurial projects with a capital of EGP 200m, a partnership with EFG-Hermes and the United Nations Development Program (UNDP). Nasr said that the ministry launched the Your Business Idea initiative to encourage and finance emerging projects and promote the entrepreneurial environment in Egypt. She explained that the initiative is based on collecting ideas from young people in all governorates and selecting the good ones, and organising workshops for their owners for four months followed by funding for the project. Furthermore, she pointed out that the ministry attaches special importance to the Investors Services Centre and will have representatives from several bodies, including the Ministry of Justice, represented in the Real Estate Month, the Ministry of Finance, and the Central Bank of Egypt (CBE), as well as the Misr for Central Clearing, Depository, and Registry (MCDR), and the Egyptian Financial Supervisory Authority (EFSA), to provide the best service to the investor in all governorates. The Ministry of Investment and International Cooperation signed two cooperation protocols with the FSA and MCDR this month to allow the exchange of data and information among them. The minister said that the government has launched an integrated plan to support and develop free zones and investment, and seeks to establish a free zone in each province. The General Authority for Investment and Free Zones (GAFI) has received numerous requests for the establishment of special free zones in a number of governorates. The new investment law allowed the return of the special free zone system, based on the offer of the competent minister and after the approval of the Board of Directors of the Authority. The minister pointed to the desire of a number of foreign investors, including two Chinese that have expressed interest in investing in the area of the Suez Canal axis, and those investments will be announced in the coming period. She said that the economic zone of the Suez Canal (SCZone) is one of the most attractive areas to attract foreign direct investment. Last week, Nasr held a session on investment in Egypt organised by CI Capital, in the presence of a number of international banks and funds, some of them in Egypt, to discuss expansion opportunities. Seven international investment banks Silk Invest, British Bellevue, Sustainable, NBK Capital, Sanlam South Africa, RIMCO, and American Oppenheimer Funds are set to invest in the Egyptian market, especially in the development projects of the Suez Canal and the New Administrative Capital. The Minister of Investment estimated the net foreign direct investment attracted by Egypt during the last fiscal year was $8.7bn. She said that the oil sector accounted for the largest share by 42%, followed by investment in the construction sector. Foreign direct investment increased by 67% in July compared with July 2016, which is promising at the beginning of the current fiscal year, she added. Investments during the past fiscal year, whether new companies were established or expanded, rose 24%, she said. The number of new companies established during the last fiscal year rose 26% to reach 15,200 companies compared to 12,084 companies during the fiscal year The number of new companies established during the fourth quarter of last fiscal year rose by 18% to 3,566 compared to 3,033 companies during the same period of the previous fiscal year, reflecting the increasing investor confidence in the investment climate, the minister said. Nasr said that the government is preparing to launch the investment map for Egypt and will include more than 600 investment opportunities in the first stage. The map will include all the projects available in the provinces and bodies of ports and airports and industrial projects, service and tourism, and others, according to Nasr. Designing ambitious programme to formalise informal economy: El-Said AUTOMATING ALL PUBLIC SERVICES IN COORDINATION WITH THE CBE AND FINANCE MINISTRY By Mohamed Ayaad Minister of Planning and Administrative Reform Hala El-Said said that the government is working on designing an ambitious programme to formalise the informal economy, which some estimate exceeds the formal economy. She added that the programme includes coordination with all sectors operating in the informal economy, provided that the programme includes incentives for the informal sector in the process of consensus and guarantees to enable them to enter the official sector without any additional losses or burdens. She said that incentives to attract the informal economy include the availability of financing at competitive prices commensurate with their ability to pay interest and premiums, which would raise the value of the GDP. He stressed that the initiative of the Central Bank of Egypt (CBE) to stimulate the small and medium enterprises (SME) sector will be used to oblige banks to allocate about 20% of their SME portfolio to stimulate the informal sector. In a related context, El-Said revealed the work on the implementation of an integrated plan to automate all public ECONOMIC GROWTH RECORDED 5% DURING Q4 OF FY 2016/17 services provided to citizens, including payment and collection services, in coordination with all government agencies. We currently have about 5 million government employees receive their salaries through ATMs. There are also about 6 million pensioners and 1.7 million citizens from the Takaful and Dignity Program. Minister of Planning and Administrative Reform Hala El-Said WE CURRENTLY HAVE ABOUT 5 MILLION GOVERNMENT EMPLOYEES RECEIVE THEIR SALARIES THROUGH ATMS The farmer is also mechanised through the issuance of a smart card for the farmer, which includes all his data in coordination with the Agricultural Bank of Egypt (ABE). This will enable the farmer to obtain the required financing at competitive interest. On the other hand, as part of the government s efforts to stimulate the investment climate and create an advanced environment for doing business, the minister explained that a law is currently in progress to speed up the process of exiting the market. El-Said explained that the steps to stimulate investment were the issuance of the Investment Law and the Licensing Procedures Law, which reduced the duration of licensing from 600 days to 30 days and 7 days in DNE Photo some projects. She added that the work is under way to amend the Law 141 on SMEs, which contributes to increasing the process of stimulation and increase rates of growth and GDP. The minister revealed that the GDP growth rate for the last fiscal year was 4.2%, against the expected 4%. This is a major development driven by growth in investments, foreign trade and consumption, which are job-rich sectors, which led to a decline in unemployment to 11.9%, she said. The economic growth and national projects contributed to the creation of about 850,000 jobs during the past fiscal year against about 700,000 jobs provided by the economy during the past years. The growth rate in the fourth quarter was 5% compared to 4.5% in the same quarter of the previous fiscal year, a positive development and a significant growth despite economic reform measures. El-Said attributed this development to the growth of the sectors of telecommunications, construction, trade, and retail, noting that all sectors have achieved positive growth rates. The growth rate was led by the telecommunications sector, which grew by 16.5% in the fourth quarter, 12.5% for the whole year, followed by the construction sector, which achieved a growth of 9.5%, the foreign trade sector, which achieved a 5.5% growth rate, and the manufacturing industries, which achieved a growth rate of 4%. El-Said said that all sectors have achieved a positive growth rate, which sends a positive message for foreign investments. Net investment inflows reached $7.9bn instead of $6.9bn, which pushed the balance of payments to improve over the past fiscal year, she said. According to data published by the CBE on its website, the balance of payments achieved a total surplus of $13.7bn during the last fiscal year compared to $2.8bn in total deficit during the fiscal year of 2015/16. The Central Bank of Egypt (CBE) said that about $12.2bn of this surplus is achieved in the period from November to June, the period following the decision to liberalise the exchange rate. Pointing out that the high-rate of growth reflected on low unemployment rates, stable price levels, and increases in investments.

3

4 4 Industrial investment map to be completed by end of September INDUSTRY MINISTRY RECEIVES REQUESTS WITH INVESTMENTS OF $16BN By Shaimaa Al-Aees The government is directing a message during the Euromoney Conference this year to emphasize that Egypt is moving steadily in the right path of development. All indicators confirm that the package of economic reforms adopted by the Egyptian government was right, the Minister of Trade and Industry said, directing a message to investors and participants in the Euromoney Conference. According to Ministry of Planning indicators, the growth rate is 4%, although tourism did not return fully. The cash reserves stood at $36 billion. The surplus in the balance of payments this year increased $11 billion. Furthermore, the trade balance showed significant progress, as imports decreased by 29% and exports rose by 8%, while the unemployment rate fell to 12%, the minister said. Daily News Egypt sat down with Minister of Trade and Industry Tarek Kabil to talk about the developments of the trade and industry sector. What does Egypt need after all these indicators to increase investment rates? In fact, Egypt needs to diversify investments to include various industrial sectors, rather than focusing on high investment rates in general. The ministry has completed the preparation of investment opportunities for more than 15 governorates. By the end of September, the industrial investment map will be completed, including all governorates. The ministry has organised a number of visits by its employees to visit all the factories in different governorates in order to know the manufacturers needs. The map is used to determine the types of employment and training programmes to achieve integration of factories and networking between factories and workers, as well as to diminish the volume of imports. The ministry is working on implementing this strategy in 6th of October City. Is there a new package of decisions on which the ministry is working to curb imports? There are no new decisions that the ministry is currently working on to limit imports, especially since Egypt is bound by the World Trade Organisation (WTO) agreements and its trade agreements with different countries. The ministry follows two methods to limit imports. The first is a set of decisions adopted by the ministry during the last year to limit the entry of imports, such as the registration of foreign factories imports to Egypt in the records of the General Organisation for Import and Export Control (GOEIC). The second method is to encourage the local industry to become an alternative to these products, which is the focus of the ministry during this period. Among the positive indicators, most imports recorded marked declines in the period from January to August. The imports of ready-made garments fell by 64%, leather by 52%, upholstery by 44%, and furniture by 40%. What is the target rate of reduction of imports by the end of the year? It is difficult to determine the proportion of the reduction of imports, especially as part of these imports are a key input to production in some industries, and some other imports are strategic commodities, such as wheat, corn, and beans. The ministry is currently seeking to reduce the trade deficit by 50% by I draw hopes to achieve those rates during the current year, considering the rates of exports and imports, as imports amounted to about EGP 24 billion and exports achieved EGP 12 billion. EGYPT IS NOT EXPECTED TO CONTINUE WITH ITS CURRENT INFLATION RATES, WHICH ARE ONLY TEMPORARY FIGURES AND WILL DECLINE NEXT YEAR Is the decision of the ministry during the last year to register foreign factories imports to Egypt a temporary decision? No, it is a permanent decision to ensure the continuity of quality of imported products for the domestic market, especially as this decision is inconsistent with the WTO. Exports have increased since the beginning of the year by 8% by the end of June. Is it a real increase or an increase driven by the currency flotation decisions? Egyptian non-oil exports in the first half of the current year rose to $11.13 billion, compared to $ billion during the same period of 2016 an increase of 8%. This increase is not due to the flotation, but the new markets opened by some export councils. Some exports are difficult to be measured by quantity. For example, readymade garments are difficult to measure by metre, but are measured by the markets that were exported to and the new export markets that were opened. But on the other side, there is a complaint from some manufacturers regarding declining demand rates and the existence of a recession in the local market? Industrial output figures do not indicate a decline in production capacities of factories. The ministry announced previously that it follows a strategy to increase the number of exporters. Is the ministry achieving that increase? Exports rose during the current year to $1 billion, and the number of exporting companies increased, especially small and medium enterprises (SMEs), so the industry needed time to increase production capacity. The ministry has established an Export Development Authority and launched a general strategy for all exports and target markets. The ministry has undertaken a special strategy for Africa and a sectoral strategy for the chemical, spinning, and weaving industries. The ministry s strategy focuses on specific markets, such as Africa, Arab countries, and the European market. Minister of Trade and Industry Tarek Kabil INCREASES IN INTEREST RATES AFFECT THE INVESTMENT CLIMATE The targeted industrial growth rate is 8% by 2020 What is the ministry s objective to increase export rates by the end of the year? At the rate at which exports are increasing, it is likely to rise from $2 billion to $3 billion by the end of the year compared to last year. What is the target industrial growth? The targeted industrial growth rate is 8% by What are the rates of industrial production growth? According to World Bank data, industrial production growth rates in June 2016 increased by (-17%) while in April 2017 (+26%), with an increase 44%. What are the ministry s plans to establish an integrated industrial city? The ministry is seeking to expand the establishment of integrated industrial cities. There are negotiations with a number of foreign investors to establish an industrial city in the north of Fayoum governorate, in Kom Oshim north of Qaroun Lake, on an area of 33 million square metres. We target the establishment of integrated industrial cities with all services, such as housing for workers, hospitals, and schools. This does not mean that we will be stopping the establishment of industrial zones, but there is a new idea for the establishment of industrial cities next to industrial zones. The ministry has not yet determined the industrial sectors to be established in the industrial city of North Fayoum. The construction of this industrial city is to be assigned to a global technical office. A delegation from the Export Development Authority met with the Saudi Development Authority to provide funds to support Egyptian exports, especially to Africa. What is the size of funds provided to exporters? The ministry is negotiating with a number of export support agencies, including the Saudi Development Bank, the African Development Bank (AFDB), and other export guarantee agencies. Through the Export Development Bank of Egypt, about EGP 841 million were provided for Egyptian exports. What is the amount of importers dues in the export refund programme for exporters? The total arrears were about 11 months, and there are no current adjustments in the export burden refund programme. Is there an intention to increase the export support fund? At present, the ministry is not seeking to negotiate to amend or increase it. What is the ministry s plan to benefit from the Mercosur Agreement after the approval of the Argentine Parliament? ECONOMIC REFORM PRESCRIPTION IS A BITTER DRUG, BUT ESSENTIAL Handout to DNE THE TRADE MINISTRY IS CURRENTLY SEEKING TO REDUCE THE TRADE DEFICIT BY 50% BY 2020 The ministry is adopting a number of awareness campaigns about the importance of the agreement and its impact on the trade movement with the Mercosur countries, the terms of the agreement, and the advantages and mechanisms of benefiting from it. Furthermore, the ministry is seeking to organise a visit before the end of the year by a delegation of businessmen to visit the Mercosur countries to start work and to hold bilateral meetings with the members of the agreement. What is the extent to which the Industrial Licenses Law and the Implementing Regulations of the Investment Law reflect the attraction of foreign investment, and are there international companies that show their desire to invest in Egypt? The decision to invest from any international company needs a long time and long internal procedures in companies, especially as international and investment decisions are not taken between day and night. First, the investment law is important, but the facilitation of the procedures is more important. Accordingly, the licensing law and other procedures are more important than the articles of the law. Finally, the advantages of the investment law are available. The ministry is now talking with an international Chinese company to invest $1 billion in the spinning and weaving sector in the Suez Canal axis, and, through the Industrial Development Authority, there are ongoing negotiations with more than 17 projects with investments of $16 billion. However, these investments will not be implemented on the ground unless the owner of the project receives the project s land and begins the legitimate executive procedures. What are the most important steps that the investor is considering to make his investment decision? What role did the government play? The first thing is security and political stability, and Egypt has achieved this compared to what we have been going through during the last three years. Then, the investor looks at the size of the market and growth rates. The third element to be considered by the investor is monetary and legislative policies. Handout to DNE Do inflation and interest rate increases affect investor decisions? The investor studies all these elements, including inflation rates and increased interest rates, in his feasibility study. The feasibility study has assumptions, and usually the feasibility study is over 10 years. Within 10 years, things change as the exchange rate and inflation rates change. Overall, Egypt is not expected to continue with its current inflation rates, which are only temporary figures and will decline next year. The investor considers the worst case senario and accordingly takes the investment decision. Additionally, I am very optimistic about the economic situation of the country, and we are currently in the middle of a disaster, but we seek to look forward in the future within three years and expect that the situation will vary completely within that time period. The current economic reforms were supposed to take place 30 years ago. The current problem is that we do not have the luxury of time, so the ordinary citizen feels the length of the procedures and suffers from a number of reforms that came very late. The economic reform prescription is a bitter drug, but essential. Does the government intend to increase the burden of factories and stimulate energy prices? There are two parts to the answer. The first is the industry must stand on its feet. I defend the industrial sector, but every citizen has to pay the actual cost of the service, which requires him to rationalise consumption. Consumption of electricity, water, and labour reduced the cost by 20% to solve the problems of recession. Furthermore, the ministry is now working with 71 energy-intensive companies and helping them with energy savings programmes to increase their competitiveness. The cost of gas for plants is higher than the price of gas globally. Will the government move to reduce gas prices? The average global price of gas is from $4.5 to $5, but Egypt does not have self-sufficiency of gas; therefore, the country imports gas, processes it, and then provides it factories. Any factory that wants gas at a simple price can import it and pay the connection cost. The government may cut energy subsidies to factories in accordance with the gradual subsidy cut programme. How do high interest rates affect investments? Interest rates in their current value certainly affect the investment climate, but this value will not continue as so in the long term, as it is a temporary measure. What are the latest developments in the signing of a free trade agreement with the United States of America? Egypt is not seeking to sign a free trade agreement with the USA because of US administration policies that do not comply with free market policies. There are currently no negotiations with the US on a free trade agreement. What are the developments of the law of giving legal personality to export councils and the establishment of a company to manage the industrial zones? The parliament is currently discussing giving legal personality to export councils to be legal entities. Its purpose is to grant more codified influences to the export councils. Its role is currently advisory. It cannot open a logistics centre in any foreign market, but the new law grants it the authority to open logistics centres. The Industrial Zone Management Law, a decision approved by the cabinet, is currently being studied by the Ministry of Industry. The idea is to ensure the continuity of the quality of the infrastructure and maintain and manage industrial development proposals. The ministry is studying the participation of the private sector in the management of industrial zones.

5 5 Foreign investment in Egypt s T-bills likely to hit $20bn in FY 2017/18: Finance Minister EL-GARHY EXPECTS HEADLINE INFLATION TO HOVER AROUND 15% BY THE END OF NEXT JUNE By Elsayed Solyman Foreign investments in Egypt s debt pile are expected to hit $20bn by the end of the current fiscal year, Amr El- Garhy told Daily News Egypt. In an interview at his office in Cairo, El-Garhy expressed his confidence about the expected foreign inflows as the government goes on its reform programme. Foreign investment in Egyptian debt is expected to stand at $20bn. They inject more cash as they are confident about the future. This is important evidence that we are restoring their confidence after years of turmoil, El-Garhy added. The governor of the Central Bank of Egypt (CBE), Tarek Amer, said that the volume of foreign investment in Egypt s debt instruments rose to $15bn since the liberalisation of the exchange rate. Foreign currency inflows into Egypt s debt and equity market have already been steadily growing since the CBE removed restrictions on the currency and raised interest rates in November before the securing of a $12bn loan from the International Monetary Fund (IMF). We are getting more intention from investors. I expect an uptick also in foreign direct investments (FDIs) in the few coming months, El-Garhy added. Investors have poured money into Egyptian debt and equities since authorities started overhauling the economy by removing most currency restrictions, raising interest rates, and cutting fuel subsidies. Foreign reserves surged to a record of more than $36bn in August, with the debt market attracting over $15bn in foreign inflows. Egypt funding gap to hit $12-14bn Egypt funding gap is expected to hit $10-12bn in the current and next fiscal year, El-Garhy said. Our expectations for the funding gap when we started our reform programme to come in $34-35bn, now we expect about $12bn for the current fiscal year, El-Garhy explained. The funding gap is the amount of money needed to fund the ongoing operations or future development of a business or project that is not currently provided by cash, equity, or debt. Funding gaps can be covered by investments from venture capitals or angel investors, equity sales, or through debt offerings and bank loans. For the current fiscal year, we expect it to stand at $12bn. For the current and next, it should hover around $12-14bn, the minister added. The ministry eyes all alternatives to bridge the gap, the minister told Daily News Egypt. According to Egypt s economic reform programme, the funding gap is to reach $30bn over three years, ending on 30 June We consider all options to bridge this gap including going back to international debt market again, El-Garhy added. Egypt raised $3bn in a Eurobond sale on Wednesday, about twice as much as targeted and at a lower cost than when the same bonds were first sold in January, a sure sign that foreign appetite for the country s debt is growing as it makes economic reforms. Last May, Egypt returned to international debt markets and raised $3bn from a Eurobond sale to cover its financing needs following its successful sale earlier this year of $4bn in five-, ten- and thirty-year bonds. The country has sought to lure back foreign investors following the 25 January Revolution, which drove them away. The sale of bonds plus anticipated payments from foreign institutions means we have largely succeeded in plugging the financing gap at least for the current fiscal year, the minister added. Egypt signed a three-year $12bn IMF programme in November attached to reforms including a value-added tax (VAT) and subsidy cuts to curb the budget deficit, moves the IMF said would boost the country s fiscal position. Finance Minister Amr El-Garhy Egypt has been negotiating billions of dollars in aid from various lenders to help revive an economy hit by political upheaval and to ease a dollar shortage that has crippled imports and hampered its recovery. Inflation to embark on easing towards 15% El-Garhy seemed to be confident about a downward trend for the inflation in the few coming months. Inflation has started its downward trajectory. Prices will continue to go down and citizens to feel that soon, El-Garhy said. Egypt s key inflation indicators dropped in August from the multi-decade highs they reached in July, when energy prices were raised as part of the IMF-backed reforms. Annual urban consumer price inflation dipped to 31.9% year-on-year in August from 33.0% in July, the Central Agency for Public Mobilization and Statistics (CAPMAS) said. Core inflation, which strips out volatile items like food, decreased to 34.86% from 35.26%, according to the CBE. I think headline inflation will hover Amr El-Garhy around 15% by the end of the current fiscal year, El-Garhy confirmed. Inflation soared in July to its highest since 1986 after the government cut fuel and energy subsidies. When El-Garhy was asked about the timing of cutting fuel subsidy again, he said, At the current stage, for the current fiscal year, there will be no hikes in fuel prices. He noted out that the oil prices in global market enabled the government to sustain the current prices. DNE Photo FOREIGN INVESTMENTS IN EGYPT S DEBT PILE ARE EXPECTED TO HIT $20BN BY THE END OF THE CURRENT FISCAL YEAR Fuel subsidy cuts were a condition of a $12bn, three-year loan program agreed last November with the IMF, which included subsidy cuts, tax increases, and looser capital controls. New programme for international bonds When El-Garhy was asked about the timing of tapping the debt market, he said that he will introduce a new programme for bonds for the cabinet after DNE Photo the end of the current programme. El-Garhy said also that Egypt plans to raise 1.5bn from the country s first sale of euro-denominated bonds. The possible sale would happen before the end of November, El-Garhy told Daily News Egypt. With local borrowing costs above 15%, Egypt is increasingly looking at international debt markets to capitalise on growing investor confidence after it floated its currency and cut costly energy subsidies. All options are on the table to plug any funding gap, El-Garhy added. The round-show for the new euro bonds will start in November ahead of the vacation season in Europe, El- Garhy confirmed. When he was asked about the timing of tapping the international debt market using the new programme, he said that could happen as of next February. Investors sentiments are on the rise We are getting noticed by new investors. Once, when I was in a call with 150 of them on the phone, they were all eager to inject cash in the Egyptian market, El-Garhy said. When he was asked about the reason behind FDIs concentrating only on the oil sector, and financial services, El- Garhy said that the other sector will soon get the attention of the investors. Egypt s net FDIs rose by 14.5% to $7.9bn in the fiscal year that ended on June 30, the CBE said. That was well below Egypt s target of $10bn as the North African country continues to struggle to attract foreign investment following the 25 January Revolution. There was a $2.3bn rise in net inflows for oil sector investments to $4bn, the bank said in a statement. Egypt paid about $2.2bn in arrears owed to foreign oil companies in the second half of , which helped attract investors to the sector. El-Garhy expected FDIs to hit $10bn by the end of the current fiscal year.

6 6 Cost of LNG imports during current fiscal year amount to $1.8bn: Minister of Petroleum EGYPT S CURRENT GAS PRODUCTION AT 5.2BN CF PER DAY, IMPORTS TO STOP AT END OF 2018 By Mohamed Adel The government succeeded in solving the energy saving crisis faced by the country until 2015 by importing liquefied natural gas (LNG) shipments and realising large oil and gas discoveries that contributed to reducing pressure on foreign currency and saving energy through local production, which necessitated dialogue with Minister of Petroleum and Mineral Resources Tarek El-Molla to explain the sector s plan to increase oil and gas production and economic development, and to direct his message to investors. How can Egypt become a gasexporting country after a 5-year long break? The oil sector gives top priority to meet the needs of the local gas market before becoming an exporting country and sets the priority of achieving selfsufficiency of natural gas by the end of 2018, once the major discoveries have been linked to the production grid. The Ministry of Petroleum is seeking to achieve a surplus of gas by 2020, so that part can be directed to meet the contractual obligations for export, as a message to reassure the investors that Egypt is a country committed to the contracts concluded. In order to optimise the utilisation of resources, the ministry will direct the bulk of the gas surplus to develop the petrochemical industry, which would also contribute in achieving value added and optimal utilisation of natural resources. What is the size of Egypt s total production of gas and oil? What is the plan to bloat production? Egypt s current production of gas is about 5.2 billion cubic feet per day, up from 4.46 billion, when the first stages of the West Delta fields entered the production map. The production will continue the gradual increase after the first phase of the Zohr field is linked to the production grid by the end of the year, as well as Atoll field, while production of oil is estimated at 700,000 barrels of crude oil per day. The ministry is exerting much effort to boost production through adopting the latest technological methods to offset the natural decay and increase production of existing wells. The sector is proceeding with the plans to increase oil production. We are also moving forward with our plan to offer tenders for exploration. The oil sector signed 82 exploration agreements with a minimum investment of about $15.4bn, which are expected to fruit some new discoveries, supporting the goal of increasing production and reserves of petroleum wealth. Efforts are also being intensified in cooperation with foreign partners to carry out projects to develop large gas discoveries in the deep waters of the Mediterranean Sea and the Nile Delta to contribute to the planned increase in gas production. WE ARE SETTING THE ROUTE OF THE GAS LINE CONNECTING EGYPT, GREECE, AND CYPRUS How many shipments of gas are imported in the current fiscal year? What is the cost of importing gas? When will we stop importing? 80 shipments of liquefied natural gas (LNG) worth around $1.8bn are set to be imported to meet the needs of the local market, stressing that imports have been cut significantly after the increase in domestic gas production last year. The procurement program considers the different needs and consumption rates between the different months. The summer months record the highest rates of gas consumption in the power plants, with imports gradually decreasing in winter, in conjunction with the decline in electricity needs and the entry of new fields of production by the end of the year. Before the end of 2018, we will stop importing and achieve self-sufficiency, which will be secured through local fields production. The coming year, before achieving self-sufficiency, we will reduce the number of imported LNG shipments. What is the size of investments spent on Zohr Field so far? Eni s investments in Zohr field in the Mediterranean amounted to $4bn so far. When will Egypt offer new tenders for exploration of gas and oil? Offering international tenders for oil and gas exploration is one of the ministry s most important work mechanism to support production. The timing of offering tenders is subject to intensive studies. Offering tenders is an ongoing dynamic procedure and offering is done following completion all geological and geophysical studies. What are the details of the gas projects that will be linked to production in the current fiscal year? Before the end of this year, three major projects will be completed, including the first phase of Zohr field, which will see its production growing gradually to reach 2.7 billion cubic feet of gas per day when all phases are completed in This is in addition to the Atoll gas field, which has rates of 300 million cubic feet of gas per day, next to Noras field with 1.2 billion cubic feet per day in production. Production companies are going forward with the development of fields and existing finds in all areas to link new wells to production, whether in the western or eastern desert, or also in the Gulf of Suez and the Delta. What is new with the cooperation with Cyprus and Greece in the Mediterranean? The Egyptian- Cypriot - Greek relations are strong across all field. In the economic aspect, Egypt is their optimal and most important partner in the Middle East and North Africa. Several meetings were held to discuss ways to enhance energy cooperation between the three countries. Specific areas were identified for broader regional cooperation in the field of hydrocarbon activities, as well as safety in marine activities and energy infrastructure, research and development in the hydrocarbon sector. This is in addition to the agreements between Egyptian and Cyprus governments to establish a gas pipeline from Cyprus to Egypt, which will work to achieve mutual benefit and support strategic cooperation in the fled of energy, which also serves Egypt s plan to become an international hub for energy trade in the region. What is new with the pipeline agreement with Cyprus? Minister of Petroleum and Mineral Resources Tarek El-Molla Tarek El-Molla during his interview with Daily News Egypt Possible options for the pipeline and land facilities to transport Cyprus natural gas to Egypt are being explored using the infrastructure available between Egypt, Cyprus and Greece, which will contribute to strengthening Egypt s position and supporting its project to become a regional hub for energy trading, next to improve the value added and revenues from the facilities of gas liquefaction in Egypt that will receive Cyprus gas. What is the size of crude oil does Egypt import from Iraq and Kuwait? The agreement with the Iraqi side includes the supply of 12 million barrels of crude oil for one year, to be refined in Egyptian refineries, as of last May, of which Egypt received four shipments of 2 million barrels each. The contract with Kuwait Petroleum Corporation (KPC) was renewed in April for a period of 3 years to supply 2 million barrels per month to be refined in Egyptian factories, while the value of each shipment varies according to international prices at the time. How will Egypt become a logistical centre for energy trading? A committee was formed by a decision of the Prime Minister under the chairmanship of the Minister of Petroleum and includes a number of ministries concerned with turning Egypt into a logistic centre to follow up this national project and support its implementation. Egypt has many elements that enable it to transform into a regional centre for energy trading, foremost of which is the distinguished geographical location, which is the Arrears owed by government agencies to Petroleum Ministry is at EGP 90bn WE FORMED A MINISTERIAL COMMITTEE TO FOLLOW UP ON EGYPT S TRANSFORMATION INTO A LOGISTICS CENTRE FOR ENERGY TRADING middle of the producing countries that are rich in energy sources and major consumer countries. These advantages require the support of a strong infrastructure in the field of oil and gas, and passage of investmentsattractive legislation. The Suez Canal as the most important international shipping corridor for international trade, and SUMED crude oil and petroleum products project in Ain Sokhna and Sidi Keri are of the main pillars of the current trend to turn Egypt into a regional hub for energy. The Ministry of Petroleum is developing the capacity of the SUMED project, and recently completed the operation of a new seaport at the port of Sumed, Ain Sokhna, and is currently developing and expanding the oil and gas pipeline network, natural gas liquefaction and exporting plants and new refining projects. Production rates are currently being accelerated in the discovery of new natural gas and the development of oil ports, in addition to the promulgation of the law regulating the activities of the gas market prepared by the Ministry of Petroleum and the new investment law as well as many steps being implemented to achieve this national project. DOMESTIC PRODUCTION SAVED THE STATE EGP 411BN LAST FISCAL YEAR DNE Photo THE AGREEMENT WITH THE IRAQI SIDE INCLUDES THE SUPPLY OF 12 MILLION BARRELS OF CRUDE OIL FOR ONE YEAR What is the size of arrears owed by government agencies to the Ministry of Petroleum? The sector s entitlements by government agencies, which represent the value of their withdrawals of petroleum products and natural gas, at EGP 96.2bn. This is a major challenge for the ministry, where the accumulation of debts owed by government agencies force the ministry to borrow. The electricity sector is the largest consumer of oil with a total of about EGP 75.9bn of arrears, while the other sectors, such as aviation, railway, and public business companies are due to pay about EGP 20.3bn. The government has this issue on its priorities and works on rescheduling the debts. What is the size of debts owed to foreign partners? They were cut to $2.3bn, which is the lowest since 2013, after the ministry paid $2.2bn of arrears to international oil companies working in Egypt. Foreign partners entitlements amounted to $6.3bn in The obligation to pay the current receivable bill regularly did not accumulate any new entitlements. This reflected positively on the increased inflow of foreign oil companies investments in Egypt and thus increased the country s crude oil and gas production. What about the Edison concession area? Edison implemented a seismic reflection survey in its concession area in the Mediterranean. The survey was completed and the company is now studying the geological structures in preparation for choosing the best drilling program in the coming period. Will there by further petroleum agreements with foreign partners in the coming period? What are the most prominent of which? The Ministry of Petroleum recently signed 6 new oil agreements with US and international companies, approved by Parliament and issued by the President, with a total investment of $160m minimum, and signing grants of $64.2m to drill 33 wells. DNE Photo How much is the cost of providing fuel for the local market without subsidy? How much is secured through importing and local production? The ministry saved some 78 million tonnes of petroleum products worth EGP 411bn at a cost of EGP 321bn and sold on domestic market at EGP 200bn. He noted that domestic production secures 70% of local needs and the state imports the remaining 30%. What are the developments in the cooperation agreement with Jordan? Relations between Egypt and Jordan have improved thanks to the distinguished relations and the brotherly ties between the two countries. The memorandum of cooperation I signed with the Jordanian Minister of Petroleum opens aspects and new fields of work, such as experts training and transferring Egyptian experience in natural gas sector. This is in addition to re-exporting gas to the consuming countries in the region through the existing infrastructure in both countries, as well as using the gasification units in Ain Sokhna and Aqaba in emergencies during maintenance periods to cover part of the countries needs of gas. This is an example of the Arab integration and cooperation in energy sectors. What is the statue of the Gas Regulatory Authority? What are the companies that presented requests to import? Have the requests been approved? Egyptian President issued a decision upholding law No. 196 for 2017 related to issuing a law for regulating gas market activities, which was approved by the parliament in the last session. This gave a push to working in this regard, with the aim of establishing a regulatory authority that clarified relations between suppliers and consumers, as well as the operators of the gas grid. This came in light of working to liberalize the gas market and open the door for the participation of the private sector to compete in the gas market, which means new supplies that cope the growth needs. We are now working on drafting the bylaws to pass them soon. Several private companies have submitted requests to obtain the license for importing gas. And initial agreement was granted to number of them. What are the new projects in the petrochemical sector? There are planned projects, including the Styrene production project in Alexandria and other projects under study and development, with investments of about $1.5bn, including the project of producing propylene and its derivatives with the expansion of Sidi Kerir Petrochemicals (SIDPEC) and the ammonia production project. The petrochemical sector will also witness the establishment of a project to produce formaldehyde and its derivatives and the project of production of resins and medium density wood panels (MDF), as well as an integrated petrochemical complex at the Suez Canal Economic Zone, the Phase II project to increase ethane extraction from the Western Desert Gas Complex, and the refining and petrochemical complex in southern Suez. What about the results of the gold excavation tender that was recently awarded? We are working to finalize the agreements laws for the awarded companies to present them to the legislation authorities to obtain final approvals. These will be submitted to the parliament in the coming session. What is your message to investors in the oil sector? It is not a message to investment in oil only, but rather to all investors. Egypt is recovering and is currently working to increase economic growth and aspires to achieve more successes, in the light of political stability. Egypt is the land of opportunities. The political leadership said, several times, that it stands with fair investment which achieves state s interest and expected revenues for investors, which is why the government passed the new investment law and its bylaws.

7

8 08 Housing Ministry supports the real estate sector within a comprehensive plan for economic reform: Madbouly MINISTRY PROVIDES UNITS AND LAND FOR ALL INCOME SEGMENTS AND MEET THE DEMANDS OF DEVELOPERS ACCORDING TO VARIOUS INVESTMENT MODELS Over the past four years, the Ministry of Housing has launched several development axes, starting with the implementation of low-income social housing projects and the Dar Misr project for middle income segments, as well as expanding in offering lands for investments. Minister of Housing Mostafa Madbouly, told Daily News Egypt that the ministry has been working on penning the specific legislation for the work of the real estate sector, including the Contractors Compensation law, the bylaws of the New and Urban Communities Authorities (NUCA), social housing law, and expanding in offering lands for individuals, along with starting the Sakan Misr distinguished housing project. By Mohamed Darwish What is the ministry s plan to support economic reform measures? The ministry has plans that must be completed in a timely manner within a comprehensive government plan for urban development and economic reform. The role of the Housing Ministry is providing the largest number of units and lands for different income segments and meeting the investors demands of obtaining lands equipped with facilities for various investment means. The Egyptian economy, particularly the real estate has faced challenges in the exchange rate and high prices. However, the ministry s plan succeeded in overcoming many variables by supplying the market with the units and land needed to meet the increasing demand. What are the details of the investment plan of the ministry during the coming period? The ministry started last year, through its investment arm the New Urban Communities Authority (NUCA), a series of land propositions in various housing and investment activities besides units in its residential projects, In the past years, real estate companies complained about a shortage of facilities equipped lands in the new cities. Yet, NUCA managed succeeded in providing areas with various mechanisms to offer opportunities to all companies according to their technical and financial ability. Moreover, NUCA offered, last month, 86 land pieces, including 59 urban development plots at a specified price with areas between 4 and 402 feddans in 19 new cities, along with 14 land plots through closed envelopes auction with areas between 10 and 105 feddans in the 6th of October, Obour, Shorouk, Sheikh Zayed, New Aswan, and New Damietta. In addition, the offering included 13 new land plots for development in cooperation with the private sector of areas from 58 feddans to 2,800 feddan in New Cairo, 6th of October, Sheikh Zayed, and South Marina. Will the new offering succeed in meeting the growing demand in the real estate sector? The new offering is suitable for all segments of the real estate development companies operating in the Egyptian market. We distributed the land plots across several NUCA cities, as part of the comprehensive urban development plan. NUCA s plan aims to bring in more internal and external investments through offering lands for real estate investment in new cities. This reflects positively on the development of these cities, and provides direct and indirect employment opportunities, since the construction sector has a great role in providing job opportunities. NUCA has endeavoured to diversify the mechanisms of offering. The lands of the specified price are suitable for many segments of the companies that target specific areas suitable for their development capacity and the pieces offered in closed envelopes are left for companies to compete on the offering price, due to their vital locations in the new cities. Will the second phase of the partnership projects succeed in attracting investors to cooperate with the ministry? Minister of Housing Mostafa Madbouly Partnership lands represent a second phase of the ministry s success in the first offering, which resulted in the signing of contracts with Egyptian and Arab companies to develop four projects of a total area amounting to 2,000 feddans in New Cairo and the 6th of October cities with investments reaching EGP 150bn. What is your assessment of the ministry s plan to provide land during the past period? The size of the NUCA offerings last year exceeded the offerings in the past years. In 2016 alone, we offered 80,000 land plots for individuals distributed on the axes of social, distinctive and most distinctive housing projects. The new placement of individual land includes 24,000 plots distributed over three income levels and match different segments. We offered 12,700 social housing lands. The down payment was set at EGP 25,000. We also offered 7,373 distinct housing pieces with a down payment of EGP 100,000. The lands were allocated through public auction. In addition, we also offered 3,930 most distinctive land plots allocated for the highest down payment. Why did the ministry resort to increasing land proposals? The ministry is striving to fight land trade by increasing the number of plots in all new cities to meet the demand of Egyptians from various sectors of society to own lands and to accelerate the development of new cities and provide job opportunities from these targeted projects. NUCA is keen to speed development so it will provide architectural models with all the necessary executive drawings to obtain licenses so that the citizens that win the tender can obtain building permits immediately upon receipt of the plot. What are the developments of the work in the new administrative capital project? The new administrative capital is one of the most important projects that support the state plans in the comprehensive urban development thanks to its large area and its ability to attract Egyptian and foreign investments throughout the development periods. The capital is on an area of 170,000 feddans. The Ministry of Housing estimates the urgent phase investment there at $8bn to develop 12,500 feddans. The Ministry of Housing is prepared to offer 25,000 units in the first phase of the residential district in the capital, including apartments and villas. The area of the first residential district in the administrative capital is 1,000 feddans that include 25,000 units. This is divided between villas and townhouses. The project is being implemented by the Arab Contractors, Talaat Mostafa Group, Petrojet Contracting, Concord, Holding Company for Construction & Development (HCC), and the armed forces, as well as Wady El-Nile Contracting & Real Estate Investments Co. Would the project succeed in achieving the development expected by the real estate sector? The capital is a development project that aims to create an integrated work environment with a high-quality infrastructure aimed at attracting capital and international companies and providing the opportunity to free Cairo from the congestion resulting from the movement of employees in ministries and government agencies. Cairo will become the cultural, historical, and tourist capital. The area of the administrative capital is equivalent to twice the area of New Cairo and provides land for a period of 50 years. It is a necessity at the present time. Moreover, many Egyptian contracting companies supervised by the armed forces are now implementing the government district, which will include the parliament, the cabinet, and 18 ministries. What about the new proposal for the social housing project? The ministry put forward the ninth announcement for social housing units in 22 governorates as part of the plan to provide low-income housing. We also completed implementing 230,000 social housing units worth EGP 31bn and are now working on Development of new cities to achieve the national plan to double the urban area to 11% until 2030 THE SECOND PHASE OF THE PARTNERSHIP PROJECTS WITH THE PRIVATE SECTOR REPRESENTS A CONTINUATION OF THE SUCCESS OF THE PREVIOUS OFFERING INDIVIDUALS LANDS OFFERINGS EXCEEDED THE PREVIOUS YEARS, WE AIM TO FIGHT BROKERS NEW ADMINISTRATIVE CAPITAL IS THE MAIN AXIS WITHIN THE STATE PLAN FOR COMPREHENSIVE URBAN DEVELOPMENT Mahmoud Fekry 270,000 units worth EGP 42bn. Furthermore, we are implementing the middle-class housing project, Dar Misr. We are finishing up 58,000 units in 11 cities and preparing to implement 100,000 more units. This is in addition to the distinct housing project, Sakan Misr, in which we have offered 40,000 units in six new cities of areas averaging 115 sqm. What are the details of the Urban Development Plan implemented by the Ministry? The government is seeking to develop the new existing cities and create a new generation of new cities to achieve the national plan for the doubling of urban areas from 7 to 11% until The ministry began implementing the new city of Alamein. What are the details of the project? We are building 1,920 residential units worth EGP 300m in the city of New Alamein, next to preparing the beachfront and infrastructure are a cost of EGP 3bn. The investments targeted for the development of the first phase of the New Alamein amounts to EGP 10bn at an area of 2 million sqm. The ministry is planning to offer projects of large areas to Egyptian and Arab investors for development through partnership with the private sector or selling them the land. PLAN OF THE MINISTRY CONTRIBUTED TO ABSORB THE FLUCTUATIONS OF THE SECTOR AND AVOID THE IMPACT ON THE WORK OF COMPANIES The Ministry implements the infrastructure, followed by some projects to confirm the seriousness of implementation. Then, projects and opportunities are presented to the investors besides construction of housing units for all levels. We started with the distinctive social housing. There are some 5,000 ready units as a first phase. We will then establish middle and luxury housing. What are the best ways to exploit the city? The area of New Alamein is 50,000 feddans with a distinctive beachfront of 14 km, which is as long as the Alexandria Corniche. It will include a large number of investment projects and a tower group, hotels, and residential buildings that will be established. The city is funded through NUCA. Several large investors have started negotiating with us and we will present them with our offers soon. The area near the beach was planned as a global tourist area, which will provide 25,000 hotel rooms that work around the year like Sharm El Sheikh. We will start implementing the projects in the first part of the coastline along 4 km and will include restaurants and hotels. What is the ministry s plan to support the construction sector? The ministry contributes to the state plan to increase the volume of construction and construction sector to about EGP 1tn in the coming five years. There is a keenness to support the contracting sector. Therefore, the contractors compensation law was issued for the effects that resulted from the liberalization of the exchange rate and the increase in the prices of raw materials. The land offer to real estate companies and individuals increases the size of the construction sector and contributes to increasing the activities of real estate companies in conjunction with the ministry s plan to develop new cities added to existing cities. What are the details of NUCA investment plan? for the Urban Communities Authority? The investment plan of NUCA in the current fiscal year is worth EGP 31bn. NUCA s investments increased from EGP 4.8bn in to EGP 7.7bn in the following year, then to EGP 2bn in 2014/2015, then up to EGP 22bn in 2015/2016 and beyond EGP 30bn in the past fiscal year. The increase in the investments reflects on the growth in the number of projects and matches the state plan to provide lands and residential units to individuals of different income levels. How can NUCA solve the real estate sector problems? NUCA is in ongoing negotiations with real estate companies to resolve the crises facing the sector. NUCA s bylaws have been adopted and we signed a cooperation protocol with the Real Estate Development Chamber of the Federation of Egyptian Industries and formed a permanent joint committee to solve the problems of investors and developers, as well as extracting building permits, ministerial decisions and organizing advertisements for real estate investment units.

9 9 Investment opportunities in energy sector increasing after economic reforms: Minister of Electricity INVESTMENTS OF PRODUCTION, TRANSMISSION, DISTRIBUTION WILL AMOUNT TO $25BN UNTIL 2020 Interview by Mohamed Farag 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. SIGNING THE ELECTRIC CONNECTION AGREEMENT WITH SAUDI ARABIA NEXT OCTOBER velopment, 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 Minister of Electricity Mohamed Shaker 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 All production plans were postponed to the 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 DNE Photo IMPLEMENTATION OF GREEN ENERGY CORRIDOR WITH AFRICAN COUNTRIES NEEDS 20 YEARS 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. 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 The project will be launched with full capacity (3,000 MW) by September The project costs $1.6bn, of which Egypt will pay $600m. The Kuwait Fund for Arab Economic De-

10 10 Palm Hills founder sees a breakthrough in confidence crisis between government, private sector STRENGTHENING THE POUND ON THE SHORT TERM THREATENS THE EGYPTIAN ECONOMY 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. By Mohamed Ayyad 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. THE EGYPTIAN ECONOMY IS ON THE RIGHT PATH AFTER THE IMPROVEMENT OF GROWTH INDICATORS AND THE ELIMINATION OF THE FOREIGN CURRENCY SHORTAGE CRISIS THE PEOPLE WOULD FEEL THE EFFECTS OF ECONOMIC REFORMS ON THE LONG TERM 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 Yasseen Mansour, the founder and chairperson of publicly-traded Palm Hills Developments 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 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 limitedand 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 COMPANIES AND MACROECONOMIC INDICATORS WILL REAP THE REFORM FRUITS WITHIN A YEAR AND A HALF OR TWO YEARS 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 The bitter reform affected the wealthy class as well, but the middle class was more affected 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 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 PRIVATE SECTOR WILL NOT FORGET INJUSTICE AND SCEPTICISM EXPERIENCED DURING THE POST-2011 PERIOD, BUT ITS LOVE FOR THE COUNTRY WILL PROMPT IT TO RESUME ITS ACTIVITY

11

12 12 Shell positioning itself as Egypt s preferred future partner: Gasser Hanter THE APOLLONIA PROJECT CAN BOOST EGYPT S UNCONVENTIONAL OIL/GAS EXPLORATION AND PRODUCTION 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 Eldin 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. Moreover, we have a thriving downstream business in Egypt with a growing lubricant-market share, at approximately 19% and an oilblending plant, which is currently undergoing expansion. Our people are our core assets. We are optimally delivering performance through building local staff competencies. Through our jointventures, 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 WE SEE THE WESTERN DESERT AS A RICH BASIN AND LOOK FORWARD TO MAXIMISING THE HYDROCARBON POTENTIAL 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 Gasser Hanter, chairperson and managing director of Shell Egypt 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. 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 multistage 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. 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. Considerable opportunities for investments in industrial modernisation, energy efficiency: Katcharov EDISON HAS 3 CONCESSIONS IN EAST MEDITERRANEAN, WITH $80M OF INVESTMENT FOR THE FIRST EXPLORATORY DEEP WATER WELL 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 mediumterm 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? Nicolas Katcharov, Edison s Egypt branch general manager and vice president of North Africa and Middle East operations. 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 THERE ARE CONSIDERABLE OPPORTUNITIES FOR INVESTMENTS IN INDUSTRIAL MODERNISATION AND ENERGY EFFICIENCY 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 We continue to explore in our two on-shore concessions Gindi and South Idku where two additional wells are to be drilled in 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.

13

14 14 The New Administrative Capital a real estate project and seat of government THE PROJECT IS ONE OF THE MOST PROMINENT PROJECTS OF THE CURRENT REGIME By Mohamed Darwish The New Administrative Capital is one of the most prominent projects of the current regime. And it is one that sees continuous oversight by the presidency since it was announced at the economic summit in Sharm el- Sheikh in March The project witnessed several changes, which were supposed to be developed by the government in partnership with the UAE businessman Mohammed Alabbar. A memorandum of understanding was signed for the development of the project, but disagreements over the terms of the partnership stopped the memorandum from materializing into a final contract. The state decided to develop the project through an Egyptian joint stock company in partnership between the armed forces and the New Urban Communities Authority (NUCA) and started implementing the government district and the residential district. The first phase of the investment lands was offered, while the government is now preparing to offer residential units to individuals. The New Administrative Capital is located in the area between the Cairo-Suez and Cairo Ain Sokhna roads just east of the regional ring road. This is roughly 60 km from the cities of Suez and Ain Sokhna. The story of the new capital from Sadat to Sisi The idea of creating a new capital instead of Cairo first emerged in the era of former president Anwar Sadat, who sought to transfer the whole capital to a city with his name on it just on the outskirts of Menoufia. Cairo remained the same and Sadat became a just another NUCA city. In the years of former President Hosni Mubarak, the men of the dissolved National Democratic Party (NDP) policy committee tried to establish a new capital east of Cairo. After the announcement of the project, it was stopped by presidential instructions for fear of transferring important state institutions to a position that will be difficult to control. Before the economic summit in March 2015 in Sharm el-sheikh, the Ministry of Housing announced a plan to establish a New Administrative Capital. During the conference, a memorandum of understanding was signed between the Egyptian government and the Emirati businessman Mohammed Al-Abbar to establish the capital. Television screens broadcasted his discussion with Al-Sisi, who insisted on cutting the implementation time from 10 to three years only. The discussions between the Ministry of Housing and Alabbar failed to reach a formula for understanding, due to disagreement over the state s stake in the project and the mechanism of funding for implementation that the government insists on collecting from abroad. Despite the announcement of the establishment of Capital City Partners Company to implement the project in partnership between Alabbar and a number of Emirati businessmen, in addition to granting the company Eagle Hills, which is headed by Alabbar, the role of the developer of the project, the agreement was not completed and the state turned to develop the project through a joint stock company between the armed forces and NUCA. How to go to the New Administrative Capital? The government has chosen a site on the border of Badr city, which is THE IDEA OF CREATING A NEW CAPITAL INSTEAD OF CAIRO FIRST EMERGED IN THE ERA OF FORMER PRESIDENT ANWAR SADAT about 60 km from the heart of Cairo to implement the New Administrative Capital project. In order to reach the capital from Cairo, you must take the Suez road through Madinaty, Al Rehab, and Future City to reach the Jandali 2 road which leads to the project s site. Jandali 2 road branches from the main Suez road. It begins with a toll gate run by the National Roads Company of the Ministry of Defence. Toll charges are collected from the cars heading to the project site at a flat rate of EGP 10. The road itself is only 10 meters wide. It is paved with a surface layer and used by cars in both directions. It passes within the desert of the project to reach the different sites of companies operating in the New Administrative Capital. Those responsible for the project site confirmed that the road is only a temporary road until the completion of the road of Mohammed bin Zayed, which connects the administrative capital to New Cairo. The new road will be divided into a northern part extending over 12 km and a southern part with the same length. Its width is expected to be 124 meters. Part of bin Zayed is a bridge that passes through the regional ring road to connect the northern part to the southern one. The length of the northern part is 160 meters and 74 meters wide, while the southern part is 160 meters long and 67 meters wide. The road works at the Mohammed Bin Zayed Axis includes the implementation of interconnections with diameters of 2,500 mm and electricity and communication interconnections with diameters of diameters of 110 mm, as well as 9 tunnels in the southern and northern parts to facilitate passage between the two administrative capital districts. Who finances the implementation of the project? The negotiations between the Egyptian government and the UAE businessman Mohammed Alabbar have stopped following the latter s request to provide part of the funding necessary for the development of the first phase of the capital of $45bn from Egyptian banks. However, the government rejected and confirmed that the memorandum of understanding signed by the Minister of Housing with Al-Abar in Sharm El-Sheikh requires the UAE investor to provide the cost of financing from abroad to benefit from increased foreign investment rates and not to finance the project from the Egyptian banking sector which suffers from a deficit in dollar liquidity. During last year, NUCA began implementing the first stage of the capital on an area of 3,130 feddans, which includes the governmental, residential, and business districts. NUCA spent EGP 6bn in the past fiscal year to implement the facilities and housing units. Housing Ministry sources told Daily News Egypt that NUCA allocated EGP 8bn in the current fiscal year to complete the facilities of the urgent phase in the administrative capital and the implementation of housing units that are being prepared for sale. The source added that construction companies will be finished in the middle of 2018 from linking the 3,130 feddans to utilities and facilities. The cabinet issued an order of attribution to four construction companies to link 40,000 feddans in the first phase of the project to facilities. This began with 3,130 feddans. This includes 1,130 feddans tasked to the Holding Company For Construction & Development (HCCD), 740 feddans to the alliance of Orascom and Hassan Allam s sons, 710 feddans to Concorde Contracting, and 500 feddans to the Arab Contractors Company. The sources pointed out that the Arab Contractors, Talaat Moustafa Group, Petrojet, Concord, HCCD, Wady El-Nile Contracting & Real Estate Investments Co., and the military works department will complete implementation of 25,000 units in the residential district of 1,000 feddans before the end of The sources also said that the investment of NUCA in the capital last year amounted to EGP 6bn, which adds up to EGP 14bn by the end of the current fiscal year. For his part, the UAE businessman Mohammed Alabbar, chairman of Emaar Properties Group, plans to implement projects in the New Administrative Capital east of Cairo after about two and a half years of the memorandum of understanding he signed with the Egyptian government to develop the capital in March Minister of International Cooperation and Investment, Sahar Nasr, met Alabbar, who expressed his willingness to increase investments in Egypt in the coming period, amid the government s efforts to offer many projects for investors, including the New Administrative Capital, according to a statement issued by the ministry. Alabbar said during his meeting with Nasr that he wants to inject new investments in the administrative capital and the new Alamein and set up a number of new projects in Cairo and South Sinai, stressing his keenness to support the Egyptian economy and contribute to providing employment opportunities for young people. What is the return received by the state from the capital? The first offering of investment land in the administrative capital has achieved sales of EGP 10bn from seven plots with a total area of 950 feddans, after 10 companies presented 13 offers to compete on 9 plots. The first offering included 15 land plots with a total area of 1,500 feddans, including one land of 500 feddans, and other plots with areas of 100 and 200 feddans, next to plots of 50 and 70 feddans designated for the integrated urban activity with special structural requirements, including increase the height of buildings to a ground floor and 7 more floors. The administrative capital stipulated that the bidder should be an existing company with experience in the field, or a company under incorporation linked to an existing company, provided that it is established within The government has chosen a site on the border of Badr city as the location for the New Administrative Capital one month from the date of attribution. The Supreme Council for Investment agreed to put the land in the administrative capital and the cities of East Port Said, Al Alamain, Galala, and new Ismailia with a discount rate of 25% from the specified pricing, for three months from the date of placement. The administrative capital company aims to offer a number of land plots in the capital with a total area of 1,000 feddans for commercial, administrative and service use. Housing Ministry sources told Daily News Egypt that the company completed setting the area of 1,000 feddans ready for offering and is now being divided to determine the final number of land plots according to the targeted investment activities. The sources added that the new offering includes a number of structural and construction features where the height reaches 30 floors. There will also be an appropriate period of time for the development of projects according to the area of each land piece while the ministerial decisions will be sped up to enable the participants to start marketing projects that they will develop. Moreover, the source said that the activities will include commercial, administrative and recreational centres adding that there are studies regarding offering larger land plots to implement malls on large areas involving various activities. The pricing committees of the company are also pricing the square kilometre in the first offering in the residential district of the capital. The company is equipped to put up about 17,000 units in the first residential district in the administrative capital. Preliminary estimates showed that the price per square meter exceeded EGP 7,000, while sales are expected to reach EGP 15bn. Government sources told Daily News Egypt that the company has yet to decide the final price per square meter, and the booklets are due to be EXPECTED SALES REVENUES OF THE FIRST OFFERING WILL REACH ABOUT EGP 15BN submitted this month. They added that the committees formed to determine the price of the meter have put estimates beyond EGP 7,000 and could be increased in distinctive locations to reach EGP 8,000. The sources pointed out that the estimates set by the company during the last year at the start of implementation amounted to about EGP 5,000 per meter, where the cost of implementation was about EGP 3,200 according to an agreement with construction companies. Furthermore, the source said that prices have risen significantly following the economic reform decisions and construction companies called on to increase the price of implementation per square meter to EGP 5,000. He said that the company is preparing a booklet with the conditions of the offering, which will include the value of down payment, the mechanism of awarding, and the loan repayment period, which could extend to 5 years while delivering units is expected to be completed within the first half of next year. Sources added that the expected sales revenues of the first offering will reach about EGP 15bn, which will be channelled to complete the first stage of the project of 12,500 feddans. The Ministry of Housing announced the launch of an advertising campaign within days to promote the apartments and villas in the capital. The government moves to its new headquarters The administrative capital will include a government district in an area of approx 1,000 feddans with a building area of 1.2m sqm. This is being implemented through Egyptian construction companies. A new palace for the presidency, a cabinet building and another for the parliament are to be established along with 18 headquarters of the ministries. Major General Mohammed Abdullatif, General Manager of the New Administrative Capital Company, said that the area of the buildings that will be implemented in the government district will reach 1.2m sqm. He told Daily News Egypt that the company used Egyptian contracting companies to implement the government district. The company has also decided to entrust the implementation of the government district in the capital to the Egyptian contracting companies and the cancellation of the memorandum of understanding signed previously with the Chinese company (CSCEC) In August 2016, the company signed an agreement of intent with CSCEC to implement the government district, following the signing of a memorandum of understanding in March of the same year through Chinese funding of $3bn. Ayman Ismail, Chairman of the Board of Directors of the company, said that no final agreement was reached with the CSCEC company regarding the district and that it will be implemented through Egyptian construction companies. There was no final agreement satisfactory to the parties on the price of implementation per square meter, and the final and lowest price was presented by Egyptian constructions companies, he said. Ismail added that the Chinese company did not complete its executive apparatus in Egypt and would rely on Egyptian contracting companies, which raised the value of its offer, from negotiating directly with the Egyptian contracting companies, and thus will rely on the implementation of the government district on the Egyptian construction companies in general.

15

16 Egypt s economic outlook in eyes of international financial institutions Egypt back on investment map: IFC IFC S COMMITMENTS IN EGYPT CLOSE TO $1BN, SAYS IFC DIRECTOR FOR THE MIDDLE EAST AND NORTH AFRICA By Shaimaa Al-Aees 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 By Elsayed Solyman 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. Mouayed Makhlouf, IFC director for the Middle East and North Africa THE IFC PROVIDED A $34M LOAN TO TRANSGLOBE ENERGY, HELPING THE OIL COMPANY INCREASE EXPLORATION IN EGYPT AND YEMEN 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 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. 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? 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 sidestep 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 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. Egypt s economy embarks on recovery, but challenges remain: Capital Economics EGYPT S NEW INVESTMENT LAW IS A POSITIVE STEP TOWARDS IMPROVING THE DIRE BUSINESS ENVIRONMENT Capital Economics senior economist Jason Tuvey THE IFC IS LOOKING TO EXPAND ITS PROGRAMME IN THE ENERGY SECTOR THE CENTRAL BANK OF EGYPT WILL LEAVE RATES ON HOLD UNTIL FURTHER EVIDENCE OF FALLING INFLATION 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 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 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 Foreign investors confident about outlook of Egypt economy: Fitch senior director THE RATING AGENCY EXPECTS EGYPT S ECONOMY TO GROW 4.5% IN 2018 By ElsayedSolyman 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 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 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 strongerthan-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 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. Egypt s economy at last reviving, government should press ahead with reforms: Angus Blair By Elsayed Solyman 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 The government insisting on carrying out its reform programme WE EXPECT SOME APPRECIATION FOR THE EGP, BUT INFLATION LEVELS TO REMAIN AS THEY ARE Angus Blair, the CEO of Pharos Holding (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. THE INVESTMENT LAW AND ITS EXECUTIVE REGULATIONS SHOULD HELP TO FOCUS INVESTMENT ATTENTION ON THE AREAS WHERE THE GOVERNMENT WOULD LIKE TO SEE INVESTMENT 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. Unified Investment Law to further increase Egypt attractiveness: OBG Africa managing editor US aid cuts will unlikely deteriorate economic ties By Mohamed Samir 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. Robert Tashima, OBG Africa managing editor 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.

17 18 How can the SCZone lead the development? Egypt relies heavily on the Suez Canal Economic Zone (SCZone) to drive the economic growth of the country, especially as it is an investment area of special nature, which gives it a competitive advantage compared to other areas of investment inside Egypt, as well as enjoying a geographical location, which gives it another competitive advantage, but compared to areas outside Egypt. and its geographical location makes it unique in comparison to other locations around the globe. The region is an investment virgin, close to a large number of ports, whether overlooking the sea or the Mediterranean Sea, provided with a network of roads increasing the opportunity for investment, and has a law designed to facilitate investment and avoids government bureaucracy, which investors suffer from. In the agriculture and fish farming sector there is a plan to grow 77,000 feddans east of the Suez Canal. On the industrial area, there is the Valley of Technology, which is based on 3,500 feddans. The first phase of the project was executed. There are also opportunities for investment in the packaging and processing of fish, as well as an area for ships and containers maintenance in Port Said and North West Gulf of Suez. All these advantages and opportunities to invest in the economic zone of the Suez Canal, if we succeeded in exploiting them it may become the main development locomotive of the country in the coming years. By Mohamed Alaa El-din The SCZone has many investment incentives. The SCZone was established as an administration body with full authority over the Suez Canal axes with regards to all projects and activities within the geographical borders of the project, stepping above the governorates where these projects are. This eliminates government bureaucracy and gives investors the flexibility needed to complete their projects. The SCZone also has the power of all ministries, governorates, and government agencies within its geographical borders. The establishment of the SCZone aims at developing the entire region to enhance investment opportunities in all economic sectors, including logistics and industrial services in accordance with the highest international standards, as well as creating a favourable business environment that encourages investors, both foreign and domestic, to establish companies in the region to benefit from all the benefits and incentives provided by law. What is the SCZone? The Suez Canal Economic Zone (SC- Zone) consists of several regions and ports, each with opportunities in industrial and commercial establishments, infrastructure, real estate development, logistics, amenities, and technology. 1: Northwest of the Gulf of Suez: The area is considered the first economic zone established in Egypt according to law No. 83 for 2002 for special-nature economic zones. The goal of establishing the zone is to benefit foreign investors, develop industries and exporting to collect hard cash, develop high-tech industries, and establish and improve the market economy in Egypt. The development of the zone in the northwest of Suez aims to offer an environment attractive to light and medium industries, as well as logistical services, which will stimulate the economic activity in the region and create jobs. The northwest of the Suez zone lies in Suez govenorate in the Ain Sokhna area, next to the Ain Sokhna port. The land allocated for the project s first phase amounts to 20.4 square kilometres. The economic zone in the northwest of the Gulf of Suez has a strategic location on the main roads for international trade. It is also close to the new Ain Sokhna port, making the Ain Sokhna area the gate of Egypt from and to the Middle East and Asian countries. The economic zone is 120 km away from southeast Cairo and 45 km from Suez. 2: East Port Said area: The area is now being developed to become a main supply centre next to a logistics hub. The area is built on 75.5 square kilometres next to the East Port Said area. According to the general plan, 40 square kilometres have been allocated for trade and light and medium industries. The incentives of the SCZone The expansion of East Port Said Port in the northwestern part of the region stimulates the industrial zone and creates the opportunity to desalinate water, build power stations, and include investment opportunities in the region. This is in addition to the real estate development and residential projects in East Port Said and Bardwil Lake, which is partially open to the Mediterranean Sea. West Qantara area: This is a new residential community with the establishment of light industry factories and logistics centres that facilitate access to the Suez Canal. It is located near agricultural land 30 km away from North Ismailia on the Port Said port. West Qantara has many advantages in terms of proximity to the fertile Delta region and is ideal for agricultural business. Currently, approximately 13.6 square kilometres are available for development in an area that has good access to water, electricity, logistical areas, and drainage. The logistical institutions also provide services such as warehousing, transportation, distribution, and shipping. 4: East Port Said Port: It is the hub of major international and domestic freight shipping at the northern entrance of the Suez Canal. East Port Said Port is also characterised by a deep plunge, which enables it to accommodate large vessels, making it one of the world s 40 busiest ports in the world and the fastest growing. The proposed expansions cover 26 square kilometers, will provide a wide range of investment and development opportunities for the port, and will develop logistics services, which will increase the total area of the port to reach 70 square kilometres. Ain Sokhna Port: The port of Ain Sokhna is located on the west coast of the Gulf of Suez, 43 km south of Suez City. It is on a total area of 22.3 square kilometres. As a result of the expansion of the surrounding areas, the port quickly became a major industrial centre serving local and international markets. Expansion plans include the operation of new container terminals, general cargo terminals, dry cargo and liquid cargo terminals, logistics services, warehousing and distribution centres, dry port construction, and investment in modernising port vehicles and container handling equipment. 6 West Port Said Port: West Port Said Port is a shipping centre located on the main international sea route between the countries of Europe and South Asia. West Port Said Port occupies 2 square kilometres at the northern entrance of the Gulf of Suez from the Mediterranean Sea. 7: Adabiya Port: The port of Adabiya is located on the western shore of the Gulf of Suez, 10 km from south of Suez. The facilities of the port are set to handle large quantities of unpackaged cargo. It covers an area of 1.8 square kilometres. The port has nine marinas with a total length of 1,840 metres. It has the ability to handle dry unpackaged and liquid cargo with a capacity of 60,000 tonnes. More investments in the port are directed to the establishment of additional terminals to deal with dry, liquid, and general cargo and container shipments. 8: Arish Port: Located on the eastern Mediterranean coast, Arish Port has basins for ships extended over 40,000 metres. The port is allocated for cargo, fishing, and tourism. The port plays a crucial role as the industrial and trade port for North Sinai and the Gaza Strip. 9: El Tor Port: El Tor Port is a strategic port of South Sinai overlooking the eastern bank of the Gulf of Suez. The bulk of exports exported from the port of El Tor are composed of minerals and shipments of dry packages. This commercial port includes stations for dry packaged goods, general cargoes, and containers, as well as fishing boats and marinas. 10: Eastern Ismailia: A new centre for high-tech industries, as well as planning to contain scientific research institutions and educational institutions, is located east of Ismailia, 10 km away from the east of the Suez Canal, covering 71 square kilometres. With the extension of electricity and water, East Ismailia is a promising area for light and medium industries, research and development centres, as well as services and commercial projects. Currently, a tunnel is being built to link East Ismailia with the Egyptian mainland, which will reduce transport time from east to west. Advantages, guarantees, and exemptions: The area has many incentives compared to other zones in Egypt, including a 10% rate unified income tax (20% outside), which is imposed on profits of companies and individuals incomes, as well as revenues from lands and nonresidential buildings. There is also 5% of income tax (10-20% outside) for dealing through the one-stop shop, which saves time for investors when dealing with different government bodies. There is a higher committee overseeing the tax system within the zone. There is also a special customs department under the supervision of the Supreme Customs Committee. The zone has the lowest production cost in the Middle East and Africa in a number of sectors. There is also easy access to the domestic market. Fees are imposed on sales in the local market on the value of imported materials only. Power generation projects in SCZone could generate $100bn per year: El Nahrawy 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, Ayman El Nahrawy 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. SCZone to be locomotive of development during coming 30 years: El Lamey Adel El Lamey, the chairperson of the Port Said Chamber of Shipping, said that if the Suez Canal Economic Zone (SCZone) is utilised optimally, it will become the development locomotive for Egypt during the next 30 years, because it has a number of features that do not exist elsewhere in the country, next to its distinctive geographical location. He added that the SCZone is characterised by a special law, which is a competitive advantage compared to other areas inside Egypt, because the law is flexible. If it is adhered to and implemented, it would have a positive impact by helping investors and eliminating government bureaucracy, which is one of the most important obstacles to investment. Meanwhile, El Lamey said that steps being taken to prepare the SCZone are accelerating compared to the past, highlighting six berths extending over 3.5 km in the East Port Said Port, which will be completed in the coming few months. This is compared to a 1.5-km berth established in the current container terminal over 10 years, which means that constructions are faster than ever. El Lamey said that the logistics area is one of the competitive advantages of the SCZone as well as the industrial zone with an area 40 square km, of which 4 square km Adel El Lamey have been completed already, close to the residential communities. The signing of DP World with Suez Canal Authority is a major development step for the region according to El Lamey. President Abdel Fattah Al-Sisi agreed to establish a joint development company between the Suez Canal Authority and DP World to implement projects in the Suez Canal area, stressing that the Egyptian government will provide all the necessary support to start the implementation of projects as soon as possible. El Lamey said that this region is witnessing a great economic movement, which helps to drive economic growth significantly and within a few months will show the effects of these positive steps on the Egyptian economy.

18

19 20 Egypt to receive third tranche of AfDB loan by February 2018 THE GOVERNMENT OF EGYPT HAS NEVER DEFAULTED ON ITS DEBT PAYMENTS TO THE INTERNATIONAL FINANCIAL INSTITUTIONS, SAYS AFDB S RESIDENT REPRESENTATIVE By Shaimaa Al-Aees 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 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? AFDB PROVIDED EGYPT LOANS OF $100M UNTIL 2020 FOR RENEWABLES, AGRICULTURE, WATER SANITATION, AND SMES 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 Which sectors is the bank most interested in? The bank s current focus is framed in the 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 Leila Mokaddem, resident representative of the Egypt field office at the AfDB EGYPT S COMPREHENSIVE REFORM PROGRAMME WILL HELP RESTORE CONFIDENCE AND ATTRACT INVESTMENTS 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 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. EIB provides 920m of finance to Egypt s traditional, renewable energy since 2011 EIB WELCOMES THE COUNTRY S ACTIONS TO MAKE REFORMS THAT HAVE LONG TERM OBJECTIVES, SAYS VICE PRESIDENT Handout to DNE 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 WE ARE IN THE PROCESS OF APPROVING A NEW CREDIT LINE WITH BANQUE MISR TO SUPPORT SMES IN EGYPT 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. Vice President of EIB Dario Scannapieco 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 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.

20 21 EBRD expects a 4.5% economic growth in Egypt in the current fiscal year By Shaimaa Al-Aees 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. WE ARE CURRENTLY WORKING WITH 9 BANKS IN EGYPT WITH A TOTAL EXPOSURE OF 700M TO FINANCE SMES 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 Janet Heckman, managing director of the SEMED region at EBRD 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. THE BANK HAS PROVIDED SIX DEDICATED CREDIT LINES TO THE LOCAL BANKS FOR ON-LENDING TO SMALL BUSINESSES 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. The liberalisation of the exchange rate is a step in the right direction

21 22 There is optimism regarding future of Egypt-US bilateral relations: CEO of AmCham Egypt.Inc THE FLOTATION OF THE EGYPTIAN POUND WAS A MILESTONE TO US INVESTORS, SAYS HISHAM FAHMY By Nevine Kamel 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 Hisham Fahmy CEO of AmCham Egypt 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 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 THE US PRIVATE SECTOR HAS SHOWN A LOT OF INTEREST IN THE EGYPTIAN MARKET, GIVEN THE ECONOMIC REFORMS ADOPTED BY THE GOVERNMENT 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 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. Egypt s economic reforms necessary engines of growth: Chinese ambassador to Egypt By Shaimaa Al-Aees and Muhammad Mostafa 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 nonrefundable 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 What is your opinion regarding the current recent DEVALUATION IN THE POUND S VALUE WILL MAKE A REVOLUTION IN INCREASING EGYPT S EXPORTS TO CHINA 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 Chinese ambassador to Egypt Song Aiguo CHINA IS NEGOTIATING WITH EGYPT TO ESTABLISH AN INTEGRATED INDUSTRIAL AREA IN THE NEW ADMINISTRATIVE CAPITAL, SAYS THE AMBASSADOR 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 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.

22 23 Thomas Cook to attract 1.5m tourists to Egypt in 2018: El-Shaer SECURITY STABILITY AND CONTINUED PROMOTION CAMPAIGNS BRING ARRIVALS TO 1.5 MILLION VISITORS By Aisha Zidane Thomas Cook Tourism in the UK aims to attract 1.5 million tourists from all European cities to Egypt in 2018, which is 70% higher than the target for Hossam El-Shaer, chairperson of Thomas Cook s agent in Egypt Blue Sky Travel Agency and owner of the Sunrise Inn, said that the arrivals through Thomas Cook to Egypt increased 10% in the current year compared to the same period last year. He predicted that the number of tourists coming through Thomas Cook to Egypt would increase to 880,000 by the end of 2017 and to 1.5 million by the end of He explained that the increase in arrivals will include tourists from England, Germany, Poland, the Czech Republic, the Netherlands, and Belgium, going to Hurghada and Marsa Alam. He ruled out organising flights to Sharm El-Sheikh Airport next year because of the travel ban imposed by the UK and a number of European countries on the city after a Russian aeroplane crashed in Sinai in October The UK has suspended flights to Sharm El-Sheikh since the beginning of November 2015 but has not imposed a ban on other destinations, including the Red Sea, Luxor, and Aswan. Summer bookings have increased 10% compared to last year. He added that the current aviation incentive programme does not encourage tour operators to work, and companies have not yet received WE TARGET LARGE INCREASES IN THE NUMBERS OF TOURISTS FROM ENGLAND, GERMANY, THE CZECH REPUBLIC, POLAND, THE NETHERLANDS, AND BELGIUM their dues despite the announcement by the Egyptian Tourism Authority that the dues have been paid to the company. He pointed out that Thomas Cook s dues are estimated at EGP 50m-60m, which impacts their plans in the Egyptian market. He explained that Thomas Cook has 22 weekly flights, adding that the incentive is worth $6,000 per flight between November 2016 and May The Ministry of Tourism adopted a new flight incentives programme in November 2016 to stimulate flights to Egypt. It requires companies running regular low-cost flights to have 22 flights per week with at least 80% of the seats occupied to receive $6,000 per flight. The incentive is paid to the Egyptian Airports Company, Hossam El-Shaer, chairperson of Thomas Cook s agent in Egypt Blue Sky Travel Agency and owner of the Sunrise Inn which in turn offers a discount on airport services for the companies. El-Shaer said that Thomas Cook negotiated with the Egyptian Ministry of Tourism before to receive its dues but has not reached a final date yet. In another context, he said that Blue Sky allocated EGP 150m of new investments for 2018, which will be used to complete its projects in Sharm El-Sheikh and Ain Sokhna. Those projects are about 90% complete so far. The company started implementing its real estate tourism project in Ain Sokhna at a cost of EGP 7bn. This includes three five-star hotels, as well as tourist housing units, hotel BLUE SKY WILL OPEN THREE HOTELS IN SHARM EL- SHEIKH NEXT YEAR, INVEST ANOTHER EGP 15M apartments, and a large number of international restaurants and entertainment facilities. The project also includes two lakes and a number of villas and shopping centres. It is set to be completed within the next year. He added that the list of projects in Sharm El-Sheikh includes three five-star hotels with a capacity of 800 rooms at a cost of EGP 1bn. El-Shaer stressed that the company believes in the Egyptian tourism industry and that it could go bad, but it does not die, which is why the company continues injecting investments into the local market despite the challenges in the past few years. He identified the biggest challenges facing the company, highlighting problems with the Ministry of Environment, as well as the Beach Protection Police, because of the increased requirements, the length of procedures, and the rise in penalties and violation fines. El-Shaer stressed the need to hold elections for the Egyptian Tourism Federation and its chambers as soon as possible, considering its role in linking officials and investors. He predicted that next year will witness a significant recovery in the tourism inflow to Egypt, estimating it to reach some 15 million visitors throughout the year from Germany, Italy, and France, as well as working on the markets of North Africa, the Arab Maghreb, and Eastern Europe. He pointed to the possibility of achieving this number of tourists if the promotional campaigns keep on performing well in all countries and are based on cooperation between the Egyptian Tourism Authority and investors, along with the stability of the country s security situation. He noted that focusing on a single market damages the sector, urging Egyptian officials to learn from the situation of the Russian market, which once topped the list of tourism markets in Egypt and fell significantly. El-Shaer said that the introduction of the value-added tax (VAT), in conjunction with the rise in bank interest rates to record figures, came despite the government s announcement of supporting the tourism sector. He called on the state to pay more attention to the tourism sector as the most important source of national income. He pointed out that Turkey suffers from weekly terrorist incidents, but received 15 million visitors in the first half of 2017, while Egypt could not follow its style in promoting tourism and facing challenges. He called for the restructuring of the Supreme Council for Tourism to include eight experts, instead of the current structure that includes only two experts and eighteen other officials from outside the sector. Finally, he called upon investors to launch a promotion campaign in cooperation with the Egyptian Tourism Authority and take extra care of the services provided to tourists to achieve better results. Blue Sky Travel Agency owns more than 20 regular and floating hotels across Egypt, especially in the Red Sea, South Sinai, Luxor, and Aswan.

23 24 Worst finally over for Egypt business environment: Raouf Ghabbour ECONOMY REFORMS START TO PAY OFF AFTER YEARS OF UNCERTAINTY By Elsayed Solyman Optimistic about the future, Egypt business guru Raouf Ghabbour, GB Auto s CEO and managing director, 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 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 Raouf Ghabbour, GB Auto s CEO and managing director 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. DNE Photo 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.

24 25 Egypt s real estate sector undergoing transformation: SODIC managing director HIGHER LAND PRICES CREATE MORE PARTNERSHIPS AMONG DEVELOPERS By Elsayed Solyman 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 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 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 Magued Sherif, the managing director of local development at SODIC 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. 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 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.

25 26 Egypt s economic reforms re-attract global investments By Hossam Mounir 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 THE CBE S DECISION TO FLOAT THE EXCHANGE RATE WAS IMPORTANT AND REPRESENTED A QUALITATIVE LEAP FOR THE EGYPTIAN ECONOMY 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. Soha Soliman, chairperson of Banque du Caire. SINCE ITS ESTABLISHMENT, BANQUE DU CAIRE HAS BEEN SERVING THE EGYPTIAN ECONOMY, WORKING TO INCREASE ITS PROFITS AND ACHIEVING GOOD PERFORMANCE INDICATORS 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 THE EGYPTIAN ECONOMY NEEDS TO INCREASE ITS ECONOMIC RESOURCES AND IMPLEMENT MANY NATIONAL PROJECTS TO ATTRACT INVESTORS AND MEET CITIZENS NEEDS 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. Egyptian economy to reap reform fruits by 2019 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 THE BANKING SECTOR ALWAYS SUPPORT THE ECONOMY WITH MONEY AND EXPERTISE AT ANY TIME 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. Amr Tantawy, the managing director of Misr Iran Development Bank 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. THE EGYPTIAN YOUTH SHOULD BENEFIT FROM THE CBE S INITIATIVE TO FINANCE SMES 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 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 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 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.

26 Sponsored by BUSINESS FOCUS Monthly special focus on Egypt's banking sector 27 Economic reform programme results exceeded all expectations of success in very short span: Elkosayer OUR NATIONAL ECONOMY IS NOW MUCH STRONGER AS A RESULT OF GOVERNMENT REFORMS AND BOLD DECISIONS TAKEN By Hossam Mounir 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 Chairperson of the Agricultural Bank of Egypt (ABE) Elsayed Elkosayer 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 DNE Photo 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.

27 28 CBE s role pivotal in economic reform programme, restoring investors confidence: El Kadi By Hossam Mounir Ashraf El Kadi, the chairperson of the United Bank, has expressed his optimism and anticipation of the launch of the Egyptian economy s kick off with the start of El Kadi explained that there is global interest by Arab and foreign investors in Egypt. He noted that this is easy to see in the large number of delegations to take part in the Euromoney Conference (which will take place in Egypt on 18 and 19 September) as well as in the number of institutions that showed interest in the investment map in Egypt. He said that this has put Egypt on the right track, according to the 2030 vision, to turn Egypt into one of the largest 30 economies in the world. El Kadi pointed out that the current economic reform programme of the social dimension has provided investors with confidence in the fact that Egypt is serious about its goals and becoming a strong, growing economy. He added that the availability of serious and attractive investment opportunities in light of the new Investment Law provides investors with protection and confidence. Sustainable development would also be easy to achieve through improving citizens standard of living, improving services, and providing more jobs. Fair distribution of investment opportunities across the country El Kadi believes that the Ministry of Investment and International Cooperation is seriously and comprehensively seeking to prepare an integrated investment map that includes all governorates of the country within a national framework. The map would aim to determine and announce the available opportunities to inject new investments in major national projects, as well as small and medium projects in order to reduce poverty, unemployment, and illiteracy. The investment map aims to achieve sustainable development in a number of governorates, the most prominent being the development of axes governorates: Matrouh, Gharbeya, Menoufiya, Kafr Al- Sheikh, Fayoum, Luxor, Red Sea, Aswan, Qena, Damietta, and Suez, El Kadi said. The Golden Triangle Economic Zone is the century s project for Upper Egypt development El Kadi has explained that the Egyptian government s issuance of the decision to establish the Golden Triangle Economic Zone is considered a true start of developing Upper Egypt s governorates. He went on to explain that the Golden Triangle Economic Zone project is a large economic leap for the governorates of Upper Egypt. It aims to achieve sustainable development in all fields. The project was designed to be the largest industrial, tourism, agricultural, and commercial centre that directly serves the citizens of Upper Egypt and the Red Sea. It would aim to increase jobs and create new urban communities with investment and economic activities that Ashraf El Kadi, the chairperson of the United Bank WE WORK ON DEEPENING THE ROLE OF THE UNITED BANK AND ITS PARTICIPATION IN EGYPT S ECONOMIC KICK OFF depend on optimal utilisation. Multiple advantages of investments in Egypt As an answer to the question regarding the investment advantages in Egypt, El Kadi said that there are several advantages that contribute to reaching an economy that is globally strong most importantly, Egypt s attractive investment climate and the availability of multiple investment opportunities and economic activities across the country. Egypt also has a strong banking system, a promising stock exchange, and an accurately put investment agenda based on studies of the nature of the areas, as well as the human and natural resources available in them, according to El Kadi. The existence of a free exchange rate and freedom in transferring funds also contribute greatly. There are four sectors likely to lead to Egypt s economic growth over the upcoming period: real estate, trade, manufacturing, and agriculture, El Kadi said. A large role played by the banking system in achieving sustainable development El Kadi noted that the Central Bank of Egypt (CBE) played a pivotal role in the economic reform programme through monetary policies and rules that regulate and control the economy to restore the confidence for investors. He stressed that the banking system has protected the Egyptian economy from violent shocks and was able to meet the market s financial needs, as well as cover the deficit of the general budget through investing in debt instruments, in addition to implementing several initiatives to finance small and medium enterprises (SMEs) and finance the real estate and tourism sectors. The CBE works on developing solutions and procedures that aim to integrate the unofficial economy to the official one through paying attention to small and micro projects in order to achieve sustainable development, El Kadi said. He added that the financial inclusion initiative launched by the bank aims to reach customers, no matter where they are geographically, and to launch products that meet their diverse needs, Financial inclusion also aims to spread the financial culture and to gradually transform the society into a digital one through maximising the role of technology and mechanising payments. The United Bank and its role in economic development plans In response to another question regarding the role of the United Bank in the economic development plans, El Kadi said that he hopes to deepen the role of the bank and make it take part in Egypt s economic kick off. He believes that the United Bank has a great banking advantage in several fields, including its awareness of the importance of the role of SMEs and micro enterprises in developing the economy, as well as providing jobs for young people to eliminate unemployment and improve citizens living conditions. This, in turn, he said, will have a positive impact on the inner and outer trade, as well as improve the quality of Egyptian products under the slogan Made in Egypt. He added that the bank contributes to enhancing the resources of Egyptian citizens through the CBE s initiative for mortgage financing for low- and medium-income individuals, and it also offers full support to the social responsibility organisations, especially in the fields of health, education, and slums community development. El Kadi pointed out that the United Bank is present through 52 branches across the country, and it also offers its services through the Internet to its clients easily and quickly. Sustaining high levels of growth and investment is important for raising people s incomes: Elwy 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. THE GOVERNMENT INITIATED STRUCTURAL REFORMS TO WELCOME GREATER LEVELS OF INVESTMENT AND BUSINESS ACTIVITY 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 Sherif Elwy, Arab Bank s regional Egypt country manager 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. THE MAIN IMMEDIATE CHALLENGE FACING THE EGYPTIAN ECONOMY IS THE NEED TO BRING DOWN THE HIGH LEVEL OF INFLATION 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 finetuning 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 publicprivate 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 startups, 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.

28 29 Flotation toughest, most daring decision between Euromoney 2016, 2017: Fayed THE ECONOMIC REFORM PROGRAMME IS A NEW BREAKTHROUGH FOR ECONOMIC GROWTH AND FINANCIAL STABILITY By Hossam Mounir 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 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 CEO and managing director of Bank Audi Egypt Mohamed Abbas Fayed 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 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 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.

29 Economic sectors in focus : opportunities, and challenges The economic reform programme implemented by the Egyptian administration is a strong push for the majority of the sectors in the Egyptian economy. Daily News Egypt showcases all the opportunities and challenges facing the most important sectors that are qualified to attract investments over the upcoming period. The sectors decision makers depend onto achieve sustainable and diverse economic growth include the oil and gas, electricity, education, and health sectors, which are witnessing growing demand from Arab and foreign investors after the recent economic decisions, especially the flotation of the Egyptian pound. EETC FLARES INVESTMENTS AFTER TURNING ENERGY SHORTAGE CRISIS INTO OPPORTUNITIES By Mohamed Farag In the past two years, the electricity and renewable energy sector has achieved a great leap with the active support of the political leadership. The sector succeeded in overcoming the challenges and achieving stability of the network and covering the gap between production and demand for electricity through short- and medium-term plans of action. The value of investments last year amounted to EGP 60.1bn, of which EGP 43.5bn are investments for the stations of the urgent plan and the three Siemens stations in the New Administrative Capital, Borollos, and Beni Suef. He pointed out that these projects are implemented through soft and commercial loans from Arab and international financing agencies, and there is still a challenge facing the holding company and its subsidiaries: to cover the cost of kilowatt per hour by having a higher average selling price, noting that the cost of production per kilowatt exceeds 90 piastres. He pointed out that the electricity sector seeks to diversify the sources of electricity production in the next two years and achieve sustainability and strengthen the transmission and distribution networks through the loan that was signed with both the National Bank of Egypt (NBE) and Banque Misr worth EGP 37.4bn. The By Mohamed Adel The petroleum sector is starting to regain its strength after the difficult period that followed the 25 January and the 30 June revolutions. The sector managed, over the past four years, to achieve distinct results in all petroleum fields after the return of political stability and security, backed by efforts and procedures made by the state to bring back investments. This comes with the encouraging major petroleum companies to continue their work in Egypt and inject new investments. During the past period, the petroleum sector managed to take successful steps towards reviving investment and searching for petroleum and gas in Egypt to develop petroleum resources and make new discoveries. This comes hand in hand with the ministry s launching of five international bids to look for petroleum and gas in the Mediterranean, Delta region, Western and Eastern desert, the Gulf of Suez, and Upper Egypt. Since November 2013 until late 2017, the Ministry of Petroleum sealed about 76 petroleum deals for petroleum and gas exploration with global companies of different nationalities with investments worth at least $15.3bn. Signing worth $1.04bn was provided to drill 319 wells. These agreements contributed to achieving many petroleum discoveries, including a petroleum discovery Arab and foreign companies are planning to increase their business in the Egyptian market THE ELECTRICITY SECTOR SEEKS TO DIVERSIFY THE SOURCES OF ELECTRICITY PRODUCTION IN THE NEXT TWO YEARS sector disbursed the first tranche of the loan to pay the dues of the companies supplying cables and wires and transformer stations. The Ministry of Electricity aims to attract investments worth EGP 82.5bn during the fiscal year 2017/18 to increase the growth rates of the capacity and improve the quality of electricity provided to all subscribers. According to the former director of the Electricity Regulatory Authority (ERA), Hafez A. El-Salmawy, the electricity sector must structure the financing of these projects, establish the corporate governance of the electricity companies, find ways to finance the money market by issuing bonds, or through the structure of credit itself without obtaining a sovereign guarantee. He said that the Electricity Law increases investment opportunities in the sector, which allows the private sector to produce and distribute electricity to others after obtaining a licence. He added that many international companies are seeking to invest in the renewable energy sector for its attractiveness and system, which enjoys great incentives. He pointed out that the state has a vision to transform Egypt into a hub for energy in general, including oil, gas, and electricity, and there is strong investment demand on the electricity sector and a candidate to increase positively in the coming period. The political leadership is a key factor in supporting the electricity and renewable energy sector by helping supply fuel for the plants, concluding the Siemens project contracts, reducing the total cost of implementation and the period required for construction. The agreement of the establishment of the Dabaa nuclear plant comes as part of the Ministry of Electricity s plan to diversify sources of energy during the five years to come. Hany El Nokrashy, a member of the advisory council of the president, said that the electricity sector succeeded in eliminating the interruptions crisis and that the national grid of electricity has become stable and there is a reserve in production, but at the same time it is necessary to rely on solar energy to reduce reliance on fuel used in the combined and gas stations. He explained that the best way to achieve self-sufficiency of electricity and water and achieve sustainability is to adopt a wise policy of dependence on solar energy. He continued, I made a number of proposals to President Abdel Fattah Al-Sisi to establish national projects to exploit solar energy as an alternative source of low-risk energy. According to the former head of the New and Renewable Energy Authority (NREA), Mohamed Salah El Sobky, the electricity sector was able to turn the energy shortage crisis into a surplus of production after the huge support of the government and the provision of fuel to run the power plants and the periodic maintenance of the units, but not only production, which are currently being implemented in the development of transmission and distribution networks. He explained that the government is determined to achieve its vision to diversify sources of production to reduce dependence on fuel in stations, improve the quality of electric nutrition, and achieve sustainability in cooperation with Arab and international companies. Arab and international companies working in the field of electricity deem the sector a promising one, a catalyst for investment, and characterised by effective legislation and procedures, according to a survey conducted by Daily News Egypt on 10 Arab and international companies. Egypt is the first country to invest in Africa and the Middle East and is seeking to make Egypt a regional hub for exporting the company s products and supporting the Egyptian economy in the coming period, said Nagy Gerigri, the regional manager of ABB Egypt, north, and central Africa. He explained that the company has been able to develop its business and has increased its exports to Africa and the Middle East for its conviction that the next stage will witness a boom in this field within the Egyptian market. EGYPT TO SOLVE ENERGY ISSUE AFTER IMPLEMENTATION OF 21 PETROLEUM PROJECTS WITHIN 3 YEARS The area of the Gulf of Suez witnessed a new petroleum discovery in January 2015 in Western Mallaha in Mallaha development area in the Eastern desert by Italian oil giant Eni. Moreover, there was the petroleum discovery of Malek in February 2015 in the concession area east of Esh El Mallaha, considered the fourth oil discovery in the area of Southern Egypt. The area of Abo Senan in the Eastern desert also witnessed an oil discovery by the General Petroleum Company (GPC), in addition to another in well ASH-1X ST-1 by the Borg El Arab Petroleum Company. Another discovery was made in Abo Senan in well ASA-1 ST3 announced by Kuwait Energy. A natural gas discovery was made in the concession area of North Damietta, named Shallow Katameya 1 in the concession area of British Petroleum the third discovery in the same area. In the Eastern desert, Badr Eldin Company made a discovery in Alam El Shawish area in well BTE-2. Its reserves amount to nearly two trillion cubic feet of gas. The area of the Gulf of Suez witnessed a new petroleum discovery of crude oil in East Gabal El Zeit in favour of Ganoub El Wadi Holding Company, with 240 million barrel reserves. South Desouq area in the Delta has achieved a new gas discovery in the first exploratory well SD-1. C Dragon and its American partner EPR both work in the area. In addition, there were three major discoveries, which are Zohr in Shorouk THE MINISTRY OF ELECTRICITY AIMS TO ATTRACT INVESTMENTS WORTH EGP 82.5BN DURING THE FISCAL YEAR 2017/18 concession area in the Mediterranean by Eni, in addition to the Atoll discovery in the concession area of maritime Damietta as well as the Nidoco discovery Nawras in Western Abu Madi in the Delta. The ministry has also taken serious steps to put the Red Sea area on the map of search and exploration investments for petroleum and gas, especially that it is a new area that has not witnessed petroleum activities before, except for the Gulf of Suez area. Ganoub Al Wadi Holding Company has finished settling the tender to collect data and carry out seismic scans in the economic water zone in the Red Sea and Upper Egypt on five companies with a cost of more than $750m. This will help turn the zone into one that is attractive for investments, especially that the ministry is looking to launch international tenders for search in this area after the collection of data. The petroleum sector has taken serious steps to operate several petroleum projects in different fields and adding them to production. Such discoveries and investments had a positive impact in securing and providing the needs of citizens and the different sectors of the state that require a diverse group of petroleum and gas products, the most prominent being electricity. The petroleum sector played a major role in the noticeable stability of the national electricity grid resulting in the surplus of electricity production. In addition, stability returned to the petroleum products market, whether fuel or diesel, and this came despite the challenges the sector had to face. The implementation of 21 projects to develop new gas fields were completed, in addition to adding new production quantities of nearly 3.1 billion cubic feet of gas daily, and 21,100 barrels of condensates with an investment cost of $7.4bn. The projects contributed to increasing production of natural gas by 18% this year to reach billion cubic feet of gas daily. The projects included developing the ninth phase of the eastern Delta fields in deep waters, which aimed to produce 450 million cubic feet of gas daily, in addition to 2,500 barrels of condensates. They also included a project to develop the natural gas processing plant in west Port Said with the aim of increasing the capacity of the plan to 625 million cubic feet of gas per day. Moreover, there is the project to develop the Denis-Karawan fields with the aim of producing 270 million cubic feet of gas on a daily basis. The implementation of developing the fields of El Aseel and El Karam fields were completed. They are affiliated to Badr Eldin, with the aim of producing 130 million cubic feet of gas daily, and 1,800 barrels of condensates. The projects also included developing the fields of Desouk area phase B with the aim of producing about 130 million cubic feet of gas per day and 140 barrels of condensates. They also included developing the third phase of Ras el Bar field in the Mediterranean with the aim of producing 110 million cubic feet of gas daily. They also included carrying out the development of the western Delta fields affiliated to BP with the aim of developing the reserves discovered in the deep waters which included natural gas and condensates, estimated at five trillion cubic feet of gas from five fields, which are Libra, Nawras, Giza, Fayom, and Ravin. The investment cost of the project is $9bn. Moreover, the production from the first phase of Nawras and Libra started in March 2017 with a total of nine wells that produce about 700 million cubic feet of gas daily. The petroleum sector managed to keep the rates of Egypt s production of crude oil at 700,000 barrels per day as a result of implementing projects and intensive work programmes as well as the drilling and development of wells in the main areas producing crude oil in the eastern desert, the Gulf of Suez, the eastern desert, and Sinai. There projects aim to keep the production rates of Egypt fixed as well as compensate for the natural decline in the productivity of wells and old fields. SHARP DECLINE IN HEALTH SECTOR S INVESTMENTS DURING 2017 INVESTORS DEMAND THE GOVERNMENT TO PROVIDE LAND IN NEW CITIES AT LOW PRICES TO ENCOURAGE LOCAL INVESTORS By Mustafa Fahmy and Mohamed Mustafa Despite being one of the most attractive sectors of investment in the Egyptian market, the health sector couldn t bring in new capital to the market. Even current investors operating in the Egyptian market have no desire to expand their projects, according to investors in the health sector. A number of investors agreed that the acquisitions, mergers, and expansions in the health sector have declined significantly during the past eight months. They attributed the decline to the high prices required by corporations wishing to exit health projects, the scarcity of investment-attracting public hospitals, the high costs of construction, the rise of land prices, and the fluctuating foreign exchange rate. Khalid Samir, a board member of the Health Care Chamber of the Federation of Industries and managing director of Dar El Oyoun Hospitals and Centres, said that the acquisitions in the health sector have declined significantly over the past months due to the scarcity of eligible corporations for acquisition and merger. Samir added that the last two years witnessed the conclusion of many acquisition deals of major hospitals, but currently the number of corporations qualified for acquisition is very limited. During the past years, major acquisitions have taken place in the health sector. The Cleopatra Hospital of the Abraaj Group has acquired Cairo Specialised, Nile Badrawi, Al Shorouk, and Cleopatra hospitals. The Andalusia Group for Medical Services also acquired two hospitals in Cairo and Alexandria. In addition, the Saudi Health Investment Company (SHIC) purchased a controlling interest of Ibn Sina Specialised Hospital in Giza. The health sector is divided into three segments: large hospitals (more than 100 beds), medium hospitals (less than 50 beds), and small medical centres (15 beds). Most of the last acquisitions targeted large hospitals that provide public services, Samir said. He attributed the decline in acquisitions in the health sector to the high prices required by corporations wishing to exit health projects, the increase in hospitals offered for sale, and the recent tendency of major hospitals to establish management companies of hospitals rather than purchasing them. He pointed put that the last period witnessed the emergence of new kinds of investment in hospitals, including management or both finance and management (ie the management company shares in the capital of the hospital it manages). These new types of investment will reduce the acquisitions of hospitals that provide public services. Samir expected that investors would purchase specialised hospitals, Concerns over imposing fixed pricing on private hospitals and clinics CLEOPATRA HOSPITALS GROUP IS ALLOCATING MORE THAN EGP 1 BILLION TO ACQUIRE TWO HOSPITALS particularly eye, urology, microscopy, and obstetrics hospitals, while mergers that have not succeeded in the last five years would decline. He called on the government to provide land at low prices for investors to implement health projects in the new cities, and in return, those hospitals would provide 10% of their services free of charge. Samir noted that encouraging local investors to expand in medical services protects the market from the control of foreign companies. He suggested that the government launches projects to build health cities, like industrial cities, and uses health development companies, like in the real estate and industrial sectors. He explained that these cities would attract major investments in the fields of pharmaceuticals, specialised and general hospitals, and medical centres. They would also contribute significantly to maximise the proceeds of medical tourism targeted by the state. Samir predicted that the next year will see the entrance of new European companies in the local market, and domestic investors will expand their projects. In the past few months, a number of major investors in the health sector, including Cleopatra Hospitals Group, SHIC, Andalusia, and Saudi German Hospital, have announced their intention to inject new investments into the Egyptian market in the coming months. The Saudi German Hospital is planning to establish four new hospitals in Giza, Ismailia, Assiut, and New Cairo. Andalusia will also establish two new hospitals in 6th of October City and the Fifth Settlement with EGP 750 million in investments. Moreover, Cleopatra Hospitals Group is allocating more than EGP 1 billion to acquire two hospitals and manage a third one, as well as the establishment of a number of specialised clinics. However, Samir expressed his concerns over the Ministry of Health s probable imposition of fixed pricing for health services provided by the private sector by the next year. Fixed pricing violates the free market rules, and the government will not be able to invite anyone to invest in the sector if it imposed fixed prices for health services, Samir warned. He added, There are four main factors that determine the pricing of health services in Egypt. The prices of land, the dollar price, the philosophy of free market itself, and the need for continuous development of health services. The Ministry of Health s Central Administration of Free Treatment plans to impose a fixed pricing rate for health services provided by private hospitals and clinics in the next year, according to Ali Mahrous, head of the administration. Al-Asmar said that the health sector in Egypt is still attractive for investment, considering the increase of population and the market s need for quality medical services. He pointed out that the specialised medical centres, which play a main role in the health system, require more investment. He expected that new Arab and foreign investments will be injected in the Egyptian market during the coming period, stressing that the government should oblige new investors to provide high quality medical services. The Central Bank of Egypt s (CBE) decision to float the pound last November has contributed to the decline of Egyptian hospitals value, which makes them more attractive to foreign investors, said Ghada Ganzouri, representative of the Health Care Chamber the Federation of Industries board. She pointed out that there is a strong demand from Gulf investors to invest in the health sector in Egypt, since it still retains the lead of the most attractive sectors in the country. Public Domain Public Domain EDUCATION INVESTORS DEMAND GOVERNMENT TO STRENGTHEN INCENTIVES FOR SECTOR By Aisha Zidan A number of investors in the educational sector have requested from the government offering incentives and extra facilitations to support local and foreign investments in the sector throughout the upcoming period. Investors in the sector have agreed that it is difficult to obtain lands for educational activities. There is also the difficulty of the strict rules enforced on educational buildings. They demanded the government to intervene in determining tuition fees and to solve the issues facing investors in the sector. El Mandoh El Husseiny head of the Private School Owners Association, and owner of El Hossam International School Group and Future Language Schools, said that the costs of operating schools have increased by 100% after the decision of the Central Bank of Egypt (CBE) to float the Egyptian pound, which negatively impacted investment opportunities in the sector. El Husseiny added that investors in the sector are facing obstacles to implement new projects or to establish expansions, and he demanded that the parliament intervene to remove the obstacles. El Husseiny estimated the volume of investments of private schools at nearly EGP 600bn. He said private schools represent only 10% of the total schools in the local market. We hope to see private schools offer 20% to 30% of the educational services offered to the Egyptian citizens; however, the issue requires more flexibility and facilitations from the government, he said. The Egyptian market includes 6,800 private and international schools, 3,648 of them being Arabic schools and 2,182 language schools, in addition to 270 international schools. The two governorates of Cairo and Giza have 75% of all private schools in Egypt, followed by Alexandria and Fayoum, according to data from the Ministry of Education. El Husseiny expected the establishment of 20,000 private schools within the project to establish schools in partnership between the private and public sectors. He said that the government project helps solve the issues of investors in education where the conditions announced by the government were eased to allow more participation. He added that the conditions put forward by the Ministry of Education are not easy to achieve, where the ministry stipulated that applicants for the project must have previous experience of establishing at least two schools, and the partnership must be based on the construction of three schools in the project. The investor must submit a financial study that explains he obtained a loan worth $15m or has $30m in his bank account. All these conditions are obstacles for a large number of investors, especially that investors suffer from the Education Law and the commitments they have towards the different government authorities, including water and electricity companies or the tax authority. El Husseiny said that the amount of new investments over the upcoming period will depend on the government s provision of real incentives for the sector and on the facilitations of the procedures to obtain lands as well as on how the government will facilitate the requirements of the General Authority for Educational Buildings. He demanded activating joint committees that include representatives of private schools and the General Authority for Educational Buildings in order to EGP 50m is the cost of establishing a school for basic education EGP 600M INVESTMENTS OF THE PRIVATE SECTOR IN EDUCATION, SAYS EL HUSSEINY improve the situation of the sector. He also demanded schools whose fees are less than EGP 5,000 in the case of Arabic schools, and less than EGP 8,000 in the case of language schools, to increase their fees in order to modify the salaries of employees. The fees of Arabic private schools range between EGP 2,000-EGP 7,000, compared to a range between EGP 2,000 and EGP 20,000 for language schools, while the fees of international schools range between EGP 30,000 and EGP 120,000, according to the data of the Ministry of Education. The ministry announced early in September that there will be an increase in the fees of international schools by 14% for new and old students starting from the new school year, subject to a 7% annual increase. While private schools, whether Arabic or language schools, will have their fees increase by 11% annually for schools whose fees are less EGP 2,000, and 8% for schools whose fees start from EGP 2,000 to less than EGP 3,000, as well as 6% increase for schools whose fees start at EGP 3,000 to less than EGP 7,000, and 5% for schools whose fees start at EGP 7,000 or more. Haitham Fath Elbab, member of the central committee for private education in the Ministry of Education and the owner of Nahdet Misr schools, said that increasing the number of private schools increases the services offered to students, maximises the competitiveness of Egyptian students, and improves the quality of education in the country. Fath Elbab demanded increasing incentives offered to investors to encourage them to inject more investments into the sector. He estimated the cost of establishing a school for basic education at EGP 50m. The conditions of the General Authority for Educational Buildings obliges investors to have their basic education schools located on an area of 1,500 square meters, and 2,500 square meters for secondary education, he said. Fath Elbab criticised the CBE s decision to increase the interest to near 20% and described it as greatly disappointing for investors. The annual return on investing in the educational sector is no more than 15% and only 2-3% in some schools, he added. Fath Elbab demanded the government to allow investors to determine tuition fees to reach an amount suitable for the number of services offered by the schools, where the role of the Ministry of Education would be supervisory. He said that the government s launching of education projects through the partnership between the private and public sector is still unclear. In addition, a large number of the offered lands are in the desert and are under a usufruct system of 40 years, which is not suitable, according to Fath Elbab. Badawy Allam, vice chairperson of School Owners Association, called for applying a new increase on tuition fees to suit the great increase in operation costs and exempting the sector from taxes as a service sector. As far as I know, the sector cannot be exempted from taxes, so the only alternative is to allow companies to determine their own fees based on the vision of their owners and their estimations of the operation costs, he added. He added that the fact that tuition fees are subject to the control of the education ministry is one of the main challenges facing investors in the sector where the ministry determines the annual increase of fees. He stressed the importance of easing the restrictions of the General Authority of Educational Buildings to reduce expenses for investors as well as shorten the time needed to grant permits to no more than one month instead of three years. He said that the sector needs to add 5,000 schools as soon as possible in order to eliminate the large number of students in classes which in some government schools reached 140, especially in Giza and Cairo. Mohsen El Sheimy, chairperson of El Horreya and Nahdet Misr schools, said that the Ministry of Education must reduce the price of lands provided for educational projects or at least remove the obligatory pricing of tuition fees. He said that the minimum fees in private Arabic schools must not be less than EGP 7,000 in order to cover operation costs. Fees would also increase with increasing the services provided by the school. He said that the school is suffering from increased operation costs, especially after the increase in taxes; the increase in the prices of electricity, water, and gas; as well as paper prices by 100% to record EGP 55 instead of EGP 28 before pound flotation. He said that the requirements put forward by the General Authority of Educational Buildings in terms of schools construction in areas with a large number of students include giving each student an area of six metres, and a metre costs EGP 10,000, which means that constructing a school that accommodates 1,000 students will require EGP 25m, in addition to EGP 45m for preparations. The requirements of the authority for the construction of schools in new urban cities include giving each student an area of 10 metres, which means that constructing a school that accommodates 1,000 students will require 10,000 metres with a minimum cost of EGP 50m. FATH ELBAB DEMANDED INCREASING INCENTIVES OFFERED TO INVESTORS TO ENCOURAGE THEM TO INJECT MORE INVESTMENTS INTO THE SECTOR Public Domain

30