Egypt: Building a Better Business Climate. February Updates on the economy, key legislation and major investment projects

Transcription

1 Egypt: Building a Better Business Climate February 2018 Updates on the economy, key legislation and major investment projects

2 Macroeconomic Round-up On November 3, 2017, one year had passed since Egypt free-floated its currency for the first time in the country s history, as part of a comprehensive reform program. The move essentially rebooted the economy, which has shown welcome signs of stabilization with GDP growth recovering, inflation moderating, fiscal consolidation on track, and international reserves at their highest levels since The macroeconomic indicators tell the story. Real Economy Real GDP growth at market prices for FY 2016/17 stood at 4.2%. GDP for Q1 2017/18 reached 5.2%, the fastest since FY 2009/10 and up from 3.4% in Q1 2016/17. Unemployment fell to 11.3% in Q compared to 12.5% in 2016 s end, indicating the creation of 700,000 job opportunities per year. The year-on-year CPI inflation rate fell to 17.1% in January 2018 compared to 21.9% in December The yearly inflation rate peaked at 35% in July The notable rise in inflation between November 2016 and November 2017 is primarily due to subsidy removals and the EGP s float. Inflation is projected at 12% by June 2018, according to the International Monetary Fund (IMF). To manage inflation, the Central Bank of Egypt (CBE) incrementally hiked interest rates by a total of 700 basis points between the float and July In February 2018, in light of the relatively tame monthly inflation, the CBE cut the overnight deposit rate, overnight lending rate, and the rate of the Central Bank of Egypt's (CBE) main operation by 100 basis points to 17.75%, 18.75%, and 18.25%, respectively. The discount rate was also cut by 100 basis points to 18.25%. Egypt received USD 25.5 billion in foreign aid, grants and loans in FY 2016/17. IMF Update The IMF s Executive Board announced on December 20, 2017, that it has completed its second review of Egypt s economic reform program, which will unlock a USD 2.03 billion tranche of the USD 12 billion Extended Fund Facility (EFF). The sign-off brings total disbursements to about USD 6.08 billion. The reform program will be reviewed three more times before the IMF completes disbursing the EFF loan by June Monetary Aggregates Since the float, the average exchange rate has remained fairly stable, ranging between EGP to the dollar. The float has significantly improved USD availability in the market, curbed the black market for foreign currency and enabled the CBE to lift restrictions on the flow of foreign funds. As of January 2018, the CBE average market rate was EGP 17.7 to USD 1. Foreign currency deposits into the banking system reached USD 44.2 billion by September Net International Reserves have reached USD 38.2 billion as of January 2018, their highest levels since March 2011 and growing from USD billion in December The Net International Reserves have grown by more than USD billion since December Foreign holdings of treasury bills reached USD 19 billion in December 2017, falling for the first time since the country floated the pound as maturing notes exceeded new purchases. Treasury bills had peaked at USD billion in October 2017 and previously registered USD billion in September, USD 16 billion in August 2017 and less than USD 1 billion in August Foreign investors now own more than 30% of outstanding Treasury bills. Investment Private sector investments accounted for 8% of GDP during FY 2016/17 totaling EGP 271 billion, compared to EGP 227 billion in FY 2015/16. The Emirates NBD Egypt Purchasing Managers Index (PMI) rose to 49.9 in January 2018 compared to 48.3 in December 2017 and 47.0 in August The PMI measures the health of the overall operating conditions in the non-oil private sector economy. Net Foreign Direct Investment (FDI) to Egypt amounted to USD 8.7 billion (3.5% of GDP) during FY 2016/17, compared to USD 6.9 billion (2.1% of GDP) during FY 2015/16. FDI growth was mainly driven by an increase in total inflows of oil and gas sector investments valued at USD 8.1 billion. In Q1 2017/18,

3 net inflows of FDI in Egypt registered USD 1.6 billion as a direct result of an 84.2% rise in the net inflow for oil sector investments. The UAE was Egypt s biggest foreign direct investor in 2017 with investments totaling USD 6.2 billion. Net portfolio investments registered net inflows of USD 7.5 billion during Q1 2017/18 against a net outflow of USD million during the same period in FY 2016/17, due to increased foreign activity in Egyptian treasury bills recording net purchases of USD 7.4 billion. Foreigners invested a net amount of EGP 7.4 billion (USD 414 million) in Egypt s stock market, the Egyptian Exchange (EGX), in The EGX s main market index has significantly grown by 80% since the float and by 21.7% during 2017, closing at 15,019 on December 31, The EGX registered the highest growth, 19%, of all the Arab stock markets in Stock market trading value fell to EGP 26.9 billion in December 2017, compared to EGP 38 billion in December Market capitalization reached EGP 687 billion and accounted for 20.2% of GDP in June 2017, growing 79.4% year-on-year. Fitch and Moody s reaffirmed Egypt s credit outlook as stable in June 2017 and August 2017, respectively. In November 2017, Standard and Poor s (S&P) raised Egypt s outlook from stable to positive while Egypt s sovereign credit rating was maintained at B-. Egypt was invited along with Guinea, Mexico, Tajikistan and Thailand to take part in the September 2017 BRICS summit in China, a huge step for Egypt s politics and economy. Egypt is also cooperating with China for the establishment of the New Administrative Capital with an investment worth USD 3.2 billion. External Sector The Balance of Payments (BOP) showed an overall surplus of USD 13.7 billion during FY 2016/17 and USD 5.1 billion in Q1 2017/18, compared to an overall deficit of USD 2.8 billion during FY 2015/16, and a surplus of USD 1.9 billion in Q1 2016/17. Egypt has cleared some USD 70.8 billion of trade-financing transactions between the EGP float and December The trade deficit narrowed to USD 35.4 billion in FY 2016/17, compared to USD 38.7 billion in FY 2015/16. In Q1 2017/18, the deficit declined year-on-year by 5% to USD 8.9 billion. Merchandise exports grew by 16% to USD 21.7 billion in FY 2016/17, compared to USD 18.7 billion in FY 2015/16. In Q1 2017/18, exports grew by 11% to USD 5.8 billion due to the rise in both oil and non-oil exports. Merchandise imports fell to USD 57.1 billion in FY 2016/17 compared to USD 57.4 billion in FY 2015/16. In Q1 2017/18, imports rose slightly by 0.7% year-on-year to USD 14.8 billion due to the increase in both oil and non-oil imports. Tourism revenues grew by 200% year-on-year in the first nine months of 2017 to reach USD 5.5 billion as of September 2017, due to a 50% increase in the number of tourist arrivals. The average number of tourist nights spent increased 100% year-on-year during the same period. Fiscal Aggregates The government s budget deficit for FY 2016/17 was EGP billion (10.9% of GDP) compared to EGP billion (12.5% of GDP) during 2015/16. This is the lowest level in five years in terms of GDP share. In H1 2017/18, the deficit decreased to 4.4% of GDP and is forecasted to be 9.5% at the end of FY 2017/18. Total government revenues reached EGP 129 billion during Q1 2017/18 compared to EGP 96.8 billion during the same period of the year before. Of this total, tax revenues rose 51.6% to EGP 97.2 billion compared to EGP 64.1 billion in Q1 2016/17.

4 Recent and Upcoming Legislation Egypt has passed several laws to stimulate the economy, reduce red tape and promote investment, with several more bills being drafted or pending approval. Below are the major laws and government actions affecting the business environment. Administrative Reform Civil Service Act (Law 81 of 2016) Status: TOOK EFFECT May 28, 2017 Description: Mandates an annual 7% salary increase for state and government employees; subjects employees to performance reviews and authorizes performance-based bonuses. Benefit: Reforms the country s outdated administrative system and reduces bureaucracy and government corruption. Industry Permits Act (Law 15 of 2017) Status: TOOK EFFECT May 9, 2017 Description: Streamlines process for obtaining licenses for industrial establishments, cuts waiting period to one month or less, compared to two years under the old law. Benefit: Encourages industry and the creation of new businesses. Labor Act Status: PENDING in Parliament Description: Forbids discrimination in hiring based on union membership; forbids arbitrary firing; enforces a notice period for resignations and allows employers to set performance-based compensation; gives incentives for on-the-job training. Benefit: Strengthens rights for workers and employers. Trade Unions Act (Law 310 of 2017) Status: PASSED December 8, 2017 Description: Authorizes all trade union organizations established by law, and introduced by the Ministry of Manpower in 2016, to retain their legal personality, retain all their property and continue to exercise their competences in order to achieve their objectives, in accordance with the provisions of the law. The new law bans the formation of independent trade unions. Benefit: Conforming to ILO requirements. Consumer Safety Reform Food Safety Authority Act (Law 1 of 2017) Status: TOOK EFFECT January 10, 2017 Description: Establishes the National Food Safety Authority to be the sole agency supervising and regulating the food industry for both domestic and export markets. Benefit: Streamlines a process currently involving multiple departments in at least three separate ministries (Health and Population, Agriculture, and Supply). Amendments to the Consumer Protection Act Status: PENDING approval by State Council and Parliament Description: Sets strict penalties for price gouging, hoarding of goods and failing to meet health and quality standards; establishes guidelines for returning purchases and expands the presence of the Consumer Protection Agency. Benefit: Encourages consumption by protecting customers from unfair business practices or substandard products. Customs and Taxation Reform Value Added Tax (VAT) Law (Law 67 of 2016) Status: TOOK EFFECT September 8, 2016 Description: Imposes a VAT on all local and imported goods and services except for 57 exempted items. The general VAT rate was 13% for FY 2016/17 and increased to 14% starting FY 2017/18. Benefit: Increases the country s tax base and overall tax revenue.

5 Tax Dispute Resolution Act (Law 79 of 2016) Status: TOOK EFFECT September 28, 2016 Description: Allows tax dispute cases to be resolved by committees, removing them from the court system. Benefit: Accelerates what was previously a lengthy tax dispute process and makes it more efficient; clears a backlog of more than 6,000 tax dispute cases worth up to EGP 47 billion (USD 5.29 billion). Changes to Import Tariffs (Presidential Decree 538 of 2016) Status: ISSUED November 30, 2016 Description: Raises custom duties for 364 tariff lines on goods considered unnecessary or luxury products. The Trade and Industry Minister announced the suspension of the annual 10% reduction in the customs tariffs of imported European cars, which was due to come into effect in early Benefit: Stimulates demand for locally made products and encourages investment in local manufacturing. Financial Reforms Amendments to the Central Bank and Banking Act Status: PENDING feedback from banking sector stakeholders in preparation to introduce to Parliament. Description: Updates banking procedures to promote use of technology; gives the Central Bank greater input in the commercial banks boards and upper management. Benefit: Certain provisions, such as removing the requirement that banks keep paper records, will increase efficiency. Bankruptcy Act Status: APPROVED by Parliament, awaiting ratification by president. Description: Abolishes prison time for debtors; allows companies to restructure and continue operations during bankruptcy, similar to the Chapter 11 Bankruptcy Code in the United States; simplifies post-bankruptcy procedures; and establishes court-appointed mediation to resolve the bankruptcy. Benefit: Encourages investment by decriminalizing bankruptcy. Central Bank of Egypt (CBE) Regulations Free-float of the Egyptian Pound * On November 4, 2016, the CBE free-floated the Egyptian pound for the first time in Egypt s history, leaving its value to be fully determined by market supply and demand. * Benefit: Attracted foreign currency back into the banking system and increased Egypt s foreign currency reserves, allowing the Central Bank to remove capital restrictions imposed amid severe liquidity shortages. Mortgage Reform * In November 2016, the CBE revised eligibility requirements for its EGP 10-billion financing initiative for low- and middle-income housing units to promote property insurance, protect borrowers from discrimination and allow banks to finance 85% of a property s price. * Benefit: Expands mortgage market by offering below-market interest rates and increased protection for low-income borrowers; expands real estate demand beyond the high-income market. Mobile Payment Regulations * Issued December 15, 2016, the new regulations address how banks verify their customers identities to let clients transfer funds between mobile bank accounts and other accounts at the same bank. * Benefit: Allows banks to offer financial services such as payroll, bill payment, collection of microfinance installments, and government payments via mobile bank accounts. Financial Leasing and Factoring Law Status: PENDING review by the State Council and Parliament Description: Provides a legal framework to regulate financial leasing and factoring activities, which provide tools to finance production and service projects. The law decreases the fees of the financial leasing contracts by more than 70 percent with a maximum of LE 500 (USD 28.19) instead of LE 3,000 (USD ).

6 Benefit: Will improve access to financing options for companies. Investment Reforms Amendments to the Capital Market Act (Law 95 of 1992) Status: APPROVED by Parliament on February 13, 2018; awaiting ratification by president. * Amended 45 of the law s 75 articles * Sets up a framework for companies and the government to issue sukuks (Islamic bonds). * Allows trading of futures contracts and the opening of an exchange for futures. * Allows for the establishment of a commodities exchange as well as privately-owned stock exchanges. * Reduces listing fees to 0.002% of the value of the financial instrument or stock to encourage smaller companies to list. * Sets up a federation for non-banking financial companies similar to the Federation of Egyptian Banks. * International credit-rating agency Moody's assessed the amendments as "credit positive" for Egypt's banks * Benefits: Greatly expands and diversifies investment opportunities in the capital markets; enhances competitiveness and financial inclusion Companies Act (Law 4 of 2018) Status: TOOK EFFECT January 17, 2018 Description: Simplifies the process for taking a limited-liability company public and the process of applying for a capital increase; allows investors to register a company and access services online via the General Authority For Investment and Free Zones (GAFI). Also known as the Corporation law, it includes single shareholder limited liability companies. Benefit: Reduces bureaucracy and simplifies procedures for businesses; works in tandem with the new Investment Law. Investment Act (Law 72 of 2017) Status: TOOK EFFECT May 31, 2017 Description: Provides more incentives to investors in Egypt, such as a 50% tax discount on investments in underdeveloped areas, government support for the cost of connecting utilities to new projects, and refunds on money paid for land if production begins within two years; cuts down bureaucracy, especially for starting new projects; restores private sector free zones. Established three new industrial zones in Sharm El-Sheikh, Qalyubia and Nuweiba, effective August 22, Benefit: Simplifies and incentivizes the process for investing in Egypt to create new jobs and decrease reliance on imports. Micro, Small and Medium Enterprises (MSME) Lending * In January 2016, the CBE mandated that by 2020, at least 20% of commercial bank loan portfolios be directed towards SME lending as part of an EGP 200 billion SME fund. In February 2017 updates, the CBE set below-market interest rates for SME loans, between 5% and 12% based on company size and sector. * In May 2017, the CBE launched a EGP 30 billion microfinance initiative targeting 10 million beneficiaries over four years, allowing microfinance loans to count toward banks 20% quota for MSME funding. * In January 2018, a draft law to develop SMEs was submitted by the Ministry of Trade and Industry to Parliament. * Benefit: Encourages MSMEs to join the formal economy with increased access to financing and other incentives. MSMEs make up an estimated 95% of all Egyptian businesses. Regulation of large-scale mergers and acquisitions (M&A) Status: PROPOSED. Expected to be introduced during the current Parliamentary session. Description: Requires Egyptian Competition Authority (ECA) approval on M&A transactions larger than EGP 100 million; may eventually include smaller transactions. Benefit: Would give the ECA, which is currently only informed about M&A transactions, more teeth in its role as antitrust regulator.

7 Social Welfare Reform Takaful and Karama programs These social security programs will provide up to EGP 200 billion as cash subsidies in FY 2017/18 to support the lowest income segments of society. These subsidies increased by about EGP 1,000 per household in response to inflation and rising prices. Spending on Takaful and Karama has increased 141% year-on-year in H1 2017/18. In early 2017, the government purged welfare rolls to eliminate duplicate or deceased beneficiaries and those no longer eligible in order to maximize funds for those most in need of them. Universal Healthcare Act (Law 2 of 2018) Status: TOOK EFFECT January 15, 2018 Description: Creates three authorities to manage the new state healthcare system: the Social Health Insurance Authority to fund the system; the Healthcare Authority to manage healthcare services provided by the system; and a third authority to ensure quality control at hospitals providing services under the act. Benefit: Ensures high-quality services in all public hospitals and extends access to public healthcare to all Egyptians. Utilities and Energy-related Reform Fuel and Electricity The state has been reducing subsidies on fuel and electricity in stages since The most recent cuts include: * August 8, 2016: Raised prices for electricity by 13-47% for residential users and 9%-38% for commercial users. * November 4, 2016: Raised prices for fuel at the pump by 30-47% in response to the free-float of the Egyptian pound on the same day. * June 28, 2017: Raised prices for fuel at the pump by 6-55%, and also for gas cylinders, natural gas delivered to households and compressed natural gas. * July 6, 2017: Raised prices for electricity by 15-42% for residential users and 21%-45% for commercial users. Benefit: Eliminates distortions in the energy sector and curbs consumer demand; encourages investment by making the sector more profitable. Transportation The government-approved taxi fares increased in November 2016 following the float of the Egyptian pound and again in June 2017 following fuel price increases. The current starting fare of EGP 5 is double the pre-float fare, with a new rate of EGP 2 per subsequent kilometer 60% higher than the pre-float rate. Fares for all public transit options including city buses, the less formal microbuses and the Cairo Metro (subway) system have all increased. In March 2017, the Metro fare doubled to EGP 2 per ride, with the Ministry of Transportation warning of future increases to fund upgrades and line extensions and to make the system profitable. In February 2018, Parliament s Local Administration Committee approved amendments to the Public Roads Act that would impose a licensing fee of EGP ,000 on food trucks and carts. The amendments will allow these businesses to receive a renewable one-year license from local administration bodies, which will determine the licensing fee based on the type of cart and its location. Water On August 3, 2017, the government raised potable water prices by as much as 50%, with all consumption brackets seeing an increase. Sewage fees, calculated as a percentage of water prices, increased to 63% of the water price up from 57% for residential use and 92% of the water price for commercial use. Benefit: Curbs consumer demand and encourages water conservation. Egypt s average water resources per capita is less than 700 cubic meters, well below the water poverty threshold of 1,000 cubic meters per capita. Natural Gas Act (Law 196 of 2017) Status: PASSED August 1, 2017

8 Makes the state the primary regulator by establishing a natural gas regulatory authority charged with licensing and devising a plan to liberalize the gas market. Allows the private sector to import gas, operate pipelines, and store, distribute and ship gas (all positions previously reserved for the government). Benefit: Attracts greater private sector participation and investment in the country s gas sector. Positions Egypt as regional hub for the trade of liquefied natural gas (LNG). Several Egyptian and international companies have already been granted preliminary approval to import natural gas to Egypt. On February 19, 2018, private Egyptian firm Dolphinus Holding Ltd. inked a landmark USD 15 million agreement with Delak and Noble Energy to import 64 billion cubic meters of natural gas from Israel s Tamar and Leviathan reservoirs. While still pending regulatory and government approval, the deal is hailed as a major step supporting Egypt s role as a regional energy hub.

9 Major Investment Projects Since the presidential elections in 2014, the government has launched or announced a number of major infrastructure projects designed to jumpstart economic development and open the door for private investment. Updates on key projects are listed below. Transportation Roads Egypt s paved road network currently covers 174,600 kilometers and accounts for about 94% of all cargo transport. The state is in the midst of the EGP 36 billion National Road Project (NRP) to upgrade or build around 5,000 kilometers of roads. Railways The Egyptian railway network extends over 9,600 kilometers, carrying approximately 500 million passengers and 6 million tonnes of goods annually. However, it is accident-prone and in need of improvement. Following a deadly train accident on August 11, 2017, that killed over 40 people, Minister of Transportation Hisham Arafat acknowledged that private-sector investment is needed to upgrade and maintain the railway system. On Jan 4, 2018, Parliament s Transportation Committee approved amendments that, if passed by the House of Representatives as a whole, would allow private sector participation in the building, management and maintenance of the national rail system. The amendments to the law regulating the National Railways Authority have been referred to the House s general assembly for discussion. The amendments target one clause of the law enshrining the state s monopoly over railway services and projects. Metro The Cairo metro system is undergoing an expansion, with one line being expanded and three lines being added. Energy Zohr Overview: The Zohr field was discovered by Italy s Eni in August 2015 in the Mediterranean Sea, approximately 110 miles (190 kilometers) north of Port Said. Thought to contain 30 trillion cubic feet (850 billion cubic meters or 5.5 billion barrels of oil equivalent), it is the largest gas field in the Mediterranean and will eventually deliver billion cubic feet per day (bcf/d) of natural gas. Latest developments: Zohr began initial production of 350 million cubic feet per day (mcf/d) in late December 2017, bringing Egypt s total gas production to 5.5 bcf/d as of February An additional 700 mcf/d is targeted to come online in June 2018, and by the end of the year the field will be producing bcf/d. It will achieve target production of bcf/d by mid Zohr will attract USD 12 billion in investments throughout its development, including USD 5 billion during its initial phase. In October 2017, Eni sold a 30% stake in the field to Russia s Rosneft for USD 1.1 billion. BP also holds a 10% share, which it bought in November 2016 for USD 375 million. Benban Solar Park Overview: The Benban solar park, covering 37 square kilometers, will be the largest grid-connected solar installation in the world with a total capacity of 1.8 GW. The project is due to be completed by mid-2019, attracting USD billion in total investments. Latest Developments: The park attracted investments of USD 2.8 billion by the October 28, 2017, closing date for the second phase of the feed-in tariff program, with 30 companies reaching financial close for solar power projects totaling 1.6 gigawatts (GW).

10 The European Bank for Reconstruction and Development provided USD 500 million in funding for 16 projects, and the International Finance Corporation led a consortium of nine international banks to provide 13 projects with USD 653 million in funding. Egypt s Infinity Solar s 50 MW plant, built under the feed-in tariff s first phase, will become the first Benban project to come online when it completes trial operations. El Dabaa Nuclear Power Plant Overview The Dabaa Nuclear Power Plant (NPP), located on the North Coast about 170 kilometers from Alexandria, will house four reactors with a total capacity of 4.8 GW. The NPP will be built and operated by the Russian state-owned Rosatom, with a total project cost of up to USD 21 billion. The first reactor, with a capacity of 1.2 GW, is expected to come online in 2026, with the remaining three operational by Rosatom will service and provide fuel for the plant for 60 years. A loan with Russia will cover 85% of the project, and locally sourced loans will cover the remainder. Latest Developments: Egypt s Ministry of Electricity and Renewable Energy and Rosatom signed contracts in December 2017 to proceed with construction; the ministry also signed contracts for fuel supplies. Suez Canal Economic Zone (SCZone) Overview The SCZone project is developing the Suez Canal area into a global hub for international trade, industrial activity, logistics and tourism. The zone covers 460 square kilometers (around 110,000 feddans) that encompass Ain Sokhna with the Ain Sokhna Port, East Port Said with the East Port Said Port, West Port Said Port, Qantara West, East Ismaliya, Adabiya Port, Al Tor Port and Al Arish Port. The SCZone offers industrial and commercial investment opportunities in infrastructure, real estate development, logistics, amenities and technology. Planned port expansions will increase the maritime traffic capacity and expand ship building, stevedoring (loading and unloading ships), bunkering (fueling ship containers), recycling and vessel scrapping. Latest developments By April 2017, Egypt had signed agreements worth a total of USD 20 billion in the zone, with the largest investor being China. In June, 15 new projects worth a combined total of EGP 1 billion were approved. Agreements signed since June include a USD 5.5 billion steel plant with Egyptian Steel, a MOU with Italy s Danieli for a steel plant, and a USD 10.6 billion petrochemical complex with Egypt s Carbon Holdings. Golden Triangle Project Overview The Golden Triangle megaproject is being planned over 9,300 square kilometers (2.3 million acres) in Upper Egypt and the Eastern Desert, anchored by the Red Sea cities of Safaga and Al Qusayr and the city of Qena on the Nile north of Luxor. The project includes agricultural, tourism, residential and industrial zones but focuses largely on mining, which is expected to account for 60-65% of investments. Italy s D Appolonia has created a 30-year development master plan for the area, which is expected to produce over 400,000 new jobs and more than USD 18 billion in investments. Latest developments On July 4, 2017, three gold mining companies the UK s Vertias Mining Limited, Egypt s East Gas Company and Resolute Egypt were awarded concessions in the Eastern Desert, just south of the Golden Triangle region, through a Ministry of Petroleum and Metallurgical Wealth tender. On July 24, President Abdel Fattah El Sisi officially approved the creation of the Golden Triangle Special Economic Zone.

11 In August 2017, it was announced that a USD 400 million container terminal would be built at the Safaga Port to serve projects in the Golden Triangle. New Administrative Capital (NAC) Overview The NAC project stretches between New Cairo and Ain Sokhna over 700 square kilometers (around 170,000 feddans) with a total of 24,500 planned buildings. The NAC will include administrative and financial districts as well as a ministerial district that will become the new home for ministries, government bodies, foreign embassies and the presidential palace. Phase one covers 10,500 feddans and includes 170,000 residential units. The project is expected to absorb a population of five million people. Latest developments In February 2017, Arab Contractors were contracted to construct the ministerial district as well as a number of residential areas at a total cost of EGP 3 billion (USD million). These are due to be completed by mid The House of Representatives building is already under construction. As of February 2017, 350 out of 700 homes slated for construction in 2016 had been completed. That same month, the Ministry of Housing announced new land tenders to real estate developers for the project s first phase at 25% discounts, attracting bids from more than 15 notable private developers including SODIC, Tatweer Misr, TMG and Misr Italia. In May 2017, Siemens began the commercial operation of two units with a capacity of 800 MW at its NAC power plant. In August 2017, China signed an agreement worth USD 739 million for the development of the first phase of an electric railway project linking the NAC with El Salam City. China is expected to invest a total of USD 11.2 billion in projects for the administrative capital. In October 2017, President Abdel Fattah El Sisi launched the NAC s first phase on a 40,000-feddan (168-square-kilometer) area, being developed at a total cost of EGP 17 billion. Featuring residential units, a luxury resort, government buildings and a new international airport, the first phase is expected to be fully ready for residents by the end of Ministries and governmental offices are to move to the capital by mid-2019, at a cost of EGP 35 billion. This publication is produced quarterly; the data in this edition is current as of February 20, All information in this publication is verified to the best of the publisher s ability. Compiled by the Business Studies & Analysis Center (BSAC) 33 Soliman Abaza Street, Dokki 12311, Cairo, Egypt Tel: (+20 2) Website: March 2018 The American Chamber of Commerce in Egypt