Monthly Report July 2017 Egypt s Economic & Political Update
Monthly Report July 2017 Page 1 FOREIGN POLICY & TRADE El Sisi attended the Egyptian-Hungarian business forum, where he invited companies to invest in the manufacturing, energy, agriculture, water treatment, infrastructure, and railway sectors Egypt and the USAID are in talks for USD 104 million in funding directed towards science and technology, higher education, agriculture, and basic education The IMF released the second half (USD 1.25 billion) of the first tranche of its USD 12 billion IMF extended fund facility Minister of Trade and Industry Tarek Kabil announced that Egypt and Argentina will form a trade committee The Italian government has come to an agreement with the Ministry of Trade and Industry to provide a loan worth EUR 45 million Prime Minister Sherif Ismail talked cooperation with Moroccan Industry, Investment, Trade and Digital Economy Minister, Moulay Hafid El Alamy. Minister Tarek Kabil also agreed with El Alamy to form an action group to promote economic cooperation between the two countries Egypt s free trade agreement with Mercosur countries will come into effect in a month STAKEHOLDERS UPDATE President Abdel Fattah El Sisi issued a decree appointing Ahmed Aboul Azm as the head of the State Council Hashem El Sayed and Khaled Abu Heif were elected to fill the two listed companies seats on the EGX s board of directors EGX Chairman Mohamed Omran, completed his term. Vice Chairman Mohsen Adel has been appointed as acting chairman until a new one is named The promotion of five CBE Assistant Sub Governors: o Mai Aboul Naga (Deputy for Supervising banks) o Rami Aboul Naga (Deputy for monetary markets) o Ayman Hussein (Deputy for Payment systems) o Mohamed Ali (Deputy for internal auditing) o Hany Omar (Deputy for Security) PUBLIC POLICY & REGULATIONS The Alexandria Containers and Cargo Handling Company decided to reduce container handling fees by c. 20% for eight of its services starting August The Ministry of Electricity raised the price of electricity by around 42% for household consumers. The state will continue to subsidize power for another five years until 2022 rather than eliminate them by 2019 as originally planned The House of Representatives approved income tax cuts ranging from 5-80% for those earning under EGP 200k a year Minister of Investment and International Cooperation, Sahar Nasr, stated that a public free zone is set to be established in each governorate, with a logistics center built for every port across the country. Private-sectorrun free zones will also play a role in the strategy. The Ministry Investment and International Cooperation launched an online platform for investors to set up and register their companies through GAFI
JUL- 15 A U G - 15 S E P - 15 OCT- 15 NOV- 15 D E C - 15 J A N - 16 FEB- 16 M A R - 16 A P R - 16 M A Y - 16 JUN- 16 JUL- 16 A U G - 16 S E P - 16 OCT- 16 NOV- 16 D E C - 16 J A N - 17 FEB- 17 M A R - 17 A P R - 17 M A Y - 17 JUN- 17 Monthly Report July 2017 Page 2 OTHER MONITORED ISSUES Egypt will begin implementing the ILO s Better Work Programme, which pushes its own labor standards for industry The Ministry of Transport and Eni began working on establishing a logistics center and storage areas at the Damietta Port. Ships docked at the Damietta Port will now have to purchase electricity from the port authority at USD 0.50 per kwh The Ministry of Agriculture is drafting legislation that would regulate pesticide usage in agriculture and set stricter punishments for the use of unsanctioned pesticides According to the Minister of Petroleum, the Executive Regulations for the recently-passed Natural Gas Act will be completed by September. The International Finance Corporation s executive board approved a USD 635 mn funding agreement to construct, operate, and maintain as many as 11 solar power plants in Egypt with a combined production capacity of 500 MW Egypt and Jordan signed seven MoUs on at a meeting of the Egyptian-Jordanian higher committee in Amman INFLATION Headline Inflation, computed by the Central Agency for Public Mobilization and Statistics on July 10, 2017, declined to 0.82% in June 2017 from 1.67% in May. The annual rate was mostly unchanged, recording 29.76% compared to 29.71% the previous month. Core inflation published by the CBE registered 1.8% in June 2017 compared to 1.99% in May. Annual core inflation recorded 31.95% in June compared to 30.57% in May. Headline Inflation Core Inflation 35% 30% 25% 20% 15% 10% 5% Source: Central Bank of Egypt
Monthly Report July 2017 Page 3 MONETARY POLICY In its meeting held on July 6, 2017, the Monetary Policy Committee (MPC) decided to raise the overnight deposit rate, overnight lending rate, the rate of CBE s main operation, and the discount rate by 200 basis points to 18.75%, 19.75%, 19.25%, and 19.25%, respectively. According the Egyptian Financial supervisory Authority (EFSA) the number female beneficiaries of microfinance have reached 1.33 million during Q1 2017, with EGP 2.55 billion in funding. According to the Head of EFSA, Sherif Samy, women account for 66% of total clients, with half of the funding directed to commercial activities and the rest to services, agricultural, and production activities. Controversy has arisen over the newly created draft Banking Law placed forward by CBE, and is currently being discussed in the Federation of Egyptian Banks (FEB). Opposition claim that the draft law gives too much power to the governor of the CBE, while supporters believe that the draft law is up to date with international banking and financial practices. Minister of Finance, Amr El Garhy, announced that the GoE will lower its customs exchange rate to EGP 16.25 per dollar from EGP16.50, effective August 1, 2017 for one month. Forbes Middle East has listed Lobna Helal, Deputy Central Bank Governor, as the 2nd most powerful Arab businesswomen. Helal was the first woman to hold the position of Deputy Governor back in 2011, however she resigned in 2013, and was repointed again by President El Sisi. She is responsible for currency reserve management, research IT, operations, foreign relations and CBE s monetary policy. Helal is also a member of the National Council for Payment, the Coordination Council, and the Monetary Policy Committee.
Monthly Report July 2017 Page 4 35 2016 2017 30 28.5 31.31 25 24.37 20 16.445 17.546 19.59 15 10 5 0 USD bn USD bn. NET INTERNATIONAL RESERVES The Central Bank of Egypt (CBE) has announced that the nation s foreign reserves registered USD 31.31 billion in June 2017, a rise of USD 180 million from May 2017. Reserves have increased by 29% since the beginning of 2017 and by 78.2% when compared to June 2016. +0.6% Source: Central Bank of Egypt During July, Egypt received the second tranche of USD 1.25 billion from the International Monetary Fund (IMF), part of their 3-year USD 12 billion deal.
Monthly Report July 2017 Page 5 TOURISM The tourism sector witnessed a turbulent time during the past month, from terrorist attacks to a sudden increase in prices. Seven people were killed in a car explosion targeting military personnel in Sinai, while 3 people were killed and 3 injured in an attack on a beach in Hurghada. However, Minister of Tourism, Yehia Rashed, stated that there have been no reports of tourists cancelling trips to Egypt following the attack in Hurghada. Head of the Egyptian Chamber of Hotels, Magdy Naguib, announced that the increases in electricity prices has caused the increase of operating costs by around 1 %, which in turn has caused a spike in accommodation prices. The Tourism Promotion Authority has launched a promotional campaign through Trip Advisor, the most famous travel website, in five markets: Germany, Denmark, England, Sweden, and Italy. The campaign was launched in June and will continue until December. In The September the campaign will additionally be launched in the US, India, and Ukraine. 800,000 600,000 400,000 200,000 1.62 1.6 1.58 1.56 1.54 1.52 1.5 1.48 1.46 1.44 bn 0 Number of Tourists 716,000 573,800 425,000 431,800 April May Source: CAPMAS Tourism Revenues 1.6 1.5 Jan-Mar 2016 Jan-Mar 2017 Source: CAPMAS
Monthly Report July 2017 Page 6 Suez Canal The Suez Canal Authority (SCA) has once again extended discounts offered to containerships coming from ports of the East Coast of America heading to South and South East Asian ports, which were originally introduced in Q1 2016. The SCA will continue to grant all containerships coming from ports north of the Port of Norfolk on the US East Coast and heading to Port Klang and ports eastwards a 45% rebate on canal tolls. Minister of Investment and International Cooperation, Sahar Nasr, in partnership with GAFI, are seeking to attract USD 30 billion in FDI s to be allocated to logistics and infrastructure hubs in the Suez Canal Economic Zone within the next five years. Nasr aims to create 1 million direct and indirect jobs in the region. Accompanied by Mohab Mamish, Chairman of the Suez Canal Authority, Nasr will be visiting Singapore next month to promote investment opportunities in the region. The African Export-Import Bank (Afreximbank) and the Government of Egypt (GoE) are negotiating the possibility of creating an African investment zone in the Suez Canal region. Mamish reiterated the importance of increasing stronger African trade and cooperation between Egypt and all African nations. The SCA has banned Qatari ships from docking in ports within the Suez Canal Economic Zone, based on Egyptian sovereignty over its territorial waters. However, the decision does not include a ban on Qatari ships passing through the canal, as it is illegal to ban any foreign ships from passing, according the Constantinople 1869 agreement. Parliament The House of Representatives has passed a new law that creates the National Electoral Commission (NEC) and phases out the judicial supervision of elections by 2024. President El Sisi s decision to extend the nationwide state of emergency for three more months was approved by Parliament, giving authorizes more power to crack down on terrorism. The nation s FY2014/2018 state budget beginning in July 2017 was passed, with a targeted budget deficit of 9.1%. The long-awaited Gas Law was passed, creating a new Gas Regulatory Authority and granting private companies a larger role in the sector.
Monthly Report July 2017 Page 7 Law Statuses Investment Law Consumer Protection Law Bids & Tenders Law Local Administration Law Unified Building Law Labor Law Gas Law Health Insurance Law Bankruptcy Law Food Safety Law Customs Law SME Law Early Drafting Phase Mid Cabinet Approval Phase Final Pending Parliament Discussion/Approval + Presidential ratification Complete Ratified by the President