EGYPT WEEKLY NEWSLETTER

MARCH, 2014 (4th QUARTER)

CONTENT

1. Political Overview………...... 01 2. Economic Overview……..….…..03 3. Banking.…………………………..….04 4. IT & Telecom………………………..05 5. Energy……………………………….…05 6. Tourism…………………………..…..06 7. Investment…..………………………07 8. Laws & Regulations……..……...08 9. Internal Trade……………………...08 10. International Relations…..….09

Compiled by Thai Trade Center,

POLITICAL OVERVIEW

Egypt's El-Sisi bids military farewell, says he will run for presidency Source: Ahramonline, March 27, 2014

Field Marshal Abdel-Fattah El-Sisi resigned from the military on Wednesday and announced that he was determined to run in Egypt's upcoming presidential elections, slated to begin 30 March. "Today is the last time you’ll see me wearing this [military] uniform. I was honoured to wear it to defend the nation and today I am also leaving it behind to defend the nation,” said El-Sisi, stressing that he has been a member of the armed forces for over 45 years. The last few years in Egypt have proved "that no one could be president without the people’s will,” he said. "My determination to run in the election does not bar others from their right to run. I will be happy if whoever the people choose succeeds,” he said, adding that he hopes for "a nation for all without exclusion.” Any Egyptian who has not been convicted by the law, El-Sisi said, is unconditionally welcomed to be an active partner in the future of Egypt. He said that he does not intend to "have a traditional campaign but rather a comprehensive vision for the nation to rise,” and called on his supporters not "to spend a lot” for his campaign. The presidential hopeful also expressed his determination to fight for a "fearless Egypt." "Egypt is rich with its resources and people [and yet] it relies on donations and assistance. This is not acceptable. Egyptians deserve much better," he said. El-Sisi pointed out that Egypt faces serious economic, social, political and security-related challenges that existed before the 25 January 2011 revolution and have continued after the 30 June 2013 protests which led to the ouster of president Mohamed Morsi. Egyptians deserve to live with dignity, security and freedom, he said, in addition to having access to jobs, food, education, medicine and housing. "Production must start again in all state

Egypt Weekly Newsletter 1 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya apparatuses. Our mission is to restore Egypt,” he said. Before breaking the widely anticipated news, El-Sisi met with the Supreme Council of the Armed Forces (SCAF) to reportedly submit his resignation and discuss his potential successor as defence minister. Chief of Staff Sedki Sobhi was promoted to the rank of colonel general by interim President Adly Mansour in the meeting preceding El-Sisi's address, a rank historically held by Egyptian defence ministers. El-Sisi's announcement came hours after Mansour arrived in Cairo from Kuwait, where he was attending the Arab League summit. The 59-year-old El-Sisi, who was appointed defence minister in August 2012 by then-president Mohamed Morsi, had to resign from the military in order to run in Egypt's upcoming presidential poll, as per Egyptian law which stipulates that military personnel are not allowed to enter politics. Speculation around his running intensified after SCAF issued a statement in January, empowering El-Sisi to run for president. The SCAF statement, broadcast on Egypt's state-run TV as a voice recording, said that based on El-Sisi's efforts during these "historic times," SCAF considered the army chief's bid for the presidency "an obligation." Last Saturday, Amr Moussa, renowned politician and head of the 50-Member Committee that drafted Egypt’s 2014 Constitution, revealed the main aspects of El-Sisi’s electoral platform. According to Moussa, El-Sisi is concerned with building the state on a modern basis and in line with the 2014 national charter. "The [electoral] platform will determine the framework of the candidate’s vision to build and establish prosperity for the people while respecting the freedoms and rights granted in the new constitution,” said Moussa, adding that the plan also includes a reformulating of "the development and investment map" in Egypt.

Hundreds of Muslim Brotherhood supporters face death sentence: Will Egypt carry it out? Source: CNN, March 25, 2014

A court in Egypt has sentenced to death more than 500 supporters of the now- banned Muslim Brotherhood following violence that broke out in the southern city of Minya last August. The Egyptian Foreign Ministry puts the number of those sentenced at 529. A single policeman was killed. Only 147 of the defendants were reportedly in court Monday. Sixteen people were also acquitted at the hearing. Another 683 defendants -- including the Muslim Brotherhood's spiritual leader Mohamed Badie -- appeared before the same judge Tuesday in relation to the unrest. Their case was adjourned until April 28. CNN spoke to its correspondent in Cairo, Ian Lee, independent Egyptian journalist Shahira Amin and Egyptian legal historian Khaled Fahmy about Monday's mass sentence. A police officer was murdered during the pro-Morsy riots in Minya last August. The violence followed a deadly crackdown by security forces on two Cairo sit-ins being held by supporters of former Islamist President Mohamed Morsy. Morsy, Egypt's first democratically elected president, had been toppled in a military coup in July 2013. Defense lawyer Khaled El-Komi told CNN the charges against the defendants appearing Tuesday include breaking into a police station, attempted murder, disturbing public peace and public order.

Egypt Weekly Newsletter 2 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya ECONOMIC OVERVIEW

Egypt shoots for 3.4% GDP growth during next fiscal year Source: Bloomberg, March 26, 2014

Minister of Planning Ashraf El-Araby announced that the interim government is aiming to grow gross domestic product by 3% to 3.4% during the next fiscal year, Reuters reported. Previously, Finance Minister Hany Kadry Dimian stated that he expected growth during the current fiscal year (FY 2013/2014) to range between 2% to 2.5%. During the first quarter of FY 2013/ 2014, GDP grew by just 1%. The Ministry of Finance attributed this “unsatisfactory economic activity” to political instability and insecurity. The ministry also stated that time-consuming public investment projects hindered growth. During the same period in FY 2012/2013, GDP grew 2.6%. In its mid-year report, the finance ministry predicted that the expansionary fiscal and monetary policies, which included two stimulus packages that amounted to 1.5% and 3% of GDP, are expected to increase the GDP growth rate to about 3.5% by June 2014. “In the second half of the year, public investment projects, the settlement of arrears, support to closed factories and wage increases are all expected to boost aggregate demand and spur economic activity,” the ministry reported. Dimian also announced that the budget deficit is expected to register 11% to 12% of GDP by the end of the current fiscal year. He added, however, that in FY 2014/2015 the deficit is expected to decline to only 10% and 10.5% of GDP.

France to support €80m employment project Source: Al Mal, March 25, 2014

The Ministry of Planning and International Cooperation signed a €80m agreement with the French Agency for Development Monday to offer long-term credit to small and micro Egyptian businesses. The agreement will support the Egyptian Social Development Fund, a state-owned agency founded in 1991, in its mission to encourage employment and improve living conditions in disadvantaged neighbourhoods, according to a statement from the French Embassy in Cairo. The European Union is expected to provide Egypt with a €15m grant to be used for the improvement of four informal settlements in Greater Cairo and Giza, where 1.2 million Egyptians reside. The four settlements are Ezbet Kheir Allah and Al-Zawya Al- Hamra in Cairo and Ard El-Lewa and Miet Uqba in Giza. Minister of Planning and International Cooperation Ashraf El-Araby represented Egypt at the signing and Jean- Marc Gravellini, director of operations at the French Agency for Development and Nicolas Galey, the French ambassador to Egypt, represented the French side. Egyptian interim Prime Minister Ibrahim Mehleb and the acting head of the state-owned Social Development Fund Hanaa Al-Helaly were also present. On the same day, the Arab Fund Economic Social Development (AFESD) signed a $50m loan agreement with the state-owned Social Development Fund (SFD) Hanaa Al-Helaly to finance small and micro enterprises. The French Agency for Development is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Provinces for seventy years.

Egypt Weekly Newsletter 3 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya Arab Fund for Economic and Social Development invests $412m Source: Egypt Daily News, March 24, 2014

Egypt’s interim government signed two agreements with the Arab Fund for Economic and Social Development (AFESD) on Monday to finance projects in the electricity sector, a statement from the cabinet said. A power station in Assiut, which is currently being upgraded to increase Egypt’s electric capacity by 650MW, will be funded by AFESD’s first $200m assistance package. In December 2013, the Upper Egypt Electricity Production Company (UEEPC) and Banque Misr signed an EGP 285m loan agreement to fund renovations and replacements in Assiut’s power station. The Islamic Development Bank (IDB) allocated $220m in February to finance the Assiut station. The allocation came as a part of a nearly $705m initiative to fund projects focusing on infrastructure, human development and education in “Muslim communities”, the bank said. AFESD’s second agreement will contribute $162m to the Egyptian-Saudi electricity linkage project. Egypt and Saudi Arabia have agreed to share power during peak consumption periods through establishing the Egyptian- Saudi linkage project, which would increase the combined capacity of the electrical grid to 3,000 MW. Both countries signed the $1.6bn deal in June 2013 and agreed that the Saudi Electricity Company and the Egyptian Electricity Holding Company are responsible for financing, operating and repairing the connectivity equipment in their territories. However, the executive and consultative duties will be lead by a Canadian firm. According to the cabinet’s Monday statement, the project is part of a larger electricity linkage system between Egypt and Gulf countries. The Minister of Planning and International Cooperation Ashraf El-Araby and director general of AFESD Abdulatif Yousef Al-Hamad signed the agreement on Monday; Prime Minister Ibrahim Mehleb, Minister of Electricity Mohamed Shaker and Minister of Social Solidarity Ghada Waly were also present. Meanwhile, AFESD also signed a $50m loan agreement with the acting head of the state-owned Social Development Fund (SFD) Hanaa Al-Helaly to finance small and micro enterprises. The Kuwait-based AFESD is a financial institution that funds public and private investment projects with the aim of achieving economic and social development.

BANKING

Egypt’s Citadel to sell Sudanese Egyptian Bank Source: Reuters, March 25, 2014

Reuters – Citadel Capital is in talks to sell its 66.1% ownership in the Sudanese Egyptian Bank as part of a programme to shed non-core assets, it said in a statement on Wednesday. Citadel is narrowing its focus to energy, transport, agrifoods, mining and cement and plans to gradually shed holdings outside those areas over the next few years and convert it into a holding company from a private equity firm. The firm, which has $9.5bn under management, includes holdings in dozens of companies, mainly in Egypt, east and north Africa, has suffered losses over the past two years partly due to Arab world turmoil.

Egypt Weekly Newsletter 4 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya IT & TELECOMMUNICATION

Announcement of fourth mobile license postponed: Source: Minister of IT & Telecommunication, March 24, 2014

Egypt’s Ministry of Communications has postponed to 2 April an international press conference at which will be announced details of the long awaited unified license, according to a ministry statement. The conference was delayed due to the absence of some heads of mobile operators and the failure of the National Telecommunications Regulatory Authority (NTRA) to hold its preparatory meeting. NTRA was supposed to decide on executive regulations for a unified license before the conference but failed to meet upon some unspecified “emergency circumstance.” Earlier this week, Interim Prime Minister said that details of the fourth virtual mobile licence would be revealed at a press conference Wednesday. The license will allow Telecom Egypt (TE), which is 80 percent government-owned, to make use of the infrastructure of one of the existing private mobile operators to provide its own mobile services, repackaged under the TE brand, in exchange for wholesale prices paid to the mobile operator. In return, the universal license will allow Egypt’s three privately-owned mobile operators — the Egyptian Company for Mobile Services (Mobinil), Vodafone Egypt and Etisalat Egypt — to build a virtual network to provide landline services, using TE’s existing fixed network. The proposed license will not, however, allow mobile operators to acquire their own international gateway or to build a fiber network similar to TE’s — an issue that the country's three mobile operators must settle in order to have the same rights as TE in terms of equitable competition in Egypt's telecom sector.

ENERGY

Egypt’s 2014 energy deficit originally expected for 2022 Source: Egypt Independent, March 25, 2014

The volume of the current energy deficit in Egypt was expected to occur in 2022, said Anhar Hegazy, head of the energy efficiency department in the state-owned Information and Decision Support Centre (IDSC), on Wednesday. The remarks were made during The Future of Egypt’s Energy Efficiency conference on Wednesday, which was organised to discuss different obstacles impeding the growth of the energy sector. According to Hegazy, the deficit in energy began in 2007. “In order to address the issue, the government should work on reforming energy subsidies, enhancing renewable energy usage and increasing the energy efficiency among different sectors,” Hegazy said. By 2022, energy usage is expected to be reduced by 10%, Hegazy said. Also speaking at the conference was former Minister of Petroleum Osama Kamal, who said Egypt has been importing 75m tonnes of petroleum products every year since 2008, with a total cost of EGP 54bn. Kamel suggested shifting to alternative sources of energy, such as coal and solar power, as a means of resolving the energy issue. “The energy subsidies system should be reformed without affecting the energy prices,” Kamel said, adding that the implementation of the smart card programme is a solution that will help reduce the smuggling of

Egypt Weekly Newsletter 5 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya petroleum products by 15% or 20%. According to Kamel, petroleum smuggling costs the state EGP 50bn. Using natural gas in households and cars as an alternative to butane gas would help in addressing the issue of fuel shortages, he added. Meanwhile, Emad Hassa, head of Nexant Inc., stressed the need to develop Egypt’s infrastructure in order to achieve energy efficiency. Hassan said in his speech that the government should define visions and tactics that will help the energy- consuming sectors, such as electricity, health, education and transportation, and improve their energy usage.

TOURISM

Egyptian Tourism Federation warns of coal use's impact on tourism Source: Ahramonline, March 23, 2014

The Egyptian Tourism Federation chambers came out against the industry ministry's plan to use coal as a source of energy on Tuesday, citing potential damage to the vital sector. Chairman of the federation, Elhamy El-Zayat said that he received a memorandum from Mahmoud El-Qaissoni, the environmental advisor to the tourism minister, warning him of the negative impact using coal to power cement factories would have on tourism. Egypt's cement sector has been campaigning for months for permission to substitute mazut and natural gas used to power cement plants with more cost-effecient coal, a proposition which the Ministry of Environment has vehemently opposed. "Cement factories are located along the Nile, in Suez and Sinai, near several touristic destinations which are valued at billions of Egyptian pounds," stressed the memorandum, warning of environmental damage to the air, sea, and aquatic life, at a time when, according to El-Zayat, local and international tourism are heading towards ‘green tourism.' Egypt could also lose millions of dollars in international aid for transforming to clean energy if the use of coal is approved, said El-Zayat. Faced with fuel shortages and the burden that subsidies have placed on balance of payments, the government has been cutting energy subsidies on energy intensive industries and pushing for alternative sources of energy. The cabinet is currently studying a proposal by the industry ministry to allow cement factories to import coal. The proposal created controversy because of the potential negative impact of coal on the environment and people’s health. On its part, the environment ministry met with cement factories on Monday and suggested the use of Refuse Derived Fuel, fuel derived from municipal waste such as plastics, as an alternative source of energy.

Egypt's tourism ministry investigating alleged rape case in Sharm El-Sheikh Source: Egypt Daily News, March 23, 2014

Egypt's tourism ministry announced on Monday that it was investigating the alleged rape of a British holidaymaker in the Sinai resort town of Sharm El-Sheikh. “We are following the case with the British embassy and local tourism police, and the case is currently under investigation,” tourism ministry spokesperson Rasha El-Azazy told Ahram Online. A severe punishment will be imposed if the ministry confirms the crime's circumstances, El-Azazy added. The victim, a businesswoman in her 40s, says she was raped by a security guard at a five-star hotel in the Red Sea resort town, the

Egypt Weekly Newsletter 6 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya Daily Mail reported on Sunday. The guard was escorting the woman back to the hotel when he allegedly pulled her into her bedroom and subjected her to the brutal assault, according to the Daily Mail The UK's Foreign and Commonwealth Office says reports of sexual assault against British nationals in Egypt have increased since the January 2011 uprising. In 2012, the office handled 23 cases of sexual assault and six cases of rape. In May 2013, Egypt's tourism minister Hisham Zaazou told Ahram Online that hotels would be closed if staff were found to have sexually harassed tourists, arguing that the behaviour would have a negative impact on the country's reputation. The tourism ministry has recorded 150 cases of sexual harassment against tourists over the last two years. There have also been three recorded rapes.

Red Sea ports to welcome 2,400 German tourists Source: Economic Ahram, March 24, 2014

The Ministry of Transportation Tuesday announced that 2,400 German tourists are to arrive to Red Sea ports in the coming period. The General Authority for Tourism will facilitate flight and transportation procedures for the tourists, according to an official ministry statement. The tourism sector has “completely collapsed” since the ouster of former president Hosni Mubarak in 2011 because of political instability, said Tourism Minister Hisham Zaazou. The ministry will be working on a plan to make “great changes” in management to improve the conditions. Tourism is Egypt’s main source of income, Zaazou said, so he will be looking into legislative amendments to resolve problems. The ministry will soon be hiring a new staff that includes younger people in an effort to revive the sector. In order to boost the flow of tourists , Zaazou signed an agreement this month with Indian travel agencies to bring one million tourists to Egypt by 2017.The Ministry will be cooperating with the Egyptian-Indian Friendship Association to facilitate flights from New Delhi to Cairo starting in May. The number of Russian tourists visiting Egypt is expected to reach 3 million by the end of 2014, Zaazou previously announced in a tourism conference in Moscow.

INVESTMENT

$1.3bn Italian investments in energy and infrastructure Source: Ahramonline, March 25, 2014

Egyptian Ambassador to Italy Amr Mostafa Helmy recently met with Italian Deputy Minister for Economic Development Carlo Calenda to discuss potential investment in a number of projects in Egypt in the field of energy and infrastructure, according to a foreign ministry statement. During the meeting, which was attended by a number of representative of Italian companies, it was agreed to hold the Egyptian-Italian Business Council on 29 and 30 April in Cairo. The foreign ministry could not be reached for comment on the names of the companies involved. According to the Egyptian ambassador, Italian investments in Egypt amount to $1.3bn. He added that investment contracts will be signed in the first week of April, and the projects involved will be in the sectors of energy and infrastructure. Helmy also said that Italy is considered the number one trade partner with Egypt in the European Union, and also ranks second in terms of international economic partners. The business council meeting would help expand economic cooperation between the two countries in

Egypt Weekly Newsletter 7 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya different sectors related to industries, construction, textiles and petrochemicals, he said. Minister of Foreign Affairs Nabil Fahmy previously stressed in an official statement on the need to promote trade and economic cooperation between the two countries, as Italy is one of Egypt’s largest trading partners and has several investments in the country. Fahmy also met with prominent Italian businessmen to “enhance bilateral trade and attract more investments in Egypt.”

LAWS & REGULATIONS

Cabinet takes measures to eliminate smuggling Source: Egypt Daily News, March 26, 2014

The Egyptian cabinet’s economic team announced the establishment of four working committees in order to eliminate the smuggling of goods and merchants. The cabinet’s announcement came after Mehleb’s meeting with Minister of Transportation Ibrahim El-Demeiry, Minister of Foreign Trade, Industry and Investment , Minister of Finance Hany Kadry, Minister of Planning and International Cooperation Ashraf Al-Araby and the Minister of State for Local Development late Monday. The first committee is the security system work group, which will set priorities and security measures to control and prevent smuggling. The work group will help tighten the security on border crossings and will be headed by the head of the Ports’ Security Authority, in coordination with the Egyptian armed forces. The second committee is the legislative system working group. The committee will be responsible for setting and applying harsher penalties on smugglers. The committee’s president is the head of the Customs Authority. Another committee will be responsible for developing the system for provinces and will be headed by the Minister of Planning and International Cooperation. The fourth committee will offer services working groups which will attempt to meet the demand provinces needed to fight smuggling. The working groups are responsible for the development of an emergency plan to prevent smuggling all over the country and particularly in the key areas of smuggling in Port Said and Sallum, an Egyptian village near the Mediterranean Sea and the country’s eastern border with Libya. The committees are said to submit a report within one week. The report will include urgent measures to eliminate smuggling operations permanently. Following the submission of the report next week, an emergency meeting will be held to activate those measures.

INTERNTIONAL TRADE

175,000 tons of wheat purchased, to be supplied in April Source: MENA, March 23, 2014

The General Authority for Supply Commodities (GASC) purchased 175,000 tons of wheat from Romania, Russia and the United States to produce subsidised bread, the Ministry of Supply and Domestic Trade announced. The purchased wheat will be supplied starting 11 April over a period of 10 days. Around 60,000 tons were purchased from Romania and the same amounts from Russia. The remaining 55,000 were bought from the United States. The average price per ton was $312, bringing

Egypt Weekly Newsletter 8 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya the total cost of imported wheat to $54.6m. Minister of Supply Khaled Hanafy said that the strategic stock of wheat is within safe levels, and has previously announced that the stock should be sufficient till June. Hanafy added that the ministry is currently studying each cycle of bread production to eliminate obstacles that create unnecessary costs. The bread distribution system wastes between 20% and 25% of the state’s bread subsidies budget, some EGP 22bn. Earlier this month, 295,000 tons of wheat was purchased from Romania and Russia. Around 60,000 tons will be imported from Romania with a cost of $292.54 per ton, while the remainder of 235,000 tons will be imported from Russia with an average price of $292.50 per ton. In February, Minister of Agriculture Ayman Abu Hadid revealed that a new strategy for marketing wheat domestically had been developed by the Ministry of Agriculture and Land Reclamation. The ministry cooperated with the Principal Bank for Development and Agricultural Credit (PBDAC) and agriculture cooperative associations to develop the new marketing strategy. The PBDAC will grant loans to agriculture co-ops in order to help them purchase wheat before the end of the supply season. The co-ops will refund the granted amount after marketing and distributing the purchased quantities.

INTERNATIONAL RELATIONS

Egypt mulls creation of industrial & free trade zones with Russia Source: MENA, March 24, 2014

Egypt is considering opening a Russian industrial zone for the manufacture of agriculture equipment, a partnership that would help Egypt meet its domestic demands and allow for surplus machinery to be exported. The industrial zone would also build grain silos, a benefit for both countries, which rely heavily on farming, said the website of the Egyptian ministry of industry, foreign trade and investment. Also, Russia said that it would take responsibility for the development of the Egyptian Iron & Steel factory in the south Cairo district of Helwan – the biggest company in Egypt's public sector and currently in a state of deterioration after a downturn in profits. The company reported huge losses in 2010 and 2011. Net losses were close to LE900 million ($130 million) during the financial year that ended in June 2013. Similarly, Russia has pledged to upgrade other iconic manufacturing plants in Egypt, such as Nasr Car Manufacturing Company, the Aluminum Complex in Upper Egypt and the power station of the High Dam in Aswan. On Wednesday, Egypt's minister of industry, foreign trade and investment Mounir Fakhry Abdel-Nour wrapped up a three-day visit to Moscow in which he and his Russian counterpart agreed to create a free trade zone with Russia, Belarus and Kazakhstan. The free trade zone would exempt the countries from customary tariffs and, Abdel-Nour says, help both countries with their exports – Egypt with fruits and vegetables, and Russia with wheat. Egypt is already the largest importer of Russian wheat, responsible for one fifth of the country's wheat exports so far in 2013/14. Egypt bought 2.6 million tonnes of Russian wheat between 1 July 2013 and the end of February, Reuters reported. Abdel-Nour said that Egypt seeks to raise the trade volume between the two countries to reach LE35 billion ($5 billion). According to an article published by Ahram Weekly in December 2013, trade exchange between Egypt and Russia reached LE25 billion ($3.6 billion) in 2012.

Egypt Weekly Newsletter 9 Thai Trade Center, Cairo March, 2014 (4th quarter) Sherif Yehya