The Energy Crisis Comes to a Head
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BUSINESS MONTHLY BUSINESS MONTHLY www.amcham.org.eg/bmonthly NOT FOR SALE A P R I L 2 0 1 4 OUT OF OUT OF GAS GASThe energy crisis comes to a head ALSO INSIDE: L L FISH FARMS GROW UP L L HOMES FOR THE MASSES L L A TASTE OF BRAZIL APRIL 2014 NEW TOC_TOC.qxd 4/2/14 4:57 PM Page 2 A P R I L 2 0 1 4 VO LU M E 3 1 | I S S U E 4 Cover Story 28 In the dark With Egyptians poised to elect anoth- er new president, the power crisis is more serious than ever. Experts say the country can no longer afford to postpone painful but necessary struc- tural changes to its energy policy. Cover Design: Nessim N. Hanna Inside 16 12 Editor’s Note 14 Viewpoint The Newsroom 16 In Brief The news in a nutshell 20 Region Notes News from around the region © Copyright Business Monthly 2013. All rights reserved. No part of this magazine may be reproduced without the prior written consent of the editor. The opinions expressed in Business Monthly do not necessarily reflect the views of the American Chamber of Commerce in Egypt. 8 I Business Monthly – April 2014 NEW TOC_TOC.qxd 4/2/14 4:57 PM Page 3 A P R I L 2 0 1 4 VO LU M E 3 1 | I S S U E 4 23 44 46 Market Watch Executive Life 36 Stock Analysis 44 Dining Out Liquidity-driven market buoys Lovely Mirai tries a little too hard investors 37 Capital Markets 46 War dance A glance at stocks & bonds Egypt’s growing capoeira scene 39 Money & Banking Forex and deposits 40 Key Indicators The economy at a glance In Depth 41 Egypt-U.S. Trade The Chamber Imports and exports 22 Fish farms seek to 50 Events hook new markets Corporate Clinic Local industry targets upscale, Member News Help wanted 54 overseas niches 42 The global unemployment crisis 62 Announcements 25 Government mega-projects spark hope, skepticism 63 Classifieds New plans for low and middle-income housing 64 Media Lite An irreverent glance at the press 10 I Business Monthly – April 2014 Editorial_Editorial.qxd 4/2/14 5:55 PM Page 1 Editor’s Note Director of Publications & Research DADDY ISSUES Khaled F. Sewelam Editor-in-Chief Rachel Scheier ppearing for what he said would be the last time in his brown camouflage Army uniform, Field Marshall Abdul-Fattah El Sisi announced on state tel- Assistant Editor evision March 26 that he was quitting the military to run for Egypt’s highest Maggie Hyde office. Without providing any details on his programs or policies, Sisi Aacknowledged that the country faced “large challenges,” including mass unemployment Contributing Editor and a weak economy. “This is unacceptable,” he said. Tamer Hafez It is virtually a foregone conclusion that Sisi will win. Egyptians weary of three plus years Staff Writer of social and political turmoil are betting that a pragmatic military strongman is their best bet Mat Wolf for a return to more prosperous times. “Sisi is like our father,” a shopkeeper in downtown Cairo recently told The Christian Science Monitor. “Our economy is bad, and things are hard, Art Director but we know that he will treat us well and do the right thing.” Nessim N. Hanna There is no doubt that security and stability will have a positive impact on the economy. But displays of strength will not fix the structural problems that have brought Egypt to the brink Contributing Writer of financial disaster. At the root of this quagmire is a decades-old crony capitalist system and Michael Braha an indiscriminate energy subsidies framework that mostly benefits the wealthy. As Maggie Photographers Hyde writes in this month’s Cover Story, such subsidies have ballooned to consume around Alfred Alfons, Soha El Gabi one-fifth of the budget, contributing to a power shortage that is hobbling industry and forcing Said Abdelmessih Egyptians to cope with regular blackouts, posing a serious challenge to the country’s prospects for economic recovery. On March 30, Egypt’s finance minister said that the current LE 130 Production Supervisor billion energy subsidies bill would grow next by 10 to 12 percent next year unless something Hany Elias is done immediately. Officials have been talking about reforming Egypt’s bloated energy subsidies regime for Advertising Director years, but thus far, its leaders have been unwilling to spend the political currency necessary to Amany Kassem do so. President Anwar Sadat’s attempts to lift food subsidies in the 1970s infamously sparked Advertising & Circulation Assistant riots. Mohamed Morsi’s failure to articulate any coherent economic strategy culminated in the Raghda Salama fuel shortages and power cuts that spurred last summer’s mass protests, ultimately ending in his removal. More recently, the interim government has relied upon generous aid from the Market Watch Analyst Gulf to mask gaping deficits. The welcome infusion of cash from Arab neighbors has no doubt Amr Hussein Elalfy kept the economy afloat, but economists point out that it has also enabled Egypt to postpone making the hard policy choices the country desperately needs. Chamber News Contacts A number of nations have successfully overhauled costly energy subsidies to channel Nada Abdalla, Nihal Alaa, resources to those who truly need the state’s help. Countries like Ghana and Brazil successfully Shorouk Genena, Salma Shaaban combined public education efforts with social benefits that compensated the needy in the face of rising energy prices to successfully phase out subsidies. In 2010, the Iranian government replaced most power subsidies with monthly cash transfers to citizens—a strategy that not only saved the government billions but re-routed the bulk of state spending to target the poor instead of the rich. One thing is certain—whoever becomes Egypt’s next president must take action to address the country’s fiscal realities and promote lasting growth. In announcing his candidacy last month, Sisi told his fellow Egyptians that “we are all in the same boat.” This may be the last U.S. address: 1615 H Street, NW • Washington, D.C. 20062 Please forward your comments or suggestions to the Egypt editorial office: chance to turn it around. Business Monthly RACHEL SCHEIER American Chamber of Commerce in Egypt 33 Soliman Abaza Street, Dokki 12311 • Cairo • Egypt Tel: (20-2) 3338-1050 • Fax: (20-2) 3338-0850 E-mail: [email protected] www.amcham.org.eg/bmonthly CTP and printing: Sahara Printing Company, SAE – Nasr City Free Zone 12 I Business Monthly – April 2014 Viewpoint_Viewpoint.qxd 4/2/14 5:01 PM Page 1 Viewpoint THE NEEDED AND THE NEEDY he needed receive what they ask for, which time is definitely right; the advantages of the location are might be what they deserve and is sometimes uncontested, and youth momentum has never been more than they are worth. The needy get stronger. The whole neighborhood is messy. Egypt rela- whatever others are willing to give them, tively has remained credible in the midst of failed states, which might be less than they are worth. demolished economies, destructive ideologies and divided TPublicly, the needed are respected while the needy are countries. The West has realized this state of affairs and often treated in a condescending manner. To be needed, you has no choice but to act accordingly, and those to our east must be qualified, in the right place at the right time and dif- are terrified; they want to maintain Egypt as a buffer and a ficult to replace. This theory applies to individuals, organiza- bastion of stability. Their livelihoods are tightly linked to tions and states. The most comfortable negotiating position is our future in spite of the fact that the financial and cultur- having something the other party wants badly enough to make al gaps between us are enormous. Traditionally, we are concessions to get it. cultural leaders in the Arab world; Egyptian educators, As a patriot, I am tired of being needy; I am sorry to be movie producers and jurists have laid the foundation for mostly on the receiving end. I dream of living to see Egypt many of our neighbors’ systems. Although it has been maximize its potential and switch to a different mode. Is it challenged at times, this deeply entrenched legacy is still doable? Certainly, it has many of the attributes needed for very much alive. success. The logical question is what is missing? Why are Having confirmed that we have the irrefutable elements we here? What needs fixing? of success, we have to admit that we are missing disci- We need first to trust ourselves, because if we do not, pline, productivity and organizations that are results-ori- nobody will. Then we must ask questions in the proper ented. Previously in this space, I have discussed training, sequence. Are we qualified? Are we in the right place? Is productivity and work culture, which are imperative if we it the right time? Qualifications have to be demand-driven want to regain international recognition of the fact that we and adequately calibrated, and the weighted conclusion is are needed and proud to be so. No pessimist has ever built unequivocally yes. Egypt has an ample supply of qualified anything; only pragmatic optimists can move ahead and potential leaders who are capable of steering the country in lead. Anyone who sees Egypt as a hopeless case is looking the right direction. We are also in the right place, and the in the wrong direction. ANIS A. ACLIMANDOS President, AmCham Egypt 14 I Business Monthly – April 2014 InBrief_InBrief.qxd 4/2/14 5:05 PM Page 1 In Brief Sisi announces presidential run Following months of anticipation, Defense Minister Abdul-Fattah el-Sisi announced March 26 that he was quitting the Army to run for president.