EGYPT WEEKLY NEWSLETTER

SEPTEMBER, 2013 (1ST QUARTER)

CONTENT

1. Political Overview…….....…01 2. Economic Overview………..03 3. Construction..………………...05 4. Automotive……………….…...05 5. Banking……………………..…...06 6. Projects…………………………..06 7. Energy..……..………..…..….…06 8. IT & Telecommunication…08 9. International Relations..….08 10. Industry………………………..09 11. Transportation……………..10 12. Mining……………………….…10 13. Laws & Regulations…..….11

Compiled by Thai Trade Center, Cairo

POLITICAL OVERVIEW

TWO MONTHS AFTER MORSI'S OUSTER, THOUSANDS PROTEST ACROSS Sources: Egypt Independent, 4 September, 2013

Marches by supporters of took place in the capital as well as in Sharqiya in the Nile Delta and Qena in Upper Egypt. Thousands of supporters of deposed president Mohamed Morsi staged protests across Egypt on Tuesday against what they describe as the "military coup" that ousted him two months previously. The 's Morsi was ousted by Egypt's military on 3 July amid mass nationwide protests against his rule. Several thousand people marched in Cairo and Giza, Suez, the Nile Delta governorate of Sharqiya and Upper Egypt's Qena, but the mobilisation seems to have lost much of its strength. The interim authorities violently cleared two large pro-Morsi protest camps in Cairo on 14 August, leaving hundreds dead, mostly protesters. There have also been many arrests, both before and after 14 August, of Brotherhood and Islamist leaders who have been slapped with various charges. Friday 16 August saw huge, heated rallies in support of Morsi, who hails from the Muslim Brotherhood, with exchanges of fire between protesters and security forces leaving dozens dead. However, the following two Fridays saw lowered turnout in the two planned pro-Morsi protests, fuelling speculation that the security clampdown on the Muslim Brotherhood and its allies has left the group crippled.

Egypt Weekly Newsletter 1 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya

Egypt shuts down four TV stations Source: BBC NEWS, 4 September, 2013

An Egyptian court has ordered the closure of four television channels that have been accused of sympathising with the Muslim Brotherhood. They include the Brotherhood's own station, Ahrar 25, and the Egyptian arm of Al-Jazeera. Meanwhile, the Egyptian army has launched helicopter strikes against suspected militant targets in the Sinai peninsula, killing a number of people. The army is trying to assert control over the area bordering Gaza. The closure of the television stations follows a crackdown on media seen as sympathetic to the deposed President Mohammed Morsi, who was overthrown by the army on 3 July, and the Muslim Brotherhood he comes from. Several channels were forced off the air following the military intervention. Now, an administrative court in Cairo has ordered Al-Jazeera's Mubashir Misr outlet to be shut down, along with Ahrar 25 and two other Islamist channels, Al-Quds and Al-Yarmuk. On Monday, Egypt expelled three foreign journalists working for Al-Jazeera's English language channel, saying they did not have correct press accreditation. Mr Morsi is in custody awaiting trial. Prosecutors announced this week that he will be tried on charges of inciting the murder of protesters last year.

Sinai strikes Source: Ahramonline, 3 September, 2013

Separately, Egypt's government continued its battle against Islamist militants in the Sinai peninsula on Tuesday, with helicopters launching a series of strikes. At least eight people - said by security sources to be militants - were reported to have been killed, and others injured. Three houses were destroyed and part of a nearby mosque was damaged, a witness told the Associated Press. The military said weapons caches were destroyed. Islamist attacks in the Sinai surged following the overthrow of Mr Morsi, and the army has been trying to re-assert control. It has been targeting tunnels used by militants and smugglers under the border with Gaza. Thirteen homes in the Rafah border town were bulldozed in the past two weeks and tunnels caved in to prepare for a possible buffer zone, according to officials.

Mubarak's Lawyer: 'He Will Be a Free Man' Source: Spiegel Online International, 4 September, 2013

Farid al-Deeb, the lawyer of ousted Egyptian President , talks to SPIEGEL about his client's health and ties to the current transitional government -- and why he believes the ex-president will soon be acquitted.

Judicial advisory body recommends dissolution of Egypt's Brotherhood Source: Akhbar El Youm, 2 September, 2013

Egypt's State Commissioners Authority, a body that advises the government on legal issues, has recommended the dissolution of the Muslim Brotherhood. In an announcement on Monday, the Authority also called for the group’s national

Egypt Weekly Newsletter 2 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya headquarters in Cairo’s Moqattam to be closed. The recommendations were made in accordance with Law 84 of 2002, which prohibits non-government organisations and institutions from forming paramilitary groups. The Authority's recommendations to the government are non-binding. In March 2013, the Muslim Brotherhood, outlawed since the 1950s, was officially registered as a non-governmental organisation by the Ministry of Social Security. After the removal of Islamist president Mohamed Morsi on 3 July, then minister of social affairs Nagwa Khalil asked whether the Brotherhood’s headquarters had contained weapons and whether there were militias or militant groups linked to the group. The questions were asked after eight people died on 1 July in clashes at the Brotherhood HQ in Moqattam after dozens of protesters stormed the building. Several Muslim Brotherhood leaders, including Supreme Guide Mohamed Badie and his deputies Khairat El-Shater and Rashad Bayoumi, appeared at a criminal court on 31 July for allegedly inciting the killing of protesters at the group’s HQ.

ECONOMIC OVERVIEW

613 Egyptian factories closed in recent months: Trade minister Source: Ahramonline, 3 September, 2013

The minister for industry and foreign trade, Mounir Fakhry Abdel-Nour, has stressed that the number of Egyptian factories that have closed in recent months is not in the thousands as some reports – and government officials – have suggested. The total number of factories closed in Egypt because of financial, technical or security issues is 613, according to the ministry. "That is the only accurate and sure figure. Talking about thousands of factories closed as some do is an exaggeration," Abdel- Nour said during a press conference on Tuesday. Kamal Abu-Eita, minister of manpower, announced a few weeks ago that more than 4,500 factories had closed in Egypt. After the announcement, the state-run Industrial Modernisation Centre (IMC) and the ministry invited those investors in difficulties to contact them. "It is very possible that more factories are facing difficulties but they did not announce themselves," added Abdel-Nour. The figures declared by Abu-Eita were based on a survey conducted by independent NGO the Centre for Trade Union and Workers Services (CTUWS) published a few months ago. According to Kamal Abbas, the general coordinator of CTUWS, the figures were obtained through a survey by centre employees with the collaboration of the Egyptian Democratic Labour Congress, an independent labour federation, in different industrial cities. "It is possible that some of these factories have reopened since that time.

Egypt to inject an additional Egp22.3 billion in public investments Source: Bloomberg, Reuters, 31 August, 2013

The EGP22.3 billion package is the first stage of a government plan to boost the economy over the next ten months, Deputy Premier Ziad Bahaa El-Din said at a press conference in Cairo. Despite the new spending, the government aims to reduce the budget deficit to 9% of GDP in the fiscal year to end June 2014 from 14% last year, through streamlining spending, especially on energy subsidies, Finance Minister Ahmed Galal said.

Egypt Weekly Newsletter 3 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya

Egypt to revive cash transfer programme to help poor families Source: Ministry of Finance, 2 September, 2013

Egypt’s finance ministry has reconsidered starting a conditional cash transfer programme to help impoverished families as a part of the government’s plan to optimise social justice, an official told Ahram Online on Tuesday. Conditional cash transfer programmes (CCTs) work by making the receipt of government welfare funds conditional on recipients carrying out certain actions. “CCT programmes have been fruitful in Brazil, Chile and Mexico, and we plan to achieve the same result and reduce the poverty rate in Egypt,” Mesbah Qotb, the advisor to the Egyptian finance minister told Ahram Online. Qotb said that the Egyptian initiative is similar to a Mexican initiative to combat poverty, the "Oportunidades" programme. In the early 2000s, the Mexican government launched a programme helping poor families in rural and urban communities invest in human capital by improving the education, health, and nutrition of their children. “The conditions are quite simple; for families that want to get cash, they have mainly to take care of their children’s health and education,” Qotb said. The ministry of finance has not released any details about the programme, including the amount of money that will be allocated, the beneficiaries or the regions targeted. "The bodies and authorities that are tasked with the matter will schedule several meetings to agree on the mechanism of implementing the initiative," Qotb told Ahram Online. Qotb said that the ministry is currently restructuring the social protection system to better aid poor families, and added that the new scheme will contribute to subsidy reform. According to official data, Egypt’s poverty rate has increased in recent years, reaching an average of 25.5 percent for the year 2010/2011, compared with 21.6 percent in 2008/2009. Poverty is particularly prevalent in rural areas, where 69 percent of the population is below the poverty line. Egypt’s subsidy bill was planned to reach around LE146 billion in the 2012/13 fiscal year; however the government expects to spend around LE205 billion on subsidies in the current fiscal year 2013/14.

Egypt says prepared to repay Qatari loan in days if necessary Source: Egypt Daily News, 3 September, 2013

Egypt is prepared to repay within days $2 billion (LE1.28 billion ) that Qatar deposited with Egypt's central bank in May if talks to convert the funds into bonds do not succeed, a central bank official said on Wednesday. "This supposedly should be moved to a three year bond, and still they have not finished it," said the official, who asked not to be named. "If it's not done we will repay it. We are ready for this." He said the talks will continue for another week.

Egypt says preparing timetable for energy debts Source: Reuters, 4 September, 2013

Egypt is preparing a timetable for repaying arrears on debts it owes to foreign oil companies to encourage them to continue investing in the country, the Petroleum Ministry said on Sunday. Egypt owes at least $5 billion to oil companies producing oil

Egypt Weekly Newsletter 4 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya and gas on its territory, with half of it overdue, according to corporate reports issued earlier this year. The government, seeking to avoid public unrest, has delayed oil payments as it struggles to meet soaring energy bills caused by high subsidies on fuel products. Some of the debts were accumulated even before Mubarak was ousted. Currency reserves have dwindled, food bills risen and tourism and foreign investment collapsed since the 2011 uprising that toppled Hosni Mubarak. Foreign companies will be asked to agree to the proposed timetable, which is being drawn up in coordination with various government entities, Oil Minister Sharif Ismail said in an emailed statement. He hoped that a schedule to pay the arrears would encourage companies to continue investing in exploration and development. The government also wanted to encourage foreign companies to speed up their development of recently discovered wells. Financial disclosures by firms such as BP, BG, Apache, Edison and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012. Dana is owed $230 million by Egypt in overdue payments for gas supplies and says it is in active dialogue with the government over the debts. BP was owed $3 billion as of the end of 2012, of which around $1 billion was overdue. BG was owed $1.3 billion, of which $600 million was overdue. Edison has $400 million overdue, followed by TransGlobe and Dana with over $200 million each.

CONSTRUCTION

OCI construction group awarded oil & gas contract in Algeria Source: Company Disclosure, 4 September, 2013

Orascom Construction Industries has announced that OCI Construction Group has been awarded a contract by Technip France (Technip) to execute greenfield and brownfield work at Sonatrach’s Algiers Refinery in Sidi Arcine, located approximately 15 kilometres from the Port of Algiers, according to the company’s disclosure. OCI Algeria, a wholly-owned subsidiary of the OCI Construction Group, will execute some of the civil works, paving works, underground piping and related brownfield construction work as part of the rehabilitation and adaptation of the refinery.

Egyptian cabinet increases budget for social housing Source: Al-Borsa, 1 September, 2013

The Egyptian Cabinet has approved increasing the budget for the social housing program during FY2013/14 from EGP2.4 billion to EGP5 billion. The next period will witness a number of tenders related to the program in several governorates.

AUTOMOTIVE

GB Auto commences its commercial activities in Libya and Algeria Source: Mubasher, 1 September, 2013

GB Auto’s management has indicated that it has commenced activities in Libya and Algeria as part of the company’s expansion strategy in the region. The company

Egypt Weekly Newsletter 5 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya confirmed that commercial activity is progressing normally and that no damage has been done to the company’s assets. Additionally, management has indicated that the group’s Iraqi activities have contributed 32% to the group’s revenues in 1H13.

BANKING

Egypt central bank to hold largest currency auction yet, $1.3 billion, for vital food imports Source: Central Bank of Egypt, 4 September, 2013 the Central Bank of Egypt will conduct its largest foreign exchange auction yet, selling $1.3 billion to banks with clients who need U.S. dollars to pay for basic imports like wheat, oil, meat and beans. It is the third auction of its kind, which is also directed at banks whose clients need dollars to import raw industrial materials and pharmaceuticals. The first auction in April released $600 million and a second in May released $800 million. The central bank said in a statement Tuesday that it would sell the $1.3 billion on Wednesday. That is around 12 times more than the bank's usual weekly sale of dollars. The bank's auction system has helped regulate devaluation of the Egyptian pound, down more than 10 percent this year.

PROJECTS

Ministry of Electricity extends offers for wind station establishment to November 3 Source: Al-Masry Al-Youm, 1 September, 2013

The Ministry of Electricity has extended the receipt of offers to establish a wind power station to November 3 instead of its initial schedule of September 2 upon the request of participating companies.

ENERGY

FRENCH OIL COMPANY TOTAL TO BUY CHEVRON EGYPT Source: Total Press Release, 2 September, 2013

Total concluded an agreement to acquire Chevron’s (owner of the brand Caltex in Egypt) retail network, general retail and aviation businesses in Egypt. The businesses include 66 service stations, two oil depots and aviation fuel operations at Cairo and Marsa Alam airports, for an annual sales volume in excess of 1.4 million tons. This comes soon after the acquisition of Shell’s retail and commercial fuels businesses, announced on May 15. Once the two transactions close, Total Egypt will be Total’s biggest marketing and services subsidiary outside Europe, with annual sales exceeding 3 million tons and its network will reach 218 service stations up from 75.

Egypt Weekly Newsletter 6 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya APACHE SELLS EGYPTIAN OIL STAKE TO SINOPEC FOR USD3.1 BILLION, FORMS GLOBAL JV Source: Ahram Online, 31 August, 2013

U.S. oil and gas producer Apache Corp is selling a 33% stake in its Egypt oil and gas business for USD3.1 billion to state-owned Chinese oil giant Sinopec Group, reducing its exposure in Egypt amid the recent political unrest. The sale of the Egyptian assets to Sinopec International Petroleum Exploration and Production Corp - a wholly-owned unit of Sinopec Group – is subject to regulatory approvals and is expected to close during the fourth quarter, said Apache.

QATAR SHIPS THIRD AND FOURTH EGYPT LNG CARGOES TODAY; CEPSA DELIVERS GASOLINE SHIPMENTS UNDER UAE AID PROGRAM Source: Ahram Online, Bloombers, 1 September, 2013

Qatar has sent its third shipment of liquefied natural gas (LNG) to Egypt on August 22. The fourth shipment is scheduled to be shipped later in the day. Fifth and final LNG cargoes will be sent in September. Meanwhile, Cepsa will deliver 3 shipments of gasoline totaling 100k metric tonnes to Egypt. The first gasoline cargo has already been delivered to Alexandria oil terminal and the rest due before end of this month.

MOP RAISES ENERGY SUBSIDY Source: Al-Watan, 31 August, 2013

The Ministry of Petroleum raised energy subsidy from EGP100 billion to EGP120bn in FY13/14. The ministry has allocated EGP50 billion for diesel imports.

KUWAIT ENERGY FINDS MORE EGYPTIAN OIL Source: Upstream Online, 2 September, 2013

Kuwait Energy has found more oil and gas in a new zone at its El Salmiya-2 well on the Abu Sennan concession in Egypt’s Western Desert. Australia-based well partner Beach Energy said that a drill stem test of the Kharita formation initially flowed at a rate of 3,530 barrels of oil per day and 4.7 million cubic feet of gas per day. The 42-degree API light crude yielded from the test is the first time oil has been encountered in the Kharita formation within the concession, Beach said, with previous production having been obtained from the shallower Bahariya and Abu Roash plays. The Kharita oil column has been measured to a depth of 68 meters, equating to 49 meters true vertical depth. According to the joint venture, the sandstone is of excellent quality with 56 meters of net pay. Kuwait has estimated gross proven and probable reserves of 18.5 million barrels of oil and 142 billion cubic feet of gas in the Kharita play alone. However, Beach believes there is potential for further upside within both Kharita and the additional identified pay zones Abu Roash C, Abu Roash E and the Bahariya formation. Kuwait operates the

Egypt Weekly Newsletter 7 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya Abu Sennan concession with a 50% interest while Beach holds a 22% stake. Dover Investments holds the remaining 28% equity.

EGYPT NAMES NEW CHAIRMAN OF STATE OIL COMPANY Source: Reuters, 31 August, 2013

Egypt has appointed Tarek El Molla as chairman of state-run Egyptian General Petroleum Corp (EGPC), the Ministry of Petroleum said, a move that is likely to encourage foreign oil companies operating there. "Tarek El Molla, who is vice chairman for foreign trade, will carry out the duties of chairman of EGPC," a ministry statement said. Molla, a veteran at EGPC, replaces incumbent Tarek El Barkatawy. Top oil officials have been changed a number of times since Egypt's revolution, and this is the third switch at EGPC since the start of the year. Tarek El Barkatawy was appointed around mid-May. "It's good because before he was head of foreign trade and operations. He is active and I hope that things improve," an Egyptian industry source said.

DISTRIBUTION OF PETROLEUM PRODUCTS USING SMART CARDS SAVES EGP30 BILLION Source: Al-Masry Al-Youm, 2 September, 2013

The Minister of Finance stated that EGP30-35 billion in savings would come about through the reduction of the leaking and smuggling of subsidized oil. He further stated that the program at present does not include the imposition of quotas, limits or price hikes. Furthermore, the government intends to reduce the gap between the international prices of energy to the manufacturing segment and their local prices, going forward.

IT & TELECOMMUNICATION

MOBINIL SEEKS EGP2.5 BILLION FROM FOUR BANKS Source: Al-Mal, 1 September, 2013

Mobinil has approached National Bank of Egypt (NBE), Commercial International Bank (CIB), Banque Misr (BM) and Qatar National Bank Egypt, seeking EGP2.5 billion in loans mostly for capex plans and partially for the repayment of loans due in 2014 and 2015. The banks should submit their offers to Mobinil by early September 2013.

INTERNATIONAL RELATIONS

EU HALTS SOME ARMS EXPORTS TO EGYPT; AID UNTOUCHED Source: EFG Hermes, 4 August, 2013

The European Union (EU) on August 21 decided to suspend exports of weapons and goods that could be used for internal repression, but did not halt aid programs for fear of hurting ordinary Egyptians already hit hard. Instead, the 28 EU foreign

Egypt Weekly Newsletter 8 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya ministers called on the military authorities and the supporters of deposed President Mohammed Morsi's Muslim Brotherhood movement to resume negotiations to avoid further bloodshed. "It was decided ... to suspend all arms deliveries that can be used internally," said French Foreign Minister Laurent Fabius following the emergency meeting in Brussels. "We have decided to maintain our aid for the Egyptian population because it already suffers enormously," he added. "We do believe that the recent operations of the security forces have been disproportionate and we're worried about the resulting alarming number of people that have been killed," said the EU's foreign policy chief Catherine Ashton. "We call on all sides to stop the cycle of violence, to stop the provocations, to stop the hate speech," she said, adding that the EU "strongly condemns" the recent violence.

TURKEY SUSPENDS USD1 BILLION AID PLEDGED TO EGYPT Source: Al-Masry Al-Youm, 2 August, 2013

Turkey has suspended USD1 billion aid representing the remaining portion of its USD2 billion pledged aid to Egypt. On a different note, Kuwait has not yet transferred its pledged aid to Egypt.

INDUSTRY

CEMENT COMPANIES REJECT USING WASTE AS A SOURCE FUEL Source: Daily News Egypt, 31 August, 2013

Cement companies rejected proposals from government bodies to use waste as a resource fuel and denied claims that they were postponing the use of coal as an alternative to natural gas and mazut, stating that they are awaiting the Ministry of State for Environmental Affairs’ permission to start using coal. They added that using waste would be costly to set up and would only supply 15% of their energy needs. Many factories have experienced increased production costs totaling upwards of 20%, as a result of fuel shortages, which has also lead to partial shutdowns of many plants.

Egypt allocates LE3 billion for industrial infrastructure Source: Al Mal, 3 September, 2013

The LE400 million allocated for 2013-14 to develop infrastructure in industrial zones in Egypt is to be raised to LE3 billion ($ 428 million). The additional LE2.6 billion is part of a LE22.3 billion ($3.2bn) economic stimulus, which aims to boost the economy, Minister of Foreign Trade and Industry - Mounir Fakhry Abdel-Nour - said on Tuesday. Thirty-six under-developed industrial zones, scattered across Egypt's 27 governorates, stand to benefit from these funds. Abdel-Nour estimates that 3000 new factories will be built in these industrial cities. The government's optimistic plan includes the construction of 22 industrial clusters across a variety of industries, including food, construction, textiles, electronics and chemical sectors. In the first press conference following his appointment, Abdel-Nour, originally a businessman, revealled his strategy to develop Egyptian industry. The minister launched a so called

Egypt Weekly Newsletter 9 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya "industrial map" for Egypt, which is to supply investors with full data about lands allocated for industry, mining areas, suggested industrial zones and Egypt's natural resources. "The aim of the map is to present to investors the data needed to make important decisions", says Abdel-Nour. The new Minister of Industry added that it’s the role of the state to supply industrialists with needed infrastructure.

TRANSPORTATION

Railway standstill Source: Egypt Independent, 2 September, 2013

The Muslim Brotherhood has called for protests in Cairo on Tuesday, under the slogan: "The coup is terrorism." The state news agency, Mena, says security forces have sealed off some roads in the capital, and military vehicles are blocking the entrances to Rabaa al-Adawiya Square and . A resumption in national rail services has also been postponed. No trains have run for 17 days, but they were due to start again on Tuesday. However, a source at Egypt's railway operator told the al-Masry al-Youm news website that had been delayed until Wednesday "for security reasons".

MINING

EMRA TO HOLD AN INTERNATIONAL AUCTION FOR THREE GOLD EXPLORATION LICENSES IN EASTERN DESERT Source: Al-Borsa, 2 August, 2013

Egyptian Mineral Resources Authority will hold an international auction for three gold exploration licenses in the Eastern Desert; government’s profit share to be 50% for production of up to 250,000 ounces per annum, 60% up to 500,000 ounces per annum, and 65% for production exceeding 500,000 ounces per annum; tin and manganese exploration licenses also to be offered

LAWS & REGULATIONS

EGYPT CONSIDERING PLANS TO IMPLEMENT VAT Source: Ahram Online, 1 September, 2013

Egypt’s government mulls over switching to Value Added Tax (VAT) as a backbone for financial discipline and social justice. The Minister of Finance considers the VAT more efficient than the current sales taxes and finds it as one of the best indirect taxing systems on consumption. The minister has approved getting assistance from the IMF’s experts to help the government through the transformation process.

Egypt Weekly Newsletter 10 Thai Trade Center, Cairo September, 2013 (1st quarter) Sherif Yehya