Egypt Business Digest

EGYPT BUSINESS DIGEST

January 2020

Updates on the economy, key legislation and major investment projects

Macro Round-up

Throughout FY 2018/19, Egypt has maintained its pace of social and economic reforms, pushing its growth well above the regional average. The country’s progress in GDP growth, foreign exchange revenues, fiscal consolidation, inflation management and other macroeconomic indicators verify the success of these reforms and justify the move onto making more structural changes to the economy.

Real Economy Indicator FY 2017/18 FY 2018/19 FY 2019/20 (IMF Forecast) Real GDP growth 5.3% 5.6% 5.9% Unemployment rate 9.9% 7.5% 8.0% Period average inflation 22.0% 13.4% 11.4% Government debt (share of GDP) 97.3% 85.2% 81.9%

• Real GDP growth hit an 11-year high in FY 2018/19, with the International Monetary Fund (IMF) forecasting it will hit 5.9% in FY 2019/20 and 6% in FY 2021/22. • The unemployment rate continued to decline to an estimated 7.5% in FY 2018/19, compared to 11.1% in FY 2017/18. • The Central Bank of Egypt (CBE)’s annual headline inflation rate fell to 7.2% in January 2020, compared to 12.7% in January 2019. • Following consistent drops in price pressures, the CBE’s Monetary Policy Committee cut key interest rates by a cumulative 650 basis points (bps) in 2018 and 2019. As of January 2020, the overnight deposit, overnight lending and main operation rates stood at 12.25%, 13.25% and 12.75%, respectively. Analysts are forecasting interest rates will continue declining by 300 bps throughout 2020. • The government aims to reduce government debt to 80% of GDP by 2022 by extending maturities on government debt and speeding up the inclusion of informal businesses into the formal economy.  Repayment of the USD 12 billion IMF Extended Fund Facility (EFF) is scheduled to begin in May 2021 with a tranche of USD 2.75 billion, followed by equal installments through 2026. Egypt’s government is discussing possible further non-financial assistance from the IMF in support of its continuing reforms.

Monetary Aggregates • The Egyptian pound (EGP) dipped below EGP 16 per USD in December 2019 for the first time in three years. The EGP has appreciated about 10% since December 2018 and is considerably stronger than its December 2016 rate of EGP 18.96 posted after the free-float of the currency in November 2016. At the end of January 2020, the USD was valued at EGP 15.79. • In June 2019, Bloomberg named the Egyptian pound as the second-best currency of 2019 for its performance against the U.S. dollar. • Foreign currency deposits stood at EGP 669.1 billion (USD 41.8 billion) as of October 2019, dropping by 2.5% month- on-month and 8.9% y-o-y in local currency terms. • Foreign holdings of Treasury bills and bonds continued rising during 2019 on the back of higher investor confidence. As of September 2019, total foreign holdings of Egyptian debt instruments recorded USD 15.3 billion, up 7% y-o-y. The Ministry of Finance issued USD 6 billion and EUR 2 billion in international bonds during 2019 and plans to issue USD 3-7 billion during FY 2019/20, with 70% earmarked for USD-denominated eurobonds. • Egypt’s total foreign debt reached USD 107.8 billion in FY 2018/19 (36% of GDP).

Fiscal Aggregates FY 2019/20 FY 2020/21 FY 2017/18 FY 2018/19 (IMF forecast) (IMF forecast) EGP 432.6 billion EGP 439.2 billion EGP 442.4 billion EGP 398 billion Government budget deficit (USD 24.4 billion) (USD 25 billion) (USD 26 billion) (USD 24.8 billion) Total deficit (% of GDP) 9.7 8.2 7.0 5.6

• Egypt achieved a primary budget surplus of 2% during FY 2018/19 and came in below its 8.4% budget deficit target.

• The FY 2019/20 budget includes a 10% increase in expenditures to EGP 1.6 trillion (USD 100 billion). Government investments financed from the General Treasury total EGP 140 billion (USD 8.8 billion), up 40% from the FY 2018/19 budget and marking the highest increase in investments over the last 10 years. • Tax revenues rose 22.4% to EGP 770.3 billion (USD 43.9 billion) during FY 2018/19 and accounted for 77.8% of total revenues, compared to EGP 629.4 billion (USD 35.4 billion) during FY 2017/18.

Investment (USD billion) FY 2017/18 FY 2018/19 Q1 2018/19 Q1 2019/20Q1 Private sector investments 17.8 28.5 6.7 Net FDI to Egypt 7.7 8.2 1.4 2.4 Portfolio investments inflow (outflow) 12.1 4.2 (3.24) (1.98) Source: CBE • Egypt was the top recipient of Foreign Direct Investment (FDI) in Africa in 2019 for the fourth consecutive year and second largest among Arab countries. Its net FDI inflows during FY 2018/19 posted a y-o-y increase of 6.5% to USD 8.2 billion.  The FDI growth was driven by a USD 837.9 million increase in net inflows for greenfield investments to USD 1.5 billion, along with a USD 256.4 million increase in net inflows for oil sector investments to USD 744.2 million.

Top FDI Inflows by Country (USD million) Rank Source FY 2017/18 FY 2018/19 Q1 2019/20 1 United Kingdom 4,552.8 6,254.6 1,264.2 2 Belgium 2,288.6 2,264.9 683.4 3 United States 2,244.4 1,631.3 583.5 4 United Arab Emirates 1,075.4 675.5 314.7 5 The Netherlands 349.1 241.0 216.6

• In July 2019, construction began for five public free zones in Tenth of Ramadan, Minya, Giza, Nuweiba and Aswan. The zones will support different industries and promote exports, and are set to be complete during H2 2019/20. • The IHS Markit Purchasing Managers’ Index (PMI) for Egypt improved in December 2019 to 48.2 from 47.9 in November, which saw the lowest level of private sector business activity in two years. The PMI measures the health of the overall operating conditions in the non-oil private sector economy, with scores above 50 indicating expanding business activity. Egypt’s manufacturing PMI averaged 48.18 from 2012 to 2019, reaching an all-time high of 52.5 in November 2013 and a record low of 37.10 in December 2012.

Egypt Long-term Sovereign Credit Ratings Pre-2016 Post-2016 Rating (outlook) Date Rating (outlook) Date Moody’s B3 (stable) Apr 07 2015 B2 (stable) Sept 1 2019 S&P B- (stable) Nov 13 2015 B (stable) May 11 2018 Fitch B (stable) Dec 19 2014 B+ (stable) Nov 25 2019

• On February 1, 2019, the Organization for Economic Co-operation and Development (OECD) upgraded Egypt’s rating on its Country Risk Classification Index to five from six, marking it as an investment-friendly destination.

The Egyptian Stock Exchange (EGX) 2017 2018 2019 EGX 30 market returns (EGP terms) 22.0% -13.2% 7.1% Volume traded (billion securities) 77.9 60.8 49.8 Value traded (USD billion) 18.7 20.0 25.5 Market capitalization (USD billion) 46.5 41.8 44.2 Net foreign equity (USD million) 487.3 403.0 -105.0 Foreign participation (share of value traded) 17.7% 23.2% 26.1% Exchange rate EGP/USD (end of period) 17.728 17.914 16.042

• Despite global economic headwinds affecting most capital markets, Egypt’s benchmark EGX30 index gained 7% in EGP terms in 2019, closing at 13,961.56 points. • In February 2019, the Financial Regulatory Authority (FRA) issued Decision 268 of 2019 on short-selling rules to activate the mechanism and began granting licenses to brokerages in June 2019.On December 1, 2019, short-selling officially launched on the local bourse with 51 licenses granted. • In March 2019, the government launched a secondary offering of 4.5% of Eastern Company SAE, one of the state- owned companies slated for partial privatization through the bourse. • In February 2020, state-owned Banque Misr announced an initial public offering (IPO) of up to 45% of its Banque du Caire (BdC) unit on the EGX in H1 2020. The bank is open to foreign investor participation in the stake sale and has begun its roadshow for the BdC IPO in the United States. • Additional stake sales in already listed state companies Alexandria Containers and Cargo Handling Company (ACCH), Abu Qir Fertilizers, and Sidi Kerir Petrochemicals (Sidpec) are expected to take place in 2020. Other companies on the government’s agenda for IPOs include Enppi, Heliopolis for Housing and Development (HHD) and e-Finance.

External Sector (USD billion) FY 2017/18 FY 2018/19 Change (%) Balance of Payments (BOP) 12.8 -0.1 -100 Current account deficit 6.0 8.2 36.7 Financial account balance 22.1 8.7 -60.6 Trade deficit 37.3 38.0 1.9 Non-oil merchandise exports 17.1 16.9 -1.2 Oil merchandise exports 25.8 28.5 31.8 Merchandise imports 63.1 66.5 5.4 Tourism revenues 9.8 12.6 28.5 Workers’ remittances 26.4 25.2 -4.5 Suez Canal Revenues 5.7 5.7 - Net international reserves 44.26 44.35 0.2 Source: CBE

• In FY 2018/19, Egypt recorded an overall BOP deficit of only USD 102.5 million, largely due to an overall surplus of USD 1.4 billion in Q3 of the fiscal year. The financial account recorded a net inflow of USD 8.7 billion over the same period, down from USD 22.1 billion, mainly due to a sharp fall in net portfolio investments. • The petroleum trade balance recorded a net surplus for the first time since FY 2012/13, registering USD 8.1 million compared to a deficit of USD 3.7 billion the previous fiscal year, due to the rise in quantities sold as well as international oil prices. • In September 2019, the government announced an EGP 6 billion (USD 355 million) export subsidy program to encourage future export growth. •Net International Reserves have grown by over USD 21 billion since October 2016, just prior to the EGP’s float, standing at USD 45.4 billion as of December 2019.

Legislative Reforms

Egypt climbed up the World Bank’s Doing Business 2020 index by six places due in part to the improvement in legislative environment. During the index ranking period, Egypt implemented four business reforms—the second largest number of reforms undertaken among MENA countries. In 2019, Parliament approved 172 laws related to the economy, social protection, advancing youth, and maintaining state security and wealth. Below are the major laws and government actions geared towards reforming the business environment.

Administrative Ministerial Investment Committee (Decree 38 of 2020)  Establishes a ministerial investment committee, chaired by the Prime Minister, to replace the Ministry of Investment. (ISSUED January 6, 2020)  Responsible for encouraging investment promotion, setting venture policies, and setting foreign direct investment (FDI) policy in Egypt; will also oversee investment dispute resolution.  Members include the ministers of tourism and antiquities, planning and economic development, international cooperation, finance, local development, housing and urban development, agriculture, and trade and industry, as well as the CBE governor, chairman of General Authority for the Suez Canal Economic Zone, executive director of Egypt’s Sovereign Wealth Fund, and the executive head of General Authority for Free Zones and Investment (GAFI).

Federation of Egyptian Industries and Chambers of Industry (FEI) Law 70 of 2019  Establishes the FEI as an independent agency and allows more self-governance; encourages private sector companies to join the federation. (RATIFIED June 1, 2019)

NGO Law 149 of 2019  Removes restrictions in the existing law, including on membership, financing and activities. (EFFECTIVE August 22, 2019)

Amendments to Economic Courts Act (Law 120 of 2004)  Expands the courts’ jurisdiction to cover non-banking financial services, money laundering, and bankruptcy cases; allows for cases to be filed electronically. (PASSED August 13, 2019)

Business Practices Amendments to the Companies Law (Law 4 of 2018)  Works in tandem with the Investment Law to reduce bureaucracy; simplifies the processes for taking a limited liability company public and applying for capital increases; allows investors to register a company and access services online.  Also known as the Corporation law, it includes single shareholder limited liability companies. (EFFECTIVE January 2018)  Reassigns the roles of the investment minister under the Companies Law to the chairman of GAFI, with a few exceptions. (Prime Minister Decree 3152 of 2019 ISSUED December 25, 2019)

Bankruptcy Law  Decriminalizes bankruptcy.  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. (EFFECTIVE March 22, 2018)

Customs and Taxation Unified Tax Procedures for Filing Income Taxes and VAT  Creates a digitized system to streamline procedures and encourage informal businesses to become formal. (PASSED February 5, 2019)

New Customs Tariff and Establishment of a Supreme Council for Customs Tariffs (Presidential Decree 419 of 2018)  Added 12 amendments to Egypt’s tariff schedule including items in the food and agriculture, pharmaceutical, chemical, wood and vehicles sectors.

 Tariffs unchanged for around 60% of items, mainly raw materials, capital goods and strategic goods. (EFFECTIVE September 18, 2018)  Customs tariffs reimposed on steel rebar (25%) and iron billets (16%) for three years. (October 11, 2019)

Amendments to the Income Tax Law (Law 10 of 2019)  Changes how income from government debt is accounted for: Treasury bills and bonds are now in a separate revenue pot. Taxes will average 28.5%, compared to an average of 24.5% under the previous law. (PASSED February 20, 2019)

Amendments to Tax Dispute Resolution (Law 79 of 2016)  Original law allows tax dispute cases to be resolved by committees, removing them from the court system; accelerates previously lengthy tax dispute process and makes it more efficient.  Amends Income Tax Law article pertaining late tax payment fees. Deadline for open tax dispute extended to June 30, 2020. (PRELIMINARY APPROVAL by Parliament January 26, 2020)

Value Added Tax (VAT) (Law 67 of 2016)  Imposes 14% VAT on all local and imported goods and services except for 57 exempted items. (EFFECTIVE September 8, 2016)  Executive regulations amended to allow VAT taxpayers to apply for fast-track refunds. (November 28, 2019)

Digitization Anti-Cyber and Information Technology Crimes (Law 175 of 2018)  Criminalizes the use of the internet to defame a person or violate their privacy, improperly access data and personal information, and commit a crime; allows the state to block websites deemed harmful to national security. (RATIFIED August 18, 2018, executive regulations drafted by Ministry of Communications and Information Technology)

E-Payments (Law 18 of 2019)  Requires government and private sector entities to pay subsidiaries, suppliers and contractors electronically; requires electronic payment for taxes and customs payments, as well as subscriptions to IPOs, investment funds and share purchases; imposes financial penalties for violations. (PASSED April 19, 2019; executive regulations issued December 2019)  An electronic billing and tax payment platform was implemented in May 2019.

Data Protection  Draft law to establish rules for how businesses use personal information collected online; grant users rights to access their private data at any time and take legal action against parties responsible for data breaches and misuse of private information. Directs Information Technology Industry Development Agency to set up a unit to protect personal data. (In Parliament)

Education Establishment of Branches of Foreign Universities in Egypt (Law 162 for 2018)  Facilitates the procedures and streamlines licensing requirements for establishing a branch of a foreign university in Egypt.  Foreign universities can establish their own branches; agree with an educational institute in Egypt to host the branch, or partner with an Egyptian university to grant a joint degree. (EFFECTIVE August 2018)

Education Reform  Presidential order directs 20% of all internal and external governmental scholarships be earmarked for teacher training over the next decade. (July 2018)

Finance Regulating Financial Leasing and Factoring Activities (Law 176 of 2018)  Improves access to financing options for companies, especially MSMEs; provides legal framework for financial leasing and factoring activities, which provide tools to finance production and service projects. (PASSED August 15, 2018)

Financial Regulatory Authority (FRA) Decision 137 of 2018  Sets preliminary conditions and procedures for approving licenses for companies operating in financial leasing, factoring and/or mortgage financing. (October 2018)

Sovereign Wealth Fund (SWF) (Law 177 of 2018)  Establishes the nation’s first sovereign wealth fund, named The Sovereign Fund of Egypt (TSFE), to invest in inactive government assets. (PASSED August 18, 2018)  TSFE admitted to the International Forum of Sovereign Wealth Funds (IFSWF) as associate member, agreeing to abide by the Santiago Principles for the governance, investment and risk management of sovereign wealth funds. (June 2019)  Currently holds USD 12 billion in total assets and is ranked 42 worldwide, 11 in the Middle East and second in Africa, according to the Sovereign Wealth Fund Institute.  The EGP 200 billion (USD 11.7 billion) fund plans to grow authorized capital to EGP 1 trillion (nearly USD 60 billion).  Diversified portfolio of investments and partnerships to target agribusiness and food processing, pharmaceuticals, infrastructure and logistics, power and tourism through three sub-funds: energy, tourism and antiquities, and industrial.  Entered a USD 20 billion JV agreement with the Abu Dhabi Development Holding Company, the UAE government’s investment arm, to establish a multi-sector investment platform with a focus on key sectors such as energy, technology, real estate, tourism, healthcare, logistics, financial services, and infrastructure. (November 2019)  Signed cooperation agreements with the Ministry of Public Enterprise and the National Investment Bank (NIB) to utilize state assets and attract more investments from the private sector. (November 2019)  Amendments proposed to authorize VAT refunds to companies that are more than 50% owned by the SWF and its sub-funds. (December 2019)

Private Sector Industrial Initiative  Sets 2-10% interest rates for loans to manufacturing companies with turnover between EGP 50 million and EGP 1 billion to fund capital expenditures. (December 12, 2019)

Amendments to the Capital Market Law (Law 17 of 2018)  Expands and diversifies investment opportunities in the capital markets; enhances competitiveness and financial inclusion. (PASSED March 14, 2018; EFFECTIVE June 9, 2019)  Allows dual listing in stock exchanges after the approval of the FRA. (Executive regulations AMENDED September 2019 by Prime Minister Decree 2216 of 2019)

Government Public Procurement Law (Law 182 of 2018)  Regulates government tenders and auctions, previously regulated by Law 89 of 1998; mandates two tender phases for specifications and price, accounting for bidder’s record for quality and delivery; grants preferential treatment to locally made products in government contracts reduces insurance fees for government projects to 1.5% from 2%. (EFFECTIVE November 2018)  New export subsidy program combines cash payouts, tax breaks and marketing support for exporters. (Executive regulations ISSUED December 1, 2019; retroactively EFFECTIVE June 2019)

Healthcare Egyptian Drug Authority (Law 151 of 2019)  Establishes independent Egyptian Drug Authority (EDA) as regulator for the pharmaceutical market, supervising the Central Administration for Pharmaceutical Affairs, National Organization for Drug Control and Research and National Organization for Research and Control of Biologicals. (PASSED August 25, 2019)

Universal Healthcare (Law 2 of 2018)  Extends access to public healthcare to all Egyptians and ensures high-quality services in all public hospitals. 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. (PASSED January 15, 2018)  The Ministry of Finance is considering amendments to the law to cap the tithe paid by businesses to fund the new universal healthcare system.

Investment Incentives Investment Law 72 of 2017  Simplifies and incentivizes the process for investing in Egypt to create new jobs and decrease reliance on imports.  Incentives include 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.  Reduces bureaucracy, especially for new projects; and restores private sector free zones. (PASSED May 31, 2017)

Amendments to Investment Law 72 of 2017  Fees for increasing a company’s capital are capped at LE 10,000. (EFFECTIVE November 2018)  Ministry of Investment Decree 742 of 2018 establishes executive regulations concerning foreign representation offices.  Ministry of Investment Decree 119 of 2019 establishes executive regulations for the management of free and investment zones.  Public and private entities must submit quarterly reports on their direct and indirect foreign investment assets to the General Authority for Investment and Free Zones. (EFFECTIVE November 7, 2019)

Amendments to citizenship and residency regulations for foreigners  Establishes conditions for allowing foreigners holding Egyptian assets to acquire Egyptian citizenship; requires a cross-ministerial body to assess applications.  Options include depositing USD 250,000 (non-refundable) into a government account, USD 750,000 into a zero- interest bank account refundable after five years, or USD 1 million into a zero-interest bank account refundable after three years; spending more than USD 400,000 for a minimum 40% stake in an investment project; or spending at least USD 500,000 to buy a state-owned or private property. (Prime Minister Decree 3099 of 2019, ISSUED December 18, 2019)

Market Safety National Food Safety Authority (NFSA) (Law 1 of 2017)  Establishes the National Food Safety Authority (NFSA) as the sole agency regulating the food industry for domestic and export markets; streamlines a process that involved multiple departments in three separate ministries. (EFFECTIVE Jan 10, 2017; EFFECTIVE February 18, 2019.)

Consumer Protection (Law 181 of 2018)  Enforces the right to exchange a product within 14 days and to exchange or return a product within 30 days of purchase if the product is flawed; requires suppliers to label products and prices in Arabic. Violations may result in fines, restitution, compensation or jail time. (EFFECTIVE September 13, 2018)

Amendments to Anti-trust Law 56 of 2014  Grants the Egyptian Competition Authority jurisdiction to investigate potentially anti-competitive practices. (PASSED April 8, 2019)

Law 144 of 2019 amending IPR Law 82 of 2002  Grants the Egyptian Plant Varieties Protection Office authority to conduct inspections and research new species. (PASSED August 6, 2019)  Makes the IPR Law compatible with the 1991 International Union for the Protection of New Varieties of Plants (UPOV) Convention and qualifies Egypt to become a UPOV member.

MSMEs Central Bank of Egypt (CBE) regulations and initiatives  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. (January 2016)  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. (May 2017 )  Set relative risk of banks’ investments in these equity funds at 0%, provided the investments meet certain requirements. (May 2019)  Licensed Egypt’s first SME finance institution, which will offer USD 200 million in funding to banks. (June 2019)

 Requires banks that provide funding to microfinance companies and organizations to confirm with the Financial Regulatory Authority that the borrower is financially able to take on the loan; ensure that debtor is not borrowing from more than three different institutions at a time; and provide monthly updates on credit limits to I-Score and CBE. These loans do not qualify for the CBE’s mandated 20% quota for MSME lending. (October 2019)

Natural Resources Amendments to Mineral Resources Act (Law 198 of 2014)  Creates new authority in charge of licensing mines and quarries, replacing governorates as licensors; removes limits on concession size; requires separate contracts and agreements for exploration and extraction. Mining activities can be undertaken under the investment zones’ regime. (PASSED August 7, 2019)  Private mine and quarry operators pay royalties of 5-20% of the annual production value, depending on type of mineral; income tax of 22.5% and EGP 25,000/square km in annual concession rent. (EFFECTIVE January 15, 2020)

Natural Gas (Law 196 of 2017)  Attracts greater private sector participation and investment in the country’s gas sector.  Allows the private sector to import gas; operate pipelines; and store, distribute and ship gas (all positions previously reserved for the government).  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.  Positions Egypt as regional hub for the trade of liquefied natural gas (LNG). (PASSED August 1, 2017; executive regulations issued February 2018 and amended on March 11, 2019)

Pricing The state has been reducing subsidies on fuel and utilities in stages since 2014, resulting in incremental price hikes around the beginning of each fiscal year. Fuel  The government adopted an automated fuel price indexation on July 5, 2019. Just before indexation, prices were 75-80% of the product’s actual cost.  Under the indexation system, prices rose EGP 1.25/liter for all petrol, diesel fuel and kerosene. CNG prices rose by 9.1%, cooking gas by 25-30% and mazout by 28.6% (excluding bakeries and electricity sectors).  Ministerial Decree 2103 of 2019 revises fuel prices downwards in line with international markets (October 2019); government pricing committee leaves prices unchanged through March 2020. (January 3, 2020)

Real Estate Amendments to the Real Estate Tax Law  Extends deadline for the Real Estate Authority to complete data collection for property tax evaluation to December 2021, instead of December 2020. (December 2018)  Factories to get a partial exemption from property tax; idle land to be fully exempted. (Draft amendments approved by Cabinet January 2020)  Draft amendments to exempt idle land from tax and grant Cabinet the power to exempt land used by strategic industries and sectors. (APPROVED by Cabinet January 2020)  Real Estate Registry Act to speed up property registration process. (Draft legislation approved by Cabinet February 5, 2020)

Tourism Central Bank of Egypt (CBE) regulations and initiatives  Extending EGP 50 billion initiative to support tourism sector. (December 2019)  Supporting innovation of hotels and floating hotels. (January 8, 2020)

Transport and Logistics Ride-Hailing App Law 78 of 2018  Regulates ride-sharing apps companies such as Uber and Careem; requires ride-sharing companies to obtain five- year renewable licenses for a fee of EGP 30 million (USD 1.7 million) and drivers to obtain special licenses to work with the company. (PASSED June 11, 2018; EFFECTIVE September 18, 2019).  Egyptian Competition Authority grants conditional approval to merger between market leaders Uber and Careem. (December 30, 2019)

 Egypt is the largest market for Uber in the Middle East and the fastest growing in Africa, Europe and the Middle East. Egypt is one of the first countries in the Middle East to pass progressive regulations for this activity.

Utilities Water  In June 2018, potable water prices increased for the second time by up to 47%; sewage fees increased to 75% of the water price for residential use and 98% for businesses.  Proposed amendments to the Water Act (Law 12 of 1984) to address contemporary challenges including high pollution levels, dwindling water resources and climate change issues. (APPROVED by Parliament’s Agriculture Committee November 2019)  A USD 50 billion Ministry of Water Resources and Irrigation plan is in motion to combat water scarcity through 2037.

Electricity  Since electricity subsidy cuts started in 2015, prices have increased by a cumulative 240%.  The latest increase—10% for factories and 19% for low-voltage users—took effect July, 1, 2019.  Legislation drafted to abolish the Hydro Power Plants Executive Authority and transfer hydroelectric assets to a new Renewable Energy Development Agency run by the Ministry of Electricity and Renewable Energy. (January 8, 2020)

Welfare Social Security and Pensions Act (Law 148 of 2019)  Replaces prior insurance laws; adds 10 new beneficiary categories for temporary and seasonal workers, housekeepers, small-scale agricultural tenants and property owners, among others. (RATIFIED August 25, 2019)  Pension installments will be 21% of monthly salaries put into a newly-established pension fund, of which 9% is contributed by employees and 12% by the employer.

Takaful and Karama Program  Total number of beneficiaries for the Takaful and Karama cash subsidy programs increased to 2.4 million families. (2019)  Spending on Takaful and Karama increased to EGP 18.5 billion. Some 63.2 million citizens benefit from food subsidies via ration cards, 70.6 million from the bread subsidy system and 3.8 million families from Takaful and Karama programs. (FY 2018/19)  A USD 500 million World Bank facility will expand Takaful and Karama programs. (October 2019)

Development Projects

Since 2014, the government has launched several major investment projects designed to jumpstart the economy and lure in more private investment. Total investment grew by 28% y-o-y in 2018/19 with 52.2% sourced by the private sector. With a strengthened macroeconomic environment and increase in investment appetite, Egypt’s investment projects are gaining momentum, with reciprocal benefits for the economy.

Egypt as an Energy Hub Egypt has been developing its energy sources on multiple tracks, guided by the Egypt 2030 Sustainable Development Strategy. The country is well on its way to becoming a regional energy hub with its recent offshore Eastern Mediterranean hydrocarbon findings and alternative energy megaprojects.

Natural Gas Egypt is achieving self-sufficiency in natural gas, supported in large part by the Zohr field, discovered by Italy’s Eni in August 2015 and estimated to be the largest gas field in the Mediterranean. Eni holds a 60% stake of the project, Rosneft 30% and BP 10%. The project is executed by Petrobel, a joint venture (JV) between Eni and the state-run Egyptian General Petroleum Corporation (EGPC), on behalf of Petroshorouk, jointly held by Eni and its partners and the state-run Egyptian Natural Gas Holding Company (EGAS). The total investment is expected to reach USD 16 billion. Recent developments in the natural gas sector include: September 2019  Shell, ExxonMobil, Statoil, Dragon Oil, Rosneft and Total reportedly all bid for 10 oil and gas exploration blocks off the Red Sea coast, which were tendered in March by the Ganoub El Wadi Petroleum Holding Company (Ganope). The tender, issued under a new production sharing contract, closed on September 15, 2019.  During FY 2019/20, EGAS is expected to issue a new international bid round in the Mediterranean. October  Burullus Gas Company began production from the Swan East well, one of the three wells of West Delta Deep Marine’s Phase 9B. Swan East has an output of 100 million standard cubic feet per day (mmscf/d) of gas.  Eni finished connecting the second well at the Baltim South West field, bringing total production at the concession to around 190 mmscf/d and 1,300 b/d of condensate; drilling on the third well is ongoing. November  Eni started testing Zohr’s 14th well, which is producing 150-250 mmscf/d. December  Emirates National Oil Company (ENOC) subsidiary Dragon Oil completed its acquisition of BP’s Gulf of Suez assets for USD 500 million, according to the Ministry of Petroleum and Mineral Resources, making it the new partner contractor in the Gulf of Suez Petroleum Company (GUPCO), a JV with EGPC that conducts exploration and production operations in the area. Dragon Oil has announced plans to invest EGP 1 billion to ramp up GUPCO’s production.  Total natural gas production reached 7.2 billion cubic feet per day (bcf/d).  Zohr’s production capacity reached 3 bcf/d.  The Idku liquefied natural gas (LNG) plant reached its full export capacity of 1.1 bcf/d, for the first time since 2013, up from 300 mmscf/d in October. EGAS has increased exports as international gas prices have stabilized.  EGPC and Ganope signed four oil and gas exploration and production (E&P) agreements worth at least USD 155 million with IEOC, Merlon el Fayum, Pacific Oil and ZNP, for concessions in the Gulf of Suez, Nile Valley and the Western Desert.  The Petroleum Ministry awarded exploration concessions to Chevron, Shell and Mubadala for blocks off the Red Sea coast. The total exploration area covers 10,000 square meters and requires a minimum investment of USD 327 million. January 2020  At the third meeting of East Mediterranean Gas Forum, held January 16, delegates finalized the charter that officially establishes the organization, with Cairo as its headquarters.  Israel began shipping natural gas to Egypt, with Egypt initially importing 200 mmscf/d of gas from the Tamar and Leviathan fields in Israel.  Natural gas exports to Jordan decreased to 140 mmscf/d from 350 mmscf/d. At the end of the month, EGAS reduced gas production from Zohr by 600 mmscf/d to reach 2.4 bcf/d due to a decline in local consumption and high pipeline pressure.

 Eni connected Zohr’s final deepwater well, bringing the field’s total production capacity to 3.2 bcf/d of gas.  The EGPC signed nine oil and gas E&P agreements that will see companies invest at least USD 452 million to drill 38 wells in the Mediterranean Sea and Western Desert. Shell, Apache and Petronas will work on those concessions.  In FY 2020/21, the EGPC plans to drill 40 new exploration and development wells and bring its total production to around 106 b/d with investments of EGP 2.6 billion.  ExxonMobil signed oil and gas exploration agreements worth USD 332 million in the Mediterranean. February  The Ministry of Petroleum reduced its arrears from USD 900 million to USD 200 million.

Hamrawein ‘Clean Coal’ Power Plant  In June 2018, a consortium of Egypt’s Hassan Allam Construction and China’s Shanghai Dongwei Electric Appliance Co. won a USD 4.4 billion contract from the Egyptian Electricity Holding Company (EEHC) to build a 6 GW clean coal power plant on the Red Sea. The China Development Bank has reportedly offered USD 3.7 billion in financing to the EEHC with the remainder expected to come from local banks.  The facility would be the largest coal-fired plant in the Middle East and Africa when it comes online six years from the start of construction.  This would be Egypt’s first coal power plant and will include six generation units of 1,000 MW each. The plant would be built on an engineering, procurement, construction plus finance (EPC+F) basis.  In November 2019, the Ministry of Electricity announced intentions to either postpone or halt the implementation of coal energy projects, including the Hamrawein plant, and replace them with renewable energy projects.

Benban Solar Park The Benban Solar Park in Aswan, covering 37 square kilometers, is the largest grid-connected solar installation in the world with a total capacity of 1.8 gigawatts (GW). Companies operating in Benban include Infinity Solar (Egypt), El Sewedy Electric (Egypt), TBEA Sunoasis (China), Scatec Solar (Norway), Ib Vogt (Germany), EDF Energies Nouvelles (France) and Alcazar Energy (UAE). The European Bank for Reconstruction and Development (EBRD) provided USD 500 million in funding for 16 projects, while the International Finance Corporation (IFC) led a consortium of nine international banks to provide 13 projects with USD 653 million in funding. Recent developments include:  August 2019: The Egyptian Electricity Transmission Company (EETC) and General Electric signed a contract to build an EGP 89 million control center to monitor the performance of Benban’s solar plants and display electricity production in real time.  September: The EETC and the Benban Solar Energy Developer Association reached an agreement for developers to pay an extra EGP 1.9 billion for the park’s cost-sharing bill.  October: The Benban Solar complex was completed on October 29. The complex contains 32 solar plants developed under two rounds of planned under a first and second round of the Feed-in-Tariff schemes.  December: The Benban Solar Park was officially inaugurated on December 11, 2019.

El Dabaa Nuclear Power Plant The Dabaa Nuclear Power Plant (NPP), located on the North Coast about 170 km 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 Atomic Energy Corporation (Rosatom), with a total cost of up to USD 21 billion. Rosatom will provide fuel for the plant for 60 years. Once complete, Dabaa is expected to cover 10% of Egypt’s electricity needs. Construction on the plant is due to begin around H2 2020. The first out of the four 1.2 GW reactors is expected to come online in 2026 and the remaining three are to begin operations by FY 2028-29. Recent developments include: September 2019  President Abdel Fattah al-Sisi met with Rosatom Director General Alexey Likhachev to discuss the latest developments on the plant and other areas of cooperation. October  Rosatom and the Egyptian Nuclear Power Plants Authority (NPPA) organized a forum to introduce 600+ local suppliers and contractors to Rosatom’s procurement system and expected tenders in the Dabaa project.  On the sidelines of the Russia-Africa Summit, Russia announced that around USD 190 million has been allocated for infrastructure work at Dabaa.  Atomstroyexport, Rosatom’s engineering division, plans to issue 20 tenders for construction and management projects. Thus far, 10 tenders have been issued for civil works, supplies and site preparations. December

 Atomstroyexport launched a tender for the construction of the site, attracting bids from seven Egyptian and Russian companies including Orascom Construction, Hassan Allam, Arab Contractors, Petrojet, an unnamed Egyptian company and two Russian companies.  The NPPA contracted Australia’s Worley as a consultant for the Dabaa NPP. The contract includes the provision of technical support in engineering and design review, project management, procurement, construction management, training, procedure development, quality assurance and commissioning. January 2020  The first phase of the Egyptian Atomic Energy Authority (EAEA)’s uranium compound plant was completed. The second phase, which will set up production lines, is scheduled for completion by the end of 2020. The uranium plant will service the Dabaa NPP.

Mega Projects Egypt has embarked on a number of national mega projects to enhance the competitiveness of the economy, create employment opportunities and attract foreign and domestic private investments. With work underway by more than 1,000 companies and nearly two million Egyptian workers, these national mega projects are contributing to a new chapter in Egypt’s economic progress.

New Administrative Capital (NAC) The NAC project stretches between New Cairo and Ain Sokhna over 700 sq. km (around 170,000 feddans) with a total of 24,500 planned buildings; it is expected to absorb a population of up to 7 million people. It will include administrative and financial districts as well as a ministerial district that will house government bodies, foreign embassies and the presidential palace. Recent developments include:  June 2019: The New Administrative Capital Company for Urban Development announced that 70% of the new capital’s infrastructure was complete, with the remaining work scheduled for completion by mid-2020.  September: The government approved six contracts with local contractors to develop the NAC’s “Green River” project, a 35-km long river that runs through the city’s residential and commercial districts.  December: DP World Sokhna entered into a trilateral partnership with China State Construction Engineering Company (CSCEC) and the China Ocean Shipping Company Ltd. (COSCO) to serve as a hub for all construction material imports needed to build the NAC’s Central Business District (CBD) and financial district.  January 2020: CSCEC announced that completion of the CBD is scheduled for 2022. The CBD will house 20 skyscrapers, including the 385-meter-tall, 78-floor Iconic Tower, which will be the tallest in Africa.

Suez Canal Economic Zone (SCZone) The SCZone was established in 2015 to develop the Suez Canal area into a global hub for international trade, industrial activity, logistics, technology and tourism. It covers 460 sq. km (around 110,000 feddans) encompassing four industrial zones and six ports: Ain Sokhna with the Ain Sokhna Port, East Port Said with the East Port Said Port, West Port Said Port, Qantara West, East Ismailia, Adabiya Port, Al Tor Port and Al Arish Port. Revenues from the SCZone hit their highest levels since its inauguration at EGP 3.7 billion (USD 217.6 million) in FY 2018/19, posting 35% growth in net profits. Recent developments include:  June 2019: Mercedes-Benz signed an agreement with the Ministry of Trade and Industry to resume passenger car assembly in Egypt’s SCZone after a four-year hiatus.  September: Egypt signed a cooperation protocol with China worth EGP 110 million (USD 6.5 million) to establish a professional and technical training center for SCZone workers. Chinese investors have established 65 logistic and 33 industrial entities over 13.5 sq. km, including Jushi, the world’s largest fiberglass manufacturer.  October: USD 1.5 billion in bids were submitted to develop iron and steel industrial complexes in the zone.  November: Inauguration of the Suez Steel Company, which has a capacity of 17% of Egypt’s total production, and an iron rolling factory with annual capacity of 1.5 million tonnes.

Transportation The transport sector has cleared the road for investors, with implemented investments at almost EGP 100 billion in FY2018/19, doubling in value from the previous year.

Metro

 The Greater Cairo metro network, the oldest and largest in Africa, is the backbone of mass transportation in the capital with a daily transportation capacity of over 3.7 million passengers. It is expected to rise to about 6 million passengers per day with the expansion of Line 3 in FY 2019/20.  January 2019: The National Authority for Tunnels (NAT) signed pre-contractual partnership agreements with France’s RATP to operate and maintain Line 3 for a 15-year period.  June: The Ministry of Transportation inaugurated three new metro stations as part of Phase 4 of the metro’s line 3 expansion. Phase 4 is being implemented with a total cost of EGP 5.4 billion (USD 298 million), in addition to EUR 485 million (USD 553 million).  Q1 2020: Alexandria to launch an international tender for the building of an underground metro. The first phase of the EGP 17 billion project will link Abu Qir to Attarine and will take two years to complete. The following phases will extend to El Max and Km 21 on the Alexandria-Matrouh Road.

National Road Network Road infrastructure has seen substantial development since 2014 when the state launched its EGP 36 billion (USD 2 billion) National Road Project (NRP). The NRP is now in its fourth phase and when complete will add 13,000 km of roads to the network.

Railways  The Ministry of Transportation has plans for a high-speed railway network project to link all new cities over three lines. The first line connects Ain Sokhna and New Alamein via three phases. The first runs 122 km from the NAC to Sixth of October City, linked with the new Rod el-Farag Axis (also known as “Tahya Masr” Axis). The second phase extends from Sixth of October City to New Alamein over 210 km parallel to the Rod el Farag–Dabaa axis. The third phase covers 92 km linking the NAC with Ain Sokhna  The second line links Sixth of October City with the Upper Egypt governorates all the way to Aswan. As part of an EBRD-financed project, the Egyptian National Railways (ENR) has awarded Talgo of Spain a EUR 158 million contract to supply and maintain six 160 km/h intercity trains for the Alexandria–Cairo–Aswan corridor. Talgo will deliver the trains in 2021 and 2022.  The third line starts from Ain Sokhna and passes through Marsa Alam and Hurghada to end in Luxor, with Ain Sokhna and Luxor junction stations for the first and third lines. The speed of passenger and freight trains will be 250 km/h and 160 km/h respectively.  The Egyptian Railway Authority (ERA) is working with the French National Railway Company and French multinationals Alstom and Thales Group to upgrade signals and other safety systems along the rail network.  August: NAT signed an agreement with a consortium of Canada’s Bombardier Transportation and Egyptian companies Orascom Construction PLC and Arab Contractors to design and build two monorail lines in Egypt. After construction is complete, the consortium will be responsible for the operation and maintenance (O&M) of both lines for 30 years. The total value of the design, build and O&M contracts exceeds USD 4.5 billion.  November: Cabinet approved a USD 466.3 million agreement for the U.S.-based Progress Rail Locomotive to supply and upgrade the ERA locomotives.  The European Investment Bank (EIB) is considering providing EUR 150 million (USD 176.3 million) for the rehabilitation of Alexandria’s Blue tram line (also called Raml line). The EUR 300 million (USD 352.5 million) project is slated to be completed in 2022 and will triple daily passenger capacity to 300,000.

This publication is produced quarterly; the data in this edition is current as of February 6, 2020. All information in this publication is verified to the best of the publisher’s ability.