Monthly Archives: November 2012
I’m off to sample cuisine typical of the US Midwest (think corn dogs, turkey and assorted berries).
Rebel Economy will be back in early December. If you feel like it, send a brief guest post to email@example.com or to me personally at firstname.lastname@example.org.
Perhaps you have an axe to grind about President Morsi and his economic plan (or any other Arab leader/government for that matter)? Perhaps you want to write about Sudan’s underreported economic malaise, or the real reason behind Iran’s currency crisis? Maybe the uphill struggle for Bahrain’s labour movement against the authoritarian government may be more up your alley?
Consider Rebel Economy your soapbox.
Till next time,
Egypt’s talks with the International Monetary Fund for a $4.8 billion loan should be frozen because the negotiations are secretive and lack popular support, Bloomberg has reported citing a letter released by 17 political parties, civil organizations and labour groups.
The letter is addressed from the Popular Campaign to Drop Egypt’s Debt, an umbrella group which has lobbied hard against the loan since negotiations started last year, the report says.
Among the signatories are three political parties affiliated with former presidential candidates, and a party set up by the Muslim Brotherhood’s youth wing, Bloomberg reports. The April 6th Movement, which took a leading role during last year’s revolution, has signed the letter, as well as unions active in Egypt’s labor movement.
The letter addressed to the prime minister Hisham Qandil and the IMF managing director Christine Lagarde says:
Loan negotiations process has “lacked transparency” from the government and IMF, talks continue in the absence of a parliament and public consultations have been “inaccessible”.
“With little transparency and no clear economic program, the potential loan agreement continues to lack the ‘critical mass’ of support that the IMF requires as a necessary condition for financial assistance.”
Though an open debate about the loan is healthy, especially considering the rich history (Rebel Economy has produced a timeline covering three decades of Egypt-IMF talks) there are several flaws to this broader lobby movement, which will hinder any action against the loan.
Here are some issues that should be noted:
◊ The lobbyists, including the Popular Campaign to Drop Egypt’s Debt, see the IMF loan as one of the main causes of Egypt’s economic downfall today. However, history shows that every IMF loan programme is followed by a period of economic liberalisation and boom. But then incessant corruption and bad economic decisions took force. In fact the IMF told Egypt in the 1970s that subsidies should go, now widely considered to be extremely bad for the economy. However the 1977 bread riots in Egypt led leaders to renege on that decision.
◊ Those opposing the loan misdirect their suspicion at the problem of rising external debt. That’s not the real elephant in the room here. The real issue is spiralling domestic debt caused by a terribly indebted oil sector and mismanaged budget. External debt stands at about $33 billion. Domestic debt is about $200 billion. That is mostly caused by energy subsidies, which use up to a quarter of the government’s spending (more than health and education combined, and then some). If you want to talk about external debt, how about the billions of dollars not on the government’s balance sheet owed to oil companies for energy exploration?
◊ The alternatives offered by lobbyists include solutions inherently linked to the IMF. The most popular option is debt relief. That solution has been popular with the IMF and Egypt in the past and probably will be in the future. For example in the late 90s, the IMF facilitated a framework for obtaining the cancellation of 50% of Egypt’s official debt from countries that are members of the Paris Club.
◊ Finally, as Nadine Marroushi, the reporter behind the story above points out:
The problem is lobbyists don’t seem to have a unified and articulated front on what economic policies need to be implemented. The fact that energy subsidies need to be reformed hasn’t taken root on a grassroots level. People are so focused on being against the loan for all sorts of reasons, many very justified (such as inflation), some just plain ignorant (such as chants that go: “we’re against the IMF’s conditions, we’re against the CIA), but there isn’t enough public discussion and pressure about what the economic problems are and how they need to be tackled.
If these groups want any chance in delaying a loan, there must of course be some kind of unity in why the loan is opposed. The reactionary approach to anything linked with the IMF must stop if a coherent conversation can begin.
But of course the government are mostly at fault. They have failed to open up a transparent dialogue on this negotiation process, leading to further suspicion and fury. And, attempting to pass off the loan as Sharia-compliant is really not helping.
We know that fuel prices need to rise, and we know that Egypt needs international help (the US has in the past offered debt relief that has saved Egypt from bankruptcy). The government needs to address the nation clearly and firmly describing what needs to happen and why. We know big changes are going to happen because they must.
But the government’s weakness breeds suspicion and until Mohammed Morsi and his government can be strong, lobby groups and other political parties will hold them to account making the economic transition difficult.
Egypt’s government has proposed tax changes and reform of energy subsidies to cut a budget deficit running at about 11% of gross domestic product, Reuters reported in a broad story outlining all the austerity measures.
An IMF team is in Cairo to negotiate a $4.8 billion finance package for Egypt. Talks are scheduled to end on November 14. Some of the key details are as follows and mostly concern the biggest weight on the economy, i.e. energy subsidies:
- total elimination of the subsidy on 95 octane gasoline, a step that will be officially announced this week
- raising the price of natural gas piped to homes, which will come into effect next month. The price increase would be “tiny”, officials have said.
- The government has delayed a programme to use smart cards to distribute canisters of cooking gas, or butagas, by several months to ensure the system works properly
- The government would not touch the price of subsidised diesel
- The government had drafted a law to raise the sales tax on both commodities and services to 11% from 10%. That includes tax on telephone services, and sales tax on other goods such as cars, cigarettes and tobacco, beer and alcoholic drinks, non-alcoholic beer, carbonated mineral water, coffee beans, water-resistant cement and reinforced steel.
All these measures have already taken a long time to enforce, so it’s lucky Egypt’s lenders are putting up cash support.
Egypt said on Sunday it had received a third tranche of $500 million from Qatar, the same Reuters story said, part of a $2 billion loan secured by Egypt in August to help stave off a financial crisis and which Qatar is depositing at Egypt’s central bank.
The state news agency MENA quoted Egypt’s Finance Minister Mumtaz El-Saeed as saying the third tranche of the loan arrived on October 30 and that the last tranche was expected to arrive “soon” but did not give an exact date.
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But if donors fail to show up Egypt can rely on the thorough corruption investigators to retrieve billions of dollars and deposit in president Mohammed Morsi’s specially made “Renaissance” account (which generous citizens can also donate to..).
The only other detail in the report is that governmental authorities are working on collecting up to around $9 billion from specific persons associated with the former regime and who have been found guilty of corruption.
The report, which is quite fuzzy on details, does highlight an important fact: Mubarak and his cronies were not as rich as initially thought. In fact, to insist that the former president and his family are worth at least $70 billion only serves to glorify a regime whose biggest failing was to neglect rather than shrewdly steal mountains of cash.
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An eye-opening profile into the chief executive of DP World, the world’s third largest ports operator in the WSJ.
Mohammed Sharaf’s personal relationship with ships started long before he began work in the industry, when, in 1961, he was shipwrecked at just six months:
MV Dara, the ship transporting him, his mother, brothers and sister sank after an explosion, just outside the port of Dubai. The incident cost Mr. Sharaf his mother, a sister and one brother, while another brother was considered lost. He survived with a caretaker before reuniting with his family in the U.A.E.
DP World, in some ways, represents the old and new Dubai.
It is a reminder of Dubai’s beginning as a successful sea port where a tiny settlement developed from a small fishing and pearl-diving community to an oil-rich sheikhdom.
But it is also an example of over-spending and spiralling debt. The company currently has a net debt of $3.5 billion and has had to let go of some of its key assets. Last month it said it was pulling out of its operations in the port of Vostochny, the largest container terminal in Russia’s far east and one of the key gateways for the country’s container network.
The head of Egypt’s state-run oil company, the Egyptian General Petroleum Corporation, will step down in January as the institution faces a growing debt pile and rising premiums for fuel imports, an official at EGPC has told Rebel Economy.
Hani Dahi, who was appointed chairman of EGPC in March 2011, will retire on January 3rd and will be replaced by Sherif Hadarra, who spent time as an executive at Sumed oil pipeline, said the official who did not want to be named because the announcement has not been made official yet.
An official at Midor, an Egypt-based refining company, also confirmed the move naming Mr Hadarra as the successor.
Before his position at EGPC, Dahi was chairman of EGPC’s engineering affiliate, ENPPI.
With many of Egypt’s debt and energy problems rooted with EGPC it is no surprise the current management is keen to get out. In the last decade EGPC has become Egypt’s most indebted state entity with a debt pile exceeding $30 billion.
According to industry sources, in 2002, EGPC’s total debt stood at half a billion Egyptian pounds. In 2012, that debt pile has jumped to 200 billion pounds.
The organisation has also maxed out financing to fund oil and gas exploration from banks including National Bank of Egypt and Morgan Stanley.
Sources say the magnitude of Egypt’s debt is such that at BP’s global board meeting, Egypt’s debt repayment plan is brought up as a topic of discussion.
Other scandals have also seen high-ranking officials linked with EGPC now in jail.
In May, EGPC along with the state-run gas company, the Egypt Natural Gas Company, filed a request for arbitration against East Mediterranean Gas Company (EMG) over a deal to supply natural gas to Israel, Hani Dahi said at the time.
The two state-run companies filed the request on May 3 after EMG breached the terms of the contract by delaying payments for gas, which it exports to Israel.
But energy experts and officials involved with the gas pipeline deal believe the real reason was that EGAS and EGPC were having trouble producing enough gas to meet export contracts, Bradley Hope of Abu Dhabi’s The National reported in June, further implicating management at the two state-run companies.
What does all this mean for the country’s decision-making and management going forward?
Industry players say EGPC’s track record of appointing specific people to senior positions in state-linked companies is merely a precursor for a cabinet position. Abdullah Ghorab, the last minister of petroleum before Osama Kamel, was the head of EGPC before he was bumped up to the ministry in 2011.
With oil and gas one of the most contentious issues the new government is having to deal with, Egypt’s president Morsi and his aides may be shifting key positions in the bureaucracy to best manage their biggest problem.
Ashraf Swelam, the former economic advisor to failed presidential candidate Amr Moussa, says the debate is healthy, in this opinion piece featured in Ahram:
The back and forth isn’t in itself a bad thing. For one, it shifts the focus from the political to the economic sphere which is in dire straits. In addition, public debate of the sort unfolding around the issue of the IMF deal is characteristic of democratic societies, and as such it should be celebrated and encouraged.
But he does repeat a mantra often spoken about the Egyptian government: be more transparent about your negotiations.
The complete absence of information about the details of the agreement… in turn opens the door wide open for unfounded suppositions and conspiracy theories.
Swelam also repeats the political bullet points brought up under his tenure as economic advisor to Moussa: Hasn’t the day come for Egypt to seriously consider decentralization and the financial and administrative empowerment of local communities? And, how are we going to address the mounting challenges of water, food, energy and environmental security?
His economic programme includes reviewing past privatisation deals, shifting emphasis to the private sector and moving money-losing state-owned institutions under a mega state-owned holding company with a chief executive. Such a programme would signal a move to a more profit-driven, capitalist model.
That certainly won’t sit easy with those (and there are many of them) against the IMF loan, who associate the international bank with harsh austerity measures years ago.
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The BBC expose on Mubarak’s billions has been translated into English. This thrilling (though at times sensationalist) BBC documentary about the Mubarak-era and Egypt’s Stolen Billions
(N.B. Without stating the obvious, it should be noted that though many journalists work to high levels of integrity and morality, sometimes mistakes happen and reporters are careless. This has led the BBC’s director general, effectively the BBC’s editor-in-chief, George Entwhistle to resign over the weekend after a BBC Newsnight film alleged child abuse by an unnamed Conservative politician – which was proved to be unfounded. Such a huge accusation is a dangerous one to make. So, former Egyptian president Hosni Mubarak may be accused of having $70 billion stashed away in hidden accounts, but that would also make the man accused of chronic “mediocrity” the richest man on Earth. Doesn’t quite gel.)
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Egypt’s inflation rate widened significantly to 7% in the 12 months to October 2012, from 6.2% in September, according to the government statistics agency. Though food prices rose, which is the standard cause for rising inflation, this time fuel prices played a big role.
The increase in natural gas and butane prices were the main driver behind the rise in inflation, staging a monthly increase of 57.8% in October 2012 from September 2012, and 175% since October 2011.
The Egyptian government has signalled it would start raising the price of energy consumed domestically and this indicates it may have already happened.
Egypt is struggling with a gas shortage because of an addiction to energy subsidies that has wiped out its resources domestically and forced it to use energy at home that it would have exported for much-needed hard currency.
One way to counter that is to immediately raise the price of fuel.
Though just anecdotal, there have been instances of increasing electricity bills and gas bills in households. Perhaps the government is quietly enforcing targeted price hikes in some areas to avoid public anger.
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Some welcome relief came to Egypt when it completed its first licensing round since the 2011 revolution in a sign that international oil firms are (mostly) undeterred by a payment backlog of billions of dollars.
Royal Dutch Shell, RWE and TransGlobe Energy were among energy companies that won concessions in Egypt.
The results for this tender were seven months after the closing bids, after the date had been delayed to March 29 from January 30 to allow more companies to take part.
Though it’s an indication that Egypt’s energy reserves are too lucrative to miss out, it doesn’t mean the country is out of the woods just yet. Delays on tenders were because international interest wasn’t that high after Egypt built up a backlog of payments to oil producers and premiums for fuel imports skyrocketed. It’s another consequence of a deep crisis impacting the energy sector in Egypt.
Iran, a country that has had to cope with severe international sanctions, has temporarily banned the import of some “luxury goods” including foreign-made cars and mobile phones to save billions of dollars for essential products in the face of worsening sanctions.
The currency has slid dramatically over the last 15 months as exports have fallen because of tighter and tighter Western sanctions.
The government has responded to a wave of dollarisation, where Iranians have scrambled to convert their savings into dollars [and euros], by restricting access to hard currency, rationing the dollars which it supplies to companies and individuals through the central bank, and setting up an official foreign exchange centre.
If you thought transparency wasn’t good enough in Egypt, take Iran where among the “Secrets” held by the government is the level of reserves.
The reserves stood at $106 billion at the end of last year, according to the International Monetary Fund. But some analysts estimate they may have dropped by several tens of billions of dollars as the sanctions have cut oil income, according to Reuters and Bloomberg.
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Egypt’s first private-sector electricity station began operations in Alexandria yesterday in a move that appears to rattle, if not, break the mould of the seven state-run energy companies operating the nation’s power stations.
TAQA Arabia, a subsidiary of Citadel Capital, the Egyptian private equity firm, is running the $400 million station, which will have a production capacity of 11 megavolts and will be fuelled by natural gas.
Up until the early 1960s, electricity generation and distribution was practiced by private companies. But in 1978, after a transition to nationalisation, seven regional electricity distribution companies were established under the supervision of Egyptian Electricity Authority, according to the Ministry of Electricity.
Some of these companies have now been split into two, but fundamentally Egypt’s electricity power supply is state-owned.
The station was acquired by TAQA as part of a Build, Own, Operate, and Transfer (BOOT) financing scheme.
BOOT projects are used to fund large-scale public infrastructure without affecting the country’s debt profile. Private developers are allowed to recover their costs of construction through ownership and operation of the plant for a fixed period before handing it over to the state.
Citadel’s project will provide power to a particular company (the state-owned Egyptian Styrenics Production Company, according to Ahram Online), but it could signal a move toward expanding this scheme elsewhere.
Egypt’s gas shortages have caused some of the worst electricity black-outs in recent years. But with electricity demand growing, could Egypt consider limited privatisation of the electric power sector?
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1) Egypt expects to reach a loan agreement with the IMF by mid-December after talks this month focusing on limiting the budget deficit and a minimum level for its foreign reserves. Ahram Online reported that the loan amount, initially set at $4.8 billion has been reduced slightly to $4.5 billion.
2) The cabinet also approved a new 10% tax on major transactions on the Egyptian stock exchange, including initial public offerings (IPOs). The president said in August there would be no new taxes.
3) Finally, the cabinet approved two new tax brackets for high-income individuals. A 22% tax will be levied on individuals with annual incomes between 1 million Egyptian pounds and 10 million pounds, while annual incomes higher than 10 million pounds will be taxed at a rate of 25%. The new structure looks something like this, according to Ahram Online:
First segment (LE5,000 – LE20,000): 10 per cent
Second segment (LE20,000 – LE40,000): 15 per cent
Third segment (LE40,000 – LE1 million): 20 per cent
Fourth segment (LE1 million – LE10 million): 22 per cent
Fifth segment (LE10 million and up): 25 per cent
The move to implement taxes on corporations and individuals after previous cabinets had failed to do so signals how the current government is forced to impose hard austerity measures that were initially played down.
The decision to levy a capital gains tax comes despite repeated assertions by bourse officials that such a tax would not be “suitable” for the Egyptian market.
Last year, the finance minister at the time, Samir Radwan, proposed a 10% tax on stock dividends in the hopes of offsetting Egypt’s rising budget deficit. But the proposal was quickly rejected by investors and bourse officials and Radwan was removed in a cabinet reshuffle. How policies change.
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In my latest FT report, I write how escalating disputes between labour unions and employers in north Africa are threatening to derail economic recovery after the uprisings that ousted long-ruling dictators in the region.
Emboldened by the spirit of political change, thousands of workers in Egypt and Tunisia have staged a series of protests and are now in deadlocked talks with companies over demands for a minimum wage.
The piece puts together a series of examples of how the quest for a minimum wage can also be detrimental to a country’s economic fortunes. But it also shines a light on the lack of conversation between labourers and their employers.
Some of the companies quoted in the report include Kraft Foods, which has commenced legal action against strikers and DP World, which shut down its Ain Sokhna port twice this year.
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As UAE-based Dana Gas restructures its $1 billion sukuk payment, averting a potential seizure of its Egyptian assets, the “region’s debt market barely blinked,” according to this Reuters feature on sukuk, or Islamic bonds.
Not long ago, a billion-dollar payment miss would have triggered a crisis of confidence in the market; now, it is almost ignored.
This is a project I have been working on in collaboration with Bradley Hope, the Cairo correspondent at The National newspaper (and author of Robbing Egypt, a three-part series on the culture of corruption and the hunt for assets related to the Mubarak regime).
We have created a non-exhaustive list of businessmen/women and government officials who have been accused, sentenced and/or convicted in corruption cases.
It is a work in progress but it would be good to get the matrix filled in where possible, and/or suggestions on how to structure it. Please email me at email@example.com.
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Full document is available here.
More than $6 billion was spent on campaigns that sought to prove how both candidates would attempt to turn around the deepest economic downturn since the Great Depression. It was Barack Hussein Obama’s night, and as the WSJ put it:
Mr. Obama’s victory in the bruising campaign marks a landmark in modern election history. No sitting president since Franklin D. Roosevelt in 1940 has won re-election with a higher unemployment rate, which stands at 7.9%.
The candidates emphasised the economy in aggressive campaigns that sought to reassure Americans how the country would be pulled out of its crisis.
It was in stark contrast to Egypt’s presidential campaigns, which failed to acknowledge the most pressing problems and papered over the economic challenges with vague rhetoric about social justice.
Hardly a word was muttered about the North African nation’s biggest economic challenges including the budget deficit, or how the presidential candidates would seek to reduce the almost 13% unemployment rate. The US victory shines a light on Egypt’s political inexperience and misdirected focus on religion.
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On that note: Egypt’s pound weakened on Tuesday to its lowest against the U.S. dollar since 2004, and traders and analysts speculated the central bank may have resumed a policy of allowing a gradual depreciation, Reuters reported. (That is despite common knowledge among traders that the Central Bank intervenes in the currency through state banks).
Egypt’s foreign reserves have hovered at about $15 billion, just above the critical level enough to cover three months of imports. But any increase in reserves has so far been superficial and down to international donors funnelling cash straight to the central bank to support the pound.
As London-based Capital Economics analysts said in a note to investors earlier this week:
Talks between Egypt and the IMF this month have focused attention back onto the external financing requirements of the region’s resource-poor economies. But so long as their oil-rich neighbours continue to drip-feed aid, we think they should be able to avoid full-blown balance of payments crises.
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In the clearest sign of Egypt’s energy problems, yesterday Orascom Construction Industries was forced to stop production at three fertiliser lines after the state gas company cut off supplies from a gas field for emergency maintenance.
Egypt, which is a net gas exporter, has been suffering more and more fuel shortages and electricity cuts due to growing domestic consumption. The country has had to re-direct gas for domestic use, that would have otherwise been exported.
Local media has reported talks between the Egyptian government and Qatar in the last few weeks to import liquefied natural gas to cover its needs. Algeria was also a possible contendor for the job.
It is a clear signal of how an addiction to energy subsidies has managed to infiltrate almost all parts of Egypt’s economy. Bankers tell me that the reason foreign reserves have declined, is not just to support the currency but to ensure Egypt has enough to keep importing oil and gas to keep its subsidy system running.
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In other news:
- Dana Gas, the first UAE company to fail to meet a bond redemption, said it had reached a restructuring deal “in principle” to repay a $1 billion sukuk, potentially averting seizure of its assets, Reuters reports.
Natural gas producer Dana, headquartered in the emirate of Sharjah, said it will cancel $80 million of the Islamic bond and sukuk holders will receive a part payment in cash from Dana as part of deal reached with an ad-hoc group of bond holders.
- Abu Dhabi Islamic Bank is set to become the first Gulf Arab company to issue a hybrid Islamic bond this week, but investors are likely to demand a big premium for the rare structure.
ADIB’s Tier 1 sukuk structure, which is expected to raise $500 million, is a different animal: it does not have a maturity date – hence it is “perpetual” – and the principal is repaid at the discretion of the issuer.
If ADIB’s issue is successful, it could pave the way for other banks in the region to follow suit, although the jurisdiction in which the bank is located will be important.
If you had all the money in the world, what would you buy?
Perhaps you would indulge in a flashy car, or treat yourself to a Bahamian island.
That is just child’s play compared to the toys members of the United Arab Emirates’ royal family have invested in (no I’m not talking about Sheikh Hamad, also know as the “Rainbow Sheikh” who owns almost every vehicle imaginable including the world’s largest caravan…).
Sheikh Tahnoon Bin Zayed Al Nahyan, one of the 19 sons of the founder of the UAE and an apparently avid chess player, decided to finance the Hydra Project, a chess machine so powerful it would dominate the computer chess world and “finally have an accepted victory over humans“.
The chess machine, designed by Dr Christian “Chrilly” Donninger, was financed by PAL Group, part of the group of companies under Royal Group, the UAE conglomerate chaired by Sheikh Tahnoon.
In 2005, “Hydra [was] widely considered to be the world’s strongest chess player,” according to a New Yorker article published at the time.
But all’s well that ends well and Hydra played its final game in June 2006. The sponsors decided to end the project, perhaps because Sheikh Tahnoon got bored of his toy.
He has some other fun investments up his sleeve, and none other than robots.
PAL Robotics, an offshoot of Pal Group, has spent more than $50 million and three years developing the Reem robot in Barcelona. The “all-purpose” robot can work in a hospital, hotels, museums or airports, according to a report in The National newspaper.
The “humanoid service robot” will cost “several thousand dollars” though the company says it hopes to reduce the price to make it more competitive.
It sounds like a recycled invention from Japan, but in a world where million dollar traders are being replaced with machines at international investment banks, anything is possible.
The Syrian National Council (SNC) says it has received over $20 million in aid from Libya since it was founded in October 2011. That’s half of the $40.4 million the opposition group has amassed since August 2011.
As Borzou Daragahi of the FT put it: “The top financier of the Syrian opposition is no Arabian Peninsula oil kingdom or cloak-and-dagger western spy outfit, but struggling, war-ravaged Libya, which is itself recovering from a devastating civil conflict.”
Qatar gave $15 million, while the United Arab Emirates gave $5 million.
But why is Libya supporting Syria? Some indications here from Daragahi:
Oil-rich Libya has emerged as one of the Syrian uprising’s firmest and earliest backers. Perhaps dozens if not hundreds of veterans of the Nato-backed rebel insurgency against Colonel Muammer Gaddafi have travelled to Syria to fight against the regime of President Bashar al-Assad. Its interim foreign minister said earlier this year that his governmentcould not prevent or condemn Libyans heading to Syria to fight.
Despite this quite detailed release from the SNC, the balance sheet, if true and accurate, also exposes how little money the opposition group has. Other details that emerged from the financial document, which apparently is an attempt by the SNC to look more transparent, show the group has just $10.7 million in its bank account.
While Egypt is getting multi billion-dollar easy loans funnelled straight to it almost two years after a popular uprising forced the former president to step down, the SNC has to manage with just a fraction of that. Egypt may be a strategically important country in the Middle East that is too big to fail, but in the bloodiest uprising that the Middle East has seen since the beginning of the last year, Syria will need much more than just $20 million if it is to beat the Assad regime.
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In the latest sign of Egypt’s energy troubles, Egypt’s state-owned Egyptian Natural Gas Holding Company (EGAS) has postponed the closing date for international companies to present their bids for 15 oil and gas concessions by three months due to weak interest in the tender.
After all, would you do business with someone if you couldn’t guarantee you would get paid?
EGAS has pushed back the deadline for bidding to February 13 from November 14, a posting on the company’s website showed without elaborating, Reuters reported.
Oil minister Osama Kamel had revealed on a Monday late night talk show that “the interest wasn’t at the level that we wanted.”
Oh dear. It’s the second controversial delay of a tender after the other main state-run energy firm Egyptian General Petroleum Corporation (EGPC) pushed the closing bid for its tender to March 29, from January 30, to allow more companies to take part.
EGPC is due to announce the results of its latest bid round some time this week, around seven months after the closing date.
The main problem is that Egypt’s energy supplies are overstretched because of rising domestic demand (from inefficient subsidies) and rising debt levels (also partly because Egypt sells what would be quite expensive energy at subsidised prices).
Earlier this week there were some moves made to test ration cards in four Egyptian provinces that limit the amount of subsidised energy distributed, but the country needs to move fast on implementing reforms before companies that explore for oil and gas decide they can no longer do business with an indebted country.
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The impact of Egypt’s oil troubles are not just limited to the North African nation. Many energy companies are owed billions of dollars in overdue payments from Egypt’s state-run energy firms and those oil companies that aren’t able to restructure the debt are having problems of their own.
UAE-based Dana Gas, for instance, last week missed a $920 million Islamic bond redemption, but said today it was still negotiating a standstill agreement with a creditors’ committee.
Dana, which became the first UAE company to miss a bond redemption, started encountering problems after the company was hit by payment delays on the gas it supplies to Egypt and Iraq’s Kurdistan region.
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All change at the helm as top Abu Dhabi banker Khalifa Mohammed al-Kindi becomes the new chairman of the UAE’s central bank, Reuters reports.
Al-Kindi is what you would call a banking celebrity. He started his career at the Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds and is a former chairman of National Bank of Abu Dhabi, the UAE’s top lender by market capitalization.
He’s a fitting man for a role that will see him head board meetings, have the final say on policy decisions, and other very important things that big bankers do.
The new chairman, whose position has not been formally announced yet, will probably also have to deal with several moaning state companies, after Abu Dhabi last month decided to issue a new directive that will rein in boom-year borrowing that has triggered bailouts of state-linked companies and losses.