Egypt’s biggest US business delegation is in Cairo this week to attempt to revive the nation’s flagging economy and promote the nation as a prime investment destination.
The nation’s prime minister, Hisham Qandil, surprised his guests with his heart-felt speech (he told the crowd he promised himself “he’d speak from the heart”) and at one point appeared to become emotional when he spoke of the country’s elections, the first free votes in Egypt’s history.
The unusually large trade delegation puts in sharp relief the political uncertainty and inefficiency that could continue to drag on growth and put off foreign investment, writes Matt Bradley in the Wall Street Journal.
Qandil said he expects to conclude a $4.8 billion IMF loan deal within two months and is in talks for additional budget support worth about $1 billion from the World Bank and the African Development Bank.
As part of the talks, OPIC, the US government’s finance arm said it would pump $150 million into a fund run by Dubai-based private equity company Abraaj for small and medium sized businesses.
Qandil also laid out plans for Egypt to sell sukuk, or Islamic bonds, after new legislation on the debt instrument is passed within three months.
NB: It is important to note that both of the above have been discussed for many months, so the announcement’s yesterday aren’t new and do not mean Egypt is suddenly back on track.
Since president Mohammed Morsi and Mr Qandil came to power there has been little sign of a real economic platform being enforced. Promises to rein in energy subsidies, replace with a coupon system and impose some taxes to generate revenue have not been fulfilled yet.
But Qandil, speaking to Reuters, said he was finalising an economic plan that eyes 7% growth in four years and 1% shaved off the budget deficit, which is already around 8% of gross domestic product.
Qandil’s smooth repartee and perfect English was reassuring to the 100 US business executives in Cairo yesterday, but whether he will allay investor worries and keep to his promises is another question entirely. One thing is for sure, he showed himself to be a likeable politician, which is an admirable feat in Egypt.
Egypt urban inflation quickened to 6.5% in August, against 6.4% in July, data from the government statistics agency showed, as the price of food accelerated slightly. Rising food prices are a concern for economists because this could be a big factor in destabilising the currency (i.e., it costs more to buy goods) and the foreign reserves pot.
Food prices have been generally stable for the last year but higher inflation means imports cost more, and already costly subsidies make a bigger dent in the budget deficit.
Orascom Construction Industries, or OCI, Egypt’s largest publicly listed company, said this morning that the General Authority for Investment and Free Zones, or GAFI (the government’s main trade arm), has approved the demerger of its construction and fertilizer units, setting in stone how this company will operate from now on under Nassef Sawiris.
Last week the company posted a 28% drop in second quarter profit last week due to higher tax rates in Europe and start-up costs associated with fertilizer plants in Algeria and the U.S.
Egypt’s cotton exporter, Alcotexa, sold 1,575 tons of cotton in the past week, it said on Sunday. Once called “white gold”, Egypt’s cotton is a valuable luxury asset that is only rivalled by America’s Pima cotton. Yet a range of problems including increased labour strikes, increased costs for producing cotton and depleting land is threatening the growth of this lucrative commodity.
Everyone should read this interesting response to the Citigroup analyst prediction that Saudi Arabia, the world’s largest oil exporter, could become an oil importer by 2030.
The columnist, Abdel Aziz AluWaisheg, says the forecast is “laughable” considering most of KSA’s budget is dependant on oil revenue. In 2011, oil revenue accounted for 93% of the government budget. He sets out a reasonable argument how KSA won’t allow itself to become an oil importer.
It may be presumptuous, however, to think that Citi’s forecast is ludicrous considering Saudi’s consumption levels and the way neighbouring countries are going – including the United Arab Emirates, which has an oil shortage problem in the Northern parts.
If you haven’t been following the unravelling of the biggest commodities deal of the year, nay, the biggest deal of the year, then you should.
Glencore has announced its final offer for Xstrata, layingout a last-ditch compromise to salvage the $80bn merger that includes keeping Sir John Bond, chairman of the mining group, at the helm of the combined companies, FT reporters write.
Ivan Glasenberg, Glencore’s chief executive, on Friday unravelled the deal negotiated in February, saying he would only increase his offer to 3.05 Glencore shares for each of the miner’s if he could head the new company. The last-minute move by Mr Glasenberg, who had previously insisted he would not budge despite calls from Qatar’s sovereign wealth fund for improved terms, seemingly relaunched the merger as a full-blown takeover and elicited an icy response from the miner’s board.