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JULY 2016 VOLUME 33

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Cover Stor y Be our guest New hotels are proliferating in Cairo, even as tourism continues to founder. The Egyptian hospitality industry is staying in the black by turning to new markets.

Cover Design: Nessim N. Hanna

Inside 8 10

Editor’s Note

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Viewpoint

The Newsroom 12

In Brief The news in a nutshell

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Region Notes News from around the region

© Copyright Business Monthly 2016. All rights reserved. No part of this magazine may be reproduced without the prior written consent of the editor.

The opinions expressed in Business Monthly do not necessarily reflect the views of the American Chamber of Commerce in Egypt.

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JULY 2016 VOLUME 33

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Market Watch

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Stock Analysis Dog days of summer

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Capital Markets A glance at stocks and bonds

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Money & Banking Forex and deposits

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Key Indicators The economy at a glance

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Egypt-U.S. Trade Imports and exports

In Depth 18

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ISSUE 7

Choppy waters for new Suez Canal So far, Sisi’s LE 60 billion megaproject hasn’t delivered Egypt to get 4G—eventually The promise of faster mobile internet gets a little closer

Business Monthly – July 2016

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Executive Life 42

Dining Out Iftar—Syrian-style

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Sports Knockouts

The Chamber

Corporate Clinic

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Events

Red tape How arbitrary bureaucracy is costing Egypt money

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Member News

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Classifieds

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Media Lite An irreverent glance at the press

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Editor’s Note

YESTERDAY

Director of Publications & Research Khaled F. Sewelam Editor-in-Chief Rachel Scheier

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few years ago, passing through one of the lovely little medieval towns of central Italy, I went into a local bar for a coffee. As the friendly old lady who ran the place steamed the milk for my cappuccino, I stared in shock at a large framed portrait of Mussolini—one of the most infamous dictators of the 20th century—that hung in a gilded frame on the wall above her. As it turns out, there are more than a few Italians—mostly older members of the working class—who remain nostalgic for the “strong” Italy of Il Duce (the leader). Never mind that very few of them are old enough to remember the Mussolini era, which is known as the darkest in the country’s modern history—or that he founded fascism, an ideology that was responsible for the deaths of 60 million people during World War II.

There is a universal tendency to romanticize the past. In our memories, departed loved ones are saints, and high school wasn’t so bad. There is always a handful of revisionists who want to return society to the good old days—an allegedly golden time when women and children behaved themselves and people didn’t have to remember 10 different passwords.

Lately though, this atavistic attitude seems to have become an international epidemic. The so-called Brexit vote, Britain’s stunning choice to leave the European Union following a campaign of open xenophobia, was only the latest example of how the resentments of ordinary citizens, feeling unmoored in a rapidly changing world, have spurred a retreat into narrower identities of nation, race and sect.

Across the Atlantic, Americans have witnessed the political rise of Donald Trump— a scowling master of spectacle who wants to build a wall to keep out Mexican immigrants and ban all Muslims from entering the United States. With not even thinly veiled racism, Trump panders to the same fears and frustrations vocalized by English Brexiters who shouted to TV cameras in the days leading up to last month’s referendum: “Give me my country back!”

As the British writer A.A. Gill asked sardonically in response: “Back from what?

Back from where?” The glorious past of secure jobs and stable racial and class hierarchies to which the mostly white, working-class Brexiters and Trump supporters aspire never really existed, and the one that did was much harsher than they remember. While the long-term consequences of Britain separating from the EU are still unclear (most economists predict that leaving will ultimately cut growth, weaken the pound and hurt London, the country’s financial center), it certainly won’t deliver on the fantasy of “an England for the English,” any more than Donald Trump’s election as president of the United States in November would “make America great again.”

Contributing Editors Kate Durham Tamer Hafez Staff Writer Edmund Bower Contributing Writer Fred Thomas Senior Art Director Nessim N. Hanna Graphic Designer Emy Emile Advertising & Business Development Director Amany Kassem Advertising Coordinators Tasneem Abo El Ezz Nada Auf Photographers Michael Braha Soha El Gabi Said Abdelmessih Production Supervisor Hany Elias Market Watch Analyst Amr Hussein Elalfy Chamber News Contacts Nada Abdalla, Azza Sherif, Susanne Winkler

R ACHEL S CHEIER U.S. address: 1615 H Street, NW • Washington, D.C. 20062 Please forward your comments or suggestions to the Egypt editorial office:

Business Monthly

American Chamber of Commerce in Egypt 33 Soliman Abaza Street, Dokki 12311 • Cairo • Egypt Tel: (20-2) 3338-1050 • Fax: (20-2) 3338-0850 E-mail: publications@amcham.org.eg www.amcham.org.eg/bmonthly CTP and printing: Sahara Printing Company, SAE – Nasr City Free Zone

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Viewpoint

FALSE FACTS

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t is always intriguing to hear statements that have no relevance to the facts declared with absolute confidence by both sophisticated and ignorant so-called “experts.” Ever since the regime change in Egypt, particularly, an avalanche of media coverage, ranging from pure speculation to in-depth political analysis, has smothered the news outlets with either blatant, erroneous reporting, or opinion pieces with no bearing to the actual facts of a situation. The intended, or unintended, consequence has served to sway public opinion and even excite negative behavior. For example, an increasing number of Egyptians have developed an unprecedented interest in politics, and the traditional football –soccer- heated arguments of the past have suddenly become serious and sometimes violent, with the police brought in to settle the unruly crowds.

New and old cafes have emerged as centers of heavy “expert” roundtable debates. Although healthy and culturally more constructive than football, the new national and international constant review of all economic and political indicators has led to all sorts of conclusions fueled by relentless conspiracy theories.

In my capacity as President of the American Chamber of Commerce in Egypt (AmCham), I am often the recipient of pointed questions and comments about U.S. - Egypt relations, some based on genuine concern and the desire to understand, and others relying completely on hearsay. Last week the prevailing question was: “Why has American investments in Egypt dropped by 36.5 %” (and please not 37%?!). Well, as far as I know, no one can name a single American company that has pulled out of the country in the past five years. In fact, a number of existing investors have substantially increased their capital commitments. I am always amazed that the assumption is based on some form of statistics generated by a "credible" source. It becomes even more interesting to me when reporters quote "false facts" as

the outcome of meetings I have either personally attended or were reported to me by people who were directly involved.

AmCham is not a political body. Our mandate is to assist in the development of trade between the United States and Egypt. On our doorknock missions to Washington, D.C., we do meet with politicians and political think tanks, not because we are deviating from our original mandate but because we understand that business and politics are intertwined. The political will of a country is an intrinsic part of its business environment. As such, no business is conducted between enemies, and nobody wants to invest in conflicts.

That is why conveying to potential business partners the actual private sector views, devoid of sensation, hysteria and paranoia, carries tremendous weight.

Recently I have received many questions about the consequences of the U.S. elections on the Egyptian economy. My personal view is that, given our limited current trade volume with the United States, the outcome of the U.S. elections will not affect trade. Trade is, and will continue to be, a factor of marketing, quality control and productivity. Some better informed analysts have developed elaborate theories that might be true, although in my humble opinion, they are farfetched and hard to prove.

During our doorknock mission in April, we were repeatedly reassured in our meetings that the U.S. wants to be our business partner. Several U.S. state department officials, as well as, prominent members of Congress and the Senate who subsequently visited the region, reiterated the same objective. They recognize that Egypt is the most stable and functional country in the Middle East.

Please help by disregarding conspiracy theories and ignoring unfounded rumors. “False facts” is a contradiction in terms, as opposed to the truth, and is not a sustainable way forward. Rather, let’s join hands to reconstruct Egypt based on the facts.

A NIS A. A CLIMANDOS

President, AmCham Egypt

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Parliament approves 2016/17 budget

Inflation soars in May Monthly headline and core inflation both hit multi-year highs in May. Clocking in at 3.15 percent, monthly core inflation soared to its highest level since January 2008, according to the Central Bank.

Meanwhile, headline inflation hit 3.05 percent in May, the steepest month-onmonth increase since July 2014. This pushed annual core inflation to 12.23 percent in May—the highest level recorded since February 2009—and annual headline inflation to 12.3 percent. The Central Bank attributes the price hikes to a number of factors: widespread increases on food partly due to the seasonal effects of Ramadan as well as rice shortages; a government-mandated rise in

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pharmaceutical prices; and a “lagged pass-through effect” from the devaluation of the Egyptian pound in March. Prices rose across the board, with the cost for some items jumping by 20 percent during the month. Drug prices rose by 22.6 percent, contributing to an overall 15.56percent rise in the cost of medical care.

Other volatile goods included rice, up by 19.93 percent month-on-month, and imported cigarettes, up by 18.5 percent.

CBE raises interest rates With inflation soaring, the Central Bank of Egypt raised benchmark interest rates by 100 basis points at the June 16 meeting of its Monetary Policy Committee.

This brought the Bank’s overnight deposit

BUSINESS MONTHLY ARCHIVES

On June 29, Egyptian lawmakers approved a draft budget for the 2016/17 fiscal year, which began July 1, reports state-owned Al Ahram. The news followed earlier reports by Reuters indicating that parliament had OK’d the budget on June 28 but had to send it to the Council of State prior to its official adoption. At press time, the final budget had not been released to the public, but the draft approved by the cabinet called for revenue of LE 627 billion and LE 936 billion in spending, leaving an anticipated deficit of around LE 309 billion. Parliament’s approval of the budget followed weeks of debate—particularly over pay rises for public employees and spending on health care and education—and the bill remains unpopular with left-leaning political factions. The constitution “states that government spending on education should be at least 4 percent of GDP and spending on health should be at least 3 percent of GDP, but the figures in the new budget have failed to meet this constitutional stipulation," Alaa Abed, a spokesman for the Free Egyptians Party, told Ahram Online.

rate to 11.75 percent, its overnight lending rate to 12.75 percent and its main operations rate to 12.25 percent. “After evaluating the balance of risks surrounding the inflation outlook to date, the MPC judges that a rate hike is warranted to anchor inflation expectations over the medium-term,” the Committee wrote in a statement. Although a rate hike can help control inflation, it risks increasing Egypt’s debt burden via a pass-through effect on yields for treasury bonds and bills. Egypt’s domestic debt rose by LE 480 billion in a year, reaching almost LE 2.5 trillion in March, or some 88.1 percent of GDP. In the first nine months of the current fiscal year, the government spent more than LE 176 billion on interest payments, almost 40 percent more than it spent in the same

In Brief

period the year before. Since the June 16 rate increase, yields on Egypt’s 1.5-year, three-year and five-year bonds have risen at auction.

Operating conditions in Egypt’s non-oil private sector worsened for the eighth month in a row in May, according to businesses surveyed for the Purchasing Managers Index. At 47.6, Egypt’s overall index score for the month was a slight improvement on the 46.9 recorded in April, indicating that conditions deteriorated at a slower rate. Any score below 50 indicates that the business environment got worse during the month. “It’s definitely encouraging to see signs that the downturn has started to ease, as tentative as those indications may be. But the survey also continues to point to fundamentally weak demand conditions across the economy, which in light of the ongoing FX shortage, is likely to persist as we head into the start of FY2016/17,” Jean-Paul Pigat, senior economist at survey-sponsor Emirates NBD said in a statement. The decline of the Egyptian pound against the U.S dollar continued to create hardships for local firms, raising costs and contributing to a liquidity shortage that has dampened business activity, respondents reported. Purchase prices rose at the steepest rate since the Egypt survey began in 2011, while both output and new business fell during the month, albeit at a slower pace than the record drop recorded in March.

Parliament to probe wheat procurement

Egypt’s unusually high wheat procurement figures have raised eyebrows, prompting lawmakers to form a fact-finding committee to look into allegations of corruption in the domestic supply chain.

Egypt’s supply ministry announced last month that it had procured 5 million tonnes of local wheat, exceeding both its target of 4 million tonnes and the typical domestic crop of 3 to 3.5 million tonnes.

Egypt buys locally produced wheat at LE 420 per ardeb, which translates to around

BUSINESS MONTHLY ARCHIVES

PMI down again in May

PARLIAMENT IS INVESTIGATING ALLEGATIONS OF CORRUPTION IN EGYPT’S WHEAT SUPPLY CHAIN.

$315 per tonne, well above the roughly $200 per tonne it costs to buy imported wheat. This price subsidy supports local agriculture but also creates an incentive for unscrupulous traders and officials to mix foreign wheat in with the domestic stock. The United States Department of Agriculture estimates that around 1 million tonnes of imported wheat was procured as domestic wheat in 2015, resulting in millions of dollars in misdirected subsidies. This year, the supply ministry once again faced accusations of releasing inflated figures for local wheat stocks, a charge it denies. However, one official was arrested last month on suspicion of recording false data about wheat procurement for personal gain. The parliamentary commission will look into allegations of fraud and question the prime minister, supply minister, trade minister and agriculture minister, reports stateowned Ahram Online. In related news, Egypt’s strategic wheat reserves are sufficient through January 2017, supply minister Khaled Hanafy told Reuters.

Parliament approves customs tax hike

Imported goods are set to get more expensive following parliamentary approval of a January presidential decree

that raised customs duties for selected consumer goods by 5 to 10 percent.

The changes will primarily affect imported fruit, personal care items, clothing and household appliances and fixtures, bringing import taxes up to 40 percent for some items. When the January decree was issued, Central Bank Governor Tarek Amer said the new regulations would help protect Egypt’s foreign reserves and boost local industry, echoing earlier statements by President Abdel-Fattah el-Sisi.

“Significant” gas find in Mediterranean

British Petroleum and Italy’s Eni announced June 9 that they’d made an “important gas discovery” in the Baltim South Development Lease in the East Nile Delta, 12 kilometers off the Mediterranean Coast and 25 meters underwater. The find brings the estimated reserves of the so-called “Great Noroos area” to 70-80 billion cubic meters of gas, according to Eni. The Noroos field, which was discovered on July 15 and is 10 kilometers south of the new gas find, was producing 65,000 barrels of oil equivalent per day in May and is expected to reach 120,000 per day by the end of the year.

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In Brief

ST RE E T SE N SE What’s your favorite hotel?

I like fancy hotels, especially the newer ones, like the Nile Ritz Carlton. Its staff is eager to please, and they focus on minute details like making sure all the flowers in the lobby are changed daily. The atmosphere is much fresher than in older hotels like the Grand Hyatt. I also think the restaurants in newer establishments make better and more innovative food.

Wafaa Ragy, 42, human resources manager

I don’t like the idea of staying or eating at a hotel in Cairo unless they offer something unique like the woodfired pizza at the Nile Ritz Carlton. But in general, I think they’re a waste of money. I also am not a fan of big chains like the Marriott and the Four Seasons; there’s something very commercial and lifeless about them. I prefer smaller, family-owned places. They might only have three stars, but they’re full of character. That’s why my favorite destination is El Gouna, which has those kind of hotels in abundance.

Yassin Fahmy, 21, marketer If I am staying at a hotel, it has to be outside of Cairo. I will eat at a hotel, but only if I’m on a date. However, if I’m going out to a pub or a disco, I go to a hotel. It’s much safer. Outside of Cairo, I like less well known hotels. You get more personal service at a much lower price than at international brand-name hotels, and they also have more character.

Maryan Adel, 26, public relations specialist I dislike hotels period. I find standalone restaurants offer better food at much lower prices. For travel, Airbnb or other kinds of rentals are cheaper and much more convenient if you’re in a group. The few times I stayed at a hotel, it was outside Egypt and I was with my parents. They were small, locally-owned hotels that made you feel like you were staying at someone’s house. It’s much more personal than staying at a big fancy hotel.

Ismail Taher, 20, computer engineer We regularly stay at hotels around Cairo, especially in the summer, when we want to cool off for a three-day weekend. We live in Sheikh Zayed, so we go to the JW Marriott or the Dusit Thani in New Cairo, where we actually feel like tourists since we rarely go there. We go shopping at Cairo Festival City and eat at the new restaurants. I think it’s silly to drive for hundreds of kilometers to stay at the beach—unless I’m taking my annual vacation, and then we stay at a nice obscure hotel that’s cheaper and has more character than the big chains.

Tasneem Abdel Rahman, 34, housewife

COMPILED BY TAMER HAFEZ

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BUSINESS MONTHLY ARCHIVES

We have our own hangout spots around Cairo, depending on what’s most convenient for the group. For example, we like the gardens at the Marriott in Zamalek. For us, it’s about the outdoor atmosphere. In New Cairo, it’s the Dusit Thani—it’s comfortable, and we like the food. We’ve tried other establishments in Cairo such as the Fairmonts, the Nile Ritz Carlton and the Four Seasons, but we didn’t take to them. We normally go to hotels for drinks and a snack in the evenings; we never stay overnight.

Ahmed Ismail, 51, business owner LESS THAN HALF AS MANY TOURISTS VISITED EGYPT IN APRIL AS IN THE SAME MONTH LAST YEAR.

Cotton crop at record low

Due to a “jaw-dropping decline in area planted,” Egypt’s cotton crop is projected to hit an all-time low of just 150,000 bales, according to a report published last month by the United States Department of Agriculture. The agency previously estimated that yields would reach 395,000 bales this season, compared to 320,000 last year. The report cites Ministry of Agriculture figures indicating that only 51,000 hectares were planted with cotton this year, compared to 97,000 last year and 500,000 hectares in the 1980s. The USDA attributes the steep drop to farmers’ uncertainty about whether the government would buy the crop, coupled with a long-term shift in the textile industry toward short-staple cotton.

The demand for the long-staple cotton Egypt has traditionally produced has declined locally and globally, while imported cotton has gotten cheaper and more available. This year, while Egypt’s cotton consumption will hold steady at around 590,000 bales, the USDA predicts imports will rise and exports will decline. Much of the land previously used to grow cotton is

expected to be planted with rice, an extremely water-intensive crop.

Tourism down 54 percent

Tourism was down by more than 50 percent year-on-year in April, with just 425,000 foreign visitors arriving, down from about 923,900 in the same month of 2015, according to state statistics agency CAPMAS. Much of the decline was due to a drop in visitors from the Russian Federation, following a ban on passenger flights after the downing of a Russian passenger jet in October. In more bad news for Egypt’s battered tourism industry, British Airways on June 22 indefinitely extended its suspension of flights to Sharm El-Sheikh, canceling departures for the crucial winter season. In a welcome shred of positive news, on June 30, Russia’s ambassador to Egypt told reporters that Russian tourists should be able to travel to Egypt in the “foreseeable future.” Meanwhile, the Cabinet has reshuffled the board of directors of the Higher Council for Tourism and plans to set a new strategy to boost the sector.

Region Notes Caspian Sea

Black Sea

TURKEY

TUNISIA

MOROCCO

Mediterranean Sea

CYPRUS LEBANON

SYRIA

IRAN

IRAQ

ISRAEL JORDAN LEBANON

ALGERIA LIBYA

SYRIA

KUWAIT PALESTINIAN TERRITORIES

ISRAEL EGYPT JORDAN

Persian Gulf

BAHRAIN QATAR UAE

SAUDI ARABIA

OMAN

Red Sea SUDAN

YEMEN

Arabian Sea

Map intended for illustrative purposes only and may not accurately depict national boundaries or disputed territories.

SOUTH SUDAN SUDAN

Atlantic Ocean

Morocco moves toward Islamic banking In an attempt to attract much-needed liquidity to its financial market, Morocco’s Central Bank announced last month that it will start issuing approvals for Islamic banks this year, with the aim of enabling them to begin operations in early 2017. Concerned about Islamist movements, the country had long rejected Islamic banking, apart from allowing “Islamic windows” in conventional banks. But legislative changes in 2014 created a pathway for foreign banks and local lenders to establish Islamic banks, create takaful insurance products and issue sukuk bonds, but implementation and regulatory approvals have moved slowly. A banking official told Reuters that the Central Bank had received seven requests to open Islamic banks and three to open windows selling Islamic financial products. Globally, the Islamic finance industry has been expanding by 10-12 percent annually, with assets of

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roughly $2 trillion as of 2015, according to World Bank estimates.

Iran fires bankers over “astronomical” pay Iran’s economy minister sacked the heads of four state-owned banks last month after the pay slips of top officials appeared online, creating a public scandal. The leaked salary information showed that senior managers of a public-sector insurance company were paid more than $28,000 in March, while the manager of a state-owned bank received some $230,000 in November, reports the BBC. As of 2014, the World Bank estimates Iran’s per capita GDP at slightly above $5,400, and living standards have been slow to improve despite the easing of nuclear sanctions. The decision to sack bank officials followed a Cabinet address by Iran's Supreme Leader Ayatollah Ali Khamenei in which he described the “astronomical” salaries as an attack on national values and demanded swift action on the matter. The heads of Mehr

Iran, Mellat, Refah and Saderat banks Indianat Ocean were replaced the request of President Hassan Rouhani, according to state news agency IRNA.

Dubai project to set benchmark for cheap solar A consortium led by Abu Dhabi’s Masdar-group won a contract to build a solar plant in Dubai that could produce the world’s cheapest energy from the sun.

The 800-megawatt plant will generate power at just under three cents per KwH, according to the bid for the project, which undercuts the cost of coal-generated power and is 15 percent below the previous record for solar energy, set in April for a project in Mexico, Bloomberg reports. By 2030, Dubai aims to generate 25 percent of its energy via clean sources, including 5,000 megawatts of power at the desert solar park, to be built by 2020.

Industry experts predict that the price reached in the emirate will set a new benchmark, bringing down the cost of solar energy and boosting the use of renewables.

In Depth

MEGAPROJECTS

CHOPPY WATERS FOR NEW SUEZ CANAL

BY TAMER HAFEZ

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o mark the opening of President Abdel Fattah el-Sisi’s LE 60-billion renovation and expansion of the Suez Canal last August, the president cruised down the canal in a 150-year-old yacht with other heads of state, who were treated to an airshow and a performance of Verdi’s “Aida.” A massive ad campaign featuring billboards, museum exhibitions and even a commemorative stamp trumpeted “Egypt’s gift to the world.”

The widening of the country’s second-most famous waterway was supposed to double its annual earnings in less than a decade, pump life into Egypt’s lagging economy and

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create more than a million new jobs. But nearly a year later, canal revenues are in the doldrums, thanks to a slowing global economy and rock bottom oil prices, which have made longer cargo routes cheaper. Meanwhile, an ambitious plan to develop the area around the canal into a global maritime center has yet to attract investors, remain skeptical about Egypt’s

BUSINESS MONTHLY ARCHIVES

In Depth

cumbersome bureaucracy and an unstable currency.

The new, 35-kilometer shipping lane greatly reduced transit time through the Suez Canal. The bump in shipping traffic that was supposed to result from this improved level of efficiency was projected to more than double canal earnings to $13.5 billion by 2023. But last year, Suez Canal revenues declined more than 5

percent to total $5.1 billion, down from $5.5 billion in 2014. Monthly income in 2015 was down year-on-year during every month except January—and it continued to drop during the first three months of 2016, according to figures from the Suez Canal Authority. Nor are conditions likely to change any time soon. Last month’s newly inaugurated expansion of the Panama Canal could translate into even more competition for the Suez Canal, offering an alternative route for larger ships carrying cargo from Asia to economic hubs on the U.S. East Coast.

With Suez Canal revenues a key source of foreign currency for Egypt, particularly in the wake of declining tourism and foreign investment, analysts have raised concerns about the long-term implications of the slowdown, particularly with the Canal Authority on the hook to repay the billions it borrowed to complete the expansion project in just one year. “The drop in revenue seems to be reaching critical levels. This will hurt the core of the economy at least in terms of foreign currency inflows,” says Mamdouh el Waly, an economics professor at Ain Shams University. The canal is currently Egypt’s fourth-largest source of foreign currency (after remittances, exports and tourism, in that order) which it needs to import crucial commodities like oil and wheat. As of the end of 2015, the canal was contributing some 10 percent of the nation’s hard currency, according to the Central Bank.

The Suez Canal has been important to Egypt, both in economic and symbolic terms, since it opened in 1869, drastically reducing the shipping time between Europe and Asia. President Gamal Abdel Nasser famously nationalized it in 1956 to help pay for the building of the High Dam in Aswan. Sisi likewise has hoped to capitalize on the canal’s economic potential as well as its importance as a proud symbol of a nation rising from backwardness and dependency toward openness and development.

But a slowing global economy means that fewer goods are moving across the seas. According to a February report by SeaIntel Maritime Analysis, world shipping was down 20 percent last year. The

International Monetary Fund forecasts that the world economy will expand by just 3.2 percent in 2016, down from 3.4 percent in 2014. China, which has enjoyed double-digit annual growth since 2002, is slowing down; economists predict that the world’s second-largest economy will grow by just 6.5 percent this year. Meanwhile, oil plunged to below $30 a barrel in early 2016, down from around $100 two years ago. The low price of petroleum now means that it’s often cheaper for ships to sail all the way around the Cape of Good Hope rather than take the Suez Canal, which shaves about 6,500 kilometers and 12 days off journeys between Europe and Asia.

Indeed, more and more ships are taking the long way, like they did centuries ago, before the canal was built.

According to a February report by SeaIntel, between October of 2015 and December, 115 Asia-bound ships opted to steam around the southern tip of Africa rather than shell out steep Suez Canal tolls, which can easily reach $500,000 for freighters from Asia, according to the report. In a March article for the BBC, a representative of Dutch shipping firm Maersk estimated that it cost around $350,000 per ship to traverse the canal, while there were also stories of ships being required to hire local crews to facilitate their Suez crossing. “On each voyage, Suez costs a ship about £400 ($560) of cigarettes, as well as dozens of chocolate bars from the bond locker,” said Rose George, the author of “Deep Sea and Foreign Going.” Even without such “taxes,” it’s no wonder a critical mass of ships decided to make the longer journey based on calculations that could have saved them more than $200,000 per trip in 2015. “It is very rare to see this volume going around the Cape,” shipping analyst Michelle Wiese Bockmann told the BBC. In its February report, SeaIntel estimated that the canal would have to cut its transit fees by 50 percent to remain cost competitive for freighters. Oil prices have recovered slightly since then from around $30 to around $50 a barrel. Still, in early March, the Suez Canal Authority took the unprecedented step of offering a 30-percent discount to certain kinds of freighters

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In Depth

on long-haul journeys, good for a 90-day period ending early June. Another deal was announced last month, featuring 45 percent to 65 percent off tolls through early September for certain kinds of ships heading to and from Asia and the Americas. Ahmed Shawky, head of logistics and shipping at the Canal Authority, called the discounts part of the “marketing strategy that the authority is undertaking to attract more freighters.”

Cutting shipping tolls to boost traffic is not an uncommon practice worldwide and makes sense for the SCA under the circumstances, says Sherif el Demerdash, an economics professor at Cairo University. “The Suez Canal is operating in unfavorable conditions and has a lot of competition,” he says, adding that the situation will get worse as summer wears on in the Northern Hemisphere and melting ice enables some ships to sail over the North Pole. In May, China announced via the state-owned press that its cargo freighters heading for the European market would go via the Arctic, docking in The Netherlands rather than at

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Mediterranean ports after crossing the Suez Canal, as they have in the past.

Meanwhile, the June opening of the nineyear, $5.4-billion expansion of the Panama Canal to accomodate larger ships, shaves five days off the route between Asia and the Atlantic coast of North America.

Discounts are only a short-term BandAid on the situation, experts say. “I don’t see that the solution lies in fees,” says Hany Tawfik, an economist and director at the Egyptian Private Equity Association.

But Tawfik does have high hopes for Egypt’s plans to develop its maritime services industry: “The government, for once, had the right idea when it created the fully independent Suez Canal Special Economic Zone.”

The authority, created last August, is headed by Ahmed Darwish, a former minister of administrative development under President Hosni Mubarak, who then oversaw the rollout of an e-government services program. The Suez Canal Economic Zone is slated to have six ports and a logistics facility. It aims to attract

investment in a range of light to heavy industries, in addition to services like vessel bunkering, transhipping, shipbuilding and ship repair as well as in other sectors that could benefit from proximity to the canal, such as pharmaceuticals, food processing, electronics, textiles and petrochemicals. The infrastructure for the first phase of the project, which is scheduled to be finished in 2030, is estimated at $15 billion.

Darwish, who answers directly to the president, has the power to set regulations and procedures including licenses, land prices and taxes for the special zone.

In June, he told reporters that the authority was considering giving away land free to “serious” investors. Seeking to assuage fears about Egypt’s infamous red tape and unpredictable regulatory climate at an AmCham event last December, Darwish assured potential investors that “we are completely independent of the government decision-making process.”

Despite all the hype, however, just one company has signed on, the state-owned Chinese-African TEDA Investment

Group, which signed a contract with Egypt’s General Authority for Investment back in 2013 to develop six square kilometers in the zone. TEDA recently finished laying the infrastructure for a 1.6square-kilometer plot as part of its plans to build an industrial park there. “We are targeting seven manufacturing sectors, which are energy, transportation, the machine industry, the petrochemical industry, electronics, automotives, the light industry, and a section of the SMEs industries,” CEO Wei Jianqing told The Middle East Observer last August.

Darwish has also alluded to MoUs with firms including Japan’s Toyota Tsusho Corp., which says it plans to build electricity and water desalination plants in the zone, and unnamed Spanish and Russian developers. But not a single new binding deal has been announced since the zone was established last August.

“We just seemed to stall after inaugurating it, despite there being an agency solely dedicated to continuing this development,” says Hamdy Barghout, the business development director at Egytrans. In fact, speeding up canal crossings has also had an unintended chilling effect on local businesses that service cargo freighters. With waiting time at the canal now reduced from around 11 hours to just three, there is no longer time for loading food, refueling and other shipping maintenance services that have traditionally been performed by operators around the canal, says Gamal Morsy, deputy head of the ship servicing chamber at the Suez Chamber of Commerce, He reports a 50-percent drop in the freight servicing business since the expansion. “If a freight wants to be serviced, it needs to park, which means penalties for voluntarily stopping in addition to the docking fee,” says Morsy. “As a result, the freight prefer to stop at another port where there are no penalties if they need supplies.”

Darwish argues that developing the zone is a long-term process. “By 2020, the infrastructure we want will be up and running,” he said confidently at a press event in March. The first phase of the project is supposed to be complete by 2030 and the second by 2050.

BUSINESS MONTHLY ARCHIVES

In Depth

The Canal Authority may not be able to wait that long. The SCA is on the hook to pay back the LE 64 billion plus some LE 7.7 billion every year in interest it borrowed from the public via Suez Canal certificates to finance the canal expansion. The Central Bank promised when the certificates were sold back in 2014 that the repayment would come directly from canal revenues rather than from the national treasury. Payments on the certificates took 20 percent of the canal’s 2015 revenues. Meanwhile, a number of reports have indicated that the SCA has borrowed from local banks over the past year in order to pay foreign contractors for their work on the canal project.

In the meantime, analysts and potential investors have raised concerns about whether the Suez Canal Zone is offering

tangible incentives to the private sector.

Specifically, they’ve objected to the 22.5-percent standard corporate tax rate set by the Ministry of Finance. Former minister and advisor for maritime transportation Ahmed Sultan told the Daily News Egypt in February that the steep tax was a “discouraging factor to any investor and is unsuitable for ports and free zones.” Many raise the example of Jabel Ali, an industrial free port zone in Dubai that charges companies no tax for 50 years and offers other incentives such as guaranteed repatriation of their capital, freedom from import and re-export duties and currency restrictions and permission to hire a foreign workforce. The zone was established back in 1985 with 19 companies; currently it houses more than 7,100 firms from 100 different countries.

Business Monthly – July 2016

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SOHA EL GABI

MOBILE INTERNET

EGYPT TO GET 4G—EVENTUALLY

BY TAMER HAFEZ

I

n 2014, a 22-year-old call center agent launched an Internet Revolution. Fed up with Egypt’s slow, unreliable internet service, he called upon fellow web surfers to join him in protest by paying their internet bills in coins, slowing down the cashiers at the country’s internet service providers the same way the networks were slowing down their customers’ data transfers. The movement garnered the attention of the media and succeeded in annoying ISPs, but two years later, Egypt still has some of the slowest, most expensive internet service in the world. The nation now has 48.3 million active internet users, according to the global research group We are Social’s “Digital in 2016” report. But Egypt ranked dead last in online connection speed among a survey of 31 countries.

Experts have been eagerly awaiting new technologies to push Egyptian companies to offer better, cheaper internet—specifically, for the advent of 4G, or fourth generation, mobile service. Officials have been promising 4G, which is already available in much of the world, for the last three years. In May, the National Telecom Regulatory Authority finally announced that it would offer 4G licenses to

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Business Monthly – July 2016

Egypt’s four mobile telecom operators, paving the way for them to offer web service that’s reportedly three times faster than the current 3G network, which has become less and less reliable. With more and more Egyptians accessing the web via their mobile phones, “The 3G network is now overloaded. This is why it’s slow and crashes frequently,” says Hamdy el Laithy, the head of LENATEL for Telecom Services. As of March, there were some 96 million mobile subscriptions; 23 million of them using the 3G network to access the internet,

In Depth

according to government figures. “The additional capacity of 4G technology will allow higher speeds and more users,” says Laithy.

Egypt’s three mobile operators, Orange (formerly Mobinil), Vodafone Egypt and Etisalat Misr, as well as Telecom Egypt, the state-owned fixed line monopoly, have first dibs on the 4G licenses, according to a statement by Orange.

Minister of Communications and Information Technology Yasser ElKady told Reuters last month that if local telecoms don’t opt to buy the licenses by the first week in August, they will be auctioned to foreign telecom firms.

But even as the licenses remain in flux, electronics manufacturers are signing deals to make 4G smartphones, SIM cards and infrastructure components, which are cheaper to produce than 3G hardware. This could translate into more affordable smartphones for millions of Egyptian consumers. Only 3 percent of mobile phones in Egypt are currently estimated to be 4G compatible, meaning the market potential for 4G devices is huge.

Sooner or later, analysts agree that the market will demand 4G regardless of which firms end up providing it.

Egypt is one of just three countries in Africa—along with Chad, Libya and Sudan—that don’t have 4G technology yet. “We are late, because up until a few years ago decision makers believed that 3G would be fast enough,” says Laithy, who adds that the upgrade was further postponed amid the confusion in the telecom sector over awarding a so-called fourth mobile license to TE. 4G, the next step up from 3G’s promise of “mobile broadband,” has the potential to enable things like egovernment services, interactive learning and other things that depend on high-quality video streaming. “4G services will have positive societal and economic ramifications,” ElKady recently told audiences at the Techne Summit in Alexandria in May, noting that faster internet speeds will help

boost foreign investment and create a better business environment. “Internet is a major factor that companies look at before they come into a country.

Without internet access, businesses can’t reach their customers or suppliers,” says Ismail Eid, the head of AG Projects, a local telecom solutions firm. Egypt ranked 101st out of 140 countries in terms of internet bandwidth in the World Economic Forum’s 2015/16 Global Competitiveness Report. “Such a low ranking is very worrying,” says Eid.

“WE ARE LATE, BECAUSE UP UNTIL A FEW YEARS AGO, DECISION MAKERS BELIEVED THAT 3G WOULD BE FAST ENOUGH.”

How soon Egypt can start enjoying the benefits of 4G depends on how fast the existing network is upgraded.

In 2015, Telecom Egypt, which owns and runs Egypt’s internet infrastructure, announced it had begun work to replace the country’s outdated and overloaded copper cable network with modern fiber optic cables, which are generally required to handle 4G speeds. TE was supposed to have connected 4 million customers to fiber optics by the end of the year, but by all accounts, very little of that work has been completed. Mohamed Abou Koraish, the secretary general of the Telecom Engineers Association, complains that only a few neighborhoods have been outfitted with the new cables. “TE is laying the optic fiber network haphazardly,” he says.

Concerns have been raised that Egypt’s outdated network infrastructure could delay the rollout of 4G services. In the meantime, Orange relies on microwaves, which enable faster

service than what’s possible via the old copper lines. Still, “It is true that we need a fiber backbone,” says Yves Gauthier, the CEO of Orange Egypt.

Until the country is outfitted with a state-of-the-art network infrastructure, the quality of the 4G signal will not be optimum, he acknowledges.

In an interview, Gauthier told Business Monthly that 4G is the “normal and necessary evolution” of his company’s services. “4G allows us to offer the customers high-speed internet in mobile; more than 100Mb/s compared to 30Mb/s,” says Gauthier, who noted that the company has yet to determine the cost of necessary upgrades to the company’s mobile towers. Meanwhile, the other local firms have yet to voice enthusiasm for the government’s terms. Vodafone Egypt’s CEO, Ahmed Essam, declined to comment on whether the company would sign on to the 4G deal by the August deadline, but he acknowledged that paying half the costs in hard currency was “a concern” at a time when local businesses are struggling to get their hands on dollars. “All our revenue is in Egyptian pounds,” he says. Etisalat did not respond to requests for comment, but CEO Hazem Metwally told Al Masry Al Youm in late June that the price was “too high.” Neither did Telecom Egypt respond to interview requests, but in a June interview with Al Mal, CEO Tamer Gadallah said the firm was exploring the possibility of taking out a bank loan in foreign currency to cover the cost of the 4G license.

Whenever 4G does come online in Egypt, the new hardware sales that come with it promise to be lucrative, as consumers rush to upgrade their phones to achieve faster online connections. This wide open consumer market and relatively low local production costs are motivating firms to get in on the ground floor of the 4G hardware market. “The scope for business for us is endless,” says Mohamed Ismail, head of technology development at Techno Mobile for Middle East and North Africa. He says his firm is

Business Monthly – July 2016

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SOHA EL GABI

In Depth

currently in negotiations with the ICT ministry to build a local 4G mobile phone factory in East Port Said. “The minister seems enthusiastic,” says Ismail.

Sico Technology has signed an agreement with China’s Megan Group to build a 4G smartphone and tablet factory in the Borg el Arab industrial zone, with production set to start in January 2018. “Exports will be 65 percent of production,” says Mohamed Salem, Sico’s chairman. In May, Egyptian officials met with representatives from Chinese telecoms OPPO and Huawei to discuss building factories in Egypt to manufacture 4G network equipment and smartphones.

In India, as part of Prime Minister Narendra Modi’s “Make in India” campaign, which aims to boost the manufacturing sector in an effort to create jobs and improve the economy, the state has provided tax breaks and other incentives to telecom manufacturers that open factories there.

As a result, a number of major players, including Samsung and Oppo, have announced plans to move their assembly lines to the subcontinent.

“Local manufacturers need something

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Business Monthly – July 2016

like that,” says Salem. “We missed that opportunity when 3G phones were first introduced,” he adds.

“Market growth could have been huge if we got on the bandwagon early.” But at the moment, all the mobile phones sold in Egypt are imported. Not only does this mean that phones are more expensive for consumers; in a country where mobile penetration is more than 100 percent, the lack of a local telecom manufacturing industry represents a vast missed opportunity.

“This technology will allow breakthrough services,” says Koraish of the Telecom Engineers Association. In particular, the faster speeds of 4G should enable Egyptians to stream TV shows and movies online without enduring the extended buffering with which local internet users must now regularly contend. “This will give the entertainment business a strong boost,” says Koraish. “It will benefit the producers and makers as well as those who make the devices.” The faster internet could also facilitate applications that enable remote control of precise activities like surgery.

“At the core of innovation in the

future is the ability to see and influence what is happening in real time.

And 4G has the potential to allow that,” says Koraish. “The government could also offer all its services via the internet with 4G, which will have the capacity to handle tens of millions of users at the same time.”

There are concerns, however, that the high cost of data plans could limit the growth of 4G. Analysts point out that emerging-market consumers already tend to save their internet activity for when they’re at home or in a café that has free Wi-Fi, due to the expense of mobile internet packages.

Analysts predict that 4G plans will be even pricier, at least initially, as telecom operators look to cover their costs. Gauthier, the Orange CEO, argues that 4G will not be any more expensive than 3G, in terms of per unit costs, but faster connections use more data, which naturally costs more. But he takes the long view: With more and more Egyptians going online, faster, more reliable internet is an easy sell. “Why do consumers choose one technology over another?

Because it brings them more speed, a better experience.”

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Business Monthly – July 2016

Be our guest Tourism remains down, but hotels are sprouting like mushrooms in Cairo. In the lean years since 2011, the hospitality industry in the capital has survived by turning to new revenue streams.

By Edmund Bower

Business Monthly – July 2016

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COURTESYY OF THE KEMPINSKI SOMA BAY

Cover Story

SEA OF WOE: RESORTS LIKE THE KEMPINSKY HOTEL SOMA BAY, WHICH HAS 325 ROOMS AND A PRIVATE BEACH, ARE ALL BUT DESERTED SINCE 2011.

T

he news in May that an EgyptAir plane heading from Paris to Cairo had crashed into the Mediterranean Sea, killing all 66 people on board, was only the latest in a string of blows to hit Egypt’s tourism sector. Just when the industry was showing nascent signs of a recovery following the turmoil since 2011, a string of disasters hit—including the accidental killing of a dozen Mexican tourists by security forces last September and the deadly crash of a Russian airliner in the Sinai the following month. In January, just 400,000 tourists visited the country, compared to nearly 1.1 million in January of 2010. “You cannot call what’s happening a drop—it’s a collapse.”

Amani el-Torgoman, a board member of Egypt’s Tourism Federation, told Bloomberg.

Still, the hotel industry in Egypt is growing, especially in the capital. At least 10 large new hotels are set to open in the country by 2020, eight of them in Cairo. Even with foreign holidaymakers staying away, business travelers have helped fill the gap, while upscale hotels are relying increasingly on revenue from corporate events, weddings and other non-tourism dependent sources.

One company, Starwood Hotels and Resorts Worldwide, plans to add a total of 1,136 rooms in Cairo by the end of next year.

AccorHotels, which owns the Sofitel in Zamalek in addition to two Novotels, plans to open its sixth property in Cairo, the LE 1-billion, 350-room Novotel Nasr City, in 2019. The five-star Hilton Cairo Nile Maadi is currently under construction in the 23-story SECON Nile Tower. Several projects are also slated for the booming satellite city of New Cairo, with Swissôtel and Westin both planning new luxury hotels for the Katameya district. Last April, the 199-room Hilton Alexandria King’s Ranch opened outside Egypt’s second city, advertising itself as

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Business Monthly – July 2016

a “secluded haven in a new industrial area” with easy access to the Borg El Arab airport.

The Westin in Katameya Dunes will be the first of three projects that the U.S.-based Starwood chain is completing over the next two years, including the renovation of the Sheraton in Giza, which has been closed since 2011. But the company's most talked-about project is the St. Regis Cairo, which has been billed by its architect as Egypt’s first six-star hotel. With 283 rooms and 93 serviced apartments for longer stays, the 39-story St. Regis will also feature five restaurants, indoor and outdoor swimming pools and a personal butler service. “It will be the most luxurious hotel in Cairo,” says Senior Development Manager Shaimaa Hamza of Qatari Diar, the investment firm behind the project.

Medha Sandrasagara of the regional office of Chicago-based real estate consultancy Jones Lang

EDMUND BOWER

Cover Story

STAIRWAY TO SUCCESS: CAIRO’S SOON TO BE OPENED STEIGENBERGER HOTEL EL TAHRIR WILL CATER TO BUSINESS TRAVELERS AND CORPORATE EVENTS.

Lasalle says that although hotel occupancy rates in Egypt are down from pre-revolution levels, hotels in Cairo managed to fill some 54 percent of their rooms last year—down from 65 to 75 percent prior to 2011, but respectable compared to areas of the country like the Red Sea coast and Upper Egypt, where hotels are barely staying afloat.

While the economy has lagged during the last five years, some believe investors are starting to trickle back.

“Many see the potential for investing in Egypt,” writes Sandrasagara in an email. In Cairo, “over the last two years, the focus has been mainly on business tourism.”

“We get few leisure customers anymore,” acknowledges Mehdi Zaanoun, general manager of the Kempinski Nile Hotel Garden City, who insists that the hotel still gets just as many corporate guests, “if not more, than before 2011.” Last year, the international chain opened the Royal Maxim Palace Kempinski

Cairo, its second high-end hotel in the capital. At the time, then general manager Oliver Kahf explained to a reporter at the Daily News Egypt that “the tourism market is not our main focus.” Rather, the five-star hotel, which ultimately plans to feature nine different eateries and bars, is aimed at attracting upscale local residents of surrounding New Cairo.

The Royal Maxim offers everything from Southeast Asian fusion cuisine to homemade gelato. Romanov, the hotel’s plush steakhouse, serves an LE 850 hamburger with truffles and gold leaf. Most of the restaurant clientele are well-heeled “locals from New Cairo, and resident expats mostly,” says the hotel’s current general manager, Paneet Singh. In addition to 10 meeting rooms, the Royal Maxim boasts “Egypt’s largest ballroom.” Singh says: “We offer space for meetings, sales pitches, conferences.”

The Steigenberger Hotel El Tahrir Cairo, set to open later this year, is a

four-star facility catering to a slightly more budget-minded clientele than five-star establishments like the St. Regis and the Royal Maxim Palace. It will be the first Cairo property of German-based Steigenberger Hotels and Resorts, the parent company of the 87-year-old Cecil Hotel in Alexandria. Offering several “executive board meeting rooms” as well as a “cyber corner,” six meeting rooms and “on-site dedicated meeting planners,” the hotel is also heavily focused on business travelers. “We see a lot of potential for this hotel,” says Tewfik El Kady, the chain’s managing director for the Middle East, adding that he expects the Steigenberger’s occupancy to reach 65 percent within the first six months after opening: “There are a lot of different companies doing business in Egypt.”

In a recent report tracking Egypt’s hotel industry, real-estate consultancy Collier’s International, notes that there is increasing demand for mid-range

Business Monthly – July 2016

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COURTESY OF THE FOUR SEASONS

Cover Story

BUYING THE KNOT: UNLIKE TOURISM, LAVISH WEDDINGS ARE A RELIABLE MONEY MAKER FOR LUXURY CAIRO HOTELS LIKE THE FOUR SEASONS NILE PLAZA.

hotels in the capital catering to “price conscious corporate and leisure guests.” In an overview for the first quarter of 2016, Colliers says that domestic travelers from elsewhere in Egypt are a growing market for hotels in the capital; an estimated 20 percent of Cairo hotel guests are “domestic,” while Libyans and visitors from the Arab Gulf—tourists and business travelers alike—are another promising niche.

But perhaps the most reliable moneymaker for hotels in the capital is weddings. “Fifteen percent of our income comes from weddings alone,” says Singh, of the Royal Maxim Palace Kempinski. Egypt’s rapidly growing population—around half of which are under the age of 25—means that matrimony provides a consistent and ever-growing stream of revenue for the hotel industry, particularly in the capital.

According to state statistics agency CAPMAS, some 953,000 Egyptian couples tied the knot in 2014. And

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wealthy families are prepared to spend through the nose on large, lavish ceremonies. “Only Indians spend more on weddings than Egyptians,” says Singh, who has worked in hotels all over the world.

Weddings at the Royal Maxim Palace start at LE 350 a head. With a 200-guest minimum, that means brides and grooms must shell out at least LE 70,000—and that’s not including a wedding cake, flowers, music, a photographer and so on.

And a wedding in the capital is de rigueur for young Egyptians. “You get people from the Delta, Upper Egypt—all over,” says El Kady. “They want a wedding in the city.” And of course, wealthy families are willing to spare no expense to ensure suitably impressive nuptials. On top of the reception costs, rooms must be booked for out-of-town guests. With big Egyptian weddings attended by as many as 3,000 people, the most popular hotels stand to make a healthy profit.

Even with tourism down, industry insiders say Cairo currently lacks the capacity to meet this growing demand. “There are not enough hotels,” says El Kady. According to Colliers, the Egyptian capital currently has around 15,000 hotel rooms. By way of comparison, Dubai, a city with only a quarter of the population of Cairo, has some 83,000, according to hotel market research firm STR Global. El Kady adds that there is a growing appetite for venues for corporate events; firms looking for an event space in a five-star hotel are generally forced to book two to three months in advance.

In other parts of the country, the hospitality industry is struggling to stay afloat. The Red Sea tourist capital of Sharm el-Sheikh has seen an abrupt drop in visitors, particularly after Russia halted trips to Egypt and the UK stopped flights to Sharm in the wake of the Metrojet plane crash last October. Some 500 resorts and

EDMUND BOWER

Cover Story

GOLDEN AGE: THE CENTURY-OLD WINDSOR HOTEL, A RELIC OF THE BRITISH COLONIAL ERA, IS ONE OF CAIRO’S FEW REMAINING INDEPENDENT HOTELS.

hotels have closed their doors, a tourism ministry official told the Daily News Egypt last month, “and more will follow if the situation does not change.”

Many Red Sea beach resorts—traditionally the bread and butter of Egypt’s tourist industry—are largely deserted. The Kempinski Hotel Soma Bay, some 50 miles south of Hurghada, has 325 rooms, a 7,500square-meter spa and a private beach offering scuba diving and other watersports. However, currently, “Our occupancy is less than 35 percent,” says General Manager Russel Storey.

“We have to look to other markets,” says Storey, who explains that the hotel is trying to target new customers in Eastern Europe and Asia, particularly China. Egypt’s tourism sector has also become increasingly dependent on other Arab markets to fill the gap left by skittish Western tourists.

In the meantime, the government

has offered tax incentives to the hospitality industry, and El Kady argues that “it’s a good time to invest,” because land prices and construction costs are low. “We always invest in the low periods,” he says.

The fact that upscale hotels nearly all charge in hard currency also gives them an edge as the pound has continued to decline, while labor costs and raw materials are cheaper than ever.

Big chains like the Kempinski also have the resources to weather the storm, they say. Storey insists that, even with the drop in tourism, the Kempinski Soma Bay is staying above water. “It’s not the cash cow it once was,” he admits, “but I pay so little for staff, we could stay profitable with occupancy rates of 25, even 20 percent.” And he remains confident that tourism will rebound.

“The market will bounce back,” says Storey, who argues that Egypt’s white sandy beaches and cultural artefacts make the country a uniquely attrac-

tive tourist destination. “We have the most beautiful places in the world,” agrees El Kady of the Steigenberger.

But while multinational hospitality chains open gleaming new facilities catering to corporate guests around the capital, small, independent hotels have all but disappeared. The historic Windsor Hotel near Ataba Square is a relic of a bygone era, when downtown Cairo was a cosmopolitan district frequented by visitors of many nationalities. Originally built in 1893 as a bathhouse for the royal family, the Windsor functioned as a British officers’ club during the First World War. Today, its old-fashioned mahogany bar, overseen by stuffed stag heads and old black-and-white photos of celebrities on the walls, is mostly deserted—apart from a handful of budget travelers and the occasional film crew seeking to recreate a time when Cairo was “Paris on the Nile.”

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Cover Story

SEVENTH HEAVEN Suites at the Burj al-Arab Hotel in Dubai (there are no single rooms), which bills itself as the world’s most luxurious hotel, range from $1,200 a night to $27,000 for the Royal Suite, which features a revolving bed and a cinema room. Guests can approach the hotel via a dedicated bridge, passing the fleet of all-white, chauffeured Rolls Royce Phantoms, or by air, landing on the 689-foot helipad. During their stay, guests can dine on seafood surrounded by a floor-to-ceiling, 700,000-gallon aquarium, have a caviar facial or play video games on the gold-plated iPad that comes with their suite.

Since it opened in 1999, the Burj al-Arab has become one of a handful of ultra-luxury establishments billed as six or sevenstar hotels—one or two levels up from the maximum five stars that have traditionally been assigned to top-of-the-line hospitality facilities. While many dismiss the new rankings as a marketing ploy, hotels like the Burj al-Arab have gone to great lengths to offer an unparalleled degree of opulence to their super rich clientele. Personal butlers—there to see to perform tasks from booking theater tickets to running your bath—dedicated chefs and custom-outfitted suites are among the extra touches that set such establishments a cut above mere ordinary luxury, they argue. The Jumeirah Group, which owns the Burj al-Arab, claims that the seven-star rating came from a British journalist who was so wowed by its sumptuous facilities that she pronounced it a seven-star hotel. “There’s not a lot we can do to stop it,” a company spokeswoman told a reporter in 2009.

Neither has the Burj al-Arab gone out of its way to disown those extra stars. But whatever the true origin of the rating, the hotel industry has clearly capitalized on the general murkiness about what constitutes a three-star hotel, a five-star hotel, and so on. Although the one- to five-star system has become internationally recognized over the years, there is no regulator setting a global standard; as a result, ratings criteria vary widely from country to country. Tourist savvy nations like France and the United Kingdom, for example, have their own hotel rating systems in place, and purport to evaluate facilities annually.

Hotels are held to different standards in different parts of the world. In Italy, which welcomed the fifth-highest number of tourist arrivals in 2015, each region uses its own standards to “star” hotels. A four-star hotel in Rome could be a three-star establishment in Venice. The United States also has several competing systems—the American Automobile Association awards diamonds, while Forbes Travel, another leading rating service, awards stars.

Still, over time, the star system has developed generally accepted definitions. A one-star facility, which usually caters to backpackers and other budget travelers, means shared bathrooms and maybe a vending machine. To claim three stars, hotel rooms are expected to have telephones and televisions as well as ensuite bathrooms. Five stars has long been the top of the line, catering to businessmen and well-to-do guests around the world.

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But whatever their rating, all hotels are under pressure to deliver on their guests’ expectations. That may be a key reason why, in the wake of the Burj al-Arab’s trailblazing “seven-star” luxury, only a very few establishments have jumped on the sixand seven-star bandwagon. The forthcoming Solis Orlando Hotel in Florida, set to open in 2018, officially calls itself a fivestar facility, albeit with “seven-star amenities”. Even the Pangu 7 Star Hotel in Beijing—which hosted Bill Gates during the 2008 Olympic Games—professes to hold no more than five stars.

A cautionary tale may be the TownHouse Galleria in Milan, which opened in 2007 as the Seven Stars Galleria after going so far as to hire an internationally known certification firm, Geneva-based SGS, to come up with a whole new set of standards for seven-star hotels, thereby naming the TownHouse the world’s first. Located above Prada and Gucci in the historic Galleria Vittorio Emanuele II shopping arcade in central Milan, right next door to the Duomo, the city’s famous cathedral, the hotel features individually furnished rooms, some featuring original frescos, some with pianos. Early reviews noted that rooms were custom-outfitted by the staff for guests—with yoga mats for fitness buffs, personal chefs or a dedicated play area for families.

Since its opening, however, the Townhouse appears to have quietly backed away from its seven-star strategy. Its own website now bills the hotel as a run-of-the-mill “five-star luxury hotel,” though “seven-star” suites are still on offer. Rooms currently begin around a relatively modest €342 for a double, with the Presidential Suite going for €4,500 a night. The Penthouse Suite, which was originally offered (complete with a chef and butler) at €15,000 per night, is no longer available. The shift perhaps highlights the risk of promising the ultimate standard of luxury— you’ve then got to deliver it.

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Stock Analysis

Dog days of summer

R

amadan began in early June, and average daily trading volume declined by some 18 percent, from LE 580 million before the Holy Month to LE 478 million in the second half of the period from May 15 to June 15. The benchmark EGX 30 inched up 0.6 percent to 7,414.8, firming up its year-to-date gain of 5.8 percent. The EGX 70, on the other hand, lost ground for the second month in a row, slipping 2.4 percent to 359.7 and extending its year-to-date loss to 5 percent. While foreign institutions were net buyers in the period, Egyptians and Arabs were net sellers. Overall, declines continued to outnumber advances by a ratio of 3-to-1.

The old axiom “what goes up must come down” manifested itself during the period. Single-digit stocks that led the gainers list the month before all fell. For instance, Ajwa Group for Food Industries (AJWA) dropped 25 percent to LE 1.74, Ismailia Poultry (ISMA) fell 18 percent to LE 1.75, and El Nasr for Manufacturing Agricultural Crops (ELNA) was down 11 percent to LE 8.38. Meanwhile, stocks that had been soaring recently on mergers and acquisitions news succumbed after talks fell through. Beltone Financial Holding (BTFH) shares dropped around 15 percent to LE 11.01 after the company called off its planned acquisition of CI Capital,

the investment banking arm of Commercial International Bank (COMI). CIB shares also fell 2.9 percent to LE 41.97, and so did Orascom Telecom & Media Holding (OTMT), the parent company of Beltone Financial, which was down 13 percent to LE 0.61.

On the positive side, both small and large caps featured in the top gainers list. For small caps, Pharaoh Tech (PTCC), an electrical engineering company, and Mohandes Insurance (MOIN) advanced 38 percent and 23 percent to LE 12.44 and LE 16.63, respectively. Among large caps, Pioneers Holding (PIOH) and Alexandria Mineral Oils (AMOC) advanced 18.5 percent and 18 percent to LE 10.40 and LE 31.67, respectively. Also, EFG Hermes Holding (HRHO) advanced 17 percent after the company said it would return some of the proceeds from its sale of Credit Libanais, while Telecom Egypt (ETEL) increased 17 percent to LE 9.10 on the news that 4G licenses will be offered to all telecom players. Also, EIPICO (PHAR) advanced 13 percent to LE 76 after pharmaceutical companies were allowed to raise drug prices.

As Ramadan drew to a close late last month, volatility was on the horizon. Namely, the “Brexit” vote for Britain to exit the European Union was expected to continue roiling global markets, Egypt included.

IN THE SPOTLIGHT

Cleopatra Hospital Egypt’s latest market debut featured Cleopatra Hospital, which floated 25 percent of the company’s shares in a simultaneous international (85 percent) and local (15 percent) retail offering. The stock was priced at LE 9 per share versus a fair value of LE 12.16 a share set by an independent financial advisor. The IPO valued the largest Egyptian hospital group at LE 1.4 billion prior to a rights offering that should inject LE 360 million into the group. Over the three weeks since its June 2 offering (which saw shares climb by 11 percent), the stock did not close above LE 10.

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Business Monthly – July 2016

Market Watch

Capital Markets Egyptian price indices - EGX 30

7415

EGX 30

Egyptian price indices - EGX 70

360

EGX 70

Selected sector performance

Business Monthly – July 2016

I

35

Market Watch

Capital Markets Corporate News Egyptian Refining Co. to start production in 2017 The Egyptian Refining Company (ERC), a subsidiary of Qalaa Holdings (CCAP), is scheduled to begin production in June of next year. The refinery is set to produce 4.6 million tons of products per annum, more than the previously reported 4.2 million. On a separate note, ASCOM, another Qalaa Holdings subsidiary, will finalize licensing for its gold mining concession in Ethiopia. It is scheduled to be operational after 12-18 months, while full-scale production is expected to begin in 2019. ASCOM also plans to expand its manufacture of calcium carbonate, while it works on exits of other noncore subsidiaries. Meanwhile, Qalaa will prioritize the repayment of its $200-million debt in order to reduce its liabilities from LE 6.5 billion to LE 4 billion by 2018.

Juhayna to raise prices by 20 percent Dairy and juice giant Juhayna Food Industries (JUFO) is currently considering gradually increasing its prices by around 20 percent across the board, in light of the devaluation of the Egyptian pound versus the U.S. dollar. This has raised production costs by some 20 percent. Meanwhile, the company signed a cooperation protocol with Fawry, an electronic payment platform, to develop an e-payment network, with annual investments of LE 15 million to streamline its collection cycle.

Beltone and CIB call off CI Capital deal Commercial International Bank (COMI) scrapped the sale of its investment banking unit, CI Capital, to Beltone Financial holding (BTFH). CIB will refund a down payment made by Beltone, which intends to acquire one of the financial lease companies in the market following the failure of the CI Capital takeover. Meanwhile, BTFH will increase its authorized capital from LE 1 billion to LE 3 billion and issued and

paid capital from LE 0.34 billion to LE 1.34 billion, distributed over 500 million shares with a par value of LE 2 per share. On a separate note, BTFH said it signed an agreement to acquire 51 percent of Auerbach Grayson, a New Yorkbased brokerage specializing in global trade execution and in-depth research on developed, frontier and emerging markets for U.S. institutional investors.

Egypt to offer 4G licenses The Ministry of Communications & Information Technology plans to offer 4G frequencies in addition to more 3G frequencies as part of a tender to telecom operators. The licenses are reportedly priced at around LE 3.5 billion for Vodafone Egypt (VFE) and Orange Egypt (OREG), LE 4.6 billion for Etisalat Misr (EM), and LE 7.0 billion for Telecom Egypt (ETEL). Moreover, two international gateway licenses, valued at LE 1.8 billion, will be offered to Orange and Vodafone.

Companies will have to pay 50 percent of the cost in dollars.

The National Telecom Regulatory Authority will guarantee that mobile operators provide landline services virtually on TE's network, while the latter will provide 2G and 3G mobile services virtually using mobile operators' networks through agreements between participating telecoms. Operators are required to respond to the deal by early August.

EFG Hermes completes Credit Libanais sale EFG Hermes Holding (HRHO) has completed the sale of an LE 310-million, 40-percent stake in Credit Libanais after obtaining board approval. EFG Hermes' board of directors agreed in March to sell a 40-percent stake in Credit Libanais to Arab and Lebanese investors at $33 per share, with plans to sell its remaining shares by next May. Meanwhile, the board recommended distributing LE 1.08 billion, or 40 percent, of the Credit Libanais proceeds to shareholders through a cash dividend or share buyback.

International stock price indices Jun. 15

May 15

March 15

Jan.15

value

% change

value

% change

value

% change

DOW

17,640.00

17,535.32

0.60%

17,251.00

2.25%

15,988.08

10.33%

NASDAQ

4,834.93

4,717.68

2.49%

4,728.67

2.25%

4,488.42

7.72%

S&P 500

2,071.50

2,046.61

1.22%

2,015.93

2.76%

1,880.33

10.17%

FTSE 100

5,966.80

6,138.50

-2.80%

6,139.97

-2.82%

5,804.10

2.80%

NIKKEI 225

15,919.58

16,412.21

-3.00%

17,117.07

-7.00%

17,147.11

-7.16%

36

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Business Monthly – July 2016

Market Watch

Money & Banking INTEREST RATES

BANKING & RESERVES (in millions of LE) 2015

2016

August

September

October

November

December

January

February

March

Reserve Money

399,916

424,431

425,386

431,665

420,638

418,881

410,150

430,378

Int'l Reserves (net, US$ mln)

16,335

16,415

16,423

16,445

16,478

16,534

16,586

17,011

Domestic Liquidity

1,819,119

1,850,305

1,868,174

1,876,828

1,905,464

1,909,422

1,922,685

1,987,839

Foreign Assets (net)

1,312,284

1,329,020

1,348,830

1,361,759

1,384,872

1,391,490

140,230

1,457,994

Domestic Assets

1,819,118

1,850,305

1,868,174

1,876,828

1,905,464

1,909,506

1,922,685

1,987,839

17.99

17.84

17.99

17.49

17.28

17.29

17.03

18.77

End of

Dollarization Rate (%) Discounted Bills (except CBE)

4,296

4,334

4,295

4,419

4,844

4,602

4,623

4,749

732,618

767,295

778,098

780,417

786,655

793,064

799,755

847,574

Securities (except CBE)

1,030,509

1,036,014

1,051,821

1,067,142

1,105,680

1,112,928

1,121,730

1,179,715

Currency in Circulation

322,381

331,684

326,756

323,893

324,569

326,179

325,132

331,977

Bank Loans (except CBE)

EGYPTIAN POUND EXCHANGE RATES Currency Australian Dollar Bahraini Dinar British Pound Canadian Dollar Chinese Yuan Euro Indian Rupee Japanese Yen (100) Jordanian Dinar Kuwaiti Dinar Lebanese Pound (100) Russian Rouble Saudi Riyal Turkish Lira UAE Dirham US Dollar

June 15 6.528 23.331 12.541 6.898 1.344 9.963 0.131 8.356 12.454 29.339 0.579 0.134 2.361 3.024 2.411 8.858

May 15, 2016 Amount change 6.490 0.58% 23.336 -0.02% 12.813 -2.12% 6.868 0.44% 1.358 -1.05% 10.028 -0.65% 0.132 -0.70% 8.114 2.98% 12.454 0.00% 29.319 0.07% 0.576 0.52% 0.137 -1.78% 2.361 0.00% 2.984 1.35% 2.411 0.01% 8.858 0.00%

March 15, 2016 Amount change 5.783 12.87% 20.091 16.13% 11.0103 13.90% 5.789 19.16% 1.180 13.89% 8.538 16.70% 0.114 15.11% 6.743 23.92% 10.788 15.44% 25.459 15.24% 0.499 16.03% 0.109 23.43% 2.044 15.51% 2.666 13.43% 2.088 15.47% 7.671 15.47%

Jan.16, Amount 5.426 20.563 11.245 5.434 1.185 8.496 0.116 6.629 10.969 25.641 0.508 0.102 2.080 2.577 2.125 7.807

2015 change 20.30% 13.46% 11.53% 26.94% 13.40% 17.27% 13.21% 26.05% 13.54% 14.42% 13.98% 31.52% 13.50% 17.36% 13.47% 13.46%

June 15, 2015 Amount change 5.894 10.75% 20.244 15.25% 11.876 5.60% 6.200 11.27% 1.244 7.99% 8.600 15.85% 0.119 10.57% 6.184 35.12% 10.759 15.75% 25.176 16.53% 0.505 14.65% 0.139 -3.52% 2.035 16.01% 2.795 8.18% 2.079 15.97% 7.636 16.00%

Business Monthly – July 2016

I

37

Market Watch

Key Indicators DEMOGRAPHICS 2007

2008

2009

2010

2011

2012

2013

2014

Total Population (millions)

77.5

79.1

83.5

84.5

88.0

90.2

92.2

94.7

Labor Force (millions)

23.9

24.7

25.4

26.2

25.8

27.0

27.6

28.4

Labor Force / Population (%)

32.5

32.8

33.1

33.4

33.0

32.7

32.7

31.3

8.9

8.7

9.4

9

12.0

12.7

13.2

13

Unemployment Rate (%)

SOURCE:

CENTRAL BANK OF EGYPT

BALANCE OF PAYMENTS (in millions of U.S. $) 2013/14

2015/16

2014/15

End of year

Q1

Q2

Q3

Q4

End of year

Q1

Q2

-33,702.7

-9,742.1

-10,430.3

-9,385.4

-9,227.6

-38,785.4

-9,985.9

-9,561.6

Trade Balance Exports

26,119.0

6,469.2

5,769.7

4,617.7

5,201.6

22,058.2

4,646.1

4,399.1

Imports

-59,821.7

-16,211.3

-16,200.0

-14,003.1

-14,429.2

-60,843.6

-14,632.0

-13,960.7

978.5

2,109.8

1,775.8

341.6

500.6

4,727.5

1,686.8

543.7

17,631.4

6,448.8

6,008.3

4,385.0

5,182.5

22,024.6

5,142.9

4,131.6

Services (net) Receipts Payments

16,652.9

4,339.0

4,232.5

4,043.4

4,682.2

17,297.1

3,456.1

3,587.9

Balance of Goods & Services

-32,724.2

-7,632.3

-8,654.5

-9,043.8

-8,727.3

-34,057.9

-8,299.1

-9,017.9

Transfers

30,367.9

6,188.6

5,797.2

4,963.1

4,926.8

21,875.7

4,318.8

3,992.7

Balance of Current Account

-2,356.3

-1,443.7

-2,857.3

-4,080.7

-3,800.5

-12,182.2

-3,980.0

-5,025.2

Capital & Financial Account

4,934.5

811.4

72.4

6,067.2

10,682.6

17,633.6

1,500.5

7,816.9

Foreign Direct Investment

4,119.3

1,773.2

960.0

2,947.9

689.9

6,371.0

1,385.5

1,718.5

Overall Balance

-1,478.6

410.0

-1,427.0

-29.1

4,771.0

3,724.9

3,656.7

-251.6

SOURCE:

CENTRAL BANK OF EGYPT

NON-PETROLEUM TRADE (in millions of U.S. $) Exports (Q2 2015-16) Total

Imports (Q2 2015-16)

Balance ( Q2 2015-16)

4,399.1

13,960.7

294.3

737.8

-443.5

1,469.8

4,299.6

-2,829.8

Other European countries

284.0

931.5

-647.5

Russian Federation & CIS

52.9

755.4

-702.5

1,349.9

2,825.2

-1,475.3

Asian countries (non Arab)

369.0

2,946.8

-2,577.8

African countries (non Arab)

135.8

214.9

-79.1

4.5

52.9

-48.4

438.9

1,196.6

-757.7

U.S.A. E.U.

Arab countries

Australia Other countries

-9,561.6

SOURCE:

INFLATION

The CPI (Consumer Price Index) and PPI (Producer Price Index) are based on the results of surveys of expenditure and consumption and relevant baskets of goods and weights.

SOURCE:

38

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CENTRAL BANK OF EGYPT

Business Monthly – July 2016

GDP GROWTH

Gross Domestic Product (GDP) growth rates are based on 2001-02 prices.

SOURCE:

CENTRAL BANK OF EGYPT

CENTRAL BANK OF EGYPT

TOURISM VISITS

Year 2013-14 2012-13 2011-12 2010-11 2009-10

Tourists 7.97 million 11.96 milion 10.95 millon 11.93 millon 13.7 millon SOURCE:

Change -34.7% 9.2% -8.2% -12.9% 11.4%

CENTRAL BANK OF EGYPT

Market Watch

Egypt-U.S. Trade EGYPTIAN EXPORTS TO THE U.S. (in millions of U.S. $)

EGYPTIAN IMPORTS FROM THE U.S. (in millions of U.S. $)

U.S.-EGYPT TRADE DEFICIT (in millions of U.S. $)

EGYPTIAN EXPORTS TO THE U.S. DURING APRIL 2016

EGYPTIAN IMPORTS FROM THE U.S. DURING APRIL 2016

SOURCE:

US INTERNATIONAL TRADE COMMISSION (USITC)

Business Monthly – July 2016

I

39

Trade

RED TAPE How arbitrary bureaucracy is costing Egypt money Published by the United States Department of Agriculture Analysis by Edmund Bower

L

ast December, Egypt unexpectedly turned back a 63,000-tonne shipment of French wheat because it carried trace amounts of ergot, a common grain fungus that can be poisonous in large doses. The “zero-tolerance” policy came as a surprise, since Egypt, the world’s largest wheat importer, has traditionally tolerated ergot levels of up to 0.05 percent, in line with international standards. That decision rocked the global grain trade, imperiled Egypt’s imported wheat supply and cost the country somewhere between $55 million and $82.5 million this year alone, not including legal fees from a multi-million dollar lawsuit brought by the French company.

The ergot controversy is just one example of how Egypt’s “unorthodox agriculture measures” have cost the country “cash it can’t afford” and “missed market opportunities for some of its key commodities,” according to a June report from the United States Department of Agriculture’s foreign service.

“What’s the Matter with Egyptian Agricultural Trade: How Unnecessary Regulation, Burdensome Tender Requirements and Misguided Export Taxes Cost The Economy and Consumers,” penned by a senior attaché with the USDA Cairo office, outlines how inefficient government policies have cost the country more than $860 million “in direct costs and foregone export earnings.” Arbitrary moves like the sudden ergot policy change have “cost the country dearly, eating away at precious foreign exchange, distorting trade, hindering private initiative, and undermining innovation.”

Agricultural experts roundly criticized the The Central Administration for Quarantine’s decision to reject the December wheat shipment as “out of step with the rest of the

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Business Monthly – July 2016

international trading community.” They explained that it’s virtually impossible to guarantee 100-percent ergot-free wheat shipments. “Egypt has been importing wheat under the 0.05 percent ergot threshold for years,” explained the report, and “there is no evidence that ergot has taken hold in Egypt’s wheat fields.” International wheat traders reacted to Egypt’s sudden policy change by refusing to submit bids to the General Authority for Supply Commodities’ tenders, “forcing GASC to cancel three tenders in January and February.”

On Feb. 7, the GASC and the Ministry of Agriculture backtracked on the quarantine authority’s zero-tolerance policy, stating at a press conference that Egypt would resume allowing ergot levels of up to 0.05 percent. The next day, however, a Canadian wheat shipment was turned away for ergot levels less than the benchmark, Reuters reported. The confusion has since prompted jittery international wheat traders to hike their prices from $5 to $7.50 per tonne for Egypt, which imports nearly 12 million tonnes of the grain annually.

The amount the country spends on imported wheat— needed to supply the poor with cheap, subsidized bread— was already unnecessarily high, argues the paper. “Egypt’s wheat tender specifications and inspection requirements are also unique in the global trading system, driving up its costs significantly.” It’s the only country that requires regular overseas visits by a six-member team in order to “pre-clear” wheat shipments, for example. Egypt has unusually strict limits on pest damage, while the country’s “constant delays in issuing its letters of credit add to its woes.”

Wheat is not the only crop that’s gotten more expensive as a result of rigid import policies. Soybeans and corn are also

Trade

subject to a “zero tolerance” standard regarding Ambrosia spp. seeds, which are commonly found in grain and oilseed shipments worldwide. If the plant—more commonly known as ragweed—is detected, then the entire shipment must be sieved, at a cost of $5 to $7 per tonne to the import company, before the grain can be released. “Added costs like these are, in turn, passed along to the Egyptian buyer.”

This year, to add to the ergot crisis, Egypt’s quarantine authority has been particularly vigilant about ambrosia: “It rejected four U.S. soybean cargoes in the first quarter of 2016 alone due to ambrosia presence.” The measures ultimately sent “feed prices rocketing” and spurred cooking oil shortages, while Egypt’s soybean crushers were left idle during April and May, incurring costs estimated at $4-6 million in 2016 alone. On top of that, Egypt will have to spend another $60 million to $80 million importing soybean meal and soybean oil to make up for the deficit.

Egypt’s intermittent protectionism and other “unique” cotton policies have also hindered “an already beleaguered textile industry.” The USDA report explains that “From time to time, Egypt imposes ad-hoc import bans on cotton lint in an effort to prop up local production.” It stopped issuing import permits in July 2015, for example, then allowed them again the following month. These moves disrupt the supply chain for local textile factories, since the local cotton industry has deteriorated to the point that it can’t meet their supply needs.

The textile industry is forced to make do with “inferior or unsuitable cotton varieties,” since Egypt still mostly produces the long and extra-long strand cotton, which can’t be used by most local factories, because they rely on the cheaper short and medium-staple varieties that are in demand throughout much of the world. The report estimates that using sub-standard cotton will cost the textile industry $75 million to $95 million this year.

Moreover, Egypt is the only country that requires that imported cotton be fumigated twice for pests—once at the country of origin and again at arrival—which will cost the textile industry an estimated $3 million to $5.5 million in 2016. Such measures hinder the competitiveness of Egyptian textile exports, which are already struggling to compete in the U.S. market, “even with preferential access under the Qualifying Industrial Zones agreement.”

The report argues that “Egypt’s refusal to adopt new technologies and adapt to market conditions has decimated the cotton industry.” By contrast, Burkina Faso, which adopted genetically-modified cottonseed in 2007, has now surpassed Egypt’s once-famous cotton sector. As a result, cotton has become a top generator of foreign exchange for the West African nation. Egypt’s cotton production has been declining for decades, meanwhile. In 1980, the country produced 24.3 million bales, but by 2011, annual production had dropped to 745,000, according to USDA figures. The

country’s cotton output hit an an all-time low of 320,000 in 2015; the USDA estimates output for 2016 will be just 150,000.

“Despite having a surplus production of rice, Egypt’s trade policy severely curtails exporters’ ability to conduct business,” in what could be a key crop. Egypt currently bans the export of rice, and when it has allowed it in the past, steep export taxes have been levied—measures the government says are necessary to ensure a cheap, plentiful local supply of the grain. “Yet, in the first half of 2016, rice producers and traders have held on to their stocks in an effort to force the government to lift the export ban.”

The state has responded by stubbornly refusing to lift it, however; instead, “GASC has issued three international tenders to purchase imported rice, all of which were all canceled as prices were higher than expected.” Currently, officials are looking to fill the gap with Indian rice.

If Egypt instead “allowed the market to work its course,” it could sell nearly a million tonnes of rice to the international marketplace for around $600 per tonne. But based on its past record, predicts the USDA, Egypt is likely to export just one-fifth that amount of rice and sell the rest to the local market “at a significant discount.” As a result of this counterproductive strategy, Egypt will shortchange itself to the tune of close to $500 million in “precious foreign exchange earnings the economy so desperately needs.”

The report also notes that Egypt bans the import of certain products from the United States. It argues that Egypt’s “protectionist” stance banning American poultry parts— ostensibly because of concerns about American-grown chickens meeting halal meat standards—is depriving local consumers of more affordable poultry, an excellent protein source. “The price differential between whole domestic poultry and U.S. poultry parts is close to $1 a kilo,” the report argues. However, it’s worth noting that the American poultry industry would clearly benefit from being allowed to sell its cheap and plentiful chicken to Egypt’s 90-million plus consumer market. Earlier this year, South African chicken farmers accused U.S. poultry exporters of “dumping” cheap chicken on the country, undercutting small local farmers and imperiling hundreds of thousands of jobs.

Despite Egypt’s “positive” efforts to reform food subsidies, “viewed as a package, the government’s efforts end up being a negative-sum game as any savings consumers could have capitalized on are eroded by regulatory burdens.” Egypt could dramatically improve its export earnings and lower import costs by following international standards and best practices, the report concludes. “Egypt can reverse course, improving social welfare significantly, while protecting its plant and animal health.”

Business Monthly – July 2016 I

41

EDMUND BOWER

Dining Out

IFTAR, SYRIAN-STYLE

A

BY EDMUND BOWER

s the sun begins to descend over the wide dome of the El Hosary Mosque in 6 October City, the neighborhood buzzes with activity. As the city prepares to break its Ramadan fast, taxis, microbusses and private cars discharge fleets of hungry passengers who head for the area that lies in the shadow of the mosque, known as Little Damascus.

Since 2011, when civil war broke out in their home country, Syrians have transformed the flavor of 6 October City, which

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Business Monthly – July 2016

became a magnet for many of their countrymen who have settled in Cairo in the last few years. Nearly 118,000 Syrian refugees are officially registered with the UNHCR in Egypt, but the agency believes there are many more than that living in the country. As the community has mushroomed in the satellite city on Cairo’s western outskirts, so has the assortment of restaurants and coffee shops of Little Damascus, which attracts people from all over the capital in search of authentic Levantine cuisine.

On a sultry evening toward the end of the Holy Month, just before iftar, diners

claim their spots at the wooden tables that fill the square off the main road. Takeaway containers in front of them, they patiently eyeball their frosted water bottles as they wait for the muezzin to sound the call to the evening prayer. Charcoal smoke billows from the eateries surrounding the midan, filling the air with the smell of grilled meat.

Barakat Chicken, a takeout joint on the east side of the square, is packed with customers clutching crumpled banknotes in their outstretched arms, shouting orders at the sweaty man behind the cash register.

Behind him, two dozen or so whole

EDMUND BOWER

Dining Out

chickens rotate on spits in a rotisserie. The menu offers quarters (LE 21), halves (LE 33) or whole roasted birds (LE 65), the juicy meat in its crispy skin served on a bed of spicy yellow rice, with pickled vegetables and French fries. A budget option is the crispy fried chicken sandwich (LE 15) and slightly less greasy grilled shish tawook (LE 12). Kebabs and kofta both go for LE 120 a kilo, and the menu also includes a range of vegetarian favorites, including taboula (LE 10), fatoosh (LE 12), hummus (LE 10), and borak (LE 10): crispy flutes of filo pastry topped with poppy seeds and stuffed with melted white cheese that explode in your mouth with each bite.

But the biggest draw is that quintessential Syrian street food, chicken shawarma (LE 15 for a sandwich). A three-foot-tall tower of glistening white meat roasts slowly on a fiery grill. With long strokes, the pot-bellied shawarma chef glides his knife across it, cutting golden slices of flesh before spinning the tower around to reach the freshly cooked chicken on the other side. He hands the shaved meat to a pair of sandwich makers, who quickly coat fresh pieces of thin, pancake-like shami bread with mayonnaise and tuck the moist chicken bits inside. Five minutes before iftar, the crowd snaps up the shawarma sandwiches as fast as the workers can wrap and bag them.

On the other side of the square, Set alSham also features the requisite outdoor

shawarma grill—these are a trademark of Little Damascus—but inside, there are bread-based treats like manakeesh (LE 2 to LE 9 for a small pie), Levantine pizzas topped with thyme, minced lamb or halloumi cheese. They’re made to order, the dough kneaded out on a floured countertop before being fed into a hand-cranked dough roller that flattens it into dinnerplate sized sheets. The fresh bread emerges warm from the oven with the flavors infused into the dough. Set al-Sham also offers the Egyptian version of manakeesh, feteer, with tomatoes, olives, cheese and meat (LE 25).

In the square, groups of men, fresh from the office in their shirtsleeves, women in colorful hijabs and families of all sizes are gathered for the evening feast. When the call rings out, a sudden and profound hush falls over the crowd, as the diners tuck into their meals, turning their attention between bites to the prime-time Holy Month mini-series being broadcast on large white screens.

Down from Barakat is Rosto, which spans half the length of the square, with grills positioned on both sides of a small side street off the midan. This wide alleyway, lined with apartment buildings with Italianate balconies, is known as Syria Street, the nerve center of Little Damascus.

This pedestrian-only thoroughfare is filled with wicker chairs, glass tables and sofas to accommodate the largely Syrian

patrons of its coffee shops, ice-cream parlors and patisseries.

The prices are higher here than in the square. Dessert shops are stacked with sticky seasonal sweets. Kunafa, the ubiquitous syrupy Ramadan cheese dessert, is cooked outdoors on charcoal grills.

Dawod Sweets is a confectionary selling all sorts of Levantine treats such as baklawa and warbat (LE 5), variations on the usual filo pastry stuffed with pistachios and simple syrup, and ghraybeh, crumbly biscuits topped with nuts and chocolate.

The kunafa they sell here (LE 15), comes warm, straight off the grill, so the halfmelted cheese comes away in bright white strands that cling to the plate.

Gradually, the black fumes from the grill are replaced by the soft aromatic smoke of shisha pipes. The restaurant workers are finally allowed some respite and perhaps a cigarette break, as the crowds whittle down to a handful of latecomers. The tables along the street and covering the square are full of friends and families chatting over steaming tea and sucking on shisha pipes. Little Damascus will stay buzzing late into the evening. As the night wears on, the crowd will begin to think about sohour. In preparation, the local Syrian ful and falafel shops will begin to open their doors, making sure their customers are prepared for the long day

of fasting ahead.

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MICHAEL BRAHA

KN OCKOUTS

BY FRED THOMAS

O

n a Saturday evening in early June, more than 400 people gathered at the Palm Hills Club in Giza to watch Egypt’s own Andre “King Cheetah” Valavanis win the World Boxing Federation’s All Africa Welterweight Champion title, defeating his countryman, Shady Mamdouh, in three rounds. The show also included two Egyptian national title fights.

Among the prominent guests in the crowd was a son of former President Hosni Mubarak, who reportedly attended with his family.

The event was part of a growing local movement to develop boxing into a proper professional sport in Egypt.

Spearheaded by handful of fighters, businessmen and other devotees of “the sweet science,” the effort aims to trans-

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form the local image of boxing as a barbaric pastime into the glamorous, lucrative form of entertainment it is in other parts of the world.

“Boxing took my whole life,” says Richard “Lionheart” Nwoba, the 40year-old Nigerian promoter of last month’s fight night, who is spearheading the effort. Nwoba, who is bald and stocky, with the prominent belly of a retired athlete, has lived in Cairo since the late 90s, when he left Nigeria after his parents forbade him to participate in boxing. He is one of those who sees the sport as an artistic display of athleticism rather a bloody, aggressive contest. In the United States and many parts of Europe, boxing has evolved into a multi-million dollar industry, with championship matches drawing celebrities in jewels and furs who pay

thousands for ringside seats. But in Egypt, it is still largely regarded, especially among the upper classes, as a bloody activity for slumdwellers.

Nwoba and his compatriots insist that the sport’s image is slowly changing, however, as evidenced by the growing popularity of upscale fight nights like last month’s at the Palm Hills Club and a February event at the Cataracts Pyramids Resort, which also drew a crowd. But perhaps the best example of the sport’s growing local cachet is Fit Box, a fancy new “boxing gym” at the Sheraton Hotel Heliopolis. FitBox invites people to learn how to fight and get toned at the same time. It offers things like kickboxing and mixed martial arts classes and plays hip hop on the sound system; an enormous “Rocky”themed mural hangs on the wall, as

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SOHA EL GABI

well as a display of autographed red boxing gloves with the names of greats like Muhammad Ali, Sugar Ray Leonard and Floyd Mayweather Jr. It also boasts Egypt’s “first professional boxing ring,” where Valavanis, the 24-year-old welterweight champion of Egypt, trains in the evenings, following his office day job. Other young up-and-coming local boxers including Ayman Ashur also train there.

The gym’s owner Mohamed Sameh, a 33-year-old businessman and boxing fanatic (he’s been known to fly to Las Vegas to attend matches), has also helped sponsor several of Nwoba’s boxing nights, which the latter insists are drawing more and more fans. “Before, people thought boxing was dirty, smelly. Now we have well-to-do people. The foreigners here want to see boxing,” says Nwoba, who retired as a fighter in 2008 after holding the UBO light-heavyweight title. The Egyptian Professional Boxing Association was inaugurated and received by the World Boxing Council in December 2014.

Nwoba even went to Las Vegas, the unofficial capital of pro boxing, to attend a week-long workshop on how to develop an industry around the sport here in Egypt. He proudly shows off snapshots of himself posing with boxing greats like Ricky Hatton, Shane Mosley and Leila Ali, daughter of the late Muhammad Ali, as well as the flamboyant promoter Don King.

Nwoba is working to attract more sponsors like Sameh to support his fight nights. In the United States, championship boxing matches carry enormous purses; boxers at the top of the pile can earn as much as $100 million for a fight—making them the highest paid athletes in the world. Much of the money made on championship matches comes from broadcasting companies who buy the rights to air the bouts live and charge viewers steep pay-per-view fees. The glitziest boxing matches are heavily commercialized, with every available space sold to the highest bidder. Boxers literally sell the skin on their back, with brand names emblazoned on their skin in black tape for the cameras to pick up.

Valavanis learned to box in a gritty gym in Heliopolis that has since closed

down. There were no ring ropes, he remembers, just walls with broken mirrored glass, and he still carries a scar above his left ear, a reminder of where he jammed his head into a nail protruding from the wall while sparring.

In Basateen, a poor neighborhood on the southern outskirts of Cairo, wouldbe champions are training in similar conditions. Muhammed Retab, a 20year-old who is widely considered one of Egypt’s best boxing prospects, trains at the Basateen Youth Club, where he has been coming since the age of three.

Nwoba insists he is “champion material” and believes he has international potential. “Bakar is just so fast,” he says, using the nickname the young boxer is often called thanks to his resemblance to the well-known Egyptian cartoon character, which is also the moniker he fights under. Bakar has gained a huge following on social media, with

hundreds of fans commenting on photos he routinely posts of himself training or simply showing off his muscles.

On a recent windy evening, Retab, a physical education student enrolled in classes at Helwan University, arrives late for training at the barebones gym in Basateen. At just 56 kilograms, he’s a bantamweight, but even with his trendy look—Mohawk haircut, oversized white Ray-Bans and headphones around his neck—there is a wiriness to his physique that suggests an athlete. He moves around the club’s ring, which is basically just a raised wooden platform, gliding across the uneven floorboards like an ice skater as he practices the combinations Nwoba hopes will one day be worth tens of thousands of dollars. “I’ll give him a couple more fights, then I’ll take him to Vegas,” says the promoter. I have partners there who’ve seen videos and they’re crazy about him.”

Chamber news BOARD OF GOVERNORS

PRESIDENT Anis A. Aclimandos, Transcentury Associates

EXECUTIVE VICE PRESIDENTS Curt Ferguson, Coca-Cola Egypt – Atlantic Industries Ahmed Abou Ali, Hassouna and Abou Ali Law Offices VICE PRESIDENT, MEMBERSHIP Amr Allam, Misr Sons Development – Hassan Allam Sons VICE PRESIDENT, PROGRAMS Tarek Tawfik, International Company for Agricultural Production & Processing VICE PRESIDENT, LEGAL AFFAIRS Said Hanafi, Orascom Hotels & Development

MEMBERS OF THE BOARD Aladdin El-Afifi, ASEC Company for Mining (ASCOM) Hashem El Dandarawy, Team 4 Security Nevine Loutfy, Abu Dhabi Islamic Bank Egypt Omar Mohanna, Suez Cement Group of Companies David Chi, Apache Egypt Companies

COMMITTEE LEADERS

(July 2016 to June 2017)

PAST PRESIDENT M. Gamal Moharam, MGM Financial & Banking Consultants ADVISOR TO THE BOARD Hisham A. Fahmy CHIEF EXECUTIVE OFFICER Tamer El Naggar

TREASURER Sherif El Kilany, Allied for Accounting and Auditing- Ernst & Young

AMCHAM COMMITTEES AND THEIR CHAIRS FOR JULY 2016 TO JUNE 2017 HAVE YET TO BE ANNOUNCED

American Chamber of Commerce in Egypt – Tel: (20-2) 3338-1050 – Fax: (20-2) 3338-1060 For more information about AmCham services and news, please visit www.amcham.org.eg or our US mirror site www.amcham-egypt.org

Events ANNUAL GENERAL MEETING

Report card

When it comes to improving the investment climate, Egypt has set its sights high. According to the government’s strategic plan, by 2030, Egypt should rank 30th on both the World Bank’s “Ease of Doing Business Report” (up from its current ranking of 131st among 189 countries) and the World Economic Forum’s “Global Competitiveness Report” (up from 116th among 140 countries). “The 2030 targets are the pressure placed on us to get there,” said Minister of Investment Dalia Khorshid, speaking at AmCham’s Annual General Meeting held May 31 at the Four Seasons Hotel Cairo at Nile Plaza. The minister outlined the challenges faced by current and potential investors and how to reach the country’s strategic goals.

Khorshid explained that the role of the ministry is to coordinate the development of Egypt’s investment policy. “Having an economic policy involves the entire country,” she said, including the private sector, which needs to contribute to developing this policy. “Its aim is to work with our strategy and vision.” Specifically, the ministry is tasked with creating an institutional framework that includes all government and private sector players, said Khorshid. The ministry’s other task is to propose legislative reforms to improve the business environment. The General Authority for Investment and Free Zones has a third task, which is to make sure that investment opportunities are clearly communicated to existing and potential investors. “In that, GAFI is our main tool,” said Khorshid.

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Egypt’s rankings in international reports serve as a reference point for how well the investment ministry is doing its job. “We need to determine where we are in the world, and how the world views us,” said Korshid. The biggest issue that impacts the confidence of investors, both domestic and foreign, are questions around how business disputes are resolved. Khorshid said the ministry is dealing with 400 outstanding disputes. “How well we handle disputes is what promotes us as an investment destination,” she said. “We therefore need to understand what these issues are and where they exist.”

The highest rankings Egypt has ever achieved was 106th, in the 2006 “Ease of Doing Business Report,” and 81st in the 2010 “Global Competitiveness Report.” Breaking into the top 30 requires unprecedented, hard-hitting and significant reforms. “To get there, we need to start working from today,” said Khorshid, acknowledging that the past five years have been full of challenges following the political upheaval that began in 2011. “The government has worked hard to achieve stability, and we will continue to ensure it remains.”

From an economic perspective, the government and private sector need to be on the same page. “We want the private sector to be positive,” said Khorshid. She acknowledged that laws need to be reformed, adding that the government is “working on that.” Turning the spotlight on business, the minister called for feedback: “We need to listen to your suggestions. And you need to listen to us as well. We understand where you are coming from. But you need to do the same.”

TRANSPORT AND LOGISTICS AND TRAVEL AND TOURISM

Crisis management at EgyptAir

“It has been said that some things can only be learned in the eye of the storm,” said Ahmed Adel, vice chairman of the EgyptAir Holding Co. at a special June 2 joint meeting of AmCham’s Transport and Logistics and Travel and Tourism Committees on “EgyptAir MS804: Crisis Management.” “Over the past four nights, those of us who have handled this crisis have learned so much, as we pass through this terrible storm,” said Adel.

EgyptAir flight 804, en route from Paris to Cairo, disappeared over the Mediterranean Sea about 130 kilometers north of Alexandria on May 19, with all 56 passengers and 10 crew members onboard presumed dead. The flight did not show any technical problems before taking off from Paris. According to flight controller data, the aircraft was at 37,000 feet when it swerved 90 degrees to the left and then 360 degrees to the right before plunging into the sea.

The aviation industry has become more experienced over the years at dealing with crises. “At EgyptAir, we all practice exercises at least once a year and our teams receive regular training.

We all know what we have to do,” said Adel. The airline is under heavy pressure from the media, the authorities and the

public. Therefore, EgyptAir’s communications and actions during the crisis were crucial. “It was all about the people who had been affected—those who had lost loved ones and whose lives have been changed forever,” Adel explained, “But the media’s focus was on what had happened and who was to blame.

EgyptAir was prepared for this, but it didn’t make it any easier.”

EgyptAir worked with crisis management experts, who advised airline officials in the days following the crash. “With their help, we are now looking through the current storm clouds on the horizon,” concluded Adel.

BANKING AND FINANCE AND INTERNATIONAL COOPERATION

Inclusive growth

The European Bank for Reconstruction and Development was founded at end of the Cold War to help develop “open and sustainable market economies in countries that are committed to and are applying democratic principles,” explained Sir Suma Chakrabarti, president of EBRD, at a June 1 joint meeting of AmCham’s Banking and Finance Committee and the International Cooperation Committee on the challenges of inclusive growth. The EBRD works mainly with the private sector to foster entrepreneurship and innovation in the countries where the bank operates, with a goal of growing of the private sector and the middle class and in turn creating a stronger base for political representation and economic development.

Chakrabarti noted that the events of 2010 and 2011 in the Middle East spurred the bank to leverage its experience to benefit of the region, which was experiencing a major economic shift occurring in parallel with the political changes. The onset of the decade saw the Arab private sector becoming a major driver of investment and employment opportunities. These two factors combined with a general demographic revolution in the region representing massive potential for growth.

So far, the EBRD has 34 projects in Egypt worth €1.7 billion, and the bank sees many other opportunities in the region.

Chakrabarti detailed the main development challenges facing

the southern and eastern Mediterranean region—Egypt, Morocco, Jordan and Tunisia—and how the EBRD can help these countries face them. While most are country specific, others are common to the region, such as declining growth, exports and a general slowdown in international trade.

However, the EBRD sees several areas in which it can make a difference, helping to build competitiveness, inclusion, governance (on the political, economic and corporate levels), integration and sustainability. While there is cause for optimism, Chakrabarti cautioned that there is a “need to adopt a very long-term perspective on change.”

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Events ICT

Embracing the Internet of Things

Economies have grown dependent on technological innovations that push the boundaries of business activity as we know it. The Internet of Things (IoT) is the next chapter connecting businesses to the future. On May 25, AmCham Egypt’s Information and Communications Technology committee hosted a panel discussion titled “The Future: the Internet of Things,” featuring Bassam ElGammal, an IoT expert at Cisco; Hatem ElMohandes, regional technical leader at Predix - GE Digital; Mahmoud Badawy, chief technical officer at IBM Egypt; and Mohamed Abdallah, enterprise unit director at Vodafone Egypt.

The Internet of Things is defined as the intelligent connectivity of physical devices to enhance efficiency and growth. By connecting “machines and things” to the internet, they can be transformed into “intelligent devices that can exchange real time information” in industries ranging from security and surveillance and industrial asset management to fleet and smart home management. Elgammal kickstarted the discussion with a

quote from Georgetown University’s Professor Michael Nelson: “Trying to determine the market size for the Internet of Things is like trying to calculate the market for plastics, circa 1940. At that time, it was difficult to imagine that plastics could be in everything.” Badawy noted that several key sectors are currently using the IoT, including agriculture, health care, manufacturing, energy and utilities to name a few. He spoke about how the IoT goes beyond devising ways to make machines work better and rather tries to make them work smarter. Analysts predict that the value added to the global economy by the IoT will reach $1.7 trillion by 2019.

Abdalla noted that the IoT value chain depends on more than just a single technology provider; it starts by transmitting data from a device and turning that data into a smart action.

ElMohandes emphasized the impact that various software systems have had on industries, pointing to how Uber and Airbnb disrupted the dynamics of their respective industries.

HUMAN RESOURCES AND INDUSTRY AND TRADE

Managing stress

Being successful doesn’t necessarily mean you are happy, said Abdel Nasser Omar, the CEO of Al Mashfa Psychiatric Hospital, speaking at a May 29 event on the impact of stress on productivity that was co-hosted by AmCham’s Human Resources and Industry and Trade committees. How people deal with stress is a key factor in their happiness, he said.

Stress is defined as “any event that challenges the power and adaptability of the individual,” said Omar. It can come from physical or psychological issues like envy; social and interpersonal issues like compulsive, paranoid and workaholic personalities; environmental issues such as poverty; or nutritional issues as a result of consuming too much caffeine, sugar or salt.

At work, stress can be caused by role ambiguity, work overload or management style, among other things. “However, we need to note that optimum performance requires a degree of stress.

If there is no stress, it becomes boredom. If there is too much, it becomes anxiety,” said Omar. “Neither is conducive to high productivity.”

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Omar notes that while short-term problems such as a loss of a job or money worries can cause acute stress, people can cope with such stress without help. “Long-term stress is more worrying, eventually causing the person to burn out and lose interest, as well as reducing his immunity,” said Omar. “It can cause heart attacks, strokes or mental breakdowns.” Dealing with stress in a healthy way requires resilience and either changing the situation or your reaction by adapting to or accepting the stressor. “Dealing with stress comes down to you taking the decision to be happy today,” said Omar.

WOMEN IN BUSINESS

Gender and growth

Gender equality is key to social and economic progress, Miwa Kato, the Egypt country director at UN Women, told attendees at a June 2 meeting of the AmCham Women in Business Committee titled “How Can Businesses Better Connect to the Wider Goal of Economic Growth?” Kato focused on the link between the business community and social and economic development, seen through the lens of women’s empowerment.

Not only is gender equality related to politics, poverty reduction, educational advancement and health, it also influences media and cultural elements.

UN Women’s role in Egypt is to promote gender equality by coordinating action and reaching out to relevant public and private institutions, and it partners with governments, civil society and rights advocates. Also essential, Kato said, are “indirect partners” with significant stakes in the economy. Engaging with the private sector is an indispensable step toward achieving UN Women’s goal of economic and social progress through gender equality and the empowerment of women. However, it is important to engage with people whose primary concern is not gender but progress. Kato explained that the main purpose of the discourse on female empowerment is not to portray women

as victims but to expose how the exclusion of their issues halts a society’s advancement.

Many studies have shown that women’s economic empowerment is not only useful but necessary. The management consulting firm McKinsey & Co. reported that firms with the more women in top management positions perform better. Another important study by the think tank Catalyst suggested that macroeconomic indicators are negatively affected when women are excluded from economic activity. Egypt’s GDP, for instance, could increase by an estimated 33 percent if women were economically empowered. Acknowledging women’s role as a business imperative is a systemic change that “we should not only be encouraged about but also make use of,” Kato concluded.

MARKETING

Self-discovery When Yasser Abdulmalak, the chairman and CEO of Nestlé Egypt, started with the company in 1999 as a trade marketing executive in Saudi Arabia, he learned to always “choose the harder right.” The right path, he believes, is one that ensures sustainability. Abdulmalak was the featured speaker at the AmCham Marketing Committee’s May 30 Inspiring Young Talents session. “You only start knowing yourself,” he said, “when making major decisions you know will have an impact on you.”

While working in Dubai as a category and brand manager in 2000, Abdulmalak realized that mounting responsibilities are what drives employees. Working hard, he says, is complemented with one’s feeling of responsibility to work his or her way out to stand out.

Abdulmalak had the distinction of becoming the second executive from the Middle East division to ever join Nestlé’s home office in Switzerland, working there two years before moving to Johannesburg, South Africa, as head of culinary business. There he oversaw operations covering 18 countries, including the second most price-sensitive market in the world.

Bending circumstances to one’s convenience is impossible, he

eventually understood. Indeed, the realization of failure is a major indication of maturity, necessary for professional endeavors.

One must never cease looking for challenges and embrace them. Returning to Dubai as business executive manager for culinary in 2008, Abdulmalak learned that challenges are the motors of opportunities, which, in turn, represent the catalysts for business. Opportunities, he added, also contribute to personal endeavors, for they expose people to bigger challenges within a business environment that is in constant search of talent.

Above all, “It is important to value yourself.” Self-worth teaches a set of values that every employee is able to identify with, leading to a healthy work-life balance. Coupling self-worth with realistic ambitions is a recipe for happiness, he concluded.

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New Members Academic/Educational/Research & Development (R&D)

Membership Type Not-for-Profit

Address: 45 Hassan Aflaton st. Ard El Golf, Heliopolis.

Tel.: (202) 2292-1100 Fax: (202) 2290-1673 Website: www.seegypt.com

Bureau Veritas Egypt

Youssef & Partners Attorneys

Address: 51 Hassan Aflaton Street, from Nozha Street, Nasr City.

Tel.: (202) 2418-3020/ 2290-0195 Fax: (202) 2418-3016

Address: 3 Yemen Street, of Nile Street, Giza Tel.: (202) 3749-9100 Website: www.youssef.law

Karim A. Youssef Owner/Managing Partner

Medhat Mounir Yousry Country Chief Executive

Membership Type General

Defense

Tewfik Shehata Principal

Ahmed Zakaria Holiel President

Membership Type General

Financial Sector

Address: 25 Cleopatra Street, Heliopolis.

Tel.: (202) 2691-0643 Membership Type Fax: (202) 2690-9129 Associate Resident Website: www.shehatanet.com

Petroleum

African Export Import Bank

TCI Sanmar Chemicals SAE

Address: 72 B Al Maahad Al Ishtraky, infront of Meryland, Heliopolis.

Tel.: (202) 2456-4100 Fax: (202) 2456-4100

Address: C 9, Industrial Area El Raswa, South Port Said Tel.: (206) 6379-3511 Fax: (206) 6377-8003 Website: www.sanmargroup.com

P.S. Jayarman Chairman

Benedict O.Oramah President and Chairman of Board of Directors

Membership Type Multinational

Industrial Machinery & Equipment Yasser Emam Managing Director

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Business Monthly – July 2016

Membership Type Associate Resident

TEXEGY LLC

Sherif A.H.Fahmy Wadood Chairman

Egy Plast S.A.E

Address: Land Mark 183/189 Industrial Area, 5th Settlement.

Tel.: (202) 2350-2465/ 37/ 618 Fax: (202) 2350-2353

Membership Type Associate Resident

Shehata, Attorneys at Law

United Group for Investment and Trade

Address: 96 Salah Zohny Street, Ibrahimia, Alexandria City.

Tel.: (203) 592-3477 Fax: (203) 591-7055

Membership Type General

Legal Services

Consultancy

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Systems Engineering of Egypt (SEE)

Ali Miniesy CEO

Zewail City of Science and Technology

Mona Wagdy Director of Communication Address: Sheikh Zayed District, Juhayna Square, 6th of October City.

Tel.: (202) 3854-0400 Fax: (202) 3851-7186 Website: www.zewailcity.edu.eg

Information Technology

Membership Type Associate Resident

Address: 2020 Richmond Ave Suite 101, Houston, 77098 Texas Tel.: (001) 83248-79384 Fax: (001) 83239-02750 Website: www.texegy.com

Membership Type Associate NonResident

New Members Real Estate

Changes

Marakez for Real Estate Investment

Change in Company Address Siemens SAE (Siemens Technologies, SAE) Bureau 175, 2nd Business Sector, Al-Horreya Axis, 90 South Road, 5th Settlement.

Ahmed Badrawi CEO

Address: 6 El Sheikh El Marsafy Street, Zamalek.

Tel.: (202) 2736-6355 Fax: (202) 2738-3474 Website: www.marakez.net

Membership Type Associate Resident

Security Systems (alarms, firefighting, video cameras, etc.)

Change in Member Category (Principal Members) Mohamed Tawfik Youssef Ezz El-Din Managing Director – UNBE - Union National BankEgypt

General Overseas Communication (GOSCOM)

Mohamed Wagih Shindy CEO/MD - The Egyptian Methanex Methanol Co., SAE

Address: 38 Cornich El Nile Street, Aliaa Tower, Maadi.

Tel.: (202) 2527-1111 Membership Type Associate Resident Fax: (202) 2527-2222

Change in Member Title Mouhamed Hussein Moussa General Manager Technical Assistant - Mancon Consultancy & Project Management

Ayman Osman Chairman

New Replacements at Member Companies: Ahmed Amin HR Director, Almansour Automotive Co. Mansour Chevrolet Tawfik Laham Chairman, Misr Glass Manufacturing Co.

Category: Affiliate Sector: Automotive

Category: Associate Resident Sector: Building Materials

Ashraf Bassiouny Managing Director's Assistant for Marketing and Retail Banking, Housing & Development Bank

Category: Affiliate Sector: Financial Sector

Manal El Boghdadly Human Resources Director, Piraeus Bank

Category: Affiliate Sector: Financial Sector

Ayman Belal Area Director of Finance, Sheraton Cairo Hotel & Casino

Category: General Sector: Hospitality/ Tourism/Travel

Tamer Gadalla Managing Director & Chief Executive Officer, Telecom Egypt

Category: Affiliate Sector: Information Technology

Karim Sakr CEO, Maxim Investment Group

Category: Affiliate Sector: Investment

Murad Nadoury Partner and Managing Director, Nadoury & Nahas Law Offices

Category: General Sector: Legal Services

David Chi Vice President and General Manager, Apache Egypt Companies

Category: General Sector: Petroleum

Khaled Abdel Badie Chairman and CEO, Middle East Oil Tankage & Pipelines (MIDTAP)

Category: General Sector: Petroleum

Peter Makram Mehany Chairman and Managing Director, Global Napi Pharmaceuticals

Category: General Sector: Pharmaceuticals/ Medical/Health

Reham El Boghdady Executive Director, Magdi Yacoub Heart Foundation

Category: Not-for-Profit Sector: Pharmaceuticals/ Medical/Health

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New Members Affiliate Members Academic/Educational/Research & Development (R&D) Rowaida Saad-Eldin

Chairman's Advisor for Development - Zewail City of Science and Technology

Agriculture

Mansour Sherif El Gabaly

Commercial Manager - Agrin Serve Co.

Defense

Joseph George Demian Guirguis

Legal Counsel - United Group for Investment and Trade

Financial Sector Loay Amin

Group Financial Controller - Commercial International Bank (CIB)

Walid Elborai

Nermine Fawzy

Global HR Director – ITWorx

Mohamed Tantawi

Director and General Manager - EMC Egypt Center of Excellence

Sameh ElBaz

HR Manager - Advansys for Engineering Services and Consultancy

Ahmed Samy Miniesy

Sales & Marketing VP – Systems Engineering of Egypt

Rana Kortam

Public & Policy Associate, North Africa - Uber Egypt LLC

Legal Services

Loay Y. El-Shawarby

Of-Counsel - Shehata, Attorneys at Law

Mona Mansour

Head of Restructuring &Recoveries of Distressed AssetsInstitutional banking - Commercial International Bank (CIB)

Of-Counsel - Shehata, Attorneys at Law

Group Executive Director - Cairo Financial Holding

Marketing Director - Maridive & Oil Services Co.

Ahmed Mekky

Ashraf Shaaban Abdel Hamid

Group Legal Head - National Bank of Egypt

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Information Technology

Petroleum

Maged Nadim Tarek Nadim Aliaa Ahmed Heikal

Deputy Chief Financial Officer - Egyptian Refining Co.

Industrial Machinery & Equipment

Mostafa Ahmed Alramly

Chairman - Egy Plast S.A.E

Pharmaceuticals/Medical/Health

Board Member - Egy Plast S.A.E

Managing Director Egypt, Libya, Jordan & Sudan – Janssen

Khaled Said

Chief Financial Officer - Egyptian Refining Co.

Mohamed Said

Willem Jacobus Blok

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Business Monthly – July 2016

Member News ARAB AFRICAN INTERNATIONAL BANK Arab African International Bank was named the Middle East.s Best Bank for Corporate Social Responsibility by international finance magazine Euromoney. The awards were presented at the 2016 Euromoney Middle East Awards for Excellence Dinner in Dubai. This is the 26th year that Euromoney presented the awards. This year there were more than 600 submissions from banks and brokerages from around the world.

GB AUTO GB Auto, an automotive assembly leader in Egypt and the Middle East and the exclusive dealer for four automotive brands, signed a deal with the Ministry of Trade and Industry to upgrade a state-owned automotive training center in Imbaba that seeks to bridge the skills gap between prospective workers and employers. GB Auto will supply machinery to the center and help train instructors. Up to 30 of applicants will be eligible for scholarships funded by the firm.

COCA-COLA Coca-Cola Egypt, in collaboration with the Misr El Kheir organization, has announced it will direct its Ramadan ad campaign money to paying off the debts of 1,000 local women who were jailed because they couldn.t repay small loans to cover basic expenses. The company will also pay to upgrade the infrastructure and facilities of 17 villages in six governorates housing some 17,000 people. The campaign is part of the soda giant.s goal of making improvements to 100 Egyptian villages by 2020. Forty villages have already benefited.

IPSOS EGYPT For the second year running, Ipsos ranked second in GRIT Top 50 Most Innovative Market Research Companies for 2016. The report is published by GreenBook, a market research firm that rates other market research firms worldwide. First place in the GRIT report went to the London-based company Brainjuicer. Following Ipsos were Nielsen, GFK, TNS and Millward Brown. The ranking is based on industry surveys that track and rate market research firms based on how innovative they are.

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Advertorial MAJID AL FUTTAIM

SOMA BAY

Majid Al Futtaim, a major player in the shopping mall, retail and leisure business in the MENA region, hosted a one-day employment fair offering some 4,000 openings in its flagship project, the Mall of Egypt, which is set to open in September. The vacancies were offered by 40 of the mall’s tenants and management. The event was inaugurated by Minister of Social Solidarity Ghada Wali. The LE 5-billion Mall of Egypt is expected to indirectly create some 41,000 jobs.

Robinson Club Somabay has reopened the resort following a sixmonth renovation. The hotel has been welcoming guests since July 1.

The Club has 304 rooms, three restaurants and six bars, which cater to young, hip travelers. Robinson Club Somabay is part of Robinson GmbH, a subsidiary of TUI AG. Its portfolio currently boasts 23 Club resorts around the world. For booking call the Somabay hotline,16390.

TAKATOF

TATWEER MASR

Takatof Association for Development inaugurated the Om El Moemenin Preparatory School for Girls in El Sayeda Zeinab.

Attending the event was Ghada Wali, the minister of social solidarity, and Japanese ambassador Takehiro Kagawa, among others. The new buildings accommodate 404 students and 43 teachers and administrative staff. The school can accommodate up to 648 students.

It was fully upgraded in seven months at a cost of LE 3.5 million.

Takatof also renovated Om El Moemenin Clinic for Students, which is affiliated with the Health Insurance General Authority. It will serve around 16,400 students and 25,000 newborns.

Real estate developer Tatweer Misr has signed an agreement with the Ahl-Masr Foundation to develop the underprivileged Salem Khidr village in Beni Suef Governorate. The project falls under the Safe Village initiative adopted by the Ahl-Masr Foundation in 2015. The effort is to include the installation of potable and waste water pipe systems and the reconstruction of unsafe rooftops, in addition to improving other utilities and fixtures. The village will also get fire extinguishers and first-aid kits provided

by Tatweer Masr and Ahl Masr.

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Business Monthly – July 2016

Announcements MOVING ON After more than 30 years of dedicated service to AmCham,

Mohamed Amin Hemimy, The director of AmCham Egypt’s Career Development Center, resigned last month to pursue other career opportunities. Amin first joined the Chamber as an accountant in 1985. In 1991, he launched the Career Development Center, which offers a variety of services to help professionals learn new skills and advance their careers.

Amin was instrumental in ensuring the success of the CDC. He secured international certification programs and established a recruitment center. In order to make its services accessible to a wider cross-section of Egyptian youth, the CDC also offered training programs at various universities across the country, including Ain Shams, Assiut and 6 October universities and the Future University of Egypt.

In 2012, Amin coordinated the signing of a partnership agreement between CDC and the University of Toledo’s College of Business and Innovation to offer an MBA program. The Program is fully accredited by the Association to Advance Collegiate Schools of Business (AACSB International).

AmCham wishes Amin continued success in his endeavors.

Jobs AMCHAM RECRUITMENT CENTER Code

Vacancies

Company Name

101853 101917 102095 101920 102212 102058

Procurement Manager Branch Manager Supply Chain Deputy Director Commercial Supervisor Production Planning Section Head Mobile Apps. Development Team Leader

Global Consolidated Contractors - GCC CONTRACK FM S.A.E Evergrow for Specialist Fertilizers CAIRO 3A Arafa Holding Chestnut

For more information about these jobs and others, visit: www.amcham.org.eg/recruitment – e-mail: recruitment@amcham.org.eg, Tel: (20-2) 333 88 220 Ext. 1513 - 1514 Fax: (20-2) 333 73 779

U.S. Exhibitions

Listings are now available on our website:www.amcham.org.eg Exhibitions related to the following sectors are scheduled for the upcoming months.

Sector

Show Name

Website

Embassy Contact Person

TEL.

Rania Mekhail

2797-3487

2797-2688

July Healthcare

2016 AACC Annual Meeting & Clinical Lab Expo

www.aacc.org August

Retail

Outdoor Retailer Summer Market

www.outdoorretailer.com

Cherine Maher

Wood Products

International Woodworking Fair

www.iwfatlanta.com

Tarek Khodary

Agribusiness

Farm Progress Show

www.farmprogressshow.com

Cherine Maher

2797-2688

For more information about these exhibitions, please contact: The Commercial Service at the U.S. Embassy Tel: (20-2) 2797-2330/ 40 - E-mail: office.cairo@trade.gov *Please refer to the Commercial Service at the U.S. Embassy for any updates on the exhibitions.

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Business Monthly – July 2016

Classifieds Benefits ROYAL MAXIM PALACE KEMPINSKI HOTEL Royal Maxim Palace Kempinski Hotel has the pleasure to extend the following benefits to AmCham members.

-15% on Deluxe rooms, with VIP amenities in room/suite during the stay, via brand.com website only, on published rate on Brand.com website only. (Published rate is the announced rate at the time).

-Access to Royal Club Lounge if booked Royal Club Room. All Booking subject to hotel availability and advanced booking.

- Family Plan: Clients of two adults and 1 or 2 children from 5.99 to 11.99 will be charged as one double and one single room.

15% on the below selected restaurants: - Discount in Romanov - Discount in Lucca, Yana and Bab El Qasr - Discounts applied on Food and non-alcoholic beverages.

Resense SPA * The above discount is on the selected restaurants - 15% discount on Resense SPA treatments

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: For rooms reservation: Mohammed Saiid Email: mohammed.saiid@kempinski.com For the spa: Birgitmarie Solheim • Email: birgitmarie.solheim@kempinski For restaurants reservation: Mona Salama • Mona.salama@kempinski.com

SAFIR HOTEL CAIRO EGYPT Safir Hotel Cairo Egypt is pleased to offer a 20% discount to AmCham members on accommodation published rates, and on food & beverages in all restaurants; Palm’s Coffee Shop, Asia Boutique Restaurant, Gazerit Al Dahab (Oriental Restaurant), Blue Pool Café, Chit Chat Café, Corporate Café, excluding alcoholic beverages and service charge and taxes.

In addition to a 20% discount on the Health Club and SPA. The offer is not applicable during special promotions and public holidays.

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: For room reservations: Abdel Mordi Moustafa Phone number: (20-2) 3748-2424 / 3748-2828 Mobile: (20-10) 0160-4108 • Email: ressce@safirhotels.com.eg For food and beverages reservations: Ahmed Omar Phone number: (20-2) 3748-2424 / 3748-2828 • Mobile: (20-10) 0518-2457 Email: fbsce@safirhotels.com.eg • Mobile: (20-10) 0518-2457

Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits

Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits

This offer is valid until December 31, 2016

This offer is valid until December 31, 2016

SEMIRAMIS INTERCONTINENTAL HOTEL Semiramis InterContinental Hotel is pleased to extend its offer to AmCham members on accommodation & restaurant: City view room: L.E 990 Double city view room: L.E 1,140 Nile view Supplement: L.E 150 20% discount on the below restaurants during weekdays: Sabaya, Pane Vino, the Grill Above rates are including breakfast & inclusive of 24.32 % service charge & taxes.

The above Benefits are not valid during Public Holidays & special events.

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Rooms Information and reservations: Mahmoud Abou Hussein Office: (20-2) 2798-8000 • Fax: (20-2) 2798-8015 E-mail: Mahmoud.abuhussein@ihg.com Dinning Information and reservations: F&B reservation desk Office: 2798-8000 - Extension: 1151 Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits This offer is valid until December 29, 2016

THE MIDDLE EAST READERS INFORMATION CENTER (MERIC) The Middle East Readers Information Center (MERIC) is pleased to offer a 25% Discount on The Middle East Observer Annual Subscription Rate.

The Middle East Observer established in 1945 by Boris & Edgar Deblac, is the oldest weekly, economic English Newspaper in the MENA Region. MEO retains the largest client base established over decades of continuity in Egypt.

The MEO is proud to offer AmCham members a 25% discount on its annual subscription rate of EGP 160 EGP.

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Abeer El-Sayed Phone: (20-2) 2393-9732/ 2392-6919 E-mail: SUBSCRIPTION@meobserver.net

Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits This offer is valid until December 31, 2016

The BUSINESS MONTHLY Classifieds section is open exclusively to AmCham member companies.

Text ads are £E 150 for up to 30 words, £E 5 per additional word. Abbreviations, phone numbers and e-mail addresses count as one word. Display ads are £E 100 per cm in height, per column (max. 20cm in combined total height). Discounts are offered for regular advertisers and repeat bookings.

Insertion orders, payment and ad content must be received by the 15th of the month preceding publication. All classified ads subject to editorial approval. For more information, or to place a classified ad, contact Amany Kassem at (20-2) 3338-9890, fax (20-2) 3338-0850, e-mail: akassem@amcham.org.eg

Business Monthly – July 2016 I

59

Media Lite

A Glance At The Press The government takes crisis management courses

“If you encounter a problem, just put it here until people forget about it.”

Al-Masry Al-Youm, June 3

Media Lite is a satirical review of items published in the local and international press. All opinions and allegations made in them belong solely to the original publications and no attempt has been made to ascertain their veracity.

THE NAKED TRUTH

People resort to all sorts of creative ways to stay cool this time of year.

Recently, a Cairo man ran afoul of the law with his personal strategy for beating the heat—standing on his balcony in the altogether. Police arrested the man after a number of female neighbors complained that the man had regularly appeared naked on his terrace in the Hadayek al-Qubba district and “sexually harassed” them. The man denied parading in the nude. “I do sometimes step outside in the balcony in an undershirt and shorts, because the weather is very hot,” he said.

Unfortunately for him, however, a court didn’t buy that excuse and sentenced the man to six months in prison for committing scandalous and immodest acts in public. The moral of the story is it’s best to keep your drawers on while taking the breeze.

Infrrad, June 15

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Business Monthly – July 2016

NO LAUGHING MATTER

A Facebook page recently appeared advertising the services of an outfit called El Srag, offering baltegeya, or thugs, for hire. With its logo featuring a closed fist in the red, black and white of the Egyptian flag, El Srag for “bullying issues” and “rights recovery” advertised services ranging from beating up obnoxious taxi drivers (LE 1,500) and parking attendants (LE 1,000) to recovering stolen cars (prices vary). The owners of the revenge service explained in their “about us” section that El Srag aimed to fill the market gap for effective crime fighting services in Egypt. They obviously hit a nerve: Within a few weeks, the “company” was so overwhelmed with inquiries that it had to take the site down. Apparently, many people didn’t realize that the page was a joke.

Al-Masry Al-Youm, June 27

RATATOUILLE

Fans of “El Set el Ghalia,” (“Mrs. Ghalia”), a popular local cooking show aimed at ordinary Egyptian housewives, were disappointed when the program suddenly with no explanation went off the air in January. Last month, appearing live before a newly renovated set, host Ghalia Mahmoud—who has been called “The Egyptian Oprah” and cooks on a propane stove, with a mismatched set of aluminum pots to reach a working class audience— explained that things had gotten a little too real during the last broadcast. Apparently, crew members had spotted a mouse sampling one of Mrs. Ghalia’s dishes and inadvertently smashed the set trying to kill it.

The show was forced to take a sixmonth hiatus, but the mouse was never caught.

Al-Masry Al-Youm, June 25

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