Business Monthly Egypt May 2016

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M AY 2 0 1 6 VOLUME 33

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ISSUE 5

Cover Stor y

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Kingdom come King Salman’s unprecedented fourday visit heralds a new stage in Egypt-Saudi Arabia relations.

Cover Design: Nessim N. Hanna

Inside 10

Editor’s Note

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Viewpoint

The Newsroom 14

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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ADVERTORIAL

Keeping pace with offerings from Samsung and Apple, HTC has launched the latest version of its flagship smartphone, the HTC 10 with a 5.2-inch screen and quad HD resolution.

It is made from a single piece of aluminum attached to a single piece of glass on the front. It is an all-new design with careful attention to details such as adding grooves to the power button on the side to distinguish it from the smooth volume buttons. The HTC 10 is designed to withstand temperatures between -20 degrees and 60 degrees.

instead adopting a top front-facing speaker and a second one located at the bottom edge of the phone. This switch was necessary to incorporate the fingerprint sensor, a setup similar to Samsung's and Apple’s top-end phones.

The team designing the HTC 10 has gone to great lengths to make sure that the camera experience is improved over the earlier HTC phones. The 12MP camera trumps its competitors with one of the best aperture specs for a smartphone at f/1.8 lenses and 1.55um per pixel for better, more coloraccurate shots, especially in low light situations. Both cameras have optical image stabilization, a first in the industry to be placed on the front-facing camera. The back camera also has a laser sensor for fast focus.

The HTC is powered by Qualcomm's latest processor, the Snapdragon 820 with 8GB of RAM and expandable storage of up to 2TB (2000 GB).

The operating system is Android’s latest Marshmallow 6.0, making it one of only a handful of phones to come with Android 6.0 out of the box. It also has HTC customary skin atop of it, which adds bloatware. The battery is 3000mAh and is equipped with fast charging, which allows 80 percent charge to be reached in 35 minutes.

The new phone also has high definition audio output with twice the bandwidth range of normal speakers, using 24-bit Hi-Res technology. The user can save several audio profiles, with the phone automatically determining which speakers are used and switching to said profile. The HTC 10 has foregone the signature twin front-facing speakers,

The HTC 10 comes in dark grey, gold, silver and red, and deliveries should start at the beginning of May. The price of the new phone hasn’t been formally announced in Egypt, but expect to pay a similar amount to that of the latest Samsung or Apple flagships.

M AY 2 0 1 6 VOLUME 33

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ISSUE 5

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24 Market Watch

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Stock Analysis Keep partying until the music stops

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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 24

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Drug shortages worsen amid currency crisis Pharma grapples with an outdated system Embracing the sharing economy Mixed reactions to independent service providers

Business Monthly – May 2016

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Executive Life 40

Dining Out Mile-high tapas

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Traditions Sandcastles

The Chamber

Corporate Clinic

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Events

Let there be light Seeking to illuminate Egypt’s electricity future

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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

NO MAN IS AN ISLAND

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’m a diver, and I live within driving distance of some of the best dive sites in the world. No exaggeration. Diver polls consistently put Egyptian Red Sea sites in the top 100 lists. The wreck of the Thistlegorm, three hours from Sharm El Sheikh, always makes the top 10. A March 2016 Telegraph article about the World’s Best Dive Sites put Ras Mohamed National Park, which includes the Strait of Tiran and the islands of Tiran and Sanafir, at number 3.

I understand the emotional attachment to Tiran and Sanafir Islands, tied as they are to the Sinai and the not-so-distant wars of the 1967 and 73. But as a draw for diving dollars, they are not that significant. Tiran Island only has two sites—the wreck of the Komoran and Laguna Reef—in the Sinai Diving Guide, which is the dive industry’s standard for the area. Sanafir isn’t even on the map. I’m far more concerned about the proposed bridge, which has the potential to disrupt one of South Sinai’s most important industries. Here’s what I want to know as a diver.

Where exactly is this bridge going? South Sinai’s east coast from Ras Mohamed to Taba is completely covered by natural protectorates. The shortest path over the strait goes over four world-renowned reefs – Gordon, Thomas, Woodhouse and Jackson – that draw a few hundred snorkelers and divers a day. It seems to me that if this bridge goes through, some protected area has to be sacrificed. Which one loses out?

What happens during construction? Will dive sites in the strait be closed? For how long? How do you protect the reefs from falling debris and pollution? How far will that pollution extend? If the coral dies, it takes decades to grow back. Can Egypt afford to risk its world-class reefs in the strait?

Regarding the islands, will there still be access to the Tiran dive sites? Dive excursions already require special permissions for Ras Mohamed National Park, so I hope a maritime treaty can create a shared diving zone, one that opens up even more sites around the islands.

It’s too early for answers, but it’s not too early for these questions. I dive because the marine ecosystems here are amazing and important. But I’m not so naïve to think respect for biodiversity is driving the government’s decisions. It’s about the money.

One person diving for a week easily drops $1,000 into the local economy during his trip – and that’s a low-budget estimate.

There are costs and benefits to any project. The biggest question in my mind is: Will the government be transparent about the costs?

Director of Publications & Research Khaled F. Sewelam Editor-in-Chief Rachel Scheier Contributing Editors Kate Durham Tamer Hafez Staff Writer Edmund Bower Fred Thomas Senior Art Director Nessim N. Hanna Graphic Designer Emy Emile Advertising & Business Development Director Amany Kassem Advertising Assistant Tasneem Abo El Ezz Photographers Micheal Braha Said Abdelmessih Production Supervisor Hany Elias Market Watch Analyst Amr Hussein Elalfy Chamber News Contacts Nada Abdalla, Azza Sherif, Susanne Winkler

K ATE D URHAM

Contributing Editor

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

SURPRISES A

ffording to forget about losses and moving on, is a privilege of the rich; being blunt and politically incorrect, anywhere anytime is another.

Financially stranded people have no choice but to be careful and watch every step, even when reasonable success implies an element of risk. No surprises can be tolerated in a poor man’s world. Every word counts, defense is costly and slips of the tongue are not retracted for free. On the other hand, if you think that you have hit bottom and have nothing to lose, you may decide to put all the family silver and the house behind a project thinking that it cannot get worse. The big surprise is that it may get worse but you do not know it or you simply are in denial.

Following that logic responsible captains of small ships always prefer to carefully study their maps and choose the safest course of action because prevention is cheaper than remedies. Hasty decisions and rules that are not implementable are expensive and counter-productive, they are bound to be changed after the damage is done, they certainly get you lost and force impose imperative expensive remedial courses that were not necessary, and definitely leave a bitter taste.

I beg all those who set the rules of any game to consult those who know as opposed to those they know and are not necessarily in the know. You can never unscramble scrambled

eggs, time is money, fresh eggs cost money and bad reputation is a heavy liability to carry. Management by objectives, should be the only focus of successful managers. If the plan does not do the trick, you are on the wrong track!

I have worked for and managed small, medium and large projects and learned that the basic rules are not options, the wrong advice will kill you, hip-shooting will ruin you; and if you stop growing while others do, you are guaranteed to be kicked out of the race sooner than expected.

Joint planning with stakeholders is the only way to succeed, several brains working towards the same goal based on converging experiences and disciplines will beat top heavy inexperienced decrees anytime. Impartial progress monitoring and evaluation is the logical safety valve, it releases steam in time and resets the course before the “U-turn” is too far.

There are no air-tight plans, thus it is crucial to have the ability to diagnose problems in a timely manner, recognize the mistakes and choose the adequate adjustments.

Surprising a wife is risky, unless through years of experience one has learned what his companion will definitely like.

Imagine landing on the wrong island and spending what was intended to be a happy time with a grumpy partner..!

Morality: if you have not been married long enough, please avoid surprises! If you are not sure that a present will not be returned or recycled, please abstain.

A NIS A. A CLIMANDOS President, AmCham Egypt

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N O W

M L & A R L

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I C H E L I N - S T A R C H E F , A U R E N T P E U G E O T C H E F J O R D A N P R O T R E B A C K W I T H A F U L L E J U V E N A T I O N O F E D E C K .

3 EL THAWRA COUNCIL STREET ZAMALEK, CAIRO R ES E RVAT I O N 0 1 1 41 1 0 0 0 1 2

2016/17 draft budget targets 9.9% deficit

Egypt signs €2 billion worth of deals with France

During a state visit to Cairo by French President Francois Hollande, the two countries signed financing and investment agreements worth more than €2 billion. According to press releases from the French government, the agreements include around €2 billion in loans to Egypt from France and €30 million in direct support to the government.

Hollande’s visit also saw the signing of 10 intergovernmental agreements to cooperate in fields including culture, energy, transportation and military communications. France’s Agency for Development signed five deals to finance development

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projects including a wind farm, a water treatment unit in Alexandria and the refurbishment of the Ramses-Heliopolis tramway. Five commercial agreements were also signed, including a contract that will see French companies Airbus Defence and Space and Thales Alenia Space build a military satellite communication system for Egypt.

PMI hits 31-month low in March

Egypt’s non-oil private sector remained firmly entrenched in a downturn in March, with businesses surveyed for Purchasing Managers’ Index reporting deteriorating conditions for the sixth month in a row. Egypt’s overall index

BUSINESS MONTHLY ARCHIVES

The draft budget approved by Cabinet March 30 anticipates a deficit of 9.9 percent of GDP and economic growth above 5.2 percent, the ministers of finance and planning announced.

Speaking at a press conference, Finance Minister Amr el-Garhy (pictured) said the 2016/17 budget anticipates revenue of LE 627 billion, LE 434 billion of which is expected to come from taxes.

Expenditure is predicted to reach LE 936 billion, resulting in a deficit of around LE 309 billion. Minister of Planning Ashraf ElAraby said the draft budget targets a 5.2 percent growth rate, which will require LE 531 billion in investment, equivalent to 16.5 percent of GDP. Despite these ambitious plans, the ministers conceded that Egypt is unlikely to meet the targets set in the 2015/16 budget. The budget deficit for the current fiscal year is projected to reach 11.5 percent of GDP, Garhy said, compared to an 8.9 percent target. Araby said this year’s GDP growth rate is expected to reach 4.4 percent, compared to an earlier target of 5 percent.

The budget was approved by Parliament. It still needs to be ratified by the president before coming into effect on July 1.

score dropped to 44.5 in March, down from 48.1 in February and the lowest score since August 2013. Any rating below 50 indicates that conditions worsened during the month. The decline was driven by lower output, a decline in new work and subdued demand due to currency shortages and the devaluation of the Egyptian pound, businesses reported.

Purchasing activity also fell at the sharpest rate since 2013, contributing to the steepest decline in pre-production inventories since the Egypt survey was launched in 2012. In a press statement, Jean-Paul Pigat, senior economist at survey-sponsor Emirates NBD, attributed some of the bleak outlook to timing. “The deterioration in business conditions is not entirely surprising as the survey took

In Brief

place at a time of elevated uncertainty that coincided with the devaluation of the EGP. Looking ahead, we believe that the move to a more competitive exchange rate has now reduced a key source of risk, and could therefore set the stage for a broader economic recovery in the second half of 2016,” Pigat wrote.

Annual headline consumer price inflation eased to 9.02 percent in March, down from 9.13 percent in February, putting annual inflation into single digits for the second month in a row and marking the fourth consecutive month of declines. Meanwhile, the monthly rate rose by 1.44 percent, compared to 0.97 percent in February. The Central Bank of Egypt attributed the decline in the annual rate to positive base effects from the previous year, when inflation reached 11.5 percent. The monthly increase was driven by higher prices for medicine and some food items. Core inflation saw a rise in both the annual rate—up to 8.41 percent from 7.5 percent in February—and the monthly rate, which rose to 1.62 percent compared to 0.88 percent the month before.

BOP deficit hits $3.4 billion in H1

Egypt’s balance of payments deficit widened to $3.4 billion in the first half of fiscal 2015/16, compared to $1 billion in the same period the year before. The overall BOP deficit was driven by a sharp increase in the current account deficit, which reached $8.9 billion compared to $4.3 billion in the first half of 2014/15.

Overall, Central Bank of Egypt figures show that cash inflows from tourism, worker remittances, foreign aid and the Suez Canal all fell during the period.

These declines were only partially offset by increases in foreign direct investment and a lower import bill. Egypt’s trade deficit narrowed slightly to $19.5 billion compared to $20.4 billion a year earlier, which the CBE attributes to lower global prices for oil and other commodities.

Meanwhile, the capital and financial

BUSINESS MONTHLY ARCHIVES

Annual inflation still in single digits

PRICES INCREASED BY 1.44 PERCENT THIS MONTH DUE TO MEDICINE AND FOOD PRICE HIKES.

account recorded a net inflow of $9.2 billion compared to $772 million a year earlier. Short-term supplier credits accounted for $4 billion in inflows, while FDI rose from $2.6 billion to $3.1 billion.

Foreign reserves hold steady in March

Foreign reserves, which have held relatively steady since October 2015, inched up to $16.56 billion in March, up from $16.53 billion in February, the CBE announced. Although stable, reserves remain at less than half of pre-January 25 levels. Egypt’s widening balance of payments deficit has put pressure on reserves, as have the Bank’s efforts to defend the Egyptian pound. Central Bank governor Tarek Amer did allow the pound’s official exchange rate to devalue from LE 7.73 to LE 8.78 during March, but he has vowed not to allow the pound to float freely until reserves reach $25-30 billion.

Food subsidies to increase by 20%

With the black market value of the dollar rising more than 11 percent last month and widespread reports of price increases and commodity shortages, Cabinet elected to increase spending on food subsidies

by LE 2.4 billion, increasing each ration card holder’s allocation by 20 percent.

This should more than balance out the increasing value of the dollar, according to a Cabinet statement. The increase will come into effect on June 1, in time for the beginning of Ramadan. The announcement followed an April 25 speech by President Abdel-Fattah al-Sisi, in which he told the public that officials would calculate the increase in prices due to the dollar and increase subsidy points accordingly.

New grain storage system comes online

About a quarter of Egypt’s 2016 wheat harvest will be monitored by a command and control center built by Blumberg Grain. The company anticipates the government will sign a contract that will see the entire crop processed through its storage systems, Blumberg’s regional CEO told Reuters— a deal the company says will save Egypt $550 million a year. Much of the local crop is currently stored in open-air sites called shounas, and Blumberg estimates the country loses about 40 percent of its crop due to poor storage and processing. It believes its high-tech processing and storage systems can reduce losses to 5 percent. However, the harvest, which

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In Brief

STREET SENSE Has the medicine shortage affected you? How? Not really, no. Thankfully, God has given me and those I care about good health. So aside from the usual headache, digestive aid and cold medications, which we regularly find, we are not feeling the medicine shortage.

Ahmed Attia, 37, owner of a dry cleaning business

I get really bad migraines and the only medicine that works properly is imported, but when I ask for it, I’m told only the Egyptian version is available. Now I get the local one, take an extra dose and have to wait longer for the headache to go away. During the more severe episodes, I have to take injections because the local medicine doesn’t have any impact. I never needed to go this far when I was taking the imported drug.

Sanaa Roushdy, 47, chef I am definitely finding it tricky when I am writing prescriptions for my patients. Several pharmacies send me a list of all the medicines that are not expected to be available any time soon, so I can find an alternative. I can tell you the list is getting longer. I have had to prescribe two medicines instead of one because one of the two I prescribe has side effects or is a weaker dosage. In milder cases, when the optimal medication is not available, I don’t prescribe anything, only basic vitamins or pain relievers.

Anonymous, 53, doctor Thankfully, I am not so sick that I need to take a medicine. I have some chest and stomach pain but it’s really not that bad. I really can’t afford the money or time to get it checked out by a doctor or buy expensive medicine. I have a friend who works at a pharmacy who usually recommends a certain medicine which I could barely afford. Recently, he hasn’t been recommending anything.

Sherif Tawfik, 49, taxi driver I don’t always find the allergy medicine that I must take if I eat anything with beans in it. Without this medication, I would mostly likely die from the allergic reaction. So I am living on the hope that what I eat doesn’t have any traces of beans.

Hany Abdel Gawad, 31, waiter I had just checked out of hospital a week ago after I had an episode and my husband couldn’t find my medication in any pharmacy. It was a bit touch-and-go for a while, but thankfully I am OK now. I didn’t realize that my medicine had run out and that it is in short supply. I asked my brother who works in Dubai to look for that medicine for me, and send it to me via courier. Until then, I make sure that I am within 15 minutes of a hospital in case that episode comes again.

Yasmine Shaarawy, 29, works in a toy shop

COMPILED BY TAMER HAFEZ

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BUSINESS MONTHLY ARCHIVES

I take a very specialized kidney medicine which hasn’t been available for some time now. I have asked friends coming to Egypt soon to get me several months’ supply because I am not willing to risk not finding the medicine here again. My doctor prescribed me a temporary medicine to keep my condition from rapidly deteriorating until my medicine arrives.

Thank God that I know people living abroad, otherwise I would end up in the hospital.

Tarek Fahmy, 67, retired journalist

JUST 1.2 MILLION TOURISTS VISITED EGYPT DURING FIRST QUARTER OF 2016.

began in mid-April, hasn’t run completely smoothly. The general secretary of the Sohag farmers syndicate told Daily News Egypt that silo operators have refused to buy wheat from unregistered local farmers, an issue the Agriculture Minister has promised to resolve.

Eni drilling fourth well at Zohr gas field

The Zohr field is on track to come online in 2017, the Ministry of Petroleum and Metallurgical Wealth announced last month. Italy’s Eni, the operator of the enormous gas deposit discovered off Egypt’s Mediterranean coast, has commenced drilling a fourth well, the ministry added. Work has also begun on an onshore processing plant in Port Said that will service the Zohr field. The project is expected to produce 1 billion cubic feet of gas per day within two years, rising to a peak production rate of 7.2 billion cubic feet per day. In related news, Edison, an Italian subsidiary of France’s EDF group, is also expanding its Egypt operations. The company signed an agreement last month to launch Phase Two of the Abu Qir production field, making an estimated investment of $220 million. The launch of the new

development phase is expected to up daily production by 50 million cubic feet of gas and 6,000 barrels of crude oil and condensates.

Tourism revenue drops by 66%

Revenue from tourism plunged in the first quarter of 2016, dropping to just $500 million compared to $1.5 billion a year before, Reuters news agency reports. According to Adla Ragab, an economic advisor to the ministry, just 1.2 million tourists visited Egypt during the quarter, compared to 2.2 million the year before. Already suffering since the 2011 revolution, Egypt’s tourism industry took a serious blow after the October crash of a Russian airliner over the Sinai Peninsula, killing more than 200 people, mostly Russian and Ukrainian tourists.

Egyptian authorities have yet to release a final report on the incident, but foreign governments believe the crash was the work of terrorists, and Russian and European airlines halted flights to Sharm el Sheikh in its aftermath. Egypt’s image as a tourist destination has also been tarnished by the accidental killing of a convoy of Mexican tourists by Egyptian security forces in September 2015, and the January murder of Italian researcher Guilio Regeni. ■

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19545_WMT_200x266_ME.indd 1

21/04/2016 10:14

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.

Atlantic Ocean

■ A new economic blueprint for Saudi Arabia With low oil prices adding urgency to calls for economic reform, Saudi Arabia’s medium-term development strategy aims to end the kingdom’s reliance on oil and transform it into a global investment powerhouse. A plan revealed last month, dubbed Saudi Vision 2030 and spearheaded by Deputy Crown Prince Mohammed bin Salman, envisions raising non-oil revenue from $43.6 billion last year to $160 billion by 2020 and $267 billion by 2030, Reuters reports.

The kingdom also intends to raise the capital of its public investment fund to $2 trillion, up from $160 billion at present, partly by transferring ownership of state oil company Aramco to the firm, and selling around 5 percent of Aramco’s shares in an IPO. The plan also calls for women to play a greater role in the economy and for improved conditions for foreign workers. Analysts critiqued the plan for containing few details about implementation, but it met with a positive response from the local market. The day the plan was released, the Saudi stock exchange jumped by 2.5 percent.

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SOUTH SUDAN SUDAN

■ Loss of territory leads to drop in revenue for Islamic State

■ Bahrain shows some success in economic diversification

Revenues collected by the Islamic State have dropped by around 30 percent in the last year, according to a report by IHS. Monthly revenue for the terrorist organization dropped to $56 million in March 2016, compared to around $80 million in mid-2015. IHS attributes the decline to a loss of around 22 percent of the group’s territory in Syria and Iraq in the last 22 months. The majority of its revenue comes from taxation and confiscation, which has fallen as fewer people remain under IS control. Oil production has also declined to around 21,000 barrels per day, compared to 33,000 per day in the summer of 2015, the researchers report.

This was attributed to military operations to reduce the Islamic State’s production capacity. In an attempt to make up for lost revenues, the group has increased taxes on basic services, imposed a raft of new levies ranging from road tolls to exit fees, and has begun accepting cash in lieu of corporal punishment for violations of its legal code. However, IHS says there are no indications the new taxes have triggered discontent.

Bahrain’s non-oil economy grew by Indian Ocean 3.9 percent in 2015, outstripping overall GDP growth of 2.9 percent, the country’s Economic Development Board reported last month. Hotels and restaurants led the way with 7.3 percent growth, followed by construction which grew by 6.4 percent, according to the Arabian Business website.

Meanwhile, the oil sector’s share of real GDP fell to just 19.7 percent. Like other countries in the region, the island kingdom is grappling with the economic consequences of a persistent downturn in global oil prices.

Officials say 2015 results are an indication that reform efforts are bearing fruit. “Despite the continued global challenges, a range of different indicators continue to demonstrate the resilience and potential of Bahrain's economy,” said Khalid Al Rumaihi, the EDB’s chief executive.

At press time, a delegation led by Bahrain’s King Hamad bin Isa Al-Khalifa was in Cairo to discuss investment opportunities. ■

KINGDOM COME FOREIGN INVESTMENT

BY EDMUND BOWER

S

audi King Salman bin Abdelaziz’s state visit to Cairo last month was greeted with unprecedented fanfare. To ensure security and the proper visuals, the interior ministry cordoned off entire sections of central arteries in the Egyptian capital for the king’s entourage. The worse than usual gridlock that resulted left grumbling commuters sitting bumper-tobumper under Saudi flags fluttering from lampposts.

The Egyptian government, meanwhile, focused on shows of adulation for the Gulf monarch. For four days beginning on April 7, the 80-year-old king was treated to fireworks displays and poetry readings, named chairman of Egypt’s numbertwo football club and awarded an honorary doctorate from Cairo University. The Egyptian parliament gave King Salman a standing ovation following his six-minute

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speech before lawmakers. More tangible gestures of friendship included the announcement of a 50-kilometer long bridge linking the two countries via the Red Sea—to be named after the king— ostensibly to boost trade, and the controversial territorial handover of two unoccupied islands. “I agreed with my brother his Excellency President Abdel Fattah el-Sisi to build a bridge connecting the two countries,” the king told

In Depth

reporters at an official press conference, calling it a “historic step” that will increase trade between Africa and Asia “to unprecedented levels.”

The visit, which was King Salman’s first trip to Cairo since ascending the throne last year, was intended to send a “message of reassurance,” to Saudi investors, a government source told the Daily News Egypt, with some $25 billion worth of agreements signed, according to the Ministry of International Cooperation, including one ensuring Egypt’s petroleum needs for the next five years. Officials touted the visit as marking a new stage in Saudi-Egyptian relations, though analysts noted that the deals included few specifics.

And analysts note that even if the investments do go through as planned, in contrast to the past, the recently announced Saudi support doesn’t include plans for even $1 to be deposited into Egypt’s Central Bank.

On the other hand, the United Arab Emirates said late last month that it would commit $2 billion to boosting Egypt’s reserves, in addition to another $2 billion in investments. However, this is still a drop in the bucket compared to the Gulf’s largesse of recent years. “It’s definitely a shift,” says Amr Adly, an economic researcher at the Carnegie Center for Middle East Studies, adding that Saudi Arabia, which is facing an economy that has been rocked by record low oil prices, cannot realistically be expected to continue funding Egypt’s chronic budget deficit. “Egypt is a big country, beyond the means of any country to carry on financing,” he says.

Bridge over troubled water?

It is no secret that Egypt has in many ways come to regard its deep-pocketed friends in the Gulf, led by Saudi Arabia, as its most steadfast friends in recent years. Gulf countries bailed out the cash-strapped Egyptian government to the tune of around $20 billion between 2013 and 2015, following the

ouster of President Mohamed Morsi and his Islamist government, a political development that Riyadh was more than happy to support. Saudi Arabia has since pumped billions in aid, lowinterest loans and fuel supplies into the struggling republic, which it sees as an important strategic regional ally.

“It’s clear Saudi Arabia wants a stable and secure Egypt,” says Emily Hawthorne, an analyst at Stratfor, a U.S.based intelligence firm. With 90 million people, Egypt’s political and economic fortunes determine the direction of the entire region. Particularly since the instability of the 2011 Arab Spring, the Saudis are determined to do what they can to prevent Egypt from going the way of neighboring Libya or Syria, both countries currently wracked by civil conflicts.

Saudi Arabia’s regional policy is in response to a changing geopolitical climate in the Middle East. “There is growing perceived Iranian influence in the region,” says Hawthorne, particularly with the recent lifting of many economic sanctions against Iran by Western nations in exchange for agreements to curb its nuclear program. In light of this, Saudi Arabia, now the world’s third biggest military spender, is pursuing a more aggressive foreign policy, with 150,000 Saudi troops leading a coalition against the Iranianbacked Houthis in Yemen and sponsoring anti-government militias in Syria.

In this same vein, Saudi Arabia has sponsored a Joint Arab Taskforce, an anti-Iranian military coalition of Sunni Muslim states. With some 700,000 troops, the Egyptian army is the largest in Africa and the Middle East and an attractive resource for Saudi aspirations. It is logical for Riyadh to look to Egypt as a source of military manpower, analysts say. Last September, Egypt announced that it was sending 800 troops to support the Saudi-led coalition in Yemen, in addition to lending naval support. But faced with fighting a growing terrorist insurgency at home in the Sinai Peninsula as well as instability along the Libyan border,

President Sisi is unlikely to be enthusiastic about making a major, long-term commitment of soldiers to regional conflicts—notwithstanding his pledge in January last year to coordinate “with our Arab brothers” to fight the growing threat of armed movements in the region. This reluctance hasn’t gone unnoticed by the Saudis, says Adly.

“Last year the Saudis were frustrated with Egypt over Yemen and Syria,” says Adly, who notes that last year, there was “almost a complete halt” of Saudi aid to Egypt.

SAUDI ARABIA WILL SUPPLY 700,000 TONS OF FUEL TO EGYPT, REPAID BY EGPC OVER 15 YEARS Moreover, with the United States retreating from its “historically intense role in the Middle East,” as two analysts with the Council on Foreign Affairs put it in a November report, ”Egypt and Saudi Arabia are now finding themselves, for the first time in years, having to form policies without U.S. input” on such issues as Iran and the growing threat of the terrorist Islamic State as well as the crises in Yemen and Syria. With Egypt desperately trying to right its economy amid a hard currency shortage and foreign reserves that have dipped to near critical levels in the wake of declining tourism and foreign investment, Egypt has little choice but to play ball with Riyadh.

Following the economic turmoil of the last five years, Saudi petro-dollars have been a great boost to Egypt’s economy.

The breakdown of tourism since the turmoil that began in 2011 has left Egypt struggling to find adequate dollar supplies to meet its import demands. Last year, at a high-profile economic summit in Sharm el-Sheikh that was meant to restore Egypt’s global image as an investor friendly nation, Saudi Arabia, Kuwait, the United Arab Emirates and Oman pledged a staggering $12.5 billion in loans, grants and investments.

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But by all accounts, Egypt has since burned through that cash, with companies increasingly struggling to get their hands on hard currency for imports.

“This happened when GCC money stopped,” says Adly. “This is exactly why we’ve been having a crisis in the last year.”

In December, King Salman gave orders to increase the country’s investments in Egypt to around $8 billion as well as to secure Egypt’s petroleum demands for the next five years and to increase Saudi traffic in the Suez Canal.

Annual FDI from Saudi Arabia increased from $192 million in fiscal 2012/13 to 649 million in fiscal 2014/2015. Moreover, the plans announced during the king’s recent visit include a $16-billion investment fund aimed at developing the Suez Canal Economic Zone in addition to a number of smaller, non-binding commitments. Officials also said Saudi Arabia had agreed to finance large-scale development in the Sinai, with a $1.5 billion concessional loan and $200 million grant signed to develop housing, infrastructure and agriculture projects, as

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well as the new King Salman University to be built in the South Sinai city of ElTor. “Sinai falls in between Egypt and Saudi Arabia,” explains Hawthorne, “and the militancy issue is a concern.”

The investment is supposed to create job opportunities to counter the chronic unemployment in the region that has made it fertile ground for the recruitment of insurgents. A $120 million loan to renovate Cairo’s Kasr al-Aini government hospital and a $100-million loan to increase the capacity of West Cairo Power Station by 650 megawatts were also announced.

While officials made much of these agreements, few details were disclosed on the deals, nearly all of which came in the form of Memoranda of Understanding rather than binding contracts. Many of the MOUs touted during last March’s Sharm el-Sheikh summit have yet to come to fruition. The most tangible aid recently announced from Saudi Arabia came from the Saudi Fund for Development, which agreed to finance the purchases of the Egyptian General Petroleum Co. to tune of $23 billion over the next five years. Under

the new deal, the Saudi national oil company will supply 700,000 tons of fuel to Egypt each month, to be repaid by the EGPC over a period of 15 years at an interest rate of 2 percent.

Last stop on the money train

A sustained period of low oil prices has suddenly changed the economic realities facing petroleum-dominated Saudi Arabia, forcing the kingdom to dip into its massive stores of foreign currency reserves. Hawthorne, the Stratfor analyst, notes that while the wealthy monarchy can afford to weather a period of lean oil revenues, Saudi Arabia’s economy is in need of diversification and other reforms in the long term, a fact that its leaders recognize. This backdrop has clearly factored into Saudi Arabia’s shifting emphasis on private sector investment in Egypt.

“They want to make sure the money they send has a return,” she says.

Another issue is Egypt’s growing foreign debt, which must eventually be paid back in hard currency. Alia elMahdi, an economics professor at Cairo

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Leading a horse to water

The question is whether Saudi businesses will follow through with promised investments in Egypt in light of the challenges that have scared away other foreign investors in recent years. Just days after King Salman concluded his visit, Al Borsa reported that the Saudi energy firm Abdul Latif Jameel planned to pull out of $700 million worth of investments in Egypt’s renewable energy sector, citing excessive red tape. Egyptian authorities denied that claim, saying the energy giant had pulled out of just one of several projects due to lack of financing. In any case, analysts say the news isn’t surprising given the difficult environment faced by foreign investors in Egypt, who now face an unstable currency and a dollar shortage in addition to chronic problems of bureaucracy and regulatory issues. Egypt ranked 131 out of 189 countries in the World Bank’s 2016 Doing Business Report, below Iran and the Occupied Palestinian Territories.

“Not only Saudis are complaining, Egyptians are also complaining,” says Mahdi, the Cairo University economics professor, who says the government must commit to real long-term reforms to make Egypt more business friendly.

However, the ongoing hard currency shortage has made things increasingly

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University says: “We used to have a saying in Mubarak’s time—never let the foreign debt exceed $35 billion. Now it’s close to $50 billion.”

However, without a stopgap source of dollars, and foreign reserves at less than half of their pre-2011 revolution levels, Egypt will continue to struggle to pay for critical commodities imports like food and fuel. “We have good relations with Saudi Arabia,” says Mahdi, “but they are a bit stressed. Egypt cannot wait to get assistance from anyone. It has to start working and encouraging a private sector.” Plans to develop industry in places like the Sinai and the Suez Canal are meant to do just that—to encourage more lasting sources of revenue for the Egyptian economy. difficult for attracting prospective investment. “Nobody wants to put their money in Egyptian pounds,” says Patrick Werr, an Egypt-based economic columnist at The National, an Emirati publication. Investors are understandably leery of an unstable currency, especially one like the pound, which many analysts still consider overvalued. Fearing widespread inflation, Egypt’s Central Bank has continued to keep the pound at artificially high levels, which chases away FDI. “If you were a businessman, why would you want to invest?” asks Werr.

The most contentious development coming out of Salman’s visit was the demarcation of the maritime borders, which placed the two disputed islands of Tiran and Sanafir under Saudi control.

The news angered many Egyptians, many of whom saw it as essentially selling off their country to the highest bidder. Many observers also saw it as embodying unhappiness with the lack of transparency that has accompanied many such decisions. Notable political figures such as Mohammad Abdul Hadi Allam, the editor-in-chief of state-owned Al Ahram, vocally opposed the move.

On the Friday following the king’s departure, which crowds dubbed the “Friday of the Land,” citizens took to the streets around Cairo for a rare show of public dissent to protest the decision— marking the first major organized rallies

since the government outlawed public protests in late 2013. Cries of “Awad sold his land”, referenced a popular song about a man who drew shame by selling off his ancestral real estate. Parliament has vowed to investigate and political parties have joined forces to petition the government to reverse the deal.

The other announcement from April that promises controversy down the road is the plan to build a bridge connecting Saudi Arabia to South Sinai across the Straits of Tiran. Originally proposed during the Mubarak era, the bridge is meant to strengthen trade ties, increase tourism and provide an alternate hajj route. The project was shelved in 2005 over security concerns, but was resurrected by the Morsi administration. Critics fear the massive construction project will damage the world-famous coral reefs in the strait and along South Sinai’s coastal protected areas, killing off Sharm el-Sheikh’s lucrative scuba diving tourism in the process.

In the wake of the public uproar over the handover of Tiran and Sanafir, Saudi and Egyptian officials responded by saying the Red Sea islands belong to the kingdom and were only under Egyptian control because Saudi Arabia had asked Cairo in 1950 to protect them. “We didn't relinquish even a grain of sand,” Sisi said in a televised speech April 13.

“Please let us not talk about this subject again.” ■

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PHARMACEUTICALS

DRUG SHORTAGES WORSEN AMID CURRENCY CRISIS

BY TAMER HAFEZ

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here are six pharmacies near Ahmed Mamdouh’s home in Sheikh Zayed, a western suburb of Cairo, but the soft-spoken accountant can’t fill his prescriptions at any of them. He takes commonly prescribed medicines to control his cholesterol and diabetes and stave off heart disease, but for the last two months, Mamdouh, 52, can’t manage to replenish his pills. “I went from being shaken down for triple the market price to being directed to a pharmacy 50 kilometers away,” he says. Now he’s simply being told that there is a national drug shortage.

Mamdouh is luckier than most. A Canadian passport holder, he can always buy his medicines abroad if it comes to that. The majority of Egyptians do not have that luxury.

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According to a March report by the pharmaceutical chamber of the Federation of Egyptian Industries, some 1,471 brand name drugs are out of stock on the local market; 300 of which have no alternative and aren’t available in any other brand.

Many of these medicines are essential “life-saving” drugs, according to the report. In a December bulletin, the

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Ministry of Health and Population reported that there were generic equivalents or alternatives for 189 drugs currently in short supply, while 43 medicines were totally out of stock.

Medical professionals and anecdotal evidence have called those numbers into question, however. While drug shortages are nothing new here—in 2012, the

health ministry set up a Drug Shortages Directorate, which published monthly tallies listing drugs that were difficult to find along with suggested alternatives— the situation has gotten exponentially worse in the wake of Egypt’s hard currency crisis. Ashraf el Khouly, a spokesman for Pfizer Egypt who is also chairman of the Egyptian Society for Pharmaceutical Research, says the situation started to seriously deteriorate in 2013, as Egypt’s currency dipped and factories struggled to get their hands on dollars to pay for critical inputs. “We are having a hard time getting letters of credit to import the raw materials we need,” says Khouly.

Drugs are cheap in Egypt because the government, like most European countries, sets drug prices. As a result, companies that make medicines for the local market have been burdened with increasing costs but are unable to raise prices accordingly. Egypt is a 90-million strong market full of unhealthy consumers—Egyptians suffer from disproportionately high rates of high blood pressure, diabetes and Hepatitis C, all chronic conditions that require long-term drug treatment. Thanks to this attractive “disease profile,” Egypt remains a lucrative pharmaceuticals market. The local industry has continued to grow, even though prices of medicines remain among the cheapest in the world. But Khouly warns that that could soon change if conditions continue to worsen.

As in other industries, in the Nasser era, government-owned factories accounted for the vast majority of the local sector. But in the 1990s, Egypt began opening up the market to private investors and multinational firms. By 2015, investments in the pharmaceutical industry topped $3 billion.Over the years, the state has gradually relinquished control of the industry to the private sector. Today, just 11 of 137 registered pharmaceutical firms are publicly owned, responsible for manufacturing just 10 percent of the drugs Egyptians buy, according to state statistics agency CAPMAS. Around 42 percent of the medicines sold in local pharmacies are made by multinational drug companies, while another 18 percent are imports.

The country’s total pharmaceutical import bill in fiscal 2014/15 reached $2.7 billion, up from $1.9 billion in 2010/2011. “The government’s medicine safety net is now firmly out of its hands,” says Adel Abdel Maksoud, head of the pharmacy division at the Cairo Chamber of Commerce. The government can cap the price of medicines, he explains, but it can’t force firms to keep manufacturing money-losing drugs, no matter how much Egyptians might need them. “If companies decide to lower or even stop production they can. It's not illegal to do so,” says Abdel Maksoud.

“THE GOVERNMENT’S MEDICINE SAFETY NET IS NOW FIRMLY OUT OF ITS HANDS.”

The roots of the problems currently plaguing the Egyptian pharmaceutical industry go back years. Keeping drug prices artificially low has come at the cost of chasing away investment and innovations that would have enabled the industry to evolve and flourish. Prior to 2009, locally made drug prices were set according to a somewhat arbitrary "costplus" framework in order to keep medications affordable. In practice, however, industry insiders say prices were often determined via backroom deals between manufacturers and officials. In 2009, Egypt switched to an external reference pricing system in an attempt to halt corruption and modernize the industry, bringing it more in line with the global marketplace. Under the new framework, prices of medicines were to be anchored to retail drug costs in 36 “benchmark” nations, including Canada, European states and countries in the Arab Gulf. But sloppy execution and protests from consumer groups ultimately resulted in many

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prices remaining artificially low.

Meanwhile, the state hasn’t updated drug prices since 2010.

The new pricing system was modeled on the system used by many European nations in determining drug prices for their citizens. But governments in Europe also tend to have comprehensive national health care schemes that cover all or most of the cost of medicines. Health industry experts estimate that Egyptians, on the other hand, pay on average 70 percent of their drug costs out of pocket.

Unlike fuel and staple foods, other basic commodities whose prices are fixed by the government, medicines are not subsidized at any point in the supply chain, says Ahmed Shaaban, secretary general of the Pharmacists Syndicate, an industry group. He says drug companies often temporarily cut back production of money-losing medicines. Another way firms counter losses is by diversifying into higher profit drugs such as weight loss and male performance enhancing aids, says Osama Rostom, the commercial director of the Egyptian International

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Pharmaceutical Industries Co., one of Egypt’s biggest local drug companies.

The firm exports drugs to 65 countries, he says, “But make no mistake: despite the diversification, our revenue is dropping.” He places the blame squarely on Egypt’s low drug prices.

According to him, some 90 of EIPICO’s medicines that made money 15 years ago are no longer profitable.

The reason companies can’t count on exports to make up for domestic losses is that many countries will not allow imported medicines to sell at above their local market price, explains Riad Armanious, a member of the Pharmaceutical Export Council. In Jordan, which has just seven pharmaceutical factories and does not cap drug prices, export revenues from the sector in 2015 topped $1 billion. Egypt has 137 pharma factories, yet export revenue fell to $267 million in fiscal 2014/15, down from $458 million in 2010/11, according to Central Bank data.

Adel Abdel Halim, head of the state-

owned Holding Company for Pharmaceuticals, better known as Holdipharma, argues that keeping drug prices capped is essentially a tool to keep health care affordable for the poor, in lieu of a viable medical safety net for the public. “The government is trying to provide one by keeping prices down,” he says. In 2009, a study by the American Journal of Pharmaceutical Education showed that Egypt has twice as many pharmacists per capita as other nations in the region. This is likely at least partly connected to the fact that Egyptians tend to rely on pharmacies for the kind of primary care and diagnosis of minor ailments that would be left to doctors and nurses in developed countries. Egypt’s health care spending is among the lowest in the region, comprising less than 6 percent of the budget, and public hospitals and clinics often don’t have basic lifesaving medicines in stock.

In the past, the state could counter market driven drug shortages by simply ordering publicly owned pharmaceutical factories to ramp up production of needed medicines. But government owned

factories have been hit hard in recent years. According to CAPMAS, stateowned pharma producers lost a total of LE 180 million last year, and some industry insiders predict annual losses of LE 250 million by the end of 2016.

“Our losses are driven by the pound’s devaluation, which started in 2011,” says Abdel Halim, who says the health ministry hasn’t adjusted drug prices since six years ago, when the official exchange rate was LE 5.25 to the dollar. (Late last month, the official exchange rate was LE 8.8, but forex dealers were reportedly selling scarce dollars on the black market for around LE 11.) The chief of Holdipharma, which oversees state-owned drug firms, says the combined operating costs for these factories increased from LE 380 million in 2012 to LE 700 million last year. Meanwhile, around 700 of the 1,200 medicines that they produce sell for under LE 5 a box.

Energy subsidy cuts and higher labor costs have also driven up production costs across the board. Abdel Halim says government-held factories, which are supposed to supply state-run health care facilities, can barely afford to conduct basic maintenance, let alone diversify into more profitable medicines. “The pressure is intense right now just to stay afloat,” he says, adding that the role of state-owned drug factories is “a matter of national security.”

Another problem is that Egyptian drug companies export very little of what they produce. Egyptians are increasingly dependent on imported drugs. In 2014/15, the country exported less than a tenth of the medicines it brought in.This trade deficit is due to a variety of factors, ranging from a lack of investment in research and development funding to an outdated regulatory system, an area in which Egypt lags “far behind” international standards, says Ahmed el Sawah of the Egyptian Center to Protect the Right to Medicine.

The larger problem, says Khouly and others, is Egypt’s failure to develop R&D in pharmaceuticals has left the

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country unable to keep up with international advancements in the field or make its own versions of modern, state-of-the-art medicines. For one thing, Egypt lacks any legislative framework governing clinical trials, so it’s very difficult for locally produced medicines to pass international standards. Globally, the pharmaceutical sector spends around $83 billion annually just on coming up with new drugs. According to Khouly, it costs an average of $2.7 billion to develop just one new medicine.

“Under the current setup, medicine shortages will continue to repeat every few years because private firms control supply,” says Shaaban, who argues that the only way to counter the current drug shortages is for the Egyptian government to reassert control over the sector. “State-owned companies need to have a strong position in the market to balance out the medicine supply.”

But others say Egypt simply doesn’t have the public resources to control its enormous drug market; Khouly points out that many publicly owned factories make drugs that are obsolete.

In the meantime, local pharma executives argue that the only short term solution to the shortage is to hike the prices of the cheapest medicines by 50 to 100 percent. Abdel Maksoud of the Cairo Chamber of Commerce argues

that the public will be able to absorb this extra cost, since the prices of many pharmaceuticals have been kept so cheap for so long. “The entire medical matrix from doctors to hospitals is already getting more expensive, but not medicine,” he says. Paradoxically, keeping drug prices so low has now imperiled Egyptians’ access to critical medicines. Tales are common of desperate citizens being forced to pay 10 times the local price for imported drugs in the absence of locally made versions.

Health ministry officials did not respond to requests for comment.

However, government representatives have in recent months repeatedly denied to local talk show hosts that there is a drug shortage, advising Egyptians who can’t find their medicines to “call the ministry hotline.”

Repeated calls to that number last month on various days and times all went unanswered.

“It’s unclear to us whether the government wants the pharmaceutical industry to walk a tightrope, be left to fade away like the cotton industry or make something good out of this sector,” says Khouly. He argues that something must be done soon to solve Egypt’s chronic drug shortages.

However, “first we need to admit that there is a problem.” ■

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SHARING ECONOMY

EMBRACING THE SHARING ECONOMY

BY TAMER HAFEZ

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n March 8, commuters trying to navigate through Mohandiseen would have done better to get out of their cars and walk. The main streets were clogged as dozens of taxi drivers used their white, stateregistered cabs to block Mustafa Mahmoud Square, the focal point of Giza’s most prominent business district, to protest app-based ride-sharing services like Uber and Careem, which they claim are driving them out of business.

The drivers got little public sympathy, however, as regular taxi users took to social media with stories of broken meters, harassment and attempts to overcharge passengers. Provide better service, the passengers retorted, and you wouldn’t fear the competition.

Debates over customer service aside, the white-taxi drivers argued that competition is unfair, because the drivers with the ride-hailing services are not subject to the same licensing and registration requirements and fees. That is the crux of the real debate about the so-called ‘sharing economy,’ where websites and

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smartphone apps connect people looking for lodging, rides and other services with people offering to rent their private homes, cars and other assets. In these person-to-person transactions, the service providers fly below the radar of state regulations and taxes. The rapid growth of this business model is shaking up service industries across the globe, and governments are wrestling with whether to embrace it or try to stamp it out.

In Egypt, the competition isn’t going away. After almost a year in Egypt, the

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Dubai-based Careem is seeking investors in its local operation to finance expanding its services beyond Cairo and Alexandria. Its direct competitor Uber already has over 10,000 registered drivers in Cairo since the company launched less than 18 months ago according to David Plouffe, Uber's chief advisor and member of the Board of Directors.

The main driver of the ride-hailing apps’ high growth rate is accessibility.

"You press a button to get a ride," Plouffe explained at an AmCham event in March. Thus far, drivers need only a basic private driving license and registered car, and to pass the company's vetting process. Clients need only to register with the website or mobile app to use the service. A feedback section allows users to rate each encounter, to identify higher rated drivers and cars for its premium service.

Meanwhile, the home sharing website Airbnb is quietly making inroads in Egypt, with more than 300 listings in major Egyptian cities and tourist areas.

Globally, Airbnb is present in over 190 countries worldwide, more than Intercontinental and Hilton hotel chains combined, while significantly undercutting their rates: An Egypt-wide search on the website listed an average nightly rate of $45.

The "sharing economy" concept started in the 1960s in the United Kingdom as a type of pay-it-forward barter system: a network of vacation-home owners would let each other use their properties for free, with a small fee going to the organization coordinating the schedules. A contemporary version is Couchsurfing.com, where hosts on the network open their homes for free to travelers. The term now encompasses paid services including not just rooms and rides, but also equipment rental, cleaning services, pet care and more.

"Increasingly, we are seeing people using this model to supplement their income,” said Plouffe.

Companies like Airbnb, Uber and Careem simply facilitate the person-toperson transactions by providing the app or website and taking a percentage

of each completed transaction. The business model is not dissimilar from how any economy works, but it bypasses government laws and bureaucracies.

The fact that it attracts individuals as well as businesses to the network makes its scalability potential massive.

Today, independent service providers can routine working 40-hour weeks and earn $90,000 a year in a major city like New York. "The value comes from the people that connect to the network," said Chelsea Rustrum, author of “It’s a Shareable Life” and strategy consultant on the sharing economy.

AIRBNB’S DATABASE HAS A HANDFUL OF EGYPTIAN BUDGET HOTELS THAT RECOGNIZE ITS MARKETING POTENTIAL.

"We couldn't have existed 10 years ago, before Facebook, because people were not really into sharing," said Nate Blecharczyk, one of Airbnb founders, to The Economist in 2013. The sharing economy’s global growth rests solidly on information technology, harnessing the internet’s ability to support low transaction fees and more detailed data about transactions, as well as GPS-based technology for more targeted results. There is also the human aspect which works better via the internet. "People are generally more comfortable meeting new people using technology," said David Lee, founder and managing partner of SV Angels, an early investor in Airbnb, to The Economist. He pointed out that with the feedback system, there is a certain level of trust created among people who have never met before.

Such high exposure means that reputation is very fragile when something bad happens. In 2014, Uber’s vetting process came under intense global

scrutiny after one of its drivers in India kidnapped and raped a female passenger. The spotlight turned on Airbnb in 2015 after an alleged sexual assault by an apartment owner in Madrid.

Property damage is also a risk, with some Airbnb hosts reporting thefts and destruction. After these high-profile individual incidents, the companies started scrutinizing their service providers and clients more closely, turning away those who don’t meet company criteria. "Creating a trusting community is just as important [as having a secure financial platform] when it comes to attracting users," said Lee. Realizing the importance of public perception and credibility, sharing economy firms in the United Kingdom created Sharing Economy UK to promote best practices across all industries using a sharing economy model.

The body also sets standards and advocates on behalf of the industry.

Currently, 41 out of 72 companies are in SEUK. The UK government is also actively promoting the person-to-person business model. “We're going to help the new world of micro-entrepreneurs who sell services online or rent out their homes through the internet," said Chancellor of the Exchequer George Osborne to parliament. The UK government announced tax exemptions worth £1,000 on trading and property income made through sharing economy companies. Osborne said that it will help create jobs for half a million people, adding, "There will be no forms to fill in, no tax to pay--it’s a tax break for the digital age."

The world’s second largest economy is also embracing this form of microentrepreneurship. According to the National Information Center, a Chinese government think tank, the sharing economy in China is worth around $300 billion and expected to grow at an annual 40 percent between 2015 and 2020. At that point, the sharing economy will account for 10 percent of China's GDP, creating income for 50 million people, almost 5.5 percent of the total workforce.

Catherine Clifford, who covers global sharing

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economy trends for Entrepreneur magazine, wrote in March that these official estimates are meant to be “a bit inspirational” to motivate entrepreneurs to join the sharing economy.

"The confidence that China's government agency is pumping is noteworthy. And even the notion that China's pie-in-the-sky dreams end up being half true is a pretty bold harbinger of the momentum of the sharing economy." China’s home-grown version of Uber, Didi Kuaidi, launched in 2015 as a merger of the top two on-demand services, has reportedly kept Uber's market share in China to less than 15 percent.

But many cities and countries are not so keen on the sharing economy, which operates in many ways as an informal economy outside government control. Among the critiques: Independent service providers are regulated by laws governing individuals rather than by corporate law. Income from sharing activities often goes untaxed, since there is no paper trail for the state to follow. Meanwhile, there is no oversight to ensure the properties, cars and services provided adhere to industry-specific laws. In Washington state, the Seattle city council in 2014 initially limited appbased ride sharing companies to 150 registered drivers each at any given time; it later replaced the cap with new licensing regulations for the companies. In April, Uber settled a classaction lawsuit with drivers for over $84 million after misclassifying them as independent contractors rather than employees to avoid paying for health insurance and other benefits.

Meanwhile, California has filed a case against Airbnb demanding that it pay the 15 percent hotel tax that applies to the formal lodging industry.

Several major European cities are also fighting back against the sharing economy, especially cities suffering from a residential housing crunch. In Paris, authorities have conducted multiple raids to catch landlords using Airbnb to rent residences as year-round tourist lodging.

Amsterdam government officials are

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masquerading as potential renters on sites like Airbnb to identify and penalize landlords who don't have a license to operate hotels. In Brussels, non-commercial drivers caught giving people rides in return for payment faces fines of €10,000. In 2014 the German government banned Uber nationwide and fined it €250,000 for violating national taxi laws.

Japan has had a change of heart about the sharing economy. The country has banned ride-sharing companies and required a minimum stay of one week for property-sharing transactions, which is too long for the majority of target clients, according to Airbnb stats. But the government is starting to relax regulations this year after Japan saw the highest tourist season in its history, with just under 20 million tourists visiting. This figure will only increase in the next four years, as Japan prepares to host the 2020 Summer Olympics. "We need to make

the experience of foreign tourists visiting Japan more convenient and comfortable," said Japanese Prime Minister Shinzo Abe during a government panel meeting in October 2015. "For this, we need to expand the number of shortterm accommodations beyond hotels, and widen the usage of private cars as a means of transportation for tourists visiting rural areas."

Be it home sharing or ride sharing, those in the industry say there is room in the market for both traditional players and the app or web-based companies. "I'm optimistic that there isn't going to be a war with hotel chains," said Brian Chesky, the head of Airbnb.

To an extent he is right, given that many travelers won’t give up the fullservice amenities that a five-star hotel offers. Airbnb’s 300+ listings for Egypt are certainly aren’t a real threat to the local industry; in Cairo alone, many five-star hotel brands have more than 300 rooms in a single property.

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That said, Airbnb goes head-to-head with budget hotels and bed-and-breakfast lodgings, which roughly offer something close to residential apartments. In fact, the database for Egypt includes a handful of Egyptian budget hotels that clearly recognize the marketing potential of an Airbnb listing.

Home sharing firms are also chipping away at the business travel market. As companies cut travel budgets, it is more cost effective to have employees share a multi-bedroom apartment booked through Airbnb while they’re on the road.

According to Concur, a travel and expenses management firm, business travel going to Airbnb has gone from what the Economist described as a “rounding-error figure” in 2012 to around $1 million in 2015.

It’s the same story with ride sharing. Uber’s Plouffe is adamant that the service targets a completely different market than traditional taxis. "We target people who already have cars, but don't want to use them for some reason," he said.

"We are not tackling the taxi market. We are tackling the private car market."

Egypt thus far has only addressed the ride sharing services. After the taxi protest, Cabinet issued a statement it would draft new legislation that will “protect citizens’ rights to choose the manner of transportation that suits them and also ensure that traditional taxi drivers would find work and make money.” The new law is expected to require ride sharing service drivers to pay the same insurance and taxes as state-registered taxis, while traditional taxis would be encouraged to join ride-sharing services. Until the law passes, however, non-commercial drivers caught accepting fares from passengers still risk having their licenses revoked.

Even with restrictions, sharing economy businesses are thriving. According to a report by JustPark, a Europe-based firm that arranges pre-bookable parking in private driveways, the cities with the most sharing economy companies are San Francisco with 131 companies and New York with 89 companies; both cities are trying to regulate the industry. London, with its more favorable business climate, comes in third with 72 companies. The other cities in the top 20 had fewer than 25 firms. "Regulatory issues are a blip on the radar if you think of it in the long term," says Rustrum.

Some major investment firms share this sentiment. GM Ventures, the investment arm of General Motors, invested $13 million in 2011 in RelayRides, a ride-sharing firm similar to Careem and Uber. And after a Wall Street Journal report valued the company at $25.5 billion, Airbnb raised over $1.5 billion in funding in the second half of 2015.

Looking back to the opportunities for Egypt, business mogul Naguib Sawiris thinks not promoting the sharing economy business model is a mistake, as it will unlock parts of the economy to new players and allow remote cities to create job opportunities and offer residents more services. "Such technologies make life in Egypt easier and less expensive," Sawiris said at the March AmCham event. "The government must embrace technology, facilitate its spread and not put it under the framework of decades old regulations. Technology and innovation always win.” ■

Business Monthly – May 2016

I

31

Stock Analysis

Keep partying until the music stops

I

nvestors continued to cheer the Central Bank of Egypt’s March 14 move to let the Egyptian pound depreciate by some 13 percent, settling at LE 8.78 at banks. Overnight, Egyptian assets, stocks included, have become cheaper in US dollar terms, inducing foreign portfolio investment inflows in the short term and hopefully foreign direct investments in the longer run. Indeed, foreigners turned net buyers in March for the first time in five months, with total inflows of $105 million or 43 percent of the total outflows over the previous four months. During the period from March 15 to April 15, the EGX 30 added another 4.5 percent to hit 7,463.1, extending its positive performance year-to-date to 6.5 percent. Similarly, the EGX 70 added another 3.7 percent to reach 374.8 but remained in negative territory for the year, down 1 percent. Advances led declines by a ratio of 14-to-10. Institutions were net buyers in March, netting $165 million.

Gainers included tourism and financial stocks—all potential winners from the recent devaluation. Orascom Hotels & Development (ORHD, up 57 percent at LE 8.28), Pyramisa Hotels (PHTV, up 40 percent at LE 26), Tourism Urbanization (TOUR, up 24 percent at LE 6.45), and Egyptian Resorts Co. (EGTS, up 18 percent at LE 0.91) advanced after investors grabbed shares in anticipation of a tourism boom against the backdrop of a weaker pound. ORHD’s 2015 net earnings jumped 129

percent to LE 229 million. Also, Beltone Financial (BTFH) and Pioneers Holding (PIOH) saw their shares jump 33 percent and 23.5 percent to LE 20.75 and LE 10.08, respectively. The former was still waiting the regulator’s “no objection” to acquire CI Capital, the investment arm of Commercial International Bank (COMI), which ended the period 2.3 percent higher at LE 39.74.

Ironically, Orascom Telecom & Media Holding (OTMT), which owns 87 percent of BTFH, has not seen its shares appreciate as much, ending the period up only 7.5 percent at LE 0.72. As of April 15, BTFH was valued at LE 3.38 billion, just 11 percent below OTMT’s LE 3.78 billion market value. Elsewhere, Domty—the latest IPO—signed a $10 million contract to supply Russia's largest retailer, Magnit, with dairy products.

The declines list included fairly illiquid names and once-market bellwethers like Mobinil. Now known as Orange Egypt, the company plans to float more shares to meet the minimum listing requirements. Although the stock is thinly traded, it was down 12.9 percent at LE 117.18 during the period but is still up 24 percent for the year.

Going forward, investors will likely eye the gap between the U.S. dollar official exchange rate and the parallel market rate.

Another wave of Egyptian pound devaluations is likely to drive stock prices still higher—the music investors want to hear for their party to go on.

IN THE SPOTLIGHT

Arabian Food Industries (Domty) Another new IPO on the block, Arabian Food Industries—more famously known as Domty—joined the stock market in a LE 1.1 billion debut. The cheese and juice producer offered 122.5 million shares, or 49 percent of its capital, at LE 9.20 a share, valuing the company at LE 2.2 billion in an IPO that was covered six times overall (5.5 times in the private placement of 110.3 million shares and 10.7 times in the public offering of 12.3 million shares). In 22 days, a total of 35 million shares worth LE 354 million exchanged hands.

Since its first trading day on March 22 through April 20, the stock increased 6.5 percent to LE 9.80 after hitting a high of LE 10.85 intraday on March 24.

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Business Monthly – May 2016

Market Watch

Capital Markets Egyptian price indices - EGX 30

7463

EGX 30

Egyptian price indices - EGX 70

375

EGX 70

Selected sector performance

Business Monthly – May 2016

I

33

Market Watch

Capital Markets Corporate News EFG Hermes' Vortex to acquire European wind energy portfolio

Vortex, a renewable energy platform managed by EFG Hermes Holding's (HRHO) private equity arm, entered into a sale and purchase agreement with a subsidiary of EDP Renováveis S.A., one of the largest players in the global renewable energy sector, to acquire a 49% stake in an operational 664 MW portfolio of European wind assets. The transaction is valued at €550 million and includes a portfolio of 23 wind farms in four European Union countries including Spain, Portugal, Belgium and France.

This acquisition will nearly double HRHO’s assets under management to just over $1.1 billion. EFG has successfully raised €550 million to fund the transaction: 40 percent in the form of equity (5 percent of which was a seed investment by HRHO and 95 percent of which comes from sovereign capital from the GCC region) and the remaining 60 percent via a 13-year facility provided by five prominent European banks. The transaction, subject to regulatory approval and other conditions precedent, is expected to close in the second quarter of this year.

Algerian mobile operators submit bids for 4G licenses

The three mobile operators in Algeria—Algeria Telecom Mobile, Wataniya Telecom Algeria and Global Telecom Holding’s Optimum Telecom Algeria—all submitted bids to the Regulatory Authority for Post & Telecommunications to obtain 4G licenses. The winning company will be announced on May 23.

EFIC seeks LE 190 million to pursue expansion and settle existing debt

The Egyptian Financial & Industrial Co.’s (EFIC) 99.8-percentowned subsidiary Suez Company for Fertilizers Production (SCFP) plans to borrow LE 100 million to settle part of its LE 240 million debt owed to EFIC. SCFP will settle another LE 100 million through capitalizing the amount and raising its capital

from LE 300 million to LE 400 million, leaving its dues to EFIC at LE 40 million. EFIC also intends to raise LE 90 million in debt to finance developments in its halted production units and improve SCFP’s liquidity.

Juhayna sells its 40 percent stake in Milky's

Al-Enmaa for Agricultural Development & Livestock Co., a fully owned subsidiary of Juhayna Food Industries (JUFO), sold its 40 percent stake in its subsidiary Milky's for Milk Production for LE 56.5 million. This divestment comes in line with the company's strategy to focus on investments in agriculture and livestock production segments. Sale proceeds will be used to finance the company's expansions and increase its herd to 4,000 milking cows.

Elsewedy bidding on a $600 million upgrade of an Emirati power plant

Elsewedy Electric is among seven other competitors bidding to upgrade the UAE’s Al Hamriyah power plant. The project's initial investment is $600 million.

Raya to float 30 percent of its call center unit

Raya Holding (RAYA.EGX) plans to sell up to 30 percent of its subsidiary Raya Call Centers in an IPO on the Egyptian Exchange in 2016. The company intends to use the IPO proceeds to fund expansion overseas.

Global Telecom to conclude a $200 million loan from VimpleCom

Global Telecom Holding’s general meeting authorized the board of directors to contract with VimpleCom for an unguaranteed revolving facility of $200 million with an annual interest not exceeding 11.5 percent on the withdrawn amount and annual fees not exceeding 0.3 percent on the unwithdrawn amount. The maximum maturity of the loan is seven years.

International stock price indices April 15

Mar.15

Jan.15

Nov.15

value

% change

value

% change

value

% change

DOW

17,897.46

17,251.53

3.74%

15,988.08

11.94%

17,245.24

3.78%

NASDAQ

4,938.22

4,728.67

4.43%

4,488.42

10.02%

4,927.88

0.21%

S&P 500

2,080.73

2,015.93

3.21%

1,880.33

10.66%

2,023.04

2.85%

FTSE 100

6,343.75

6,175.49

2.72%

5,804.10

9.30%

6,118.28

3.69%

NIKKEI 225

16,848.03

17,117.07

-1.57%

17,147.11

-1.74%

19,596.10

-14.02%

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Business Monthly – May 2016

Market Watch

Money & Banking INTEREST RATES

BANKING & RESERVES (in millions of LE) 2015

2016

June

July

August

September

October

November

December

January

Reserve Money

485,876

413,623

399,916

424,431

425,386

431,665

420,638

418,881

Int'l Reserves (net, US$ mln)

18,534

18,096

16,335

16,415

16,423

16,445

16,478

16,534

Domestic Liquidity

1,765,492

1,799,490

1,819,119

1,850,305

1,868,174

1,876,828

1,905,464

1,909,422

Foreign Assets (net)

1,266,427

129,653

1,312,284

1,329,020

1,348,830

1,361,759

1,384,872

1,391,490

Domestic Assets

1,714,112

1,799,490

1,819,118

1,850,305

1,868,174

1,876,828

1,905,464

20

17.86

18.30

17.99

17.84

17.99

17.49

17.28

17.29

End of

Dollarization Rate (%) Discounted Bills (except CBE)

4,336

4,405

4,296

4,334

4,295

4,419

4,844

4,602

713,661

721,869

732,618

767,295

778,098

780,417

786,655

793,064

Securities (except CBE)

1,016,025

1,015,348

1,030,509

1,036,014

1,051,821

1,067,142

1,105,680

1,112,928

Currency in Circulation

314,885

328,175

322,381

331,684

326,756

323,893

324,569

326,179

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

April 15 6.799 23.332 12.536 6.896 1.366 9.977 0.133 8.103 12.458 29.305 0.584 0.134 2.361 3.102 2.411 8.857

Mar.15, Amount 5.783 20.091 11.010 5.789 1.180 8.538 0.114 6.743 10.788 25.459 0.499 0.109 2.044 2.666 2.088 7.671

2015 change 17.56% 16.13% 13.86% 19.12% 15.78% 16.86% 16.31% 20.17% 15.48% 15.11% 17.03% 23.03% 15.50% 16.36% 15.46% 15.46%

Jan.15, 2014 Amount change 5.426 25.30% 20.563 13.46% 11.245 11.48% 5.434 26.89% 1.185 15.29% 8.496 17.43% 0.116 14.39% 6.629 22.24% 10.969 13.57% 25.641 14.29% 0.508 14.96% 0.102 31.09% 2.080 13.49% 2.577 20.39% 2.125 13.45% 7.807 13.45%

Nov.15, Amount 5.563 20.545 11.891 5.860 1.223 8.408 0.118 6.365 10.989 25.662 0.516 0.117 2.081 2.752 2.126 7.809

2015 change 22.22% 13.57% 5.42% 17.68% 11.68% 18.66% 12.63% 27.31% 13.36% 14.20% 13.18% 14.75% 13.42% 12.75% 13.41% 13.42%

April 15, 2015 Amount change 5.783 17.56% 20.049 16.38% 11.183 12.10% 6.060 13.79% 1.242 10.01% 8.062 23.74% 0.122 9.07% 6.355 27.51% 10.701 16.42% 25.143 16.55% 0.496 17.74% 0.147 -9.15% 2.027 16.44% 2.844 9.08% 2.071 16.42% 7.607 16.43%

Business Monthly – May 2016

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35

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:

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CENTRAL BANK OF EGYPT

Business Monthly – May 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 FEB. 2016

EGYPTIAN IMPORTS FROM THE U.S. DURING FEB. 2016

SOURCE:

US INTERNATIONAL TRADE COMMISSION (USITC)

Business Monthly – May 2016

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37

The energy crisis

LET THERE BE LIGHT Seeking to illuminate Egypt’s electricity future Published by the Egyptian Center for Economic and Social Rights Analysis by Rachel Scheier

L

ast month, Italian oil giant Eni successfully completed drilling its third well in the “supergiant” Zohr natural gas field off Egypt’s Mediterranean coast. Senior executives at the firm said the well held some 20 percent more gas than expected and that it could begin flowing at the end of next year. Egypt’s collective sense of relief in the wake of the field’s discovery last summer has been palpable. Estimated to hold some 30 trillion cubic feet of gas, Zohr could help satisfy Egypt’s gas needs for decades.

Since the find was announced, the previous drumbeat of bleak energy crisis news has quieted, replaced by stories about the dollar shortage.

The reality, however, is that Egypt’s energy woes are far from solved. The complex set of circumstances that culminated in regular summer blackouts, gas lines and industrial shutdowns since 2013 were years in the making—and they will take years to solve, as experts have pointed out. If and how that will happen also depends on a complex set of factors connected to economics, politics and environmental issues. But decisions about Egypt’s energy policy have historically been made by officials behind closed doors, with little or no input from anyone besides those officials and the private sector. A report released in late March by the Egyptian Center for Economic and Social Rights, commissioned by Germany’s Heinrich Böll Foundation, “80 Gigawatts of Change: Egypt’s Future Electricity Pathways,” seeks to help remedy that state of affairs. “We do not see a governmental energy vision that encompasses the depth of energy’s impact on society, communities, the surrounding environment, the economy or many more sectors besides,” write the authors.

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Business Monthly – May 2016

Aiming to arm civil society groups with hard data, the report puts forth seven different medium-term energy policy scenarios ranging from the baseline status quo, relying on natural gas to generate virtually all the country’s electricity, to models that add coal, nuclear power and renewables into the mix, to more radical moves toward energy independence and decentralization. The paper weighs the pros and cons of each from an economic, political and environmental perspective.

The culmination of an eight-month study, it “endeavors to model how Egypt’s electricity sector could look” in 2035, “if social and environmental constraints and community impacts are taken into account.”

Egypt relies on natural gas and oil for some 91 percent of its power needs, with 8 percent coming from the High Dam and just 1 percent from solar and wind power combined.

“Sitting on vast reserves of natural gas has maintained the high rates of electricity access and consumption that has successfully helped Egypt to develop into the new millennium.”

However, beginning in 2000, as old gas wells dried up, “the drop in native oil products production was not replaced with other energy sources,” and with rising consumption from a ballooning population quickly overtaking energy production, Egypt went from being an oil exporter to an oil importer by 2013. “The consequences of this switch fed into the plateauing of human, economic and industrial development which is still evident.”

An entrenched regime of inefficient energy subsidies that mostly benefit the wealthy has also fed the crisis, in addition to discouraging the development of Egypt’s “vast renewable energy resources.” The government’s stated intention to gradually phase out power subsidies as well as the passage of a

The energy crisis

feed-in tariff in 2014 to encourage the production of green energy are “the two most major inflection points Egypt’s energy sector has seen in many years.” However, both efforts remain in their early stages. In the meantime, power demand is around 30,000 MW during the peak summer season, with a supply of around 26,000 MW, leaving a 4,000 MW gap.

“This deficit is not a mere hiccup but a substantial and deepseated problem.” With Egypt’s population projected to continue growing at a rate of around 1.6 percent annually, so will the country’s energy needs. “The energy sector will consistently be at the very center of the government’s fiscal and dayto-day policy-making, as without it, the country would come to a standstill.”

The researchers used LEAP (Long-range Energy Alternative Planning System), a software tool designed by the Stockholm Environment Institute to analyze energy policy, to evaluate each of the seven scenarios. They held workshops with academic experts, business people and consultancies to refine those results, and consulted with members of NGOs and other community groups.

The final assessment carefully avoids endorsing any particular energy strategy or critiquing the government’s current plans, although some scenarios are clearly better than others.

The research also raises obvious questions about Egypt’s current energy plans. The seven strategies begin with a baseline scenario, BAU (Business as Usual), which assumes that Egypt maintains its current energy mix of relying mostly on fossil fuels through 2035 while introducing some efficiency measures. Scenario two (BAU+coal) assumes the same picture as the first but shifts 14 percent of energy generation from natural gas to coal. Three scenarios aimed at reducing carbon emissions are weighed: TZC (Toward Zero Carbon) envisions the results of 45.5 percent of Egypt’s power coming from renewables two decades hence; TZC+nuclear imagines a similar picture but with 2 percent coming from nuclear power; while TZC+CSP (Concentrated Solar Power) replaces the nuclear portion of the mix with energy from the sun. The final scenarios are TEI (Toward Energy Independence), which “also maximizes renewables, but on a centralized grid using natural gas for the transition to higher levels of renewables from 2030-2050;” and TED (toward energy decentralization), “the most radical departure from the status quo by decentralizing energy generation from the national grid, moving in the direction of devolving generation capacity using renewables to the governorate, community and domestic levels, where solar panels can directly feed the demand of an industry, a block of apartments or an oasis.”

In its recently released Vision 2030 plan, the Egyptian government outlines its goal of energy diversification, setting targets of deriving 29 percent of the nation’s energy from coal and 9 percent from nuclear power within two decades.

Although the report steers clear of endorsing any particular pathway over another, the scenarios that involve relying on coal and nuclear energy fared poorly in the analysis. Relying

on coal for even just 14 percent of Egypt’s energy needs—less than half of the government’s stated target—would result in fewer jobs than the baseline scenario while at the same time increasing carbon emissions, making the country more dependent on imports and increasing overall costs, it found.

Nuclear power plants, meanwhile, were found to create fewer jobs per gigawatt hour than any other power source, while also increasing Egypt’s dependence on imported fuel.

The report notes that experts also considered nuclear power as unsafe and not viable for the local market.

The Concentrated Solar Power scenario also earned relatively low marks. Currently a more expensive and less popular form of solar power than photovoltaic solar panels, CSP getting just a 2-percent share of the country’s energy mix would push costs up by $24 billion.

The remaining scenarios offer a mix of pros and cons. The authors of the report note that merely adding efficiency measures to the baseline scenario would save Egypt billions of dollars and reduce emissions. The more ambitious pathways—Toward Zero Carbon, Toward Energy Independence and Toward Energy Decentralization—appear more expensive but also pay long-term benefits such as job creation and lowering greenhouse gas emissions and dependence on imported fuel.

The biggest leap is the Toward Energy Decentralization scenario, which is the only plan that doesn’t assume that energy will be distributed via a central grid. Rather, it envisions a move toward producing and distributing power at the community level, which could increase access in poor and rural areas of the country—the groups who most lack electricity currently.

“The ‘Towards Decentralized Energy’ pathway sets out to put Egypt on the pathway to self-sufficiency through decentralization of energy generation, devolving control to local communities and the governorate level, bringing citizens closer to energy decision-making and offering more agency over their lives.” The TED scenario would involve locally produced power that’s “cleaner and closer to the people.”

A key point of the report is that even if Egypt’s energy policy continues a la the Business as Usual scenario, “the reality of the current energy crisis is that there can be no ‘business as usual’ if the country is expected to simultaneously progress in developmental terms and also eliminate fossil fuel subsidies.” And the government cannot afford to continue to foot the bill for the latter—in 2014, fossil fuel subsidies were eating more than 14 percent of Egypt’s GDP. Whatever future long-term energy strategy Egypt’s leaders choose, the authors of the paper hope it will provide a starting point for further inquiry. Energy, they argue, “is a web, a web that extends far beyond electricity to include transport, agriculture, industry and other sectors. If we are serious about offering ways and means of reducing inequalities, preventing environmental degradation, and promoting community building and development, the full panoply of energy-related issues should be included in future studies.” ■

Business Monthly – May 2016 I

39

MICHAEL BRAHA

Dining Out

MILE-HIGH TAPAS

L

BY RACHEL SCHEIER

ike French hors d’ouevres, Italian antipasti and Middle Eastern mezze, tapas are small, shareable tasty foods; snacks, really, meant to be consumed with friends, over drinks. From the beginning, tapas were a sidekick—based on the Spanish verb tapar, “to cover,” they originated simply as the slices of bread or meat used by Andalusian tavern-goers to protect their sherry from fruit flies between sips. Over the years, though, the Spanish have ele-

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Business Monthly – May 2016

vated these small plates into a sophisticated cuisine that has become popular around the world; trendy tapas bars in cities from Brooklyn to Beijing boast lines out the door on weekends. And small wonder: tapas are the ideal sociable bar food—salty, democratic, non-committal.

No lengthy study of menus is required; there are never any regrets about having ordered the lamb instead of the fish. You just order a bunch of plates and get back to the more important business of drinking and talking.

Dos Cañas, an upscale tapas bar that

opened late last year in the leafy but woefully sparse restaurant neighborhood of Garden City, clearly appreciates this concept. Located at the top (19th floor) of the Cairo Capital Club, the place features a stunning Nile view that is worth the price of admission all by itself. From up there, the capital looks glittering and romantic, the bleating taxis and stinking piles of trash are but a distant memory. Unfortunately, we neglected to take into account that an outdoor terrace 19 floors up is also in its own climate: On a breezy April evening that featured T-shirt weather on the

MICHAEL BRAHA

Dining Out

ground, it was downright chilly up there, despite the presence of several strategically placed heat lamps. I braced myself for an evening of pretending to enjoy myself while freezing to death, but the staff at Dos Cañas were prepared. After escorting us to a prime table at the edge of the terrace, an attendant offered us cozy oversized ponchos to protect against the wind. Think extra-thick airline blankets with arm holes in a Don Quixote-themed print.

Thusly wrapped, we proceeded to the question of drinks, which have their own lengthy menu. The house specialty, appropriately, is Sangria, in pitchers of red or rose, which aren’t just festive but also may be the one way to make Omar Kayyam drinkable. Still, LE 300 (for rosé, LE 320 for red), is a little steep for cheap wine mixed with fruit juice. Instead, I ordered a Manhattan (LE 110), which was no less overpriced, but at least it came with maraschino cherries. My companion’s exotically named Cucumber Kiwi Mojito (also LE 110), meanwhile, was about what you’d expect—pretty, sweet and watered down.

Eventually, we got around to the food.

The menu explains that the dishes have a global “inspiration,” drawing on everything from South American cuisine to “Continental classics.” In other words, don’t go to Dos Cañas expecting anything remotely resembling the foods you’d find

at a tapas bar in Barcelona. (This is the first tapas restaurant I’ve been to that doesn’t offer a single dish featuring olives.) Instead, you can choose from such items as the Quinoa Salad (LE 61) with roasted kale and pomegranate seeds, which made for a crunchy, pleasant, if not exactly exciting, mix of flavors, and the Chicken Croquetas (LE 47), with creamy potatoes, leeks and Romesco sauce, which were basically fried balls of mashed potatoes that functioned mainly as a vehicle for the tangy, spicy sauce. Oddly, the chef seemed to be more at home on sub-continental turf; a substantial number of items on the menu were takes on Indian favorites. For instance, the Grilled Mint Chicken (LE 66) was essentially the same nicely grilled tandoori chicken you might find at a familyowned Indian spot, if you grilled it after dousing it in the tasty mint sauce that’s typically found in a communal serving dish on the table. The Chicken Tikka Salad (LE 67), meanwhile, was just what it sounds like—a colorful medley of fresh sliced red, yellow and green bell peppers along with cucumbers and tomato mixed with bright orange pieces of spicy, tender Chicken Tikka Masala.

On the other hand, the Delhi Prawn Biryani (91) was more or less, well, just an Indian prawn biryani. The Nasi Goreng (LE 85), an Indonesian or Malaysian fried rice dish that sometimes comes with shrimp or

a fried egg on top, in this case was rather basic. While the chili added some zing to the rice and the peanuts gave it a nice crunch, it was still, at the end of the day, fried rice. In principle, I was fine with Dos Cañas’ “global fusion” tapas concept, which seems in keeping with the casual, party friendly nature of the original idea.

On the other hand, it also seems like some basic parameters should be observed. If a bowl of rice can masquerade as a tapa, why not serve pizza or falafel sandwiches and call those tapas, too?

That said, the simple but well-executed Pan con Tomate (LE 48), which was similar to an Italian tomato bruschette—fresh bread topped with tomato, garlic, salt and olive oil—did a better job of hitting the mark. Even Dos Cañas’ Patatas Bravas Bombay City (LE 46), crisp fried potatoes steeped in cumin, turmeric and garlic, were so flavorful that they managed to be delicious on their own without even making me long for a ramekin of aioli (garlic sauce) on the side. Last but not least, the Beef Mishkaki (LE 85), a Swahili-style shish kabob from East Africa, scored points for both originality and execution.

Since tapas is drinking food, it doesn’t usually involve sweets, but here again, Dos Cañas hasn’t been afraid to break with tradition, with such dessert offerings as Mixed Berries Lemon Cream (LE 59) and Churros (LE 49) with chocolate dipping sauce. For our part, we skipped dessert in favor of checking out Dos Cañas’ bar, a small but comfortable space beneath an enormous skylight at the entryway of the restaurant. The décor, like the food, is an eclectic but tasteful mix of neon lights and antique wooden doors.

Overhead is an elaborate old ballroom chandelier that looks like it might be a relic from whatever originally occupied the top floor of the Cairo Capital Club once upon a time. This high up, it’s easy to find yourself looking wistfully out over the city and wonder what it will all look like a few more decades on. ■

Dos Cañas 9 Rostom Street, Garden City Open daily 3:30 p.m. to 3:30 a.m.

(02) 2792-9443

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Traditions

SANDCASTLES

BY EDMUND BOWER

F

or thousands of years, the oasis of Siwa has been a refuge in the heart of the harsh Sahara Desert. Just 70 km from the Libyan border, it was an important stopover for ancient and medieval traders bringing commodities like gold and slaves out of the heart of Africa.

Lacking even roads to connect it to the rest of Egypt until the 1980s, Siwa developed its own distinct language and culture—one shaped by the extreme conditions of the desert.

One Siwan tradition that has gained attention from the rest of the world in recent years is its unique architectural style, one that was adapted over millennia by locals to cope with the whims of the Sahara. In Siwa, the sweltering midday heat often pushes the mercury past 40 degrees in the summer; while the lack of cloud cover means nights can easily dip down to close to freezing. Made of kersheef, a mixture of salt, clay and sand from the banks of Siwa’s saltwater lakes, the oasis buildings provide natural insulation from these extreme temperatures, as well as shelter from the desert winds. Perforated with squat, square windows and lines of protruding tree trunks, their distinctive appearance has long captured the imagination of visitors to the oasis. Unlike the ugly brick and concrete eyesores that dominate modern Egyptian cities and towns, traditional kersheef buildings blend seamlessly with their

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surroundings, their curved brown walls seeming to emerge naturally from the desert.

Siwan architecture is also a result of the community’s isolated geography, as locals used what they had to build dwellings that could withstand the elements. For centuries, these buildings were constructed the same way, using readily available, cheap local materials. Wet kersheef is formed in layers, the salt allowing for quick drying, to form textured brown walls atop beams made of tree trunks. The resulting structures stay naturally cool during summer days while also protecting inhabitants from the cold desert nights.

In recent years, foreign architects have traveled to the oasis to study this ancient, eco-friendly construction method, hoping to keep it from becoming extinct. “It's a dying art form,” says British architect Fiona McKie, who retired to Egypt 15 years ago to follow her passion for desert dwellings after a career designing modern commercial developments in London.

Today, she is one of only a few residents who are working to preserve the architectural heritage of the oasis. She explains that traditional Siwan architecture is gradually disappearing as old timers die or move away, and a new generation opts for modern buildings. Modern Siwans, like other Egyptians, tend to aspire to

Traditions

modern McMansion-style villas rather than dusty traditional dwellings. “People don't want to use kersheef anymore,” she says. “It's seen as archaic, old, and dusty.” Kersheef buildings require a lot of upkeep, and abandoned traditional structures have been left to slowly disintegrate. Empty, their walls become too dry and start to crumble. "You gotta live in them," explains McKie. These days, virtually the only people building with kersheef are eco-lodge owners and foreign environmentalists and architectural preservationists like McKie. Even the poor no longer use it, now that they can easily get their hands on concrete, which is cheaper and requires less work. Ibrahim, who works as a chef at a local restaurant catering to tourists, is one native who used to live in a traditional home but has eschewed the hassle of kersheef for a more modern dwelling. “My new house is concrete,” he says, “It's much cheaper.” While the materials to make kersheef are free and readily available, the labor required to build with it isn’t, he explains.

But McKie and other preservationists argue that kersheef has cost benefits in the long term. Its natural thermodynamic properties save energy, a huge plus given the rapidly rising cost of electricity. “I don't have an air-conditioner, and I'm comfortable,” says McKie, who lives in a traditional kersheef home she designed herself. Moreover, the materials that go into kersheef are local (further reducing its carbon footprint) and all-natural. “It's nicer for the workers to use,” says McKie. “There are no chemicals in it.”

And of course, these buildings are an important piece of local heritage in an age when many aspects of Siwa’s distinctive traditional culture are gradually fading away. “I don't know of any other area in the world that uses this method,” says McKie. 44

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The architect’s home is an ever growing complex with a lakeside view just outside of Siwa; it’s built almost entirely from kersheef. Her goal, she says, is to make the material “work as a modern concept and show how malleable the material is." She has incorporated various shapes and patterns, both traditional and modern, into her residence, even referencing the red and white brick work typical of fashionable “Matrouh villas,” her shorthand for the popular upscale holiday homes that now dominate the North Coast. Following in the footsteps of traditional local dwellings, McKie has built curved walls for structural integrity.

"All buildings work well in a curve," she explains. She has also lent her expertise to help renovate traditional buildings in Siwa’s old town.

Not all of kersheef’s proponents are in it purely for altruistic reasons. Mounir Neamatalla, a Cairene businessman who was educated in the United States, appreciates the aesthetic appeal of traditional Siwan architectures as well as its sustainability. His upscale desert ecolodge Adere Amellal, some 10 kilometers outside of town, was built using traditional local methods. As a result, this exclusive retreat matches the rugged beauty of the desert, attracting well-heeled, eco-conscious guests—including, most famously, Prince Charles and Camilla of Great Britain in 2006—who come from around the world to stay in the unique structure. Neamatalla also runs two more mid-range hotels in Siwa’s old town, Al Babinshal and the Shali Lodge. Both are made from kersheef.

But a couple of hotels and some private villas aren’t enough to keep the craft alive. The vacated buildings of the old town are slowly crumbling with no sign of new builds to replace them.

Unless more Siwans decide to move back to kersheef then the art will be lost to future generations. ■

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 Thomas Maher, Apache Egypt Companies PAST PRESIDENT M. Gamal Moharam, MGM Financial & Banking Consultants

COMMITTEE LEADERS

(July 2015 to June 2016)

Insurance Chair: Alaa El-Zoheiry, Arab Misr Insurance Group | gig

ADVISOR TO THE BOARD Hisham A. Fahmy CHIEF EXECUTIVE OFFICER Tamer El Naggar

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

Investment Chair: Hazem Badran, CI Capital Holding Co. Co-Chairs: Ahmed Ozalp, Akanar Partners Sherif El Kholy, ACTIS

Agriculture and Food Security Chair: Abdel Hamid Badawi Demerdash, Magrabi Agriculture Company Co-Chairs: Seif ElDin Saad ElSadek, Agrocorp for Agriculture Investment Hatem El Ezzawy, PICO Agriculture

Energy Chair: Khaled Abu Bakr, TAQA Arabia Co-Chairs: Ali Bakr, ExxonMobil Egypt, SAE Osama ElSaid, Masa Electro

Banking and Finance Chair: Nadir Shaikh, Citibank, NA Egypt Co-Chairs: Zeinab Hashim, Abu Dhabi Islamic Bank – Egypt Ahmed Issa, Commercial International Bank (CIB)

Entrepreneurship and Innovation Chair: Alaa Hashim, Egyptian Center for Economic Studies (ECES) Co-Chair: Heba Gamal, Endeavor Egypt

Capital Market Chair: Karim Awad, EFG-Hermes Holdings, SAE Co-Chair: Sharif El Akhdar, Beltone Private Equity

International Cooperation Chair: Nada Shousha, IFC International Finance Corporation Co-Chairs: Rafeh Saleh, CID Consulting

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Legal Affairs Chair: Hani Sarie-Eldin, The Middle East Center for Law & Development Co-Chairs: Emma El Meligi, Pepsi-Cola Egypt Girgis Sarwat Abd El Shahid, Shahid Law Firm Marketing Chair: Dalia Wahba, CID Consulting Co-Chairs: Mai Aly, 4PR Group Tamer El-Araby, Nielsen Egypt, Ltd.

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Real Estate Chair: Mohamed Abdallah, Coldwell Banker Affiliates of Middle East & Greater Africa Co-Chair: Abdalla El-Nockrashy, Majid Al Futtaim Properties-Egypt

Health & Pharmaceuticals Chair: M. Maged El Menshawy, Manapharma Co-Chairs: Mohamed Roushdy, Amoun Pharmaceutical Co., SAE Amjad Laimoun, AbbVie Tamer Said, GE Healthcare

Corporate Sustainability and Responsibility (CSR) Chair: Mohamed El Kalla, Cairo for Investment & Development Co-Chair: Shereen Shaheen, Pepsi-Cola Egypt

Human Resources Chair: Somaya El Sherbini, Microsoft Egypt, LLC Co-Chair: Maisa Galal, General Motors Egypt, SAE

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Transport and Logistics Chair: Marwan El Sammak, Worms Alexandria Cargo Services Co-Chairs: Ahmed Elfangary, DHL Express Osama Fawzy Hegab, Triangle Trading & Engineering

Customs and Taxation Chair: Hassan M. Hegazi, Master Trading, SAE Co-Chair: Hossam Nasr, Allied for Accounting and Auditing- Ernst & Young

Industry and Trade Co-Chairs: Mostafa El Halwagy, The Egyptian Company for International Touristic Projects (Americana) Omar El Derini, FAOM Consult/ Red Wing Ashraf Bakry, Unilever Mashreq

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Travel and Tourism Chair: Karim El Minabawy, Emeco Travel Co-Chairs: Roland Bunge, Carlson Wagonlit Travel Nelly El Kateb, Astra Travel

Education Chair: Sherif Kamel, The American University in Cairo Co-Chairs: Shahinaz Ahmed, Amideast Egypt Maggie Nassif, Binational Fulbright Commission in Egypt

Information and Communications Technology Chair: Amr Talaat, IBM Co-Chairs: Ayman ElGohary, Cisco Systems International Reem Asaad: Raya Holding

Women in Business Chair: Dina El-Mofty, INJAZ Co-Chair: Yasmine Mowafy, Beltone Financial

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 MARKETING

Brand Building 101

A skilled marketer is one constantly looking for opportunities to strengthen long-term loyalty with every innovation, explained Randa Abdou, CEO, chief strategy and creative officer at Creative Lab Group, at the Marketing Committee’s second “Everyday Marketing” workshop at the Cairo Marriott Hotel. The March 30 session, titled “Building Strong Brands and Agency Management,” also featured Gehan Iskander, marketing director of Chilled Dairy Category at BCC Group/Lactalis International.

Identified as “the essence of marketing,” brand building needs to be supported by strong brand equity, accurate market research and effective communication tools and skills. Through equity, a strong brand allows it to gain consumers and retain a sustainable connection between them and the product. Abdou said market research is maximized when results are tested and interpreted by professional researchers, while well-implemented market communication shapes public tastes in line with moral and ethical standards. “Strong brands are those who consistently follow cultural values.”

Agency management also contributes to the building, promotion and success of a brand. Iskander explained this process is supported by three pillars: the advertising brief,

agency selection and the marketers’ relationship with agencies. The structure and content of a brief must strategically advertise a brand and/or a product. Agency selection is preceded by the marketer’s familiarization with the agency’s credentials, past projects and its interest in the business in question. Marketers should not shy away from creating criteria to assess their agencies’ performance. The relationship between both parties is built on a deep briefing session introducing the brand/product and the development of creative strategies.

Communication is key, Iskandar emphasized. When responsibilities are clearly outlined between marketers and agencies, constructive briefing, feedback and mutual appreciation all account for the realization of their shared vision.

HUMAN RESOURCES

Living By Your Core Values “Core values are the two or three behavioral traits which already exist that lie at the heart of the organization’s identity and never change,” said Sherif Amer, HR Director, ITIDA, at a March 27 Human Resources Committee meeting on “Talent Acquisition in Time of Change Management,” with Dr. Eva Wuellner, Chief People Officer, Wadi Group. Amer added that, “Humans are social and learn by observing others, therefore it is important for employees who have influence to live the values so that others can learn.” However, some organizations do not utilize value-based hiring, value-based performance evaluation and value-based recognition, and as a result they are not able to achieve their objectives. In those cases, Amer noted, values are merely a tag line rather than the core motivation driving the company.

Wuellner explained that Wadi Group went from a “‘loyalty based organization” to a “performance based organization,” which required the group to find, acquire and train skilled labor to meet a new organizational culture. Wadi Group comprises numerous companies focused on delivering products to consumers and businesses. Wadi Group’s subsidiaries include poultry, agro-food and industry, as well as industrial projects like

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Idafat, Asmida, Tawseel, and Nile Storage and Stevedoring Company. Wuellner summarized Wadi Group’s values in one sentence: “We change and grow by performing effectively and empowering our people to serve our customers and community.” In result of Wadi Group’s culture change, its HR department had to promote, facilitate and drive the change, and also be strategic advisors to the Executive Team. It also called upon them to act as integrators and talent architects, as well as business partners, counselors and coaches. In conclusion, Eva Wuellner emphasized that an “effective organizational change management process reduces the dip in performance occurring while going through the change and accelerates the time to achieve the targeted performance.”

INTERNATIONAL COOPERATION

The EIB and Egypt

Since 1979, Egypt has received more than €7 billion in loans from the European Investment Bank, with some €2.7 billion of that coming since 2010. In 2015, EIB funded approximately €871 million worth of new loans. The longstanding relationship between Egypt and the European Union’s primary financing partner was the subject of the International Cooperation Committee’s March 28 session on the “European Investment Bank’s Activities in Support of Egypt’s Economy.”

The EIB is the largest multilateral lender and borrower worldwide with projects in over 160 countries, prioritizing projects related to the environment, infrastructure, innovation and small and medium enterprises. These projects take place across nearly 140 non-European countries with the aim of upgrading socioeconomic infrastructure, promoting environmental sustainability and developing the local private sector. EIB is also considered the world’s largest provider of climate-related finance, providing up to 25 percent of the total globally, 35 percent of that in developing regions. The bank is expected to spend another $100 billion over the next five years.

Within Egypt, the EIB focuses on renewable energy and transportation, especially activities aimed at the development of

roads, ports, railways and airports. Additional areas of interest include rural development, water and sanitation, and urban and social development. The bank provides corporate loans that fall within the range of €15 million to €300 million per transaction. Target clients are typically large local companies as well as smaller firms that generate hard currencies and international companies investing in Egypt. It also provides SME and midcap loans by cooperating with local Egyptian banks to finance projects that could range from €50,000 to €25 million. EIB also works with fund managers in traditional and innovative segments that aren’t considered mainstream but still fall within the EU’s priority objectives.

MARKETING

The Consumer is Boss In times of turbulence, “optimism is a force multiplier,” said Karim Kamel, country manager – Near East Region, Procter & Gamble (P&G), at the Marketing Committee’s March 21 session of Inspiring Young Talents. Drawing on his P&G career, Kamel explained that marketing strategies only materialize into “big ideas” when they elicit strong responses from consumers.

Sales should not only target improving the lives of consumers, they should also be channeled using impactful marketing strategies that respond to buyers’ needs.

Consumer needs, he explained, are what drive P&G’s unified Framework for Brand Building (BBF) and Communication Plan. An accurate BBF is built on identifying competition, points of differences and parity, while keeping the consumer central to every business decision. Factoring in the “First Moment of Truth” (FMOT) - when the customer first encounters the product in the store - is mandatory, Mr. Kamel added.

Regarding communications strategy, he suggested doing “fewer but bigger things.” P&G’s approach relies on identifying areas in which consumers will be most receptive to create the connections between products and consumers.

Kamel recommended that in difficult times, companies focus on their core brands to appeal to different consumer segments.

By doing so, the company can offer propositions for buyers to move across product categories. Investing in innovation during difficult times also portrays the strength of a company. This incentive, driving the P&G model, allows it to create and transform categories, while maintaining the highest quality and performance, modest price premiums and superior consumer value with every innovation launched on the market.

Most importantly, companies must stay true to their core values and principles, as it enables them to last. Despite all external factors, he reminded, the company has a responsibility to stand up in times of crisis and deliver on its promises.

Business Monthly – May 2016 I

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Events CUSTOMS AND TAXATION

Understanding Egypt’s tax law Navigating a new tax code can be a daunting task. To help explain a raft of changes to the system made in 2015, AmCham’s Customs and Taxation Committee sponsored an April 5 workshop at the Conrad Cairo Hotel. It featured tax experts from financial consultancies Deloitte, Ernst & Young, PricewaterhouseCoopers and Mazars Mostafa Shawky.

Ramy Mina, a tax partner at Deloitte, shed light on the new income tax law, which saw the maximum rate capped at 22.5 percent for anyone making more than LE 200,000 a year. In addition, the legislation set the income level to qualify for exemption from income tax at an annual LE 6,500 and below.

As for companies, they will switch from a tiered system to a flat levy of 22.5 percent. He also noted that under the new law, the government taxes income on foreign currency according to the most recent exchange rate: “This is a big problem.”

Ahmed el Sayed, a senior tax partner at Ernst & Young, explained how the new modifications deal with companies paying or receiving payments from partners abroad as well as agreements between governments, especially those meant to prevent the double taxation of citizens. “The way the law is written will just increase both the financial and administrative cost of technology transfers and franchising,” said Sayed.

Companies seeking reimbursements based on the signed international tax agreements must present a formal request to Egyptian Tax Authority. “There is a long queue,” he said.

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Yasser Maharem of Mazars Mostafa Shawky talked about taxes paid on dividends from Egyptian firms, whether privately owned or publicly traded. He noted that individuals can ask the firms to pay the tax on their earnings directly to the TA. The fluctuating exchange rate represents a big question mark given the wide gap between the official and black market rates.

The tax code says a maximum of 7 percent of companies’ net profits can be undocumented. The black market gap is 28 percent,” said Maharem.

Karim Emam of PricewaterhouseCoopers talked about the new capital gains tax that was enacted in 2014 but subsequently watered down and postponed. Whenever it does go into effect, stock sellers are supposed to pay a 10-percent levy.

Other business assets are taxed at a hefty rate of 22.5 percent.

Under international tax treaties, local authorities can challenge transactions that are believed to defer, reduce or avoid paying tax, he said.

New Members New Replacements at Member Companies: Donald Smith CEO, Chrysler Group Egypt

Category: General Sector: Automotive

Karim Fadl Managing Director & CEO, Solutions Consulting

Category: Affiliate Sector: Consultancy

Ashraf El Kady Chairman and Managing Director, The United Bank

Category: General Sector: Financial Sector

Category: Affiliate Nader Nabil Ekdawi Sector: Financial Sector Deputy Managing Director, Acumen Holding, Acumen Asset Management

Ahmed Al-Bakary General Manager & CEO, The Egyptian Company for Foods "Bisco Misr"

Ayman Khattab President & CEO, North East Africa, General Electric International Operation

Category: General Sector: Industrial Machinery & Equipment

Ayman Abdel Rahman Managing Director, Fujitsu Services Egypt

Category: General Sector: Information Technology

Mohamed Rahmy Managing Director, Endeavor Egypt

Category: Not-for-Profit Sector: Non-Governmental Organizations (NGOs)

Indren Poovan Chief Operating Officer, Dar Al Fouad Hospital

Category: General Sector: Food & Beverages

Kamal El Raie Chairman of the Board of Directors, MAC Carpet

Category: General Sector: Pharmaceuticals/ Medical/Health

Category: General Sector: Textiles

Changes Change in Company Information Creative Lab Downtown Katameya Mall, Office Building. S2A, Road 90, Katameya, New Cairo.

Telephone: (202) 2314 6360/1/2

Bassam Hajhamad Principal - Strategy &.

Sami Zaki Principal - Strategy &.

Change of Member Information Karim Aly Partner- Strategy &.

For any change to contact information, please contact the Membership Services Department at the Chamber’s office Tel: (20-2) 3338-1050, ext. 0016 – Fax: (20-2) 3338-1060 E-mail: membership@amcham.org.eg

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.

May Energy-Oil

Offshore Technology Conference

Otcnet.org

Mai Abdelhalim

2797-2146

Aerospace and Defense

SOFEX 2016

-

Cherine Maher

2797-2688

Restaurant Equipment

NRA Show 2016

www.show.restaurant.org

Rania Mekhail

2797-3487

June Environment-Water

WasteExpo 2016

wasteexpo.com

Hany Wassef

-

ICT

InfoComm 2016

infocommshow.org

Cherine Maher

2797-2688

Franchise

International Franchise Expo

www.ifeinfo.com

Cherine Maher

2797-2688

Food / Agribusiness

Fancy Food Show (Summer) 2016

www.specialtyfood.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.

Business Monthly – May 2016 I

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Member News EMIRATES NBD Emirates NBD approved a LE 2 billion loan to the Egyptian Electricity Holding Company to finance two power plants in the new administrative capital and the region of Borollos in Kafr el Sheikh governorate. The total electricity output for each power plant is 4,800 MW. NBD’s corporate banking portfolio grew last year by 70 percent to LE 7 billion, mainly by increasing its financing to SMEs.

GENERAL ELECTRIC General Electric in Egypt signed a contract worth about $250 million with the Egyptian Electricity Transmission Company to connect 7 GW of power to the national grid. The power stations will be located in Mostathmereen, Beni Suef Industrial, Ismailia East and Temay Alemdeed. These four gas-insulated substations will provide electricity to more than 6.5 million homes. In other news, Ayman Khattab has been appointed president and CEO of GE Egypt, Libya and South Sudan. Khattab has been with GE since 2008.

GENERAL MOTORS EGYPT General Motors Egypt has launched the first-ever, 100-percent locally manufactured Chevrolet Optra in the local market. GM Egypt is also investing LE 110 million to upgrade its production line, after sales service and employee training.

Mario Spangenberg, GM Africa president, said that the company is increasing its investments in the country because it sees Egypt as a base of operations to feed the rest of the African market.

SCHNEIDER ELECTRIC Schneider Electric has signed a memorandum of intent with South Sinai Governor Khaled Fouda to establish a 40 MW solar energy power plant worth €75 million in Sharm El Sheikh. “Schneider Electric is keen to support the government’s strategy aiming to add 50,000 MW to the national grid within the coming 20 years to address the growing needs in power supply,” said Mohamed Saad, Africa & Caribbean Zone president at Schneider Electric.

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Advertorial ACCORHOTELS

HILTON HOTELS & RESORTS

AccorHotels has signed a management agreement with International Trade Co., a subsidiary of Al Yassin Holding for Financial Investments, to operate the Egyptian company’s latest hotel facility in Nasr City, Cairo. This hotel targets upper mid-scale clientele and is the sixth property managed by AccorHotels in Egypt. It is expected to open in 2019. The hotel will be built on a 24,000-square-meter plot and have 350 rooms and suites. The total expected investment cost will be LE 1 billion, creating some 4,000 direct and indirect job opportunities.

Hilton Hotels & Resorts has announced the official opening of Hilton Alexandria King’s Ranch, Hilton’s 18th facility in Egypt. The Hilton Alexandria King’s Ranch is located in the King Mariout region just outside the city of Alexandria and 12 kilometers from Borg Al Arab International Airport. The hotel offers 199 rooms, including 20 suites and 21 executive rooms. The hotel has six restaurants offering different cuisines.

L’ORÉAL

IKEA

L’Oréal Professionnel Egypt has launched the internationally revolutionary Pro Fiber line dedicated to every woman suffering from damaged hair. The new hair care product has 15 patents that treat dull, dry hair and split ends. Pro Fiber is available exclusively at L’Oréal Professionnel salons. It is also used in both stages of the hair repair program called Regenerate.

IKEA in Egypt is offering university undergraduates the opportunity to intern at the company during summer. The initiative started last year and hosted 40 interns from various Egyptian universities.

IKEA cooperated with the American University in Cairo by accepting 18 undergraduate students for their job shadowing initiative.

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BARON HOTEL

LAGUNA BAY

Baron Hotel in Sahl Hashish is announcing that its meeting rooms can host up to 800 guests. Their column-free design means that they can be partitioned into sections of varying sizes. These rooms can serve multi-purpose meetings and conferences. The hotel also offers organizers tailored programs and catering facilities. These rooms have hosted meeting and conferences for Pepsi, Total Egypt and Ezz Steel and others.

El Sherouk for Touristic Development and Capital Developments has announced the launch of the second phase of Laguna Bay Ain Sokhna. The new complex encompasses a range of facilities and services to make it easy for the family to live there throughout the year, including housekeeping services, laundry and a theater, to name a few. There is also a walkway in addition to the jogging and cycling lanes.

EMIRATES

SOFITEL

Emirates SkyCargo, the cargo division of Emirates Airline, has launched an upgraded version of its product protection casing for valuable temperature-sensitive cargo such as pharmaceutical products. The casing is water resistant and breathable, which prevents moisture damage as well as excess condensation or dry conditions. It is also environmentally friendly and 100% recyclable. In other news, Emirates is also increasing the baggage allowance for all its classes on outbound African flights.

Sofitel Cairo El Gezirah held its second General Manager’s cocktail reception on the famous Opera ballroom terrace with the magnificent view of the Nile. The event theme was a Night in Paris, with the terrace transformed into a high-end Parisian neighborhood.

Diplomatic representatives, media personalities, and partners from key corporate and travel accounts attended the event.

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Announcements Jobs AMCHAM RECRUITMENT CENTER Code

Vacancies

Company Name

100488

Cost and Budgeting Manager

Asfour Crystal International

100550

Export Area Manager

Sphinx Glass

99963

HR Manager

Arafa Holding

100690

Costing Manager

Dakahlia Poultry

100805

General Manager

CompuGeorge

100950 100828

Purchasing Section Head Operations Manager

CAIRO 3A National Automotive Co. "NATCO"

100710

Cluster Sales Manager

International Associated Cargo Carrier Group

100540

Fleet Operations Section Head

Ibnsina Pharma

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

Top Tenders

TOP TENDERS

FROM

TAS

Client

Description

Deadline

Bid bond Specs fees

Request of offers from Egyptian, Saudi & international consortia for the design CAPW - Construction Authority for Potable Water & implementation of a 500,000 M3 per day capacity water treatment plan under & Wastewater, The Cashier the design & build system in Abu Oweikal & a discharge pipeline to feed all of Nasr City with drinking water. Egyptian contractors need be classified by the Contractors Federation not less than grade 1 & Saudi Contractors classified under Grade A & B.

May 11, 2016

10,000,000 LE LE 10,000

Supply of three bulldozers on rubber wheels to remove sand from tracks & of E.N.R. Egyptian National Railways Authority, the one loader on rubber wheels to purge sand dunes & accumulated floods water Purchases & Stores Dept from tracks in two lots. Bid bond given is for each bulldozer or loader.

May 08, 2016

150,000 & 30,000 LE LE 5,000

Construction Projects Transport

Two tenders for the (a) construction of a first aid unit (Esaaf) next to the exist- General Authority for New Urban Societies, Al ing telephone exchange at the entrance of the City's Industrial Zone & (b) sup- Obour City Development Agency ply & erection of passengers elevators at the medium housing buildings of Dar Misr Project. Pre bid meetings set for 5/3 & 5/4/2016.

May 17 & 18, 2016

25,000 & 250,000 LE LE 300

Electromechanical Works Local Administration Authorities

Two tenders requesting international offers to supply (a) 50,000 metric tons HADISOLB - Egyptian Iron & Steel Co., Foreign Purchases Committee metallurgical coke & (b) pumps for the steam boilers. Ref. 16215 & 16213.

May 11 & 26, 2016

25,000 & 4,000 $ LE 500 & 150

May 10, 2016

145,000 LE LE 1,000

Construction of a new Azhari Institutes' Complex for male & female in the City.

General Authority for New Urban Societies, New Asswan City Development Agency - New, The Cashier

Beneficiary Sectors

Generating Sectors

www.amcham.org.eg/TAS

For further information, contact the Business Information Center at AmCham Egypt Tel: (20-2) 3338-1050 – Direct: (20-2) 3761-9641 • Fax: (20-2) 3338-9896 • E-mail: info@amcham.org.eg Website: www.amcham.org.eg • US Website: www.amcham-egypt.org

54

Sectors

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Business Monthly – May 2016

Electromechanical Works Water & Waste-Water

Industry Industry Construction Projects Education

Classifieds Benefits ARAB MISR INSURANCE GROUP | GIG Arab Misr Insurance Group | gig has the pleasure to provide AmCham members a 25% discount on Travel Care Insurance Rates.

Below are the required documents from members to be sent to the contact person email: * Passport copy * Valid membership card * Duration of travel * Phone number and the nearest branch

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Nadine Yousri Phone: (20-2) 2451-7620/22/44 Ext. 324 E-mail: yossry.n@gig.com.eg; miscellaneous@gig.com.eg 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

KEMPINSKI NILE HOTEL Is pleased to extend its offer of 15% discount on Food and Beverages on all restaurants at Kempinski Nile Hotel during breakfast, lunch and dinner. * Discount is not applicable on alcoholic beverages In addition to a special accommodation rate of $175 per single Medina Deluxe room per night based on bed and breakfast and $200 per double Medina Deluxe room per night based on bed and breakfast. *Room rates are included with service charges and applicable taxes

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Food and Beverage reservations: Rasha Sayed •Office: (202) 2798-0000 Mobile : 010-1942-4528 •E-mail: rasha.elsayed@kempinski.com Room reservations: •Mostafa Mahmoud •Office: (202) 2798-0000 E-mail: reservation.cairo@kempinski.com Christina Sedrak •Office: (202) 2798-0000 E-mail: christina.sedrak@kempinski.com Ali El Rashidy •Office: (202) 2798-0000 E-mail: ali.elrashidy@kempinski.com

MEDITERRANEAN SHIPPING COMPANY MCS Cruises is glad to offer AmCham member companies special rates on summer, Eid Adha and fall promotions on cruises to France, Spain, Italy and Malta. * Summer promotions rates will be valid until the 15th of May, Fall promotions will be valid until the 9th of June. * HR letter is required from the member company for the employees who do not hold a membership card.

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Reham Bassiouny; Sarah Mamdouh Phone: Reham Bassiouny: (20-3) 488-4121, (20-10) 0122-8181 Sarah Mamdouh: (20-3) 488-4175, (20-10) 1512-6662 Email: rbassiouny@msccruises.com.eg; smamdouh@msccruises.com.eg Please visit AmCham Cyberlink on http://www.amcham.org.eg/cyberlink for more information for AmCham benefits This offer is valid until June 9, 2016

THE INSTITUTE OF MANAGEMENT ACCOUNTANTS (IMA) The Institute of Management Accountants (IMA) is pleased to offer a special 30% discount to AmCham Members on IMA Membership.

As a member of the IMA, you can benefit from a wide array of benefits from networking to access to thought leadership, CPE opportunities and special corporate offers: * Peer Networking. * IMA Middle East Website and Newsletter. * CMA Certification. * Career Resources. * Continuing Education. * Publications. * Please browse the benefits file on AmCham Cyberlink to see the offer details http://www.amcham.org.eg/cyberlink

***Discounts will be granted for AmCham members upon presenting their AmCham 2016 membership card*** For more information, please contact: Renad Hamza Telephone: (20-2) 2461-8534 Email: rhamza@imanet.org

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 May 31, 2016

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 – May 2016 I

55

Media Lite

A Glance At The Press The black market

“No, as of today, there is no Central Bank... I am the Central Bank.”

April 24 Al Masry Al Youm 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.

FASHION STATEMENT

In August 2012, amid daily power outages, then-Prime Minister Hesham Qandil took a lot of heat for suggesting Egyptians “wear cotton underwear’ to stay cool.

Summer has yet to hit this year, and TV talk show host Gaber al-Qarmouty is already hot under the collar. Qarmouty went on air dressed in a giant utility bill to illustrate his rant about rising prices. Dressed in a memorable knee-length, over-the-shoulder montage of electricity, gas and water bills, the presenter proceeded to prove he’s not just another pretty face by reciting a poem dedicated to his fellow citizens who are “really feeling the pinch” from energy bills that have more than doubled in recent months. Apparently, animal prints are out, power prints are in.

Various media, April 6

BY A STRING

Speaking of wasting energy, parliamentarians set aside the trivial task of assessing the government’s national plan for a more serious topic—a puppet. Abla Fahita, the outspoken TV muppet diva with a dubious sense 56

I

Business Monthly – May 2016

of fashion, called MPs “imbeciles” on the air, prompting lawmakers to demand the show be taken off the air and the puppet brought before the Court of Administrative Justice for publicly insulting public figures. "The government has no control over Abla Fahita," lamented Minister of Parliamentary Affairs Magdi El-Agati. This isn’t the first time Ms. Fahita has tangled with MPs. In December, even before Parliament was seated, newly elected MP Saeed Hassassin threatened to resign if Abla Fahita mocked him or his fellow parliamentarians.

Al Bawaba, April 10

TOWER ENVY

When it comes to skylines, size does matter in the Arab world. And Governor of Alexandria Mohamed Abdel El Zaher wants to makes sure his city stands out—or at least up. Zaher wants to erect the world’s tallest building in Egypt’s second city, modeled after the long-fallen Pharos Lighthouse, one of the Seven Wonders of the Ancient World. The current world’s tallest building is Dubai’s Burj Al Khalifa, at 828 meters. Zaher’s plan already has stiff competition from Emirati

developer Emaar, which last month announced plans to build an Eiffel-like tower at Dubai Creek Harbor, to be complete by 2020, to stand “a notch taller” than the Burj Al Khalifa. Meanwhile, Saudi Arabia’s onekilometer high Kingdom Tower is already under construction in Jeddah. Undaunted, the Alex governor has commissioned feasibility studies on the project.

Cairoscene, April 18

BE CAREFUL WHAT YOU WISH FOR

It’s every woman’s dream to marry a handsome doctor, but one Egyptian woman living that dream has declared it a nightmare. The Cairo woman is filing for divorce on the grounds that her husband is “too handsome.” The distraught wife explained that she lived in fear that her spouse might have an affair because of the constant glances from admiring females. She shared her sorry situation on social media, where it naturally went viral, but oddly enough, she neglected to share her husband’s picture.

Cairoscene, April 4

儀愀琀愀爀 一愀琀椀漀渀愀氀 䈀愀渀欀 䄀䰀䄀䠀䰀䤀 匀⸀䄀⸀䔀 䌀愀氀氀 ㄀㤀㜀 漀爀 瘀椀猀椀琀 焀渀戀愀氀愀栀氀椀⸀挀漀洀

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