OCTOBER 2018 - American Chamber of Commerce in Egypt

© Copyright Business Monthly 2018. 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.

OCTOBER 2018VOLUME 3 5 | IS SUE 1 0

Investor Focus18 Road to Recovery Is Egypt’s apparel industry a potentialcash cow?

Regional Focus40 Investing in EGX vs. TadawulChoosing your best bet

Inside12 Editor’s Note14 Viewpoint

8• Business Monthly - OCTOBER 2018

The Newsroom16 In BriefAn analytical view of the topmonthly news

Market Watch48 Not a Bear Market … Yet

American Impact 44 Shadow BankingIs the global economy approachinganother crisis?

© Copyright Business Monthly 2018. 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.

OCTOBER 2018VOLUME 3 5 | IS SUE 1 0


Public and private sector join forcesto lessen the dependency on printmoney

Cover Design: Nessim N. Hanna

Cover Story34 Egypt as a CashlessSociety

In Depth22 The Long-Awaited IPOProgramEgypt’s equity financing future

The Chamber

54 Events

63 Exclusive Offers

64 Media LiteAn irreverent glance

at the press

Executive Life50 A Beautiful Investment Investing in Egypt’s art scene

At a Glance26 Investing in EgyptA market overview

Many lives, at least in my opinion, can be summarized in the strugglebetween the need to evolve and the comfort zone. The humankind isconditioned to have both, one to help us connect continents and theother to keep us from slipping off a cliff, each triumphing at point in time.

One of my favorite stories of this struggle is that of Pharaoh Akhenaten. He challengedthe norm of the Egyptian society by depicting his reign in a vastly different way from therulers who came before him. He changed the religion of ancient Egypt from polytheisticto monotheistic, and moved the capital from Luxor where it has always been to the middleof the desert. Legend has it that he chose this location because the sun rises exactlybetween two hills, representing the power of the god Aten. He promoted a different kindof art, life, and philosophy. Alas, as you visit his kingdom today in the outskirts of Al Minya,you will only find a little more than a patch of desert. What Akhnaten missed was the com-fort zone of his people. The culture wasn’t ready, and as soon as he passed away his sonmoved the capital back and the people went to the cultural practices they were comfort-able with.For Egypt, this struggle today can be seen in the country’s pursuit of a cashless society.

With government plans, private sector initiatives, more FinTechs than Egypt has ever had,the near future is looking more and more paperless. However, cultural readiness and com-mon perceptions remain a huge hurdle to overcome. Continuing on the financial track, the Egyptian government is following through on its

2016 announced plans to list state-owned companies. We speak to experts on the expectedpotential and looming challenges, especially in light of the emerging markets crisis. Despite the volatility witnessed in Egypt’s stock exchange, foreign investment is well on

the rise. However, as Saudi Arabia reformed its regulations, encouraging foreign invest-ment in Tadawul, its international standing rose to compete with that of Egypt. Thismonth’s Regional Focus compares the figures and performance of both stock exchanges. Shifting to other investment angles, Egyptian apparel brands are back on the interna-

tional wagon. However, the industry is still plagued with significant challenges that hamperits growth locally and internationally. Business Monthly delves into the sector’s profitabil-ity analyzing its investment potential.Not all investment ventures are dry and figure-based. This month we chose to look into

the investment activity of Egypt’s contemporary art scene. Hidden in Cairo’s nooks andcrannies are galleries making millions per sale, which begs the question: Are we missing outon significantly appreciating assets?Last but not least, we did things a bit differently this month. We swapped one of our in-

depth articles for a detailed visual presentation of the different factors that shape thepotential of new investments, covering everything from cultural readiness, labor compet-itiveness, business environment, to technology penetration. Tell us if you would like to seemore of this.

Cultural Evolution

Director of Publications & ResearchKhaled F. Sewelam

Editor-in-ChiefNadine Abou el Atta

Contributing EditorTamer HafezLeah BremerKate Durham

Consulting EditorsBertil G. Peterson

Contributing WritersMahinaz el BazJulian NabilMenna Farouk

Senior Art DirectorNessim N. Hanna

Senior Graphic DesignerEmy Emile

Graphic DesignerVerina Maher

Advertising & Business DevelopmentDirectorAmany Kassem

Advertising CoordinatorLamia Seleit

Circulation CoordinatorDina Karara

PhotographersKarim el SharnoubySaid Abdelmessih

Production SupervisorHany Elias

Market Watch AnalystAmr Hussein Elalfy

Chamber News ContactsNada Abdalla, Azza Sherif,Susanne Winkler

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

Business Monthly American Chamber of Commerce in Egypt33 Soliman Abaza Street, Dokki 12311 • Cairo • EgyptTel: (20-2) 3338-1050 • Fax: (20-2) 3338-0850E-mail: [email protected]/bmonthly

CTP and printing: Sahara Printing Company, SAE – Nasr City Free Zone

NADINE ABOU EL ATTAEDITOR-IN-CHIEF

[email protected]

Editor’s Note


@BusinessMonthlyEg @BusinessMonthly @BusinessMonthly

U.S-Egypt relations are witnessing an upward trend. We just came back from amini-doorknock, highlighted by a business dinner in honor of President AbdelFattah al Sisi in New York. The meeting was attended by 21 distinguishedbusiness leaders representing some of the top U.S. companies, both working and

interested to work in Egypt. President Sisi articulated the case of Egypt and hit on all theright notes, he touched upon economic reforms, social inclusion, security, stability,citizenship, and continuing the reform agenda.

The feedback from corporate America was beyond positive, unlike previous meetingswhere optimism was guarded by caution. Not this time.

Further boosting Egypt’s positive image, we heard the meeting with President Trumpwent even better than the previous one. In Washington DC the positive sentiment regardingEgypt’s successful economic reforms by far takes priority as opposed to any concerns. In factthe message is keep doing what you are doing right. International financial organizations areimpressed by Egypt’s ability to weather the emerging markets storm, in one strikingcomment: “It’s too good to be true” notwithstanding the imperative need and urgency forsectoral reform, which are needed more so than ever.

Interestingly enough, no serious concerns regarding government debt were raised, as longas it is getting lower in percentage to GDP, not necessarily in absolute terms. October willwitness the periodical review of rating agencies and donor organizations, along with annualWEF Competitiveness ranking. It will be interesting to see the outcome.

Egypt still has a challenging time ahead, hot money flight, emerging markets stress, therising price of oil, and the challenge of attracting foreign direct investments, which is yet tohappen. In many ways it could be a blessing in disguise, prompting the government to pushfurther to unlock the ill-famed bureaucracy.

A sentiment that seems to gain traction within Egypt’s decision-making circles is againperceived as a bastion of stability in a treacherous region, and has a role to play in manydifferent fronts, be it the Israeli-Palestine presumed peace initiative, the Libya file, or EastMediterranean economic coalition. Egypt foreign relations are back on track.

On a final note, the Egypt-U.S. relations are highlighted by the release of $195 million inmilitary aid in August, the visit of Melania Trump in October, the 40th celebration of CampDavid, and the honorary medal awarded to late President Sadat, and the resumption of thestrategic dialogue between the ministries of foreign affairs and defense in both countries,along with the unequivocal support from the U.S. on our war on terror.

For a change we come back this time with a positive note.TAREK TAWFIK

President, AmCham Egypt

Strength in Partnership

Viewpoint


THE NEWSROOMIN BRIEF


Tourism Revenue up 77 Percent

Software Piracy Down

Egypt's tourism revenue jumped 77 percent in the firsthalf of 2018 to around $4.8 billion compared with thesame period last year, a government official toldReuters in late August. The recovery is partly attrib-uted to the flotation of the Egyptian pound, whichhalved the currency’s value, making the country a moreattractive holiday destination through cheaper hotelprices. He added the number of visitors jumped in thefirst half of the year to 5 million, a 41 percent year-on-year growth. “Indicators suggest the sector will earnabout $9 billion by the end of this year,” the officialsaid, adding there were expectations of greater trafficfrom Western Europe, Italy, Germany and Ukrainetowards the end of the year. Last year the governmentpocketed $7.6 billion off the tourism sector, which haslong been considered a pillar of Egypt’s economy and akey foreign currency earner.

The software piracy rate in Egypt hasdropped two percent in 2017, to 59percent, according to a bi-annualreport by U.S.-based BusinessSoftware Alliance. The value of unli-censed software in Egypt declinedfrom $157 million in 2015 to $64 mil-lion in 2017. The report ranks Egyptseventh on the Middle East and

fourth place in Africa. Egypt’s figuresstand to further improve after parlia-ment in July approved the nation’sfirst-ever cybercrimes law, which isexpected to limit the ability to down-load pirated software off the internet.This is made possible as the regulationfor the first time allows the court touse digital evidence to prosecute a

case. Under the law, offenders includethose who operate any informationsystem, such as a website, account, oremail, that encourages cybercrime.Those convicted can face up to a yearin prison and fees up to EGP 100,000,depending on whether the defendantwas a distributer or solely a user ofpirated software.

•17Business Monthly - OCTOBER 2018

In Brief

New Assiut Investment UpdateNew Assiut city is set to receive EGP247 million in investments in fiscal year(FY) 2018/2019 atop the EGP 4.1 billionit has received to date. The New UrbanCommunities Authority (NUCA) hasreleased a report highlighting invest-ment figures for the construction ofNew Assiut city, an extension of Assiutgovernorate which is 386 kilometerssouth of Cairo. It is built over 30,000feddans, of them, 6,600 feddans areallocated to real estate development.This land is earmarked for a maximumof 71,000 residential units, of which12,700 will be built by NUCA.Developers have already completed11,280 units, with an additional 648units under construction. Meanwhile, 15commercial centers have been complet-ed, with 22 still under construction.

Infrastructure has also made significantprogress, with underground pipeworkalready complete, and the electricitygrid work 95 percent finished. Laggingare road paving, at only 50 percent com-pletion, as well as cultivation works,which are 75 percent complete. This cityis part of an ambitious plan to build newcities on the outskirts of every majorgovernorate in Egypt, including theNew Administrative Capital and NewAlamein City.

2,079 Unused Government Assets Egypt has 2,079 state-owned assets ofempty plots, buildings, and factorystructures in 15 governorates, PrimeMinister, Mostafa Madbouly,announced during a press event. Thecabinet is still discussing the optimalutilization of the assets. According to

Madbouly, they will either be includedin Egypt’s recently-announced sover-eign wealth fund, if they pass certain cri-teria; used for different projects; or soldin open auctions to pay off the debtsaccumulated by different governmententities. The findings were based on thework of a specialized committee thatwas formed a year ago to consolidate thegovernment’s assets nationwide. LastJuly, Parliament assessed the govern-ment’s unused assets at EGP 1 trillion.Their recommendation, at the time,was that they should all be put under thesovereign wealth fund. This, theyargued, would allow each asset to befully utilized as some of Egypt’s bestinvestment experts run the fund. This isthe first time that the government hasmade an official nationwide, cross min-isterial, record of all of the government’sunused assets.

Petroleum Consumption on the Rise

Consumption of petroleum products in Egypt isexpected to reach 35.5 million tons by the end offiscal year 2018/2019, a 10.24 percent increase overthe previous fiscal year. That was the estimation ofTarek el Molla, minister of petroleum and mineralresources, when speaking to Al Shorouk newspa-per in September. This comes as the government isworking on reducing butane consumption by 4.87percent, capping it at 3.9 million tons compared to4.1 million last fiscal year. However, it is allowingconsumption of other petroleum products to fluc-tuate based on supply and demand. El Molla pre-dicted that gasoline consumption will increase by5.63 percent to reach 7.5 million tons by the end ofthis fiscal year. Meanwhile, diesel consumption willgrow 8.88 percent to reach 14.7 million tons, whilethe highest consumption forecast goes to mazut,which is set to increase by 25.3 percent to reach 9.4million tons. For the past three years, the govern-ment has been resorting to raising prices of fuelproducts annually in an attempt to force people touse less expensive public transportation.


Investor Focus

Egypt’s homegrown apparel industry is undergoing a revival that is pushing itonto the international stage. Can domestic manufacturers overcome challenges tothe “Made in Egypt” brand?

By Menna A. Farouk

Road to RecoveryEgypt’s Apparel Industry

•19

Twenty years ago, Hani Guweida built a business in Cairo based on selling importedapparel to domestic retailers. By 2014, the entrepreneur abandoned that strategy infavor of bringing 100 percent locally-produced products to the market.

“We realized how promising Egypt’s apparel market is, taking into consideration the high-quality materials we have and the country’s strategic location,” says Guweida, chief executiveofficer of Town Team Company for Readymade Garments. “We managed to establish a factoryin Tanta, and we are now building another manufacturing plant in El Sadat City.” Despite such expansion, several challenges undermining growth not just for Guweida’s com-

pany, but throughout a sector considered vital to the Egyptian economy. “The scarcity oftrained workers and the high production costs,” he says, citing the two main areas of concern.“We are still trying to overcome them.”Guweida is among hundreds of apparel manufacturers who face soaring prices for raw mate-

rials, and a lack of machinery and qualified workers, as well as the widespread perception thatimported clothes are better.

Robust IndustryAccording to the Readymade Garments Export Council, the apparel industry contributes 3 per-cent to Egypt’s gross domestic product, represents 15 percent of non-oil exports, and employs33 percent of the industrial labor force.The council reported in January that Egypt’s exports in this sector rose 13 percent in 2017

to $1.4 billion, compared to $1.3 billion a year earlier, the first increase in three years. Previousexports declined year-on-year by 3 percent in 2016 and 8 percent in 2015, according to thecouncil’s data. Meanwhile, imports of readymade garments declined 55 percent from January through

August due to the devaluation of the Egyptian pound, the Ministry of Trade and Industry statedin an October 2017 press release.Last year, the U.S. topped the list of Egyptian apparel importers, receiving knit apparel worth

$380 million and woven apparel worth $348 million, according to the Office of the U.S. TradeRepresentative. On the other hand, China had the lion’s share of apparels exported to the U.S. with $27.04

billion worth of products. Vietnam came in second with $11.56 billion, followed byBangladesh at 5.06 billion and India at $3.7 billion, as per data released by the Office ofTextiles and Apparel in the U.S. Department of Commerce.

Market EdgeThose interviewed stress the industry’s potential. “There is an increasing supply of workers,declining wages in comparison with other countries, and the availability of fertile land forgrowing long-staple cotton, which rarely exists elsewhere,” says Magdy Tolba, chairman ofCairo Cotton Center, a supplier of high-quality knitted apparel to Europe and the United States.Tolba adds that multinational companies have robust confidence in the apparel produced in

Egypt, citing his company’s contracts with Macy’s, Gap Inc., Liz Claiborne, Levi Strauss, Nike,Adidas, Marks & Spencer, Calvin Klein.The float of the Egyptian pound in 2016 laid the foundation for an export-friendly economy.

“Locally made products have become more affordable for consumers abroad, giving a largeboost to the industry,” he says.Taking into account the encouraging market conditions in Egypt, Tolba says, his company is

launching an international trademark inspired by the movement to promote Egyptian products.“The 100 percent Egyptian brand will go international and be sold across the world,” he adds,offering no further details.Furthermore, Egypt enjoys a competitive edge that has lured investors. Yehia Zananeri, chair-

man of the Association of Readymade Garments Producers, believes Egypt’s apparel industryhas drawn both local and foreign investors, which is encouraging expansion. “Egypt has a very

Business Monthly - OCTOBER 2018

Investor Focus

Investor Focus


strategic location, being proximate toEurope, the Middle East, and Africa.This enables the country to export eas-ily to several countries. It also hassome of the best materials in theworld,” he adds.Nevertheless, Zananeri emphasizes

that Egypt still must make efforts tocompete. Turkey benefits from a simi-lar geographic advantage and has cap-italized on its location near Europeand the Middle East to surpass Egyptin apparel exports. Turkey’s exports of clothing reached

$17 billion by the end of 2017, up 3percent, according to a report by theTurkish Exporters’ Assembly, whileEgypt’s exports of apparel paled incomparison at $1.4 billion.Experts cite Turkey’s qualified and

educated workforce, adequate invest-ment in technology, world-class quali-ty, adherence to environmental andhealth regulations, and competitivedesign as the country’s major advan-tages over Egypt.In order to boost its apparel indus-

try, the Turkish government increasedthe number of private foundationsand universities that specialize in fash-ion design. In addition, it raised thenumber of fashion exchange opportu-nities with European countries.In cooperation with the private sec-

tor, the Turkish government also start-ed to organize design competitions,fashion shows at high schools andshopping malls, and a fashion week inits capital.

Challenges to GrowthAll those interviewed acknowledgedthe challenges that persist despite gov-ernment support and the potential ofthe apparel industry. SayyedMahmoud, the owner of a small shopat Wekalet el Balah, a marketplaceknown for its affordability, says prob-lems include the poor machines usedin manufacturing, a lack of trainedworkers, rising prices of raw materialsdue to the exchange rate, and highproduction costs. “Although the country has a strong

apparel industry with a long and

reputable history, it does not produceadequate apparel products to coverthe local market. Most clothing wehave is from China, Italy, the U.S.,among others,” Mahmoud says.He adds that quality domestic

readymade garments do exist, empha-sizing that Egypt has some of the finestraw materials in the world. "Whatdamages the image of ready-made gar-ments in Egypt is random workshopsthat are not monitored by the govern-ment, do not apply international stan-dards, and produce poor-quality prod-ucts," he says. “Such low-qualityapparel has reinforced the perceptionthat locally made products are notworth the money.”As a result, local products can’t

compete with international brands,says Waleed el Masry, another shopowner in Wekalet el Balah.“Marketing is also added to the list ofreasons,” he says. “We do not knowhow to market our products abroad.You know what? Chinese ready-madegarments are very low-quality.However, there is demand for them.People prefer to buy any foreign thingrather than a locally made product.”El Masry adds that with the devalu-

ation of the Egyptian pound, the pur-chasing power of Egyptians dramati-cally declined. “There is barely anylocal demand for clothes,” he says.“Prices of clothes have soared.”

Government EffortsIn recent years, the government hasstarted to pay more attention to theapparel industry. In July 2017, itsigned an agreement worth $1.7 bil-lion with the United NationsIndustrial Development Organizationand the Italian Agency forDevelopment Cooperation to improvethe quality of cotton.Moreover, the government

launched a mass campaign under theslogan “Made in Egypt” promotinglocal commodities, including gar-ments. They further complementedthe decision by imposing tariffson hundreds of imported goods,including 40 percent on clothing.

In September, the Ministry of Tradeand Industry signed a protocol ofcooperation with EG-Gate, a platformdeveloped to offer marketing servicesto local manufacturers to digitallypromote Egyptian products.According to the protocol, onlinestores will be set up for Egyptian com-panies on the EG-Gate platform.Enas Abbass, a marketing expert

and public relations consultant, saidthe first thing the government has todo is address the widespread percep-tion about the quality of local prod-ucts. “This can be done through mas-sive media campaigns,” she explains.“Secondly, the government has toimprove the quality of Egypt’s apparelproducts, intensify monitoring of theirproduction, before launching onlineand offline marketing campaigns.”Moreover, Abbass says Egyptian

apparel brands should be displayed atlarge shopping malls in the countryalongside international brands to give theimpression they are on equal footing.

Investment PotentialIn addition to government efforts,Egyptian fashion designers are spread-ing the word about their country’sapparel industry. Several brands arebecoming known on the internationalstage over the past decade, includingMarie Louis, Shahira Lasheen, Zak,Rana Madkour Designs, and SarahBahaa Designs.“This proves how strong Egypt’s

apparel industry is and the potential forit to be stronger. We can go internation-al, but we just need a sound governmentstrategy that supports local manufactur-ing, addresses the challenges, and focus-es on marketing,” says Ahmed elShami, an economist and professor offeasibility studies at Ain ShamsUniversity. “It seems the government isadamant about that, but this will takesome time to be felt on the ground. Thepassion is there and the government’scurbs on imports are being implement-ed. Egypt is heading toward a develop-ment in the apparel market and theindustry is expected to rebound and seeunprecedented growth.”■


Investor Focus

As the government takes steps toward launching its long-awaited IPO program, experts weigh in on implementation.

By Mahinaz el Baz

InDepth

After years of deliberation, Egyptis finally ready to list its state-ownedcompanies in the stock exchange. Oflate, it has taken steps to prepare forInitial Public Offerings (IPO) for anumber of governmentally ownedcorporations in different sectors. Theplan was officially announced in 2016and is partially building on the lastpublic offering of state-owned com-panies, which took place in 2015.The IPO program intends to list 23

public sector companies on theEgyptian Exchange (EGX). Themove is in line with the government’sproposed national budget for fiscalyear (FY) 2018/2019. Plans includeoffering EGP 100 billion worth ofshares in state-owned companies,according to a March statement bythe Ministry of Finance. The IPOprogram is expected to be imple-mented over 24-30 months.

However, investors are skepti-cal as to whether this IPOprogram will benefit Egypt’seconomic prospects. “Weshould ask ourselves animportant question. Whydoes the government actu-ally list the state-owned compa-nies?” saysMo h am e dReda,

CEO of SOLID Capital Egypt, aninvestment bank. “If the answer is topump the profits directly into thebudget to reduce its deficit, then itshould halt this program.” Redabelieves the rationalpurpose of theIPO program is torestructure unsuc-cessful public com-panies. This goalcan beachieved byintroducingother suc-c e s s f u lc o m p a -nies tot h eEGX in

order to increase their overall capitaland profit, which will be invested insustaining the reform of the unsuc-cessful companies. “I believe that the program is a

very critical one,” says Omar elShenety, managing director ofMultiples Group, an investmentbank. “On one hand, it aims at listingsome of the government-owned com-panies to generate cash to reduce thebudget deficit. On the other hand,listing the government entities isaimed at improving governance andprofessional management at thosecompanies.” Economic consultant Reham el

Desoki explains that “increasing thenumber of state-owned listed compa-nies will enhance the performance of

the stock market by giving itmore depth and [growing] market

capitalization. The bigger the mar-ket capitalization, the cheaper thefinancing methods.”Moreover, IPOs could contribute

to economic growth by forcing state-owned entities to become more effi-cient, Jenik Radon, a lawyer andadjunct professor at the School ofInternational and PublicAffairs at ColumbiaUniversity, told Egypt Oil& Gas magazine inSeptember 2017. “Making

Equity Financing and Egypt’sLong-Awaited IPO Program


an enterprise more efficient, prof-itable, and expanding a good enter-prise by investment—through morecapital—would obviously grow theeconomy,” he said. “In the end, theissue is making enterprises more effi-cient, which means more business,more taxes.”

The Plan’s Two PhasesThe Ministry of Finance plans toimplement the IPO program overtwo phases. The first will include sell-ing additional shares of already-listedAlexandria Mineral Oils Company(AMOC) and Eastern Company,Finance Minister Mohamed Maaitannounced in September at the EuroMoney Conference. Abu QirFertilizers, Alexandria Container andCargo Handling (ACCH), andHeliopolis Company for Housing andDevelopment (HHD) will follow bythe end of the year.The government hopes to raise as

much as EGP 25 billion from the fiveIPOs, with EGP 10 billion going tothe state’s coffers, according toMaait.Eastern Company and AMOC will

pilot the program; the two compa-nies will introduce a new wave oftheir shares to the EGX. Eastern andHHD were originally slated to pilotthe program, but Public BusinessSector Minister, Hisham Tawfik, told

Bloomberg in a June interview thatAMOC had replaced HDD for anOctober slot. Furthermore, Maaithad announced in September that afurther 20 percent of AMOC will beoffered on the EGX. The Ministryexpects that the offering will gener-ate around EGP 2.8 billion, Reutersreported.As for AMOC, the company

showed a 24 percent year-on-yearincrease in profit to EGP 1.05 billionfor the nine-month period ending inMarch. To secure eligibility to issueglobal depository receipts (GDRs),the government is considering float-ing some of its shares on the NasdaqDubai exchange after it is listed onthe London Stock Exchange Eastern Company, a subsidiary of

the Chemical Industries HoldingCompany, is an Egypt-based jointstock company. It produces 94 per-cent of all cigarettes sold in Egypt,and exports to 30 countries, accord-ing to an August Ahram Onlinereport.“The Eastern Company is a monop-

olistic company that controls domes-tic tobacco production. Demand forits products is exceptional, thus it

gains remarkable profits annually. As aresult, investors would definitely wel-come investing in such a company’s[stock,]” says Reda. In 2017 the compa-ny recorded EGP 13.4 billion in sales,according to an official statement.However, according to Reda, with

65 percent of its production spent onraw materials, primarily importedtobacco, the company is vulnerableto any change in foreign exchangerates. The company needs EGP 600million annually to buy raw materials.Reda believes the five companies

are the optimal choices for the firstphase of the IPO program. They arecharacterized by strong financial per-formance, positive future insights,and increasing demand for theirstock on the EGX. El Shenety agrees, saying the gov-

ernment chose companies that wouldsatisfy the appetite of investors. “Atthe end of the day, investors want to

Business Monthly - OCTOBER 2018 •23

InDepth

see companies with good financialstatements, solid track records, andreasonable forecasts,” he continues,“so the government had to focus onsome of the good companies andinstitutions it has.”Preparations for the program’s sec-

ond phase are on track as well, withmore state-owned companies sched-uled to tap into the equity markets in2019, Maait says, adding that the listof potential companies is still underconsideration.For the second phase of the IPO pro-

gram, Reda says, “Enppi is at the top ofthe list. It has diversified activities and astrong financial position in the market.Maybe by then the government willdecide to introduce national banks tothe EGX in the second phase--Banquedu Caire, for instance.”

ImplementationHurdlesIn principle, the IPO initiative couldbe a good program, yet the devil liesin the details when it comes to execu-tion, how proceeds will be used, andhow companies will cope, el Shenetyexplains. “I believe these are the cri-teria that can define the success andusefulness of the program.”According to Reda, the program

was delayed by conflicts amongstakeholders deciding what compa-nies should be listed. In addition, tocontradicting plans due to the multi-ple government entities involved.“The ongoing IPO program is moreorganized,” he says. “The Ministry ofFinance is the only official entityresponsible for the program.” In the pre-IPO phase, el Shenety

explains that “a lot of organizationaldevelopment efforts have to be done,including restructuring of these compa-nies as well as building a solid corporategovernance system that would matchthe requirements of publicly listed com-

panies. The downside internally couldbe related to manpower, where somelayoffs may result from restructuringand this is a sensitive topic.”According to Reda, public compa-

nies introduced to the EGX will besubject to governance, disclosure,and transparency practices. “Havinga proper business plan, a clear vision,and an elastic structure are key ele-ments in sustaining the success of theprogram and increasing the ability tofinance new projects,” he says. Challenges can change due to the

dynamic nature of both the econom-ic and financial markets. Those inter-viewed argue the potential challengesthat might face the ongoing programare different than the previous chal-lenges that caused the earlier delaysin launching the program.

The stock market has not beendoing well lately, with disappointingtrade volumes. “For the IPO programto succeed, there must be externalinvestors participating and injectingfresh funds in the market,” says elShenety. “This is the wish of every-one, but it is not clear whether thiswill happen. The looming emergingmarket crisis could definitely affectthe IPO program. I believe lots ofefforts on promotion and fundraisingin the international markets for theseIPOs are critical.”Reda, on the other hand, believes

the main challenges are high interestrates, which cause lower levels of liq-uidity and erode purchasing power.“The government should considercutting rates to achieve IPO programgoals,” he says.

Moreover, there is regional pres-sure from the Saudi IPO program.The Saudi financial market is seventimes larger than Egypt’s and couldattract foreign investments not onlyfrom Egypt, but also from other mar-kets in the Gulf, Reda explains.

From her side, el Desoki believes“the more transparent the program,the less public criticism it will face.Transparency increases investor con-fidence.”

To assure success of the govern-ment’s IPO program, Reda explainsthat three key elements must be met.“I call it the success triangle: timing,pricing, and promotion,” he says.“First, the government should choosethe best time for listing state-ownedcompanies. Secondly, price the stocksfairly. Third, promote the stocks oflisted companies to attract both for-eign and domestic investments.”

Deciding to InvestDividing the program into two phaseswas important to boost investor confi-dence. The first phase of increasingthe free float and selling additionalshares of the two already-listed com-panies, AMOC and the EasternCompany, will prepare the market forthe second phase, according to Reda. “The main purpose of including

listed state-owned companies in theIPO program is to expand the privatesector’s stake,” el Desoki says. “Thiswill support improving the financialperformance of these companies.”Furthermore, economic and financial

experts agreed that any counseling ser-vice should be based on financial andtechnical analyses. “For the first phase,investors have a clear vision, since thecompanies already are listed,” says Reda.“However, it is going to be more compli-cated in the second phase. It will mainlydepend on the availability of data foreach company.”El Shenety believes the stock mar-

ket can be a lucrative investmentchannel with new listings. “It will giveinvestors a bigger set of opportunitiesto look at. I would recommend thatthey look at these opportunities andallocate part of their portfolios tothese new listings,” he says. “Thebelief is that the biggest gains happenin the first few days, and I think thiswill affect the view of individualinvestors.” ■


InDepth

“The belief is that the biggest gains happenin the first few days, and I think this willaffect the view of individual investors.”

Egypt100

Morocco71

Jordan65

Kuwait52

Bahrain44

UAE17

Saudi Arabia

Rank is out of 137.Source: Global Competitiveness Index 2017-2018

30

Lebanon105

Competitiveness of Regional Players


At a Glance

Investing in EgyptA Bird’s-eye View of Egypt’s Business Climate

Egypt’s GlobalCompetitive Rank

Investors seek a complete picture of the true trajectory of aneconomy before financing new ventures, pumping extrainvestments, or establishing a new business entity. Even thesmallest details can be an important indicator that helps buildthe right decision and more importantly, evaluate the businessprospects accurately.This report sheds light on two of the most effective interna-

tional indicators, the Global Competitiveness Index (GCI)and the Doing Business Index (DBI). Both indicators provide

foreign investors with an in-depth perspective beyond newsupdates.It additionally helps answer vital questions about the perfor-

mance of the Egyptian economy outside of progress, growth, ordeterioration. It goes deeper into what makes Egypt’s economylucrative for foreign investors, analyzing indicators that reflectmany characteristics, such as smoothness of operations, qualityof labor, market development, technological readiness and signsof business’ adaptiveness.

In fiscal year 2017/2018, Egypt earnedits best GCI ranking in the past fiveyears. The country recorded a scoreof 3.9 out of 7 points, approachinglevels of competitiveness similar toit's all time high of 4.04 recorded in2010, according to the GCI report.

On a regional level, Egypt’s economy ranked11th out of the 13 Middle East and NorthAfrica (MENA) countries examined in thereport. Standing at 100, Egypt passedLebanon’s 105 rank and Yemen which stoodlast in the report ranking 137. On the otherhand, the United Arab Emirates was ranked asthe most competitive economy in the region,and holds spot number 17 on the global index,followed by Qatar and Saudi Arabia, thatsnatched spots on the top 30 places on globallist, ranking 25th and 30th, respectively.Gulf Cooperation Council (GCC) countries

are generally undertaking the most intensiveefforts to increase the amount of availableseed capital to SMEs, yet other countries suchas Egypt have been more active lately in thismarket, the report states.

2012/2013

2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

3.7

3.6

3.6

3.7 3.7

3.9

2013/2014

2014/2015

2015

/201

6

2016/2017

2017/2018

107 118 119 116 115 100

Source: Global Competitiveness Index 2017-2018 Score is out of 7.Rank is out of 137.

RankScore

Egypt’s Global Competitiveness Score


At a Glance

Basic requirements sub-index measures competitiveness through four pillars: institutions, infrastructure, macroeconomicenvironment, and health and primary education.

2013/2014

2014/2015

2015/2016

2016/2017

2017/2018118

121

115

117

106

Basic Requirements Rank

Rank is out of 137.Source: Global Competitiveness Index 2017-2018

Infrastructure

98

100

91

96

71 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Source: Global Competitiveness Index 2017-2018 Rank is out of 137.

The institutional environment ofa country depends on the efficiencyand the behavior of both public andprivate sectors. The legal and admin-istrative framework within which

individuals, firms, and governmentsinteract determines the quality of thepublic institutions of a country andhas a strong bearing on competitive-ness and growth.

The infrastructure pillar measuresthe extensiveness and efficiency of themodes of transport, electricity, and telecomnetworks. Infrastructure is crucial in ensur-ing a well functioning of the economy.

Institutions

117

100

87

87

64 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014



At a Glance

140

141

137

134

132 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Macroeconomic environment


Health and primary education

100

97

96

89

87 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014


The macroeconomic environ-ment rank tracks the overall level ofeconomic stability and is a signal tothe level of competitiveness of Egypt.

The health and primary educationindicator signals to the expected produc-tivity levels of the local workforce. Workerswho have poor health can’t function to

their potential and will be less productive.In addition to health, this pillar takes intoaccount the quality of basic education,which is fundamental in today’s economy.

As for the efficiency enhancers sub-index, it includes six competitiveness pillars, namely higher education and training; goodsmarket efficiency; labor market efficiency; financial market development; technological readiness; and market size.


2013/20142014/2015

2015/2016 2016/20172017/2018

109106

100 100 87


At a Glance

The higher education and trainingrank reflects the economy’s ability tomove up the value chain beyond simpleproduction processes and products.

The goods market efficiencymeasurement highlights Egypt’s abili-ty to produce the right mix of products

and services, given their particular sup-ply-and-demand conditions, as well asensure that they can be most effectivelytraded. Additionally, market efficiencydepends on demand-generating condi-tions such as customer orientation andbuyer sophistication.

The labor market efficiency pil-lar analyzes the relationship betweenthe efficiency and flexibility of laborand the effective allocation of workersin the economy that provides themwith incentives to put forth their besteffort in their jobs.


118

111

111

112

100 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Higher education and training


119

118

115

112

90 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Goods market


146

140

137

135

134 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Labor market


119

125

119

111

77 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Financial market development


100

95

98

99

94 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Technological readiness


29

29

24

25

25 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Market size

The financial market developmentfigure measures the financial mar-kets’ efficiency through the allocationof the resources saved by a nation’spopulation, as well as those enteringthe economy from abroad, to theentrepreneurial or investment pro-jects with the highest expected ratesof return rather than to the politicallyconnected.

The technological readiness pillarmeasures the agility with which an econo-my adopts existing technologies toenhance the productivity of its industries,with specific emphasis on its capacity tofully leverage information and communi-cation technologies (ICTs) in daily activi-ties and production processes forincreased efficiency and enabling innova-tion for competitiveness.

As larger markets have the ability toallow businesses to exploit economiesof scale, Egypt’s size of market rankis an indicator of profitability. By includ-ing both domestic and foreign marketsin the measure of market size, the indi-cator gives credit to export-driveneconomies and geographic areas thatare divided into many countries buthave a common market.


At a Glance


84

95

89

85

84 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Business sophistication


120

124

120

122

109 2017/2018

2016/2017

2015/2016

2014/2015

2013/2014

Innovation

Business sophistication rank concernstwo elements that are intricately linked: thequality of a country’s overall business net-works and the quality of individual firms’operations and strategies.

Innovation measurement is directlylinked to the sufficiency of investment inresearch and development, especially bythe private sector; the presence of qualityscientific research institutions that can gen-

erate the basic knowledge needed to buildthe technology; extensive collaboration inresearch and technological developmentsbetween universities and industry; as well asthe protection of intellectual property.

Most Problematic FactorsThe report explained that the most problematic factors for doingbusiness in Egypt are policy instability, inflation, and corruption.The report notes that since 2011, Egypt has been facing political,economic, and social instability. The economy had faced manyhardships when reforms began in 2016. The ongoing economicreform program is based on the shock methodology, which affectsthe macro-economic indicators negatively in the short term.Furthermore, social aspects and policies need more developmentsas well, according to the IMF’s third review for Egypt’s ongoingreform program.As for inflation, Egypt’s macroeconomic environment, which

improved only by 2 ranks (132nd) came in as the second lowest

pillar in the GCI report after the labor market efficiency pillar(134th). Since the Central Bank of Egypt (CBE) made its initial ten-tative adjustment to the exchange rate in March 2016, the rate ofinflation has fluctuated wildly. Following the initial currency deval-uation the headline consumer prices index rate of inflation hit anall time high in July 2017 recording 32.95 percent. The latestannounced figures date stand at 14.2 percent.Egypt’s corruption rank came in 117th out of 180 countries on

the annual Corruption Perceptions Index of the graft watchdogTransparency International, compared to 108/176 in 2016. Egyptrecorded 32 points, compared to 34 points in the 2016 report,witnessing a slight increase in corruption, according to the report.

Innovation and sophistication factors sub-index measures competitiveness using two pillars, business sophisticationand innovation.

2017/20182016/2017

2015/2016

2014/2015

2013/2014

101111113113

104



At a Glance

Egypt’s Doing Business Index Rank and IndicatorsIn 2018, Egypt ranked 128th among 190 economies in the Ease Doing Business Index Report, dropping six spots from last year. Ease of DoingBusiness in Egypt averaged 120 over the last 11 years, reaching an all-time high of 128 in 2013 and a record low of 106 in 2009.

In 2016, Egypt had the biggest increase in the distance to frontier score over the past 14 years, though most of the gains occurredin the first half of that period, before 2009.

Source: Doing Business Report 2018 Rank is out of 190 countries

Egypt’s Doing Business RankEgypt’s Doing Business Rank

2015 2016 2017 20182014

128 112 131 122 128

Rank is out of 190 countriesSource: Doing Business Report 2018

50

73

73

39

103 2018

2017

2016

2015

2014

Starting a Business


149

142

113

64

66 2018

2017

2016

2015

2014

Dealing withConstruction

Permits Rank is out of 190 countriesSource: Doing Business Report 2018

105

106

144

88

89 2018

2017

2016

2015

2014

Getting Electricity

Starting a business is measuredthrough the analysis of length of pro-cedures, time, cost, and paid-in mini-mum capital to start a limited liabilitycompany.

Dealing with construction permitsis similarly measure by length of proce-dures and cost to complete all formali-ties to build a warehouse and the qualitycontrol and safety mechanisms in theconstruction permitting system.

Getting electricity is ranked basedon procedures, time, and cost of gettingconnected to the electrical grid, the reli-ability of the electricity supply and thetransparency of tariffs.


156

152

157

162

160 2018

2017

2016

2015

2014

Enforcing Contracts


At a Glance


148

149

151

162

167 2018

2017

2016

2015

2014

Paying Taxes


83

99

155

168

170 2018

2017

2016

2015

2014

Trading acrossBorders

Paying taxes is measured through thepayments, time, and total tax rate for afirm to comply with all tax regulations aswell as post-filing processes.

Trading across borders rankdepends on the time and cost to exportthe product of comparative advantageand import automotive parts.

Enforcing contracts pillar isbased on the time and cost to resolve acommercial dispute and the quality ofjudicial processes.

Registering property index is basedon procedures, time, and cost to transfera property and the quality of the landadministration system.

Getting credit rank is based onthe quantification of the movable col-lateral laws and credit informationsystems.

Protecting minority investors ismeasured by analyzing minority sharehold-ers’ rights in related-party transactions andin corporate governance.


105

84

111

109

119 2018

2017

2016

2015

2014

Registering Property


86

71

79

82

90 2018

2017

2016

2015

2014

Getting Credit


147

135

122

114

81 2018

2017

2016

2015

2014

Protecting Minority Investors


146

126

119

109

115 2018

2017

2016

2015

2014

Resolving Insolvency

Resolving insolvency rank is based on the analysis of time,cost, outcome, and recovery rate for a commercial insolvencyand the strength of the legal framework for insolvency.

ImprovementsDespite the rank deterioration, the 2018 edition of the DBIhighlighted Egypt’s success in passing legislation thatincreased corporate transparency requirements, and thusincreasing the shareholders' role in company management.This translates into the protection of minority investors in Egypt.

Protecting Minority Investors: In 2018, Egypt ranked 81 inprotecting minority investors. Since 2015, Egypt has been workinghard to protect minority investors. The country recently strength-ened minority investor protections by increasing shareholder rightsand their role in major corporate decisions.

Starting a Business: Egypt ranked 103 in starting a business.

From 2008-2017, Egypt took serious steps towards facilitating thestart of any business, which slightly enhanced the country’s rankin this indicator.In 2017, Egypt made starting a business easier by merging

procedures at the one-stop shop by introducing a follow-upunit in charge of liaising with the tax and labor authority onbehalf of the company. In 2011, Egypt cut the cost to start abusiness. In 2010, Egypt eliminated the minimum capitalrequirement. In 2009, Egypt reduced the paid-in minimumcapital requirement, abolishing bar association fees andautomating tax registration. In 2008, Egypt lowered registra-tion fees, improving the process at the one-stop shop andreducing the minimum capital requirement.

Deteriorating and Constant PillarsOne of the points of criticism was registering property in Egypt asrecently it was made more difficult and more costly to verify andratify a sales contract.

Registering property: In 2018, Egypt unfortunately madeit more difficult to register property by raising the cost to ver-ify and ratify a sales contract. The country ranked 119 in regis-tering property. On the other hand, 2009 witnessed the lastinitiative by the state to expedite property registration by sim-plifying administrative procedures, reorganizing the businessworkflow between the real estate registry and the EgyptianSurveying Authority and introducing time limits for severalprocedures.

Enforcing contracts: In 2018, Egypt ranked 160 in enforcingcontracts. Over the past decade, 2010 was the only year that saw adevelopment in this issue, when Egypt made enforcing contractseasier by creating commercial courts.

Dealing with construction permits: In 2018, Egypt ranked66 in dealing with construction permits. The country did not takeany recent steps to help deal with construction permits. Thelast action took place in 2010, when the country made dealingwith construction permits easier by issuing executive articlesimplementing its new construction law and by eliminatingmost pre-approvals for building permits.

Getting credit: Egypt ranked 90 in getting credit. The ease ofgetting credit has not seen any changes since 2010, when the pri-

vate credit bureau I-score added retailers to its database, improvingaccess to credit information.

Paying taxes: Egypt ranked 167 in paying taxes. As a result,experts believe that the country should consider quicker andmore developed tax reforms. In 2014, the state made payingtaxes costlier for companies by increasing the corporateincome tax rate. It has not enhanced the tax payment mecha-nism since then.

Trading across border: In light of the ongoing economicreform, Egypt followed a stricter methodology to reduce imports.The main reason is eliminating the balance of payments’ deficit andnarrowing the gap between imports and exports. Egypt currentlyranks 170 in cross-border trading.This was a direct result to the country’s policies in 2017 that

made trading across borders more difficult by making the processof obtaining and processing documents more complex.

Resolving Insolvency: Egypt’s current rank stands at 115in resolving insolvency. Data show no action, whether positiveor negative, in time, cost, outcome, and recovery rate for acommercial insolvency and the strength of the legal frame-work for insolvency since 2008 until now. It is noteworthy thata new bankruptcy law was passed in 2017; however, it is yet tobe enforced. Fluctuations witnessed in Egypt’s insolvency rank are attributed

to the changes in other countries, and as a result their ranks.


At a Glance

34•Business Monthly - OCTOBER 2018

Cover Story

As the government attempts to make Egypt a cashless economy by pushing its agencies toaccept only payments made online and cards, challenges persist.

By Tamer Hafez

Coming SoonA Cashless Society


Cover Story

“Despite having an increasingly stronger position in thelocal market since 2012, 85 percent of Jumia’s cus-tomers in Egypt choose the ‘pay on delivery’ option,”says Hisham Safwat, Egypt’s CEO of Jumia, an e-com-

merce website operating in 21 other African countries. “E-com-merce is supposed to help increase cashless transactions. Yetdespite our best efforts [periodic promotions and discountswhen paying online] buyers just want to pay in cash.” Egyptians love using cash, even when buying something offthe internet. A 2018 McKinsey report noted that only 2 percentof Egypt’s payment transactions were cashless in 2017. Last year,cashless transactions accounted for 4.4 percent of Egypt’s GDP,according to the report. This comes at a time when the government is pushing to makeEgypt a cashless society to create a more stable financial system,as all transactions would be recorded in the banking system.This is vital as such transactions would help achieve the goals ofthe country’s Vision 2030 plan, Hala el Saeed, minister of plan-ning, follow-up and administrative reform, noted during a con-ference in August. Such a system would include cashless pay-ment options for government agencies, individuals, and busi-nesses, making them faster, safer, and simpler. Yet many believe that neither Egypt’s society nor infrastruc-ture is ready for cashless payments on a national level. Such pay-ments would not solve imminent or nagging problems for locals,such as the fear of being conned. In addition, infrastructureneeds major updates to withstand extra loads. “To push aheadwith infrastructure investments and force civil servants to dothings differently on a national level needs a serious and strongcommitment from the government,” says Mohamed Shawky,deputy head of the customs clearance officers committee in theAlexandria Chamber of Commerce.

Perception 1.0 For many Egyptians, the idea of not paying for goods and ser-vices with paper notes is alien. “I generally don’t like to use cred-it cards because I need to feel how muchmoney I am paying for a product

or service, and not justgive the seller a card and type

in some numbers,” says KhadigaAmr, a 51-year-old university professor.

Meanwhile, factory manager Yassin el Gammal,35, avoids using his card in general as he fears his

information could be stolen. “The only exception is the ATMmachine, as it is owned by the bank,” says el Gammal.Such attitudes constitute a major obstacle for the govern-ment. “As banks, our biggest challenge has always been theparts of society that believe banks are evil,” says Adnan elSharkawy, former head of the Egyptian Real Estate Bank.

“These people deliberately avoid banks. No matter what youdo, they still won’t be banked.” He cites the example of thosewho withdraw all their salary as soon as it is deposited. “Eventhough they are banked on paper, in reality they are no differentfrom unbanked individuals,” says Sharkawy. “Those people cannever go cashless without strong campaigns to make thembelieve in the [banking] system.” This distrust dates back to the 1990s, according to TarekHelmy, a board member at Suez Canal Bank. “There can be nodenying that confidence in the system was lacking with thebankruptcy of a few high-profile non-bank investment firms,which were not supervised by the Central Bank of Egypt,” hesays. “Now, however, it is a completely different world.” A major factor in the successful shift to cashless transactionsin other countries stems from fear of being mugged or robbed,Sharkawy points out. One such example is Sweden, where about1 percent of the value of payments nationwide is done in papermoney and coins, according to Riksbank, Sweden’s CentralBank. "We wanted to minimize the risk of robberies, and it'squicker with the customers when they pay by card," VictoriaNilsson, who manages two bakeries in Sweden, told the BBC inSeptember 2017. Enabling such a switch is an array of consistentand strong legislations, such as banning the use of currency onbuses.In Egypt, however, being safe from mugging is not a high pri-ority. Yamen Sobhy, a 40-year-old civil engineer, bought his newcar with cash. He took the money from selling his old car, with-drew his savings, went to a second bank to withdraw a loan hehad previously secured, and took his brother to the car show-room, where they paid in cash.

Cashless GroundworkDespite cultural barriers and limited infrastructure, Egyptshould have a lot of potential when it comes to adopting cashlesstransactions because of its predominantly young population, saythose interviewed. According to a report by CanadianHootsuite, in 2017 there were 49.23 million—out of a popula-tion of nearly 100 million—already online. That is a 41 percentincrease compared to 2016, stated the report. However, most Egyptians don’t use smartphones to access theinternet. As of July, smartphone penetration remains low at 34.2percent of all mobile users, according to the ministry of commu-nications report “ICT Indicators in Brief”Another factor that could make people stop using papermoney on a daily basis is access to financial services and usabletools. According to CBE Governor, Tarek Amer, during a Julyinterview with The Egyptian Economist magazine, the numberof bank accounts equals 33 percent of the 60 million people eli-gible to have them. However, as it is common practice forEgyptians to have multiple bank accounts, the actual number of

banked unique individuals is likely less.“I believe that 10 million uniqueEgyptians have at least one bankaccount,” says Shawky. The CBE doesn’t publish figures onhow many bank accounts exist or howmany individuals are banked. However,according to the 2018 McKinsey Report,there were 22.95 million debit, credit, andprepaid cards in circulation as of 2017, ofwhich only 3.5 percent of debit cards and1.4 percent of credit cards were used tomake a purchase in the year. While all canbe used to pay for goods and services,only the 2.8 million credit cards in circu-lation can be used online. Nevertheless,the report highlighted that these figuresrepresent a 17 percent increase in com-parison to the number of available cardsa year earlier.

Building the SystemFor the government, the first step tobuild a cashless society was to createthe National Council for Payments(NCP), which has a higher authoritythan ministries and is headed by thePresident Abdel Fattah al Sisi, accord-ing to Helmy. Established in February2017, the NPC has a mandate toreduce the use of banknotes outside thebanking system as well as develop anational payment system that wouldachieve financial inclusion.The NCP has met only three times,most recently in September. Accordingto a press release after that meeting,Amer said the CBE was working on a“general framework for a transition toa less cash-based society” with the firstconcrete announcements to be made bythe end of 2018. The release furthernoted the CBE will have cybercrimetraining for those overseeing the newsystem. It added that Finance Minister,Mohamed Maait, has completed con-version of payroll to e-payments for allcivil servants, while the InteriorMinistry is researching the issuance of anew national identification cards withsmart chips, opening the door for usingID cards to gain access to governmentservices, including subsidies. Such tools require cooperation

among the private sector, CBE, andMinistry of Information andCommunication Technology (MCIT).“This is one crucial factor, in my view,as there is a definite mutual need forbanking and ICT infrastructures towork together,” says Mohamed elItriby, chairman of Banque Misr. He explains the main role of the CBEis to ensure the security and soundnessof the transactions as the nation movesfrom banknotes and checks to onlineand cashless transactions. Meanwhile,the MCIT and private sector are neededto help banks get services online as wellas offer more ways to access the inter-net. Sharkawy of the customs clearanceunion believes the introduction of 4Ghigh-speed internet helped facilitate theintegration as it ensured real-timeupdates whenever a transaction wasexecuted, which is vital for security.“Having a 100 percent reliable infra-structure is step one,” he continues,“you can’t rush this step.” Lobna Helal, the deputy CBE gover-nor, explained during an August confer-ence that the bank’s strategy is to buildfinTech tools and services that potentialusers would find useful, enticing themto make the switch. “We want people toput their money in banks,” she said.“Then they would want to pay foreverything using their cards, and thiswould push businesses to offer this pay-ment option.” She noted that a seniorstaff delegation from the CBE andbanks traveled to Sweden to learn fromits experiences.

National-Scope Projects One of the first projects under the CBEumbrella was implementation of a cash-less payment system in 2017 thatincludes ATM machines and convertingsalary payments for 5 million govern-ment employees from cash to bankaccount transfers, accessible via debitcards. In addition, the project saw 10government universities equipped tocollect education fees using debit andcredit cards. In March, HelwanUniversity announced a partnershipwith the National Bank of Egypt, Visa,

and e-Finance to allow students to paytuition using mobile-oriented toolsincluding NBEPay and mVisa. A furtherpart includes equipping farmers withsmart cards to pay for their subsidizedseeds and fertilizer.“These projects are excellent exam-ples of the government working withthe private sector on the paymentfront,” Saeed said during a Februaryconference organized by the EgyptianFederation of Industries. Another major government project isconverting the Egyptian CustomsAuthority (ECA) payment system fromaccepting only cash to requiring onlinepayments starting 2019. The projectwas announced in November 2017.Currently, payment in banknotes andchecks is allowed for amounts underEGP 100,000. Larger amounts must bepaid through the ECA website. If that isimpossible, cash payments would beaccepted with a fee added.Moreover, under development at theCBE are upgrades to the mobile pay-ment system for better regulation andtransparency, according to AymanHussein, CBE sub-governor for pay-ment systems and business technology.This is in addition to the developmentof a system that allows cashless inter-governmental payments, he adds. In thelong term, the CBE is working on creat-ing a unified payment card that wouldbe used in any transaction with the gov-ernment. According to Maait, talking tothe press in September, as of next April,any citizen not paying the governmentusing a payment card will be fined EGP10,000 plus 10 percent of what is owed.The system should be up and runningby January and include prepaid cardsissued at government agencies. It isunclear whether these agencies willaccept commercial credit and debitcards. The private sector has also beeninvesting cashless-transaction projects.In October 2017, the CommercialInternational Bank and Careem-Egyptagreed to develop a digital wallet for theride-sharing firm’s drivers for quicktransfer of payments with the company

Cover Story


as well as clients who have a compatibleelectronic tool. Furthermore, inOctober, AlexBank signed a memoran-dum of understanding with theNational Council for Women to offerdigital payment services and toolsto encourage

womento have bank accounts, asa step towards formalizingtheir business under theone-man-show companylaw or micro-enterpriseslaw implemented since fis-cal year 2017/2018. Amonth later, in November,Vodafone Egypt signed anagreement with AlexBank tosupport the mobile moneytransfers.

FinTech Downscaling These large projects are complement-ed by small-scale businesses that aremerging and tailoring technology andfinancial services (finTech) to encourageindividual companies and laymen toswitch to cashless transactions. “The

wave of innova-tion sweepingthrough theworld of finan-cial technolo-gy promisesn o t h i n gshort of arevolution[…] It willc h a n g ethe natureof money,shake thefoundationsof centralbanking, anddeliver nothingless than a democ-ratic revolution forall who use financialservices,” said Mark

Carney, the Governor ofBank of England last January. The Egyptian government

understood the best way to create acashless society was integrating cashlesspayment options within startups fromday one. To that end, in September2017, the Ministry of Investment andInternational Cooperation along withthe U.N. Development Program andinvestment bank EFG-Hermeslaunched Fekretak Sherketak (YourIdea, Your Company) accelerator, anentity that works with entrepreneurs onturning their business plans into star-tups. Projects supported by EFG-Hermes include fintech tools that makethem cashless enterprises. Barclays Bank and Flat6Labs, anentrepreneurship support organization,established finTech focused 1864Accelerator in May 2016. It is a 14-week program that focuses on commer-cializing finTech ideas. Supporting thesecompanies as well is the AUC VentureLab Fintech accelerator, established bythe American University in Cairo andthe Commercial International Bank. Inaddition, Payfort incubator, an organi-zation that works on growing youngstartups, is known as a finTech factory.It is a subsidiary of Amazon that

Cover Story


launched in 2016 and serves theMENA region through its Cairo office.However, the incubator accepts onlybusinesses that can benefit Payfort. This rise of accelerators and incuba-tors signals strong potential forfinTechs in Egypt and that local entre-preneurs are willing, and have theskills, to capitalize on the anticipatedboom. “FinTech is one of the mostprominent spaces in the startup com-munity in Egypt,” says KennedyKitheka, Seedstars managing directorin Egypt. “Early entrants are gainingtraction, and stronger, more structuredconcepts are popping up. The model ofFawry [Egypt’s first finTech, estab-lished in 2009], has demonstrated thevalidity of such business models.”Despite this growth, many believe fin-tech is still hampered by Egypt’s lowlevel of financial inclusion. “FinTechstartups usually have small markets iftheir services are not targeted towardimproving financial inclusion,” saysAbdelrahman Elsharawy, co-founder ofVapulus, a finTech firm specializing inonline payment software and hardware.

Informal EconomyConundrum Another major factor in deciding howcashless can Egypt ultimately becomerests with informal businesses. “I am afan of businesses that are cropping upon social media. They are inexpensiveand offer unique products and services.I stopped going to brand namesbecause they are too boring and expen-sive,” says Sara Sobhy, a 41-year-oldmiddle manager at a real estate firm.This is despite the inconvenience ofhaving to withdraw cash from an ATMwhenever she needs to buy somethingfrom unregistered online businesses. “Iwould like for them to offer paymentby credit card, but if not, it wouldn’t bea deal breaker,” she adds. To offer a cashless payment option,informal businesses need to register

with the state before opening a corpo-rate bank account and apply for acredit card license. However, the feasi-bility of such businesses is based on thepremise of avoiding government paper-work and hassle to reduce costs as wellas expedite the startup phase. “It wasperhaps the easiest and quickest deci-sion I ever took to become a profes-sional photographer. I just took somepictures, posted them on social mediaand mentioned that I am a freelancephotographer,” says Wael Saleh (nothis real name). Now, whatever he ispaid is not reported to the state, despitecharging several thousand pounds perevent and securing at least one gig aweek. Yet he is starting to rethink his statusas an informal professional, as itbecomes increasingly uncomfortablecarrying wads of cash. “I offer clientsthe option to pay me via a bank trans-fer, but nearly no one is doing it,” hesays. “I believe that if they can pay mewith a credit card, it would definitelybe much better for both of us.”However, the hassles he expects to facewhen registering still outweigh the ben-efits. “I am in a holding pattern, so tospeak. If my business gets any bigger, Imay have to register,” he says.

Problematic InfrastructureA major challenge to going cashless ona large scale is the tech infrastructure.A case in point is the repetitive net-work crashes that plague the ECAsince the law forced companies to payon the website. “We have been tryingto work with online payments for afew months, and it’s actually worse forus because the network keeps crashing,and we are left unable to pay due cus-toms for days,” says Shawky of thecustoms clearance officers committee.

“I [spoke] to people on the inside, andthey said it was because the network isoverloaded with requests.” This ishurting their business and raising costs,as paying in banknotes or checks addsan administration fee that can’t bepassed on to clients. Currently, no gov-ernment agency accepts credit cardpayments. Another potential obstacle is Egypt’sinconsistent legal infrastructure. “Oneimportant thing we need to consider isthat banks are heavily regulated.Meanwhile, tech companies are notheavily regulated,” says Itriby. “To cre-ate a cashless society, there has to be alegal convergence, or balance, betweenthe two sectors.” That has proved achallenge thus far as the CBE is heavilyregulating banks, for better or worse.A case in point is that mobile moneytransfers haven’t been a runaway suc-cess, in part because of restrictions ontransferred amounts, according toexperts. Currently, out of all smart-phones in Egypt, 9.5 million are sub-scribed to mobile money services.According to Hussein, they belong to 8million unique users. However, he isoptimistic such transfers will eventual-ly gain traction. For some, having a hybrid legal sys-tem and strong oversight to balancesecurity with flexibility should provestraightforward because the FinancialRegulatory Authority has a strongtrack record of regulating non-bankfinancial institutions. The key questionprobably will be how much the CBE isinvolved in fintech. Regardless, going completely cash-less is likely to take years, if notdecades. “I think my granddaughterwill not use cash at all,” says Amr, theuniversity professor and reluctant carduser. “My sons, who are in their 30s,already use cards when buying devices,and sometimes for groceries or out-ings. Their culture is noticeably differ-ent from mine.” ■


Cover Story

“Even though they are banked on paper, inreality they are no different from unbankedindividuals.”

“I generally don’t like to use credit cardsbecause I need to feel how much money I amspending.”


Cover Story

Even as stock market volatilityspreads from developed toemerging economies world-wide, investors are turning

their attention to countries like Egyptthat have undertaken financial sectorreforms. At the same time, Saudi Arabiais becoming a potent competitor sinceit began implementation of its Vision2030 initiative by gradually opening itsmarket further to foreign investors,removing most restrictions on partici-pation in Tadawul, its stock exchange. A recent Bloomberg article described

emerging-market stocks as one of thesafest places for investors as they are“cheaper today than they were beforethe U.S. presidential election, comparedwith U.S. and developed-market equi-ties. The lower valuations and growingearnings estimates may give the comfortinvestors need in times of turbulence.” Foreign investments in the Egyptian

Exchange (EGX) leaped from EGP 1.6billion before the floatation of thepound in late 2016 to EGP 25 billion inApril 2017 and EGP 73 billion ($4.1 bil-lion) by the end of last year, EGXChairman Mohamed Farid said inDecember. For Saudi Arabia, Tadawul’sreports show the total value of sharespurchased by foreigners reached SAR34.6 ($9.23 billion) in 2017, in compari-son to the slightly less SAR 33.91 billion($9 billion) in a year earlier.

EGX LuresIn line with economic reform measuresundertaken by the Egyptian govern-ment as part of the InternationalMonetary Fund loan program, the EGXhas embarked on a plan designed toimprove the capital market, includingincreasing its daily volume and tradingthrough a number of new measures. Anexample of which is targeting youngerinvestors. “Those who are 40 years oldand younger make up 75-80 percent ofthe population, yet only 30 to 34 per-cent of them are investors, we need toincrease this percentage,” Farid said dur-ing the Euromoney 2018 Conference inSeptember. To achieve greater partici-pation, the EGX wants to introduceincremental savings, an approach usedin many capital markets for long-terminvestments, he added.Amr Hussein el Alfy, head of

research at SHUAA Securities,believes raising awareness is the keyto attracting young people, sayinguniversities should do more toexpose undergraduates to economicsand finance. To that end, Faridannounced the EGX is working withthe Ministry of Education on afinance curriculum, including invest-ing in the stock market.Another obstacle is making mar-

kets more exciting. “Egypt’s stockexchange model is still plain vanilla,

with investors being able to makemoney in bull markets on the way up(being long),” el Alfy explains. Withthe long position, the investor buys astock with the expectation that itwill rise in value, and thus benefitfrom its upward price movement.Some experts, including el Alfy,

believe short-selling activity couldcomplement the long-position strat-egy that dominates the EGX.Therefore, the stock exchange hasbeen studying the implementation ofshort selling, which involves shed-ding shares at higher prices thenreacquiring them later at lowerprices.

The Financial RegulatoryAuthority told Reuters it would final-ize rules for short selling by the endof September, adding, “We will beready for implementation in early2019, then wait for an official deci-sion to start using it.”Furthermore, the EGX plans to

introduce derivatives, includingfutures that allow buying and sellingof stocks at a specified price anddate, which investors use to hedgetheir risk. “This will take 12-18months to be finalized because ofinformation technology require-ments, such as developing tradingand management systems,” Faridexplained.

Regional Focus


As part of ongoing reform efforts, Saudi Arabia is opening its stock exchange to foreign investors,a move that could make the EGX less attractive.

By Julian Nabil

EGX vs. Saudi’s TadawulWhere should you invest?

•41

Adding futures to the mix wouldboost liquidity and provide investorswith more tools. “This will all add to themarket depth and drive more efficiency,in my opinion, and attract new types ofinvestors,” says el Alfy.Also in the works is restructuring

some indices to focus on certain sectorsbased on an international standard. “Wewant to add a total return index to allowpeople to see actual returns associatedwith the market and not only pricereturns,” said Farid.Total return indices track the gains of

a group of stocks over time and assumethat cash distributions are reinvestedback into the index.

Tadawul Comes into PlayAs part of the Saudi regulatory reformprogram launched in 2015, Tadawul hasseen new measures aimed at luring for-eign investors.The country overturned policies that

limited direct investment in Tadawul-listed shares to Saudis, resident foreign-ers, and GCC investors. Before thisdecision, foreign investors could onlygain exposure to Saudi-listed stocksindirectly through derivatives andinvestment funds, according to FTSERussell, a global provider of bench-marks, analytics, and data solutions.Amending the regulations of foreigninvestment in its stock exchange is “acrucial step in long-term efforts to growand diversify its economy,” according tothe statement.This new policy set eligibility and reg-

istration rules for qualified foreign insti-tutions (QFIs), overseen by the coun-try’s stock market regulator, the CapitalMarket Authority (CMA). A QFI appli-cant must be a financial institutionlicensed by a regulatory authority andincorporated in a jurisdiction recog-nized by the CMA.Furthermore, the CMA issued new rules

effective last January to further ease qualifi-cation requirements for QFIs seeking topurchase listed securities and increase thenumber of eligible institutional investors.

Additionalr e f o r m sinclude lower-ing asset require-ments from $1 bil-lion to $500 millionand increasing the per-centage of shares thatQFIs and their affiliatescan own from 5 to 10 per-cent. Other changes includethe ability of QFIs’ qualifyingsubsidiary and individually man-aged funds to trade on Nomu,Tadawul’s equity market. Nomuserves as an alternative platform forcompanies to go public, and invest-ment is restricted to QFIs.In September, Tadawul announced a

plan to introduce exchange-tradedderivatives in the first half of next yearinvolving a futures index based on atradable index jointly developed withMSCI, a global stock index provider.Other significant market develop-

ments include the introduction of secu-rities borrowing and lending, short-sell-ing frameworks, and establishment of acentral counterparty clearing entityresponsible for overseeing settlementand obligation fulfillment in all trades.Last March, FTSE Russell upgraded

Saudi Arabia’s status from Frontier toSecondary Emerging market—the sameas Egypt—on the FTSE Global EquityIndex Series, marking a milestone in the

Ta d a w u l ’ squest to grow and diversify. FTSERussell classifies stock markets asDeveloped, Advanced Emerging,Secondary Emerging, and Frontier.Saudi Arabia’s Secondary Emerging

Market status is expected to reduce theweight of Egypt and others on the index,but that should not have much of animpact on the overall market, says el Alfy.

Business Monthly - OCTOBER 2018

Regional Focus

Comparing FiguresThe EGX had a fruitful year in 2017,registering the highest growth of allMiddle East stock markets at 19 per-cent, according to an EGX pressstatement.The main EGX 30 index rose 21.66

percent to more than 15,019 points bythe end of last year. Tadawul’s primaryAll Share Index closed 2017 at 7,226.32points, a gain of 15.89 points over theprevious year.Egypt's market capitalization of listed

companies increased to EGP 825 billion($46 billion) at the end of December,according to the 2017 EGX annualreport. Tadawul saw market capitaliza-tion rise by 0.45 percent year-on-year toSAR 450.56 billion ($120.1 billion).International players were signifi-

cant contributors to the EGX’s posi-tive trend, with nearly 1,150 foreigninvestment funds and institutionsentering the Egyptian stock market in2017, compared to 900 in 2016. Duringthe same period, 118 foreign institu-tions registered to invest on the Saudistock market.In 2018, however, the EGX 30’s

performance has been volatile.“While the index is currently uparound 5 percent for the year andmore than 18 percent versus a yearago, it has been below its end-of-2017level all year,” el Alfy says. However, Ahmed Abou el Saad,

Chairman of Rasmala Egypt AssetManagement Company believe theEGX is poised for an overall recoveryheading into autumn. It’s recovery overthe past six months has laid the ground-work for the market to reach higher lev-els, he says.In Saudi Arabia, Tadawul has largely

avoided the emerging market sell-off,rising continuously over the past threemonths and pushing year-to-date gainsto about 17 percent, according to areport published by Jadwa Investmentin July. Active investors entering themarket prior to actual inclusion areexpected to drive Tadawul’s perfor-mance even higher, the report states.

Can Egypt Lead?The EGX has long been important in theMENA region as one of only threeemerging markets included on the widely

followed MSCI Emerging Market index.This has placed Egypt on the radar ofglobal investors, according to el Alfy.Adding investment tools such as short

selling and futures, and the IPOpipeline of both state-owned and pri-vate sector companies is expected toattract Egyptian and foreign investorslooking for diversification and exposure.Yet el Alfy argues that this is not

enough, as timely disclosure on the part oflisted companies and tight scrutiny ofmarket manipulation will have to go handin hand with any market development toensure a level playing field for all investors,both institutional and individual.Farid believes the stock exchange

reform program will give it an edgeamong emerging markets. “Reforms areusually difficult to implement, but thegovernment is doing its best to alleviateany adverse impact,” he added. While competition is fierce, explained

Farid, “we have to be up to the challengein terms of regulations and ease of doingbusiness. The ultimate target for anyexchange is having a vibrant market, byfurther activating the capital marketthrough minimizing challenges.” ■

Regional Focus


As governments around theworld push for higher eco-nomic growth, many busi-nesses are taking risks to

grow, increasing the appetite for credit.With many conventional banks averseto risk, non-banks, also known asshadow banks, such as investmentfirms, hedge funds, insurance compa-nies, and crowdfunding are filling thegap.

The collapse of investment firmLehman Brothers a decade ago set offthe global financial crisis and remainsa symbol of the consequences of risk.Nonetheless, lending by shadow banksagain is on the rise, and they remain acrucial part of the world economy.The World Economic Forum (WEF)has attributed the importance of shad-ow banks to their ability to fund high-risk ventures. Even though the system

is “inherently unstable, simply shuttingit down risks damaging liquidity [...] inthe real economy,” stated a WEF papertitled: Is shadow banking good for theeconomy?

Nevertheless, if shadow banks con-tinue to grow unchecked by regulationor government supervision, anotherglobal crisis might be ahead. “Risknever disappears. Regulators wereworried about banks lending too muchto highly leveraged companies. So theycracked down on that,” Greg Ip, chiefeconomics commentator at The WallStreet Journal, told CNBC inSeptember. “As a result, a lot of thisbanking has migrated to shadowbanks [...] Do we really know if riskhas been reduced or has it just changedform?”

A meltdown could happen with littlewarning, as in 2008 when the demise

of Lehman Brothers set off a dominoeffect worldwide. “At the heart of ashadow banking bust is an acute short-age of good collateral, resulting fromrisky investments made during theboom,” said the WEF paper. ForLehman Brothers, it was a cascade ofdefaults from subprime mortgages.

The Bigger They Are...Given that shadow banks can be any-thing from an individual investor, to alarge or small investment firm, to aninvestment fund, determining whatconstitutes a shadow bank and thescope of the sector is not easy. “It isvery difficult to separate out the shad-ow entities, they are so intimately relat-ed to the conventional banking systemI’m almost loathe to call [them] entities.They are activities [within the system],”Freya Beamish, chief Asia economist at


American Impact

A decade after the global financial meltdown,signs are emerging of another on the horizon aslending by non-banks is on the rise once again.

BY TAMER HAFEZ

Shadow BankingSpotlight on


American Impact

Pantheon Macroeconomics, told TheTelegraph in October 2017. TheFinancial Stability Board (FSB), whichmonitors the global financial systemfrom its headquarters in Switzerland,placed two definitions of shadow bank-ing in its 2018 report.

Under the “narrow definition,”shadow banks are “entities that maybe engaged in credit intermediationthat involves liquidity/maturity trans-formation and/or leverage.” As per thisdefinition, shadow bank assets topped$45.2 trillion worldwide in 2017.However, the FSB’s broader definitionof shadow banking includes all non-bank financial intermediation, such asinsurance companies, and adds $160trillion to last year’s figure to reach atotal of $205 trillion. Based on FSBdata, total global financial assetstopped $336 trillion last year, withmore than 61 percent of lending notregulated by a central bank.

During the first half of this year, theS&P financial sector index saw non-bank financial stocks increase 7 per-cent. Meanwhile, assets of shadowbanks grew 5 percent, versus 2 percentfor commercial banks worldwide,according to the report.

The actual percentages are likelyhigher, as shadow banks have longrelied on loans from conventionalbanks. Therefore, banks can beexposed to the same default risks facedby shadow banks. Interestingly, banksseem to be forthcoming about lendingto non-banks, according to a 2018report by Keefe, Bruyette & Wood(KBW), a U.S. based investment firmspecializing in financial services.

U.S. LeadIt should come as no surprise that thelargest economy in the world, the U.S.,has the most shadow banking activity,accounting for 31 percent of globalshadow bank assets, according to theFSB report. China and the CaymanIslands, with 16 percent apiece, comenext, followed by Luxembourg at 7 per-

cent and Japan at 6 percent.While many countries, most notably

China, are using legislation to curbshadow lending, it is booming in theU.S. despite federal regulations intro-duced in the aftermath of the globalfinancial crisis intended to limit suchactivities. As a result, U.S-bound shad-ow banks’ assets reached $18 trillionin 2017, compared to $16 trillion forbanks, according to the KBW report.

Data collected by Bloomberg showsthat while the top 10 regulated banksin the U.S. underwrote 73 percent ofall domestic loans in the first half of2013, they underwrote 54 percent inthe first six months of this year. “Webelieve that our strong client relation-ships and innovative financing solu-tions will enable us to continue to besuccessful in the context of any regula-tory environment,” Peter Nolan, asenior managing director at AntaresCapital, a non-bank investment andfinancing firm, told Bloomberg in July.

Shadow banking puts the U.S. econ-omy in a precarious position, sincenon-banks often rely on selling bondscomprised of various loans, such assubprime mortgages. Bond sales allowshadow banks to offload their portfo-lios and build capital to reinvest. Suchbonds are rated by international agen-cies as non-investment grade—com-monly referred to as junk bonds—asthey finance non-investment gradecompanies. Last year the number ofthese bonds rated as junk by all threeglobal credit agencies increased by 18percent in the U.S., currently reaching$2.3 trillion in value, or about 11.8percent of U.S. gross domestic product,as reported by Bloomberg in July.

Moreover, foreign banks have beendrawn to the U.S. shadow bankingboom. Deutsche Bank AG announcedit will allot $16 billion for non-invest-ment grade debt this year, up from $12billion in 2017. The bank is regulatedby the central bank in Germany, butcan operate as a shadow bank else-where. “Deals are getting done at

leverage levels that regulated bankswouldn’t have done a year ago,”Richard Farley of the law firm ofKramer Levin Naftalis & Frankel LLPtold Bloomberg in July.

U.S. federal agencies are similarlyenticed by shadow lending. The U.S.Postal Service, for example, hasannounced it would lend to companiesat interest rates, independent from theFederal Reserve. The House ofRepresentatives received a memo inJuly from the Bankers Association andthree other financial industry bodiesurging that the Postal Service bebanned from all banking services.

It is a “race to the bottom,” saidFrank Ossino, senior portfolio manag-er at Newfleet Asset Management, onPYMNTS, an online portal, in July,referring to the creditworthiness of thecompanies borrowing from non-banks.

Egypt a Safe Haven,for NowAmid this growth and attempts to reg-ulate shadow banking in the U.S,Egypt’s existing regulations are likelysufficient to keep non-bank lending atbay. All shadow banks already operateunder the FRA. “We introduced a def-inition for shadow banking in 2014 tobe able to monitor their activity. Thisallows us to introduce more legislationif we need to,” said Gamal Negm, aCentral Bank of Egypt (CBE) deputygovernor, during a July meeting of theArab Banks Union. “Keeping a closeeye on this activity is important tomaintain Egypt’s banking sector stableand secure.”

In Egypt domestic banks are allowedto establish non-bank financial firmsthat are not regulated by the CBE,including investment funds and evenfull-fledged subsidiaries. Banking activ-ities are overseen by the CBE, whilenon-bank operations fall under theFRA. This can make life complicated,as neither agency coordinates its efforts

or ensures that regulations arealigned. “This is a ‘Twin-Peaks’model where two institutions per-forming the same activities are beingregulated by two sets of laws andregulations,” wrote Yasmeen Salem,an economist and PhD holder, in aJune 2017 research paper titled:“How Far is Shadow Banking inEgypt from InternationalExperiences?”

Salem’s findings differ fromNegm’s statement. She shows that

shadow lending in Egypt has beenincreasing at a rapid pace since2008, with the only drop-off com-ing after the 2011 January revolu-tion. Insurance companies andmortgages account for most shadowlending in Egypt, according toSalem.

However, she believes local shad-ow lending will not take off like ithas in the U.S due to oversight bythe FRA, which can quickly enactnew regulations to curb excess activ-ity. As a result, Salem argued, thereis little chance Egypt will go througha financial crisis or instability in itsbanking system even if there were amassive default of shadow loans.

Salem further noted the situationcould be bad news for Egypt’s infor-mal companies, micro-enterprisesand small and medium sized enter-prises (SMEs). When such compa-nies need financing to expand, theyusually seek out shadow sources,including microfinance institutionsand NGOs.

That practice, Salem wrote in herpaper, can contribute to inflation asit increases the amount of currencyin circulation. “There should becoordination between the CBE and[FRA] to control the money supplyin the economy and inflation.”

In the long term, shadow bankingactivity likely will be affected byhow well conventional banks canfinance SMEs given that regulationsrequire 20 percent of banks’ lendingportfolios go to SMEs by 2020. In2015, the government earmarkedEGP 200 billion for SME financing at5 percent interest, compared to theprevailing double digit rates at date.

Future Driven by TechGlobally, shadow banking will onlygrow and likely become increasingly

difficult to define and regulate asthey take full advantage of doingbusiness via the internet, where theycan adopt whatever business modelthey want. According to the thinktank Chicago Booth Review, the riseof new financial technology toolswill give informal businesses andSMEs, especially those rejected bybanks as too risky, more avenues tosecure funds outside the bankingsystem. It further noted that finan-cial technology is designed to caterto businesses that prioritize quickaccess to funds over yields. It alsoallows more flexible repaymentoptions, as well as plans negotiatedon a case-by-case basis.

Similarly, tech tools can attractlenders that want to make loansquickly, often without performing arisk analysis. A direct consequence isthat companies can access a largeglobal pool of lenders to choosetheir best option, and vice versa.

A possible side effect is thatshadow banking supported byfinancial technology could makeformal businesses drift into infor-mality, safe in the knowledge theycan still secure financing. In themeantime, thriving formal busi-nesses can head to shadow banks ifthe latter can keep up with theirneeds via innovative and moreaccessible services. “I [am] con-cerned about the non-bank finan-cial institutions,” ChristineLagarde, managing director of theIMF, told CBS News last year,adding that a lot of these transac-tions are already happening withno supervision. While there is bothgood and bad shadow banking,she said, “what matters is that thissector has to be supervised andregulated” to guard against anoth-er global financial crisis. ■


American Impact

Investors, especially individuals, need to remember thatEgypt’s stock market is not isolated from its global peers. Asone of the three emerging market exchanges in MENA, as

classified by MSCI EM index, Egypt’s stock market is subject-ed to global sentiment. Over the last five months or so, emerg-ing markets have been at the center of attention of bothinvestors and the financial media. As the U.S. Federal Reservecontinues its monetary tightening by 25 basis points every quar-ter, the dollar has been strengthening vis-à-vis other developedmarket currencies as measured by the DXY index. Meanwhile,emerging market currencies have been feeling the brunt ofdomestic economic issues in Argentina and Turkey, whose cur-rencies fell some 50 percent and 40 percent, respectively, on ayear-to-date basis. Back home, the Egyptian pound only slipped1.2 percent over the same time frame.

As for the stock market, during the period from August 15 toSeptember 15, EGX 30 slipped 0.3 percent to 15,308.6, trimmingits year-to-date gain to 1.9 percent. This periodic performancedoes not tell the full story, as the index succumbed later in themonth to pressure from individual investors locked in margincalls as stock prices fell. Meanwhile, the EGX 70 index inched0.3 percent higher to 742.7, still down for the year (10.3 percent).

The period saw declines outnumber advances by a ratio of 3 to2. Investors were afraid that the risk sentiment surroundingemerging markets would catch Egyptian stocks. Interestingly,while foreign investors have been net buyers since the Egyptianpound flotation, by EGP 20 billion, they turned net sellers inAugust for the first time in 10 months. During the first half ofSeptember, they turned back to being net buyers following adrop in stock prices as they hunted for value.

So far investors seem to be looking forward to the publicofferings program of five state-owned companies scheduled forthe fourth quarter of 2018. This, along with other private-sectorpublic offerings, makes investors concerned that they may suckup trading liquidity, which could explain the negative perfor-mance of the market in September. Second, with interest ratesbeing hiked elsewhere globally, all eyes were on the CentralBank of Egypt’s meeting on September 27 to see if there is anychange in direction in terms of policy rates. As for the former,external liquidity (coming from foreign and Arab investors) issorely needed for the upcoming stock offerings. As for the lat-ter, any rate hike throughout the remainder of 2018 may put alid on economic growth stepping into 2019. As always, onlytime will tell.

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11.36

11.07

11.29

11.24 11.24

11.26 11.2511.34

11.3311.23

11.12

10.59

10.34

10.15

9.919.83

The Market Falls on Fears of Emerging Markets Contagion

Stock Analysis

MARKET WATCH


Exports represent more than 60 percent of OrientalWeavers Carpet (ORWE) sales. Despite the Egyptianpound flotation, the stock has been down by 35 per-cent year-to-date to EGP 9.83, a two-year low.Investors may be discounting the potential exportsslowdown in view of competition from Turkey afterits currency plummeted more than 40 percent. Morerecently, the company revealed that recent US tariffsimposed on China could actually work in their favoras they compete with Chinese products in the UnitedStates. Still, the company’s stock fell during the peri-od by 15.5 percent after 14 million shares worth EGP152 million changed hands.

Capital Markets

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15295.9715273.39

15239.0315236.64

15606.18

15835.73

16009.41

15852.3615821.92

15750.94

15922.96

15803.17

15740.06

15628.43

15488.49

15308.62

Egyptian price indices - EGX 30

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740.28739.31

743.19

745.3

747.38

751.26751.15

753.8

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749.46

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757.42

747.16

742.74

738.6738

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465.19

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464.79

461.35 461.67

464.08 464.04

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458.64

459.26

Egyptian price indices - NileX


“What does a share in a companylook like to you?” asks WaleedAbdulkhalek, founder and direc-tor of Al Masar Gallery, when

asked about investing in Egyptian art.“Nothing, right?” A secretive smilespreads across his face as he points to ajarring mixed media piece by Kareem AlQurity, a contemporary artist featured inthe gallery. “When you own art, youdon’t just receive your dividend at the endof the quarter or year–you see it and feelit. You experience your dividend everyday.”Abdulkhalek presides over some of

Egypt’s most valuable pieces in a domestic market that has seenstrong appreciation since the 1990s, as well as within a region-al art market that is now producing strong sales numbersfueled by the establishment of auction houses in Persian Gulfcountries. It was a bumper year for the global art market in 2017,

which saw $63.7 billion in sales, a 12 percent increase over2016, according to The Art Market 2018 report compiled byArt Basel and UBS.While a large chunk of those billions comes from high-end

sales, art fairs have similarly generated a healthy portion ofsales, increasing by 17 percent last year alone to reach more

than $15 billion, lending hope for emerging artists at smallermarkets like Egypt’s who want to tap into the global art scene.

Topping the RegionWhile global sales are concentrated in the U.S., which leadswith 42 percent, China with 21 percent, and the U.K. with 20percent, western art dealers have over the past decades increas-ingly looked to the Middle East for new cultural acquisitions,which have become more trustworthy with the development ofa secondary market.Auction house giants like Sotheby’s and Christie’s have

established operations in the Gulf that have produced headlinesales for Egyptian artists. Amid wild applause, MahmoudSaid’s Les chadoufs sold for $2.4 million in 2010, a record foran Egyptian artist at the time. Said’s work lead overall sales inDubai’s auction houses this year at $1.8 million after a record-breaking portrait sale of his Fille à l’Imprimé. Other Egyptian

names, such as Fouad Kamel, AbdelHadi el Gazzar, and Hamed Nada arealso among the top 10 artists in theregion in terms of sales volume, andalong with Said, account for 60 per-cent of sales at Gulf auction houses,according to Adsum Art, an art con-sulting firm. The remaining 40 percent was gen-

erated by non-Arab artists, helpingsolidify Egypt’s reputation as theMecca of Middle East art. “I don’tthink Egypt will ever have competi-tion as the regional art hub,” saysMohamed Talaat, founder and cura-

tor of Gallery Misr in Cairo’s upscaleZamalek neighborhood. “Egypt has 100 mil-lion people and 25,000 artists. A market likeLebanon, for example, does well for its population, and theLebanese are good business people that market themselvessmartly. But they can’t compete with the size and talent in theEgyptian market.”Abdulkhalek disagreed, noting that Syrian and Iraqi artists

garner a lot of collectors’ attention. Egypt has an edge, he says,because it started earlier, founding the region’s first art schoolin the early 20th century that began churning out talent since1912. “The second Arab art movement didn’t happen until 50

to 60 years later in the Levant, so Egypt was always seen as thefounder of the region,” he says.As museums and foundations in the wealthy Gulf nations

have begun building permanent collections, the reputation ofcontemporary Egyptian art as the storyteller of Arab historyhas solidified. Egyptian art made up 92 percent of sales forBonhams, 21 percent at Christie’s, and 39 percent at Sotheby’s.For this year, sales for the main auction houses are down to

$7.8 million, after a high of $20 million in the first six monthsof 2016, according to research by Adsum Art.Those numbers could reflect an insular nature of the

Egyptian art market, which began shunning foreign moneyand artists in an effort to protect cultural hegemony in a post-colonial world, says Abdulkhalek. Abdulkhalek believes that before the 1990s, Egyptian collec-

tors favored foreign acquisitions, however, a special bond with-in the Egyptian school of artists began turning them


Executive Life

Contemporary ArtBy By Leah Bremer

Investing in


inward toward their own national identity.“Egyptianism pushed collectorsto start acquiring only Egyptianart,” he explains, “becauseidentity is key, and you will findidentity in Egyptian art.”He relays a story about a

Syrian artist who tried to breakinto the art market, as if it werea cautionary tale. “I told him‘do not come to Egypt,’” heremembers. “But he came,opened a gallery, and wasclosed within six months.”Lina Mowafy, an artist and founder of

ArtsMart, which boasts the largest onlinegallery of contemporary Egyptian art in theworld with more than 4,000 pieces, says

that in spite of their digital platform offering Egyptianartist to collectors around the world, most of her clientsare Egyptian. However, she adds, collaborations withinternational platforms has helped ArtsMart expandbeyond the country’s borders. “We receive a lot of interestfrom the Gulf and the U.S. through our partnership withArtsy,” Mowafy says, referring to an online platform forcollectors.

What Collectors WantWhether from home or abroad, higher-end clientele have expe-rienced a sea change in attitude, discarding emotional connec-tions in favor of investment value.“They used to acquire by heart,” Abdulkhalek says. “It was

love plus money. But now there is a value craze, everyone wantsto know the value upfront. It went from ‘we don’t buy to sell’to ‘where will the price go?’”When he describes the appreciation of some pieces, it is easy

to see why; prices can often double within just a few years. “Ihave clients who bought a piece for EGP 180,000 and sold it forEGP 280,000 after three years because they were buying ahouse,” he says.Mowafy, whose clients come from a wider socioeconomic

background, says taste still matters. “They ask about promisingartists, and what they end up choosing depends on their taste,

interest, and budget,” she notes. “A large number of collec-tors are willing to take a chance on newartists because of their trust in the gallery andbecause it is usually more affordable.” Businesses looking for collections to outfit

offices are a large part of a gallery’s clientele.Mowafy’s gallery has an art advisory servicethat helps companies build collections. “Wehave a very active B2B department that dealswith businesses and corporations looking forartwork for either their own space or those oftheir clients,” she explains. Cultural authorities and businesses looking

to amass permanent collections may not nec-essarily be looking for value, but rather a piece of history.Non-profit cultural foundations like Al-Ahram and PharosArts Foundation, as well banks like CommercialInternational Bank, preside over invaluable collections thatgreatly benefit from the regional drive for collecting cultur-ally or historically significant works. Talaat of Gallery Misrexplains that since places like the UAE are striving to becomeart hubs, yet lack the homegrown talent, their culturalauthorities often come to Egypt, ready to buy. “We have col-lectors from Morocco to Saudi Arabia coming for one thing:Egyptian art,” he says. “They buy up works here to takeback home for their showcases.”

While businesses and foundations might set out to ownpieces of history, private collectors are more driven by marketand mood. “Lots of people mistakenly think the art market islinked to real estate,” says Abdulkhalek, “but it is actuallyjoined to the stock market.”“In my experience, when the market goes up and down, up

and down, that’s good for art,” Christophe Van de Weghe, aNew York dealer, told Bloomberg in April. “Over the past 30years, volatility has been very good for us dealers, because that’swhen people want to buy a hard asset.”Ahmed el Dabaa, founder of Ubuntu Art Gallery, disagrees,

noting that 80 percent of his clients are furnishing houses. Hebelieves “what ultimately sustains the market here is people buy-ing what they like to fill their homes.” While the devaluation of the Egyptian pound in late 2016

hurt Egyptians’ purchasing power, Abdulkhalek says it didn’thurt sales. “Nothing will stop a collector except the mood to

Executive Life


acquire. When the mood is not there,the market slows.”When asked to describe that mood, el

Dabaa says that while the art remainsexceptional, the mood is not currentlystrong, possibly validating Abdulkhalek’stheory about the link to the stock mar-ket, which is currently shedding value ina downturn amid widespread sell-offs inemerging markets.

A Different Kind ofDividendWhen investing in Egyptian art, cura-tors normally point out overlapping fac-tors to watch out for. In a 2016 articlefor Rawi Magazine on the Egyptian artmarket, Saida el Harakany, founder ofAdsum, named an artist’s consistency, awork’s uniqueness, and provenance asthe three points to consider wheninvesting. “There is no doubt thatEgyptian modern art is a sound invest-ment given recent market activity,” shesaid. “Art patronage, smart investment,and curation of cohesive collections aregood ways to start.”Researching the art market to learn

about artists, their full body of work,and their peers underpins these fac-tors. “Collectors must do their home-work,” says Abdulkhalek. “The dili-gent ones go to galleries, read aboutthe contemporary art movement, andvisit international art fairs.”

Knowing an artist’s full body of workis important not only for recognition,but also in order to be able to spot arare piece. Mahmoud Said’s Les der-viches tourneurs sold for $ 2.5 millionnot only because of his status as theleading contemporary Egyptian artist,but because the work was a rare piecewithin his collection, which consistsmostly of portraits and landscapes,according to el Harakany’s article.Seeing which Egyptian artists receive

international recognition is an impor-tant factor in gauging a work’s potentialinvestment value. “International recog-nition can definitely appreciate thevalue of an artist’s name and artwork,”Mowafy explains. “Being featured in aninternational set-up (art fair, gallery,auction house, etc.) increases theirexposure and, if there is a positiveresponse, fame and value.”

Creating ValueDealers and curators see several chal-lenges evaluating the Egyptian art mar-ket. Despite the volume of homegrownartists and regional prominence of itsart school, a lack of awareness persists.The auction houses of Dubai promoteartists, engage in marketing, and pro-vide security in things like tracing own-ership; these types of structures are stilllacking within the Egyptian market.“Egypt has no secondary market, no

system in place for assessing value,”says el Dabaa of Ubuntu Art Gallery. “Ifyou buy a piece from me and my gallerycloses, what are you going to do whenyou try to resell? We don’t have criticshere to guide collectors and providevalue frames. You just have to havefaith that what I’m selling has value.”Furthermore, the dash for value has

led to what Abdulkhalek calls “fastart,” when buyers snap up pieces with-out doing the research and try to resellquickly. Online platforms have fueledthis type of buying, which can affect notonly authenticity, but the human con-nection as well. “I had a buyer who wasafter me for a long time to acquire apiece for him he had seen online. Hewas feverish about it,” he remembers.“When I tracked it down and he finallysaw it face to face, he felt nothing. Theconnection has to be there, in person.”However, others like Mowafy see dig-

ital platforms as adding value by creat-ing some transparency for Egypt’s insu-lar art scene. Ultimately, whether online or in per-

son, anyone worried about plunkingdown tens of thousands of dollars for aSurrealist painting from Hamed Nadacan take solace from the soothingwords of Sir Joseph Duveen, an influen-tial British art dealer who made hismark in the early 20th century: “Whenyou pay high for the priceless, you’reactually getting it cheap.” ■

Executive Life

BOARD OFGOVERNORS

American Chamber of Commerce in Egypt – Tel: (20-2) 3333-6900 – Fax: (20-2) 3336-1050 For more information about AmCham services and news, please visit www.amcham.org.eg or our US mirror site www.amcham-egypt.org

CHAMBER NEWS

PRESIDENTTarek Tawfik, International Company for Agricultural

Production & Processing

EXECUTIVE VICE PRESIDENTSDavid Chi, Apache Egypt Companies

Ahmed Abou Ali, Hassouna and Abou Ali Law Offices

VICE PRESIDENT, MEMBERSHIPDalia Wahba, CID Consulting

VICE PRESIDENT, PROGRAMSKhaled Abu Bakr, TAQA Arabia

VICE PRESIDENT, LEGAL AFFAIRSTarek Mohanna, MHR & Partners in association

with White & Case

TREASURERAladdin El-Afifi, Pharos Holding

MEMBERS OF THE BOARDHashem El Dandarawy, Team 4 SecurityGirgis Abdel Shahid, Shahid Law Firm

Seif El Din El Sadek, Agrocorp for Agriculture InvestmentNadir Shaikh, Citibank, NA Egypt

Sherif Kamel, AUC

PAST PRESIDENTAnis A. Aclimandos, Transcentury Associates

ADVISOR TO THE BOARDHisham A. Fahmy

CHIEF EXECUTIVE OFFICERSylvia Menassa

COMMITTEE LEADERS

ÇÇÇ

Agriculture and Food SecurityChair: Abdel Hamid Demerdash, Agricultural Export Council Co-Chairs: Amr Salah, Cargill Hatem El Ezzawy, PICO AgricultureTamer Mosalam, PepsiCo

Banking and Finance Chair: Ahmed Issa, Commercial International Bank (CIB)Co-Chairs: Akef El Maghraby, Banque Misr Hassan Hussein, El Taamir Mortgage Finance – Aloula Soha Ali, J.P. Morgan Chase BankTarek Azmy, Corporate Leasing Company Egypt (CORPLEASE)

Corporate Sustainability and ResponsibilityChair: Tamer Younes, Procter & Gamble Egypt Ltd.Co-Chairs: Mireille Nessim, Takatof Association for DevelopmentNadine Abou El-Gheit, United Nations Development Programme – Egypt Country OfficeSarah El Battouty, ECOnsult

Customs and TaxationChair: Hassan Hegazi, Master Trading, SAECo-Chair: Hossam Nasr, Allied for Accounting and Auditing - Ernst & Young

Capital MarketChair: Karim Awad, EFG Hermes Holdings, SAECo-Chairs: Hesham Gohar, CI Capital Holding Co.Omar El Labban, BPE Partners

Information and Communications TechnologyChair: Bassel Mubarak, Oracle Egypt, Ltd.Co-Chairs: Ayman Elgohary, Cisco Systems InternationalReem Asaad, Raya HoldingYasser Shaker, Orange Egypt for Telecommunications

Entrepreneurship and InnovationChair: Alaa Hashim, Giza Seeds and Herbs Co-Chair: Mohamed Rahmy, Endeavor Egypt

Human ResourcesChair: Somaya El Sherbini, RIGHTFOOT Co-Chairs: Emad Nasr, Lecico Egypt Maisa Galal, Coca-Cola Bottling Company of Egypt (TCCBCE)

Industry and TradeCo-Chairs: Ashraf Bakry, Unilever Mashreq Mostafa El Halwagy, Youssef Allam & Co. Omar El Derini, FAOM Consult Red Wing

Health & PharmaceuticalsChair: Mohamed Roushdy, Amoun Pharmaceutical Co., SAECo-Chairs: Ahmed Ezzeldin, Cleopatra Hospital Group Ramy Koussa, MSD Egypt Tamer Said, GE Healthcare Yousri Nawar, Pfizer Egypt

J

G

t

InsuranceChair: Alaa El-Zoheiry, Arab Misr Insurance Group | gig Co-Chairs: Axel Bromley, CHUBB (Formerly ACE Life Insurance Co.)Elena Butarova, MetLife, Life Insurance Company Sherif ElGhatrifi, Medmark Insurance Brokerage

InvestmentChair: Hazem Badran, CI Capital Holding Co. Co-Chairs: Moustafa El Chiati, EFG Hermes UAESherif El Kholy, ACTIS

Legal AffairsChair: Hani Sarie-Eldin, Sarie-Eldin & Partners Legal Advisors Co-Chairs: Mohamed Serry, Serry Law Office Said Hanafi, MHR & Partners in Association with White & Case

MarketingChair: Tamer El Araby, Egypt & Levant, Nielsen Egypt, Ltd. Co-Chairs: Heba Saleh, Procter & Gamble Egypt, Ltd. Moataz Kotb, CultarkOmar El Masry, Danone Egypt

Oil & GasChair: Hesham El Amroussy, ExxonMobil Egypt, SAECo-Chairs: Mark Konecki, Apache Egypt CompaniesOssama Halim, Halliburton

PowerChair: Khaled Hashem, Honeywell EgyptCo-Chairs: Ahmed Ramadan, General Electric International OperationMorten Langsholdt, Scatec Solar Solutions Egypt

Real EstateChair: Mohamed Abdalla, Coldwell Banker Affiliates of Middle East & Greater Africa Co-Chairs: Abdalla El Nockrashy, Majid Al Futtaim Properties-EgyptMagued Sherif, Six of October Development and Investment Co. (SODIC)

Transport and LogisticsChair: Marwan El Sammak, Worms Alexandria Cargo Services Co-Chairs: Ahmed El Fangary, DHL Express Alfred Assil, Menarail Transport ConsultantsTarek Fahmy, Mediterranean Shipping Company

Travel and TourismCo-Chairs: Haitham Nassar, Hilton Pyramids Golf Resort, HiltonWorldwide Karim EL Minabawy, Emeco Travel Moataz Sedky, Travco International Holding, SAE

Women in BusinessChair: Manal Hussein Abdel Razek, Orascom Development Co-Chair: Nahla Kamal, Nestlé Egypt

˚International CooperationChair: Walid Labadi, IFC International Finance Corporation Co-Chair: Catarina Hansen, European Bank for Reconstructionand Development (EBRD)

(July 2018 to June 2019)


Events

“Our reform focuses on stable macroeconomic indicators,social inclusion, and deepening structural reforms,” saidFinance Minister, Mohamed Maait, at a September 19thluncheon meeting with AmCham members at the CairoMarriott Hotel. “This includes reforming everythingincluding taxes, manufacturing, social safety nets, healthcare,education and housing.”These reforms continue to exact a heavy toll on all

Egyptians, Maait acknowledged. However, he noted that if wecompare Egypt’s economy between 2011 and November 2016,when serious reforms began with the floating of the pound,we can conclude that the country is moving on the right track. He cited three major national problems between 2014 and

2016 that led to the firm belief that hard reform is the only wayforward. The first was electricity cutouts that lasted for over sixhours a day, affecting both households and factories. The sec-ond was the need to secure from the government $15 million toimport virus C medication after banks could not support theMinistry of Health. The third major issue appeared when wheatsuppliers started demanding upfront payment for shipments,fearing that Egypt won’t have foreign currency to pay for thegoods. “I think it is always important to remember how bad things

were to realize how effective our reforms are, despite thembeing hard and harsh for everyone,” said Maait. He furtheradded that delaying reforms to retain prices is one of the mainreasons the current impact is compounded.These reforms resulted in better macroeconomic figures and

government finances. He noted the GDP growth rate, whichtopped 5.5 percent in fiscal year 2017/2018 compared to 2.3 per-cent on average between 2011 and 2014. “Net exports registereda surplus for the first time since 2011,” Maait added. Meanwhile,investment’s contribution to the GDP growth went from 1.2percent in 2014 to 2.5 percent in fiscal 2017/2018. “Industrial and touristic investments saw the most growth,”

he noted adding, “Natural gas as well saw notable growth, whichwill increase as we are planning to seize its imports next year aswe reach self-sufficiency.”Other figures Maait pointed out were a declining in

unemployment from 13.3 percent in fiscal 2012/2013 to 9.9percent in fiscal 2017/2018. Overall deficit dropped from16.7 percent in fiscal 2013/2014 to just under 10 percent in2017/2018. “We are aiming for 8.4 percent by the end of thisfiscal year,” noted Maait. Of this deficit, primary deficitchanged to a surplus for the first time with plans to furtherextend it from 0.3 percent to 2 percent during this fiscal year.“We will use these savings to spend on human capital develop-ment, investments, education and healthcare,” asserted Maait. Moreover, the government reform program included leg-

islative reforms including an all-new investment law passed

at the start of fiscal 2017/2018 and a bankruptcy law passeda few months after. Maait praised ongoing efforts to improve, digitize, simplify,

and unify taxes and customs procedures. “We are not looking atincreasing rates. The modifications are administrative andupgrades to existing systems,” said Maait. “They aim at creatinga better investment environment, which we need to build astronger and more sustainable economy than ever before.”Accordingly, Maait estimated that GDP growth rate would

top 5.8 percent by the end of this fiscal year. “We are aiming forinflation (hovering around 13 percent) and unemployment todrop to single digit figures,” he added. However, Egypt is facing a lot of challenges moving ahead,

especially with the unfavorable developments hurting emergingmarkets. Maait gave an example with planned oil prices and theUSD exchange rate the current fiscal year budget was calculat-ed upon, as both elements are currently growing so is thedeficit. “Meanwhile, interest rates are still high,” he said, addingthat the stock market is also suffering, which is hurting Egypteconomically as well as hurting the government’s plans to gopublic with a number of government-owned enterprises. “Weare trying to manage these difficult times. Our economy isresilient and diversified. When tourism fell, other sectors car-ried its load,” Maait noted. “If we continue to absorb theseexternal pressures and deal with it, showing resilience, then thiswill be a great success story for Egypt especially that manyemerging markets are dealing very badly with these globalchanges.”

MONTHLY LUNCHEON

Egypt’s Reform Trail


Events

“We are not going to solve the world’s problems today, but Ithink this will be the start of a conversation,” Faris Alami told aSeptember 6th meeting of the Entrepreneurship andInnovation Committee. Alami is founder and CEO ofInternational Strategic Management and an adviser for theGoldman Sachs 10,000 Small Business Program. The theme of the meeting was “Global Lessons and Best

Practices for Egypt’s Growing Entrepreneurial Ecosystem.” Itwas structured as an interactive discussion in which attendeeshelped identify the characteristics of an entrepreneurshipecosystem and how to push for its development in Egypt.Alami started the conversation by breaking down the var-

ious components of an ecosystem. “Many people talk aboutit and many are in it,” he said, highlighting the importanceof starting with a clear definition of what constitutes anentrepreneurial ecosystem before discussing its challengesand strategies for overcoming them. Alami defined ecosystems by focusing on six pillars: policy,

finance, culture, supports, human capital, and markets. “Eachone of them has several subtopics,” he said, emphasizing thatgovernment policy is the critical first step, however, all of thepillars are connected and that whenever one changes, all theothers are affected. “The key to understanding and clearly iden-tifying this ecosystem is to frame it. Once that happens, every-one will see the same exact thing,” Alami explained. “Withoutthe frame, we would be running around in circles because every-one has his own vision of what it is supposed to be rather thanwhat it really is.”Furthermore, he outlined things that should be avoided

when creating an entrepreneurial ecosystem. First is tradi-tional investments and incubators without a vision that isat least 10 years in the future. “Because then you will notsee anything,” said Alami. “In fact, during those 10 yearsyou will feel like you are going backwards.” The secondthing to avoid is copying other successful ecosystemsbelieving they will work for you. “You have to tailor it toyour community, based on what you have versus what you

need, [then] fill in what you are missing,” he added. Thethird is creating obstacles to entering the system throughlicensing procedures and other paperwork. He moved on to highlight the difficulty of defining some

aspects of the ecosystem, such as, “What is an incubator?”Another question to be avoided is, “What exactly is a suc-cessful startup?” “Success rate and market growth arebenchmarks I don’t like because they depend on the typeof business,” said Alami. For example, retailers shouldemploy few people in the first few years, while a tech com-pany might not need to hire anyone. He went on to discuss basic best practices for ecosystems.

Altogether, these include establishing a long-term vision; localand personal plans that respond to a specific ecosystem’s capac-ity and needs; allowing space for inclusion and competition; andmeasuring progress by collecting data from the six componentsin order to inform policy making.Alami then asked those in attendance what could be done to

help advance ecosystems in general and in Egypt in particular.Overall, the discussion included providing stakeholders withaccess to services, such as financial institutions; curating talentwith an entrepreneurial mindset; managing the expectations ofentrepreneurs; and building an acceptance of failure.He stressed that connecting all parts of that ecosystem is a

must to make it grow and achieve its full potential. A case inpoint is that some fundraisers and support organizations limitthemselves to talking to companies that are at a particular stageof development or have been in businesses a certain number ofyears. This, Alami noted, would help neither a business nor thecommunity.In closing, He encouraged ecosystem stakeholders to start

scheduling regular meetings between various support organiza-tions, which could then become more frequent and expand toinvolve more players. This communication and linking the var-ious parts of the ecosystem would help sustain the conversationand move it forward. “The key is to tailor it to Egypt’s uniqueenvironment,” Alami said

ENTREPRENEURSHIP AND INNOVATION COMMITTEE

Starting the Conversation:The Entrepreneurial Ecosystem and its Six Components

NOVO NORDISK

Member News

The General Authority for Health Insurance and Novo Nordisk, a globalmanufacturer of insulin and hemophilia treatment, inaugurated the firstCenter of Excellence for the treatment of hemophilia patients at Atfal MisrHealth Insurance Hospital in El Sayeda Zeinab. The center will be operat-ed by the authority, while Novo Nordisk Egypt will provide technical sup-port and training. The total cost of the new center is approximately EGP2 million.

BARON PALACE SAHL HASHEESH

Baron Palace Sahl Hasheesh’s Bella Vista Restaurant & Lounge has wontwo awards from World Luxury Restaurants Awards (WLRA). The first cat-egory was Best Fine Dining Cuisine 2018 and the second was the MostLuxurious Ambience 2018. Moreover, last year the restaurant becamethe only one in Egypt to receive the Jeunes Restaurateurs award. The lat-est WLRA awards are the 16th international award given to a restaurantand bar inside the Baron Palace Sahl Hasheesh.

CAIRO MARRIOTT HOTEL & OMAR

Marriott International has announced that it is merging all three of itsloyalty programs into one comprehensive benefit program. Guests cannow earn and redeem points from any Marriott, Ritz-Carlton, andStarwood property in the world. The program covers all of MarriottInternational’s 29 brands, with more than 6,700 participating hotels in130 countries and territories.This also applies to Elite status memberswho can now earn 20 percent more points for every $1 they spend at thehotel.

INTERCONTINENTAL CAIRO CITYSTARS

InterContinental Cairo Citystars hosted a press conference in which DinoActivations announced the return of ‘Disney Live’ performances in Egypt,in the presence of Rania Al Mashat, Minister of Tourism. This is the resultof joint efforts of the Ministry of Tourism, Ministry of Investment andInternational Cooperation and Feld Entertainment, the producer ofDisney Live Show. El Mashat said during the press conference that this isa vital step to promote a new kind of tourism


The Egyptian International Co. forLand Reclamation (Belco) Mohsen ElBeltagyVice President

Address: 19 Abo El Feda Street, ZamalekTel: (20-2) 2735-7213Fax: (20-2) 2737-0037Website: www.belco.com

Tanta Motors Co. S.A.E Abou-FreikhaAmr AboufriekhaCEO

Address: 9 Elriadah Street, Nasr CityTel: (20-2) 2404-0116Fax: (20-2) 2402-9060Website: www.tantamotors.com

NEW MEMBERS


Agriculture

Membership TypeGeneral

Industrial Machinery & Equipment

Membership TypeAssociate Resident

Global for Contracting andEngineeringOmar Taha Elsegaey Member of the Board

Address: 134 Nile Street, AgouzaTel: (20-2) 3338-2204/270Fax: (20-2) 3338-2110

Construction/Engineering


Hikma Pharma EgyptMasoud AbdelmajidTerritory VP- Egypt

Address: 12 Esraa Street, off LebanonStreet, MohandessinTel: (20-2) 3304-9071Fax: (20-2) 3305-0739Website: www.hikma.com/home/

Pharmaceuticals/Medical/Health


Real Mining ServicesMuhammad ZaherCEO

Address: 2 Ibn Sina Street, off OroubaRoad, HeliopolisTel: (20-2) 2291-7363Fax: (20-2) 2291-7363

Mining


Nasco Egypt, SAE Mikel Hitti General Manager

Address: Office 502, Building 238, 2ndSector, City Center, New CairoTel: (20-2) 2811-0008Fax: (20-2) 2811-0008Website: www.nascoinsurancegroup.com

Insurance


Diplomatic Missions Catarina HansenDeputy Head of Egypt, The European Bank forReconstruction and Development (EBRD)

Financial SectorInes KadriHead of Communications & SustainableDevelopment, Credit Agricole Egypt, SAE

Information TechnologyAisha MostafaChief Executive Officer, Information Technology ofEgypt Corporation, SAE (ITE Corp.)

Alaa FahmyChairman of the Board, Information Technology ofEgypt Corporation, SAE (ITE Corp.)

Aly ShashAccounts & Business Development Director, SarhankGroup for Investment

Pharmaceuticals/Medical/HealthMohamed Abdel DaimHuman Capital Director, Hikma Pharma Egypt

Saad StephanFinance Director, Hikma Pharma Egypt

TextilesAshraf MorsyMember of Board of Directors, Oriental Weavers Co.

Affiliate Members

NEW MEMBERS


For any change to contact information, please contact the Membership Services Department at the Chamber’s officeTel: (20-2) 3333-6900, ext. 0016 Fax: (20-2) 3336-1050

E-mail: [email protected]

Anan MarzoukSenior Category Manager andDepartment Head

Mohamed BedeirDeputy CEO & Chief BankingServices Officer, Bank Audi,SAE

Taner Sensoy Egypt Country Manager & VicePresident, Noble Energy EMEAVentures Limited

Saad Amin MahdyDeputy CEO, Dar Al FouadHospital

Alaaeldin HegazyChairman and CEO ,Engineering for the Petroleum& Process Industries (ENPPI)

Sadik MohamedGeneral Manager Sales Egypt,Lufthansa German Airlines

Category: AffiliateSector: Finance

Category: Associate Non-Resident

Sector: Petroleum

Category: AffiliateSector: Food & Beverages

Category: GeneralSector: Pharmaceuticals/

Medical/Health

Category: GeneralSector: Petroleum

Category: MultinationalSector: Transportation

New Replacements in Member Companies

Change in Member Company:Amal RaghebGroup Financial Consultant, ECG Engineering Consultants Group, SA

Changes

Announcements


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

Jobs

AMCHAM RECRUITMENT CENTER

Industry Industry

TransportTransport

Revamping of an 800 mm. size quadratic rolling machine. Ref. 9/ 2018/2019.

Conducting the rehabilitation of the escalators serving all three mero lines inGreater Cairo. Documents to get from comany's building in Hammamat ElQobba Metro Station Building in Cairo. .

Helwan Co. for Non Ferrous Industries, Ex Factory63, Foreign Purchases Committee

Egyptian Co. For the Metro Management &Operation [ Ex Cairo Metro Operation Agency ]

EGP 200,000EGP 500

EGP 200,000 EGP 10,000

October 10, 2018

October 10, 2018

www.amcham.org.eg/TASFor 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: [email protected]: www.amcham.org.eg • US Website: www.amcham-egypt.org

Description Client Bid bondSpecs feesDeadline Sectors

Beneficiary Sectors Generating Sectors

Top Tenders

TOP TENDERS FROM TAS

Code Vacancies Company Name

113349 Security Manager CONTRACK FM S.A.E113278 HSE Supervisor Egyptian Kuwaiti Foundry113320 Project Manager Intelligent for Field Marketing113427 Senior Service Engineer Youssef Allam Group113540 Personal Assistant to the CEO MANAPHARMA - Mohamd Maged El Menshawy113563 Staff Assistant CID Consulting

Sector Show Name Website Embassy Contact Person TEL.

November

Healthcare -Medical Equipment

The Greater New YorkDental Meeting gnydm.com Rania Mekhail 2797-3487

December

POWER-GEN International Energy power-gen.com Dina Bissada 2797-2340/2330

U.S. ExhibitionsListings are now available on our website:www.amcham.org.eg

Exhibitions related to the following sectors are scheduled for the upcoming months.

For more information about these exhibitions, please contact: The Commercial Service at the U.S. EmbassyTel: (20-2) 2797-2330/ 40 - E-mail: [email protected]

*Please refer to the Commercial Service at the U.S. Embassy for any updates on the exhibitions.

Exclusive offers


Exclusive Offers

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 moreinformation, or to place a classified ad, contact Amany Kassem at (20-2) 3338-9890, fax (20-2) 3338-0850, e-mail: [email protected]

Le Meridien Pyramids Hotel & Spa is pleased to offer AmCham members, a 20% dis-count on food & beverages consumption including local alcohols published prices atGardenia outlet only, excluding hard liquors, and a special accommodation rate:

Premium Classic City View Special Rate for Foreigners & Egyptians (After Discount):

Single: 800 EGP Double: 900 EGPSupplements: Premium pool view: USD 20.00Premium deluxe pyramids view: USD 25.00

Triple occupancy with breakfast on double rate: USD 12.00Junior suite: USD 70.00

Premium deluxe suite: USD 95.00Presidential suite: USD 250.00

*Discounts will be granted to AmCham members upon presenting their AmCham 2018 membership card*

For more information, please contact:Reservation Department:Tel: (20-2) 3377-7070/ 3377-3388Emails: [email protected]

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

This offer is valid until December 31, 2018

LE MERIDIEN PYRAMIDS HOTEL & SPA

Safir Hotel Cairo Egypt is pleased to offer a 20% discount to AmCham members onaccommodation published rates, and on food & beverages in all restaurants; Palm’sCoffee Shop, Asia Boutique Restaurant, Gazerit Al Dahab (Oriental Restaurant), BluePool Café, Corporate Café, excluding alcoholic beverages and service charge and taxes.

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

*Discounts will be granted for AmCham members upon presenting their AmCham 2018 membership card*

For more information, please contact:For room reservations: Phone number: (20-2) 3748-2424 / 3748-2828Mobile: (20-10) 0160-4108 • Email: [email protected] food and beverages reservations: Ahmed OmarPhone number: (20-2) 3748-2424 / 3748-2828Mobile: (20-10) 0518-2457Email: [email protected]: (20-10) 0518-2457

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


SAFIR HOTEL CAIRO EGYPT

Appliance is pleased to offer its unique solutions and services to AmCham Membercompanies

Up to 20% on National Trading Company (Appliance) Products to AmCham Members1- Appliance Electronics: 4% discount on Mobile Phones

3% discount on Note Book15% discount on Mobile Accessories

10% discount on Notebook Accessories2- Appliance Furniture: 10% discount on all furniture products

3- Appliance IT Solutions: 20% discount on Digital Signage solution10% discount on GPS services

10% discount on security systemsYou can check our website for more info.:

www.appliance-eg.com, www.appliance-eg.com/b2b

For more information, please contact:Muhammad Hamdi • Phone Number: (20-2) 2670-6627/ 2670-6320Mobile: (20-12) 2030-0071 • Email: [email protected] Abdel Halim • Mobile: (20-12) 2222-2525Email: [email protected]



NATIONAL TRADING COMPANY (APPLIANCE)

Exclusive Tailored Discounts on BMW Car Models, Services & Insurance Packages.1- 2% discount on BMW line sticker prices.

2- Original car carpet & Key chain as a gift on your car.3- BMW insurance with different packages, services and

special rates:4- Trade with the best market price in all BMW and non-BMW cars through the

trade in dep. 5- Several Bank finance program on all of BMW range.

*Discounts will be granted to AmCham members upon presenting their AmCham 2018 membership card*

For more information, please contact:Karenza Jane HannaMobile: (20-10) 6104-0005Email: [email protected] Sales: Ahmed Ezzat: Mobile: (20-10) 0481-6939Email: [email protected]



BAVARIAN AUTO GROUP (BAG)

Advertorial


PepsiCo Egypt has sponsored the second round of El Gouna FilmFestival to promote leisure tourism in one of Egypt's most beautifulbeaches. By sponsoring this festival, PepsiCo seeks to support the“seventh art” in Egypt, provide an opportunity for cultural and artisticexchange and gain an understanding of the different international andArab cultures. Most importantly, PepsiCo aims to awaken the Egyptiancinematic art and restore Egypt to its distinguished position in theexport and propagation of art to the entire region. During the eventPepsiCo launched a limited version of its products, garnished with thedistinctive star of El Gouna.

PEPSICO EGYPT

Xiaomi announced the release of its latest Mi Max in Egypt. The newgeneration enjoys a larger screen, a bigger battery, a stronger SoC anda more powerful set of cameras compared to the last generation.Touted to be “as powerful as a power bank”, Mi Max 3 features a5500mAh battery with a standby time of 474 hours that can double upas a power bank. It sports a 6.9-inch full screen display, a 12MP+5MPAI dual camera and the Qualcomm® SnapdragonTM 636 SoC.

XIAOMI

With the aim of supporting the cultural and artistic movement, OrangeEgypt has sponsored the second edition of the El Gouna Film Festival.This year’s festival witnessed the participation of entertainment figuresfrom around the world and included the screening of more than 80 dif-ferent artistic pieces produced in several Arab and foreign countries,featuring: long films, short films, and documentaries. El Gouna FilmFestival new platform will resume providing the opportunity forEgyptian and Arab filmmakers worldwide, to identify, exchange expe-riences and merge together so as to create an integrated cultural scenethroughout Egypt.

ORANGE EGYPT

For the first time in Egypt, Mercedes-Benz unveiled at this year’sAutomech auto show its all-time best selling model, the new C-Classfamily range. Also, on display was the new E-Class Sedan and E-ClassCabriolet. In addition to the new SUVs, the segment leading GLC 250SUV and GLC 300 Coupé. Mercedes-Benz Egypt also introduced themotor show their top luxury Saloon flagship, the S-Class introduced tomarked earlier this year as Individualized special orders. Last but def-initely not least, the compact segment display included the new modelyear of the popular CLA and GLA.

MERCEDES-BENZ EGYPT

Advertorial


Tatweer Misr, signed a contract with the Faculty of Engineering to spon-sor a team of students working to design and build ultra-efficient andeco-friendly vehicles. Ahmed Shalaby, Tatweer Misr CEO and ManagingDirector, attended the ceremony alongside Mohamed Tag El Deen,Dean of the Faculty of Engineering at Cairo University, and praised thestudents participating in this year’s Shell Eco-Marathon AsiaCompetition. “Providing support to young entrepreneurs with potentialis a key part of our company agenda; it helps us contribute to thedevelopment of a new entrepreneurial mindset in the Egyptian societywhile driving job creation and economic growth,” said Shelbaya.

TATWEER MISR

Fiat Chrysler Automobiles Egypt participated in the 2018 AutomechFormula Motor Show showcasing some of its latest offerings. The FiatTipo sedan and hatchback include manual and automatic transmissionoptions. There will be baseline and highline trim levels. Also from Fiatwere the 500C and 500X. From the Alfa Romeo line, the companyshowcased the Stelvio SUV, Giulia hatchback, and Giulietta sedan.While, for the Jeep the display included the Jeep Renegade, the GrandCherokee, and the Compass. Lastly, Mopar showcased accessorizedWrangler Unlimited among accessories for other car brands.

FIAT CHRYSLER AUTOMOBILES

AUC’s long-standing hostel in Zamalek is currently undergoing anextraordinary renovation by Samcrete Development. Now known asICONIA, the mixed use building will feature serviced apartments, retail,and offices. This iconic landmark was originally designed in the late80’s by the renowned architect Amr el Alfy. It is recognized by its eclec-tic façade combining arabesque with modern architecture. The facility’sname choice; ICONA; is a throwback to the iconic of this building as itis passed on from generation to generation and continuing its legacytill today.

SAMCRETE DEVELOPMENT

To commemorate three decades of success, as well as the inaugurationof the Semiramis Spa & Fitness Centre, Semiramis InterContinentalheld a cake-cutting ceremony. Attendees included the chain’s top man-agement, various board members, ambassadors, members from vari-ous diplomatic entities, businessmen, prominent society figures, andmedia personalities. Guests enjoyed an epic Nile view as they indulgedin various bites from around the globe, courtesy of the property’seleven award-winning signature restaurants, which were elegantly re-created and displayed at the venue. Private walk-through tours of thestate-of-the-art Semiramis Spa & Fitness Centre added an unbeatabletouch of flair to this historic event.

SEMIRAMIS INTERCONTINENTAL

Sama el Masry Strikes AgainAfter failing to be appointed headcoach of the Egyptian national foot-ball team, belly dancer Sama elMasry didn’t give up. She applied toa recently vacated position as anassistant professor at the Faculty ofArts, English Division, at 6th ofOctober University. In her resume,she wrote that studying at the uni-versity until 2002 was a huge advan-tage as it made her aware of univer-sity policies and systems. El Masryadded that her English is up to thefaculty’s standards given that shepassed the course as a student.Interestingly, her CV was handwrittenin Arabic.

Al Masry Al Youm, September 4th

Om Mohamed the RobotMonths after Sophia, the first socialhumanoid robot in the world andSaudi citizen, visited Egypt, govern-ment officials announced they wantone of their own. Saleh al Sheikh, headof the Central Organization forManagement and Administration, toldthe press in September that threecompanies are vying to build it and thename would be announced byNovember. Social media lit up withsarcastic posts, beginning with trulyEgyptian name suggestions, fromFatakat to Om Mohamed. There wasalso a debate over whether she will beasked to pay taxes and apply for an IDcard or passport at the Mogamma, thenation’s central administrative hub, ifultimately given Egyptian nationality.

Egyptian Streets, August 30th

Taking Matters into their HandsUpon declaring a state of emergency inLuxor and Aswan due to termite infesta-tion, the Ministry of Agriculture hastasked its research and developmentdepartment to start developing cures.However, cashing in on the opportunity,several informal businesses began sendingout flyers promoting their “smuggled andeffective solutions.” Topping their listwere breeding anteaters from Sudanincluding mongooses and bats. Also seiz-ing the opportunity, local black magicpractitioners started advertising the newspells they developed to dispel these ter-mites. Interestingly, local officials are yetto comment on the rise of these illegaloperations, leaving social media to specu-late all sorts of reasons, including the min-istry itself resorting to the imported crea-tures and black magic.

Al Watan, September 10th

Media Lite


Al Masry Al Youm, September 17th

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 theoriginal publications and no attempt has been made to ascertain their veracity.

A Glance At The Press

“Every time I see him, he is carryinga bag of mangoes... another time

bananas... of course he must be anembezzler.”

High Prices of Fruits and Vegetables