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Egypt’s profit margin guidance will not be legally binding: minister
A committee established by the Egyptian government to determine how much profit should be made from the sale of essential goods will offer guidance only and firms will not be legally required to comply, Trade and Industry Minister Tarek Kabil said.
Egypt formed a cabinet-level committee this month tasked with devising mechanisms to set the appropriate profit margins on the sales of basic goods.
Struggling with double-digit inflation and sugar shortages, ordinary Egyptians have urged the government to stabilize prices of essential goods, but the announcement raised fears among investors that the government was planning to introduce price caps.
“The one thing I assure you is there is no obligation for setting the price. We will not be pushing companies to sell at a certain price. It is just a direction, that is all. There is no legal requirement,” Kabil told Reuters.
Prime Minister Sherif Ismail, who will chair the committee that will include representatives from several ministers as well as intelligence and state watchdogs, has already said that the committee would focus on profit margins not prices.
Kabil said he had no details on which goods the guidelines might apply to or when they would be introduced.
Egypt industry races to fill void as trade gap to narrow $11-12 billion in 2016
(REUTERS): Egypt expects to cut its trade deficit by $11-$12 billion in 2016 as part of efforts to ease an acute dollar shortage and is encouraging domestic industries to fill the void as imports plummet, Trade and Industry Minister Tarek Kabil said.
Speaking as part of the Reuters Middle East Investment Summit, Kabil said Egypt had produced about $4 billion worth of import substitutes since the start of the year and aimed to grow domestic industry by 8 percent in three years.
“If you look at last month’s report, industry grew by almost 20 percent, because it has to fill the gap of the imports. Some of (the imports) are unnecessary and some is real consumption that Egyptian industry has to fill the gap for,” he said in an interview at his wood-paneled offices in Cairo.
He said local companies were producing substitutes primarily in food industries, but also building materials, chemicals, leather and furniture.
Egypt has struggled to overcome a crippling dollar shortage since the 2011 uprising caused foreign investors and tourists, key earners of foreign exchange, to flee.
The shortage is exacerbated by a severe trade imbalance – Egypt imported $67 billion worth of goods in 2015 but exported just $18.5 billion, according to trade ministry data.
Central bank governor Tarek Amer said in January Egypt aimed to cut its import bill by 25 percent to ease dollar demand.
Egypt has this year raised customs tariffs on luxury goods, plugged customs loopholes, and tightened quality controls.
Together with dollar rationing and capital controls that have made it difficult for merchants to obtain enough foreign exchange to pay for cargoes, the measures have curbed imports.
Prices of imported goods have soared as merchants are forced to source their dollars on the black market for as much as 15.5 pounds per dollar, a wide spread over the official rate of 8.8 pounds. Some imported goods have become scarce.
Kabil said the trade deficit had narrowed by $8 billion in the first nine months of this year, with imports falling $7 billion but exports – key to bringing more dollars into the economy – rising by only $1 billion.
But the moves have prompted complaints from manufacturers who say they struggle to import components and raw materials or pay more for them as they have to source dollars on the black market. The result: more expensive end products that are less competitive abroad.
The minister, a former PepsiCo executive, said low labor costs would help keep manufacturers competitive as Egypt seeks to double its exports in the next five years.
Egypt has created an export development agency to market Egyptian products abroad, Kabil said. It is focusing on Africa, where Egypt has a competitive as well as geographical advantage. The aim is to increase exports to Africa from $4 billion now to $8 billion five years, or 20 percent per year, he said.
“We have already opened a logistics center in Kenya … last month,” said Kabil. “We have a direct shipping line now from Egypt to Kenya and we’re expanding on that … Kenya is a no-brainer because it has access to five immediate countries next to it.”
To boost manufacturing, Egypt has increased the amount of industrial land available and will offer 10 million square meters on 30-year-leases this year, he said.
It has already offered about 5 million square meters and is working on fully integrated industrial parks dedicated to small manufacturers.
“We have been focusing on this because there is a severe shortage of industrial land,” Kabil said. “We are looking for exports to be 50 percent of imports within three years.”
Egypt launches record LNG tender for 96 cargoes -trade
(REUTERS): Egypt launched the world’s biggest tender for liquefied natural gas (LNG) on Sunday as officials from top energy companies and trading houses converged on Cairo undeterred by new rules forcing them to wait even longer to get paid.
After months of speculation and delay, state-run Egypt Natural Gas Holding (EGAS) released tender documents on Sunday bidding to secure 96 LNG shipments in 2017 and 2018, participants in the tender told Reuters.
An additional 12 optional cargoes were included in the tender, which EGAS may decide not to award, they said.
It is the biggest mid-term LNG buy tender ever issued, trade sources said.
Egypt, a major importer of commodities from wheat to diesel, helped buoy global gas markets last year after emerging as the fastest-growing new LNG consumer.
Once an LNG exporter, Egypt turned into a net gas importer just as global spot prices plunged.
Commodity trade houses, led by Switzerland-based Trafigura , vied to supply Egypt as the country looks to buy until new gas finds can be developed offshore.
But Egypt’s worsening credit profile has tempered initial enthusiasm as suppliers fret over payment difficulties given the country’s sinking economy and shortage of U.S. dollars.
Under the latest tender terms, LNG suppliers may have to wait as long as six months after delivery to get paid, according to two sources with knowledge of the matter.
At a meeting with energy suppliers this month Egypt discussed extending payment deadlines to as much as 120 and 180 days after delivery to give itself more breathing room, the sources said.
“I know that the 180-day payment terms were something agreed in Cairo a couple of weeks ago across all products and is a sign of the current situation in Egypt,” one trading source said.
LNG shippers previously got paid 90 days after delivery.
Firms may think twice about committing to large supply positions carrying credit risks, but the tender is expected to draw large crowds given generally weak demand for LNG.
“It’s a big short in a long market – I expect participation to be huge,” a trade source said.
Japan to give Egypt $460 mln in soft loan to resume construction of Grand Egyptian Museum
Egyptian Minister of International Cooperation Sahar Nasr and Japanese ambassador to Cairo Takehiro Kagawa will sign on Monday a deal, per which Egypt will receive $460 million in soft loan with 1.5 percent interest, to resume the construction of the Grand Egyptian Museum (GEM), Youm7 reported.
Takehiro voiced his hope that the construction of the museum to be complete by the end of 2016 to be inaugurated by President Abdel Fatah al-Sisi and Japanese Prime Minister Shinzo Abe by 2022.
Built over 120 acres of land, GEM is located 2 km southwest of the Giza Pyramids and was scheduled to be inaugurated in August 2015, but due to funding issues it has been delayed until August 2018.
The construction of the three-phase project, which includes the construction of the museum’s main building and implementation of the master plan, landscape parks and surrounding site infrastructure, began in March 2012. Two phases have currently been completed.
Egypt chases own energy sources as government struggle to meet demand
(Reuters) Egypt will boost production of natural gas to 5 billion cubic feet per day in the 2017-2018 fiscal year as the giant Zohr field comes online, but will still also ramp up gas imports to feed a spike in consumption, Oil Minister Tarek El Molla said.
Once an energy exporter, Egypt has turned into a net importer in recent years, squeezed by declining production and increasing consumption. The shortfall and squeezed finances have forced the government to ration gas supplies to industry, with some plants unable to operate at full capacity as a result.
Egypt’s Oil Ministry is racing to reverse that trend, speeding up the development of major gas discoveries with a stated goal of achieving energy self-sufficiency by 2020-21.
Next year Zohr, the offshore field discovered by Italy’s Eni (ENI.MI) in August 2015, comes online. Zohr is the biggest gas field in the Mediterranean with an estimated 30 trillion cubic feet.
Further boosting supply, BP’s (BP.L) northern Alexandria field is also due to enter production next year.
“Eni will begin producing about 1 billion cubic feet a day from Zohr at the end of 2017 and there is also the production of BP at around 450 to 500 million cubic feet a day,” he said at Reuters Middle East Investment Summit.
“We’re still looking to have (gas) production reach over 7.5 billion cubic feet in 2020-21, and this will allow us to achieve self-sufficiency.”
Zohr is expected to produce 2.5-3 billion cubic feet per day when it reaches peak production in 2019.
Egypt’s domestic gas production is currently about 4.35 billion cubic feet per day versus consumption of around 5.2 billion, Molla said.
Egypt’s gas company EGAS will also launch a new exploration tender in early 2017, offering nine to 11 concessions, as part of efforts to boost production, the minister added.
But even with the expected increase in production to 5 billion cubic feet of gas per day, Egypt’s gas production is likely to fall far short of rapidly growing consumption in the 2017-2018 fiscal year, which begins in July.
Gas consumption is set to spike as three Siemens (SIEGn.DE) power plants come online over the next year designed to boost electricity generation by 50 percent by 2018.
LNG IMPORT BOOM
Egypt has emerged as a major buyer of liquefied natural gas (LNG).
State gas buyer EGAS said last week it would hold an international tender for 48 to 56 LNG cargoes, the first batch of roughly 120 cargoes expected for 2017.
A third floating and storage regasification unit (FSRU), an import terminal that converts LNG to natural gas to feed the power grid, is expected to arrive at the end of June 2017 and will help process the surge in gas needed once the Siemens plants enter the energy grid, Molla said.
Egypt is expected to begin imports from France’s Engie (ENGIE.PA) in early 2017 as part of a previously agreed memorandum of understanding to buy 12 cargoes, Molla said.
Molla said the import bill for LNG this year would be roughly $3 billion and that Egypt spends some $700-$800 million on both LNG and petroleum products monthly.
That bill rose sharply in October after Saudi Aramco halted delivery of petroleum aid agreed as part of a five-year plan to ease Egypt’s energy spending.
State petroleum buyer EGPC said it would allocate over $500 million to cover its October needs after the cutoff. The status of the aid and reason for its halt remain unclear.
The state’s 2016-17 budget had aimed to reduce subsidy expenditure, targeting 35.04 billion Egyptian pounds from the 51 billion spent in 2015-16.
But the rise in oil prices in recent months will increase the state’s subsidy bill, which was about 12-13 billion Egyptian pounds ($1.4-1.5 billion) during the first quarter of the 2016-17 fiscal year, Molla said.
“The rise in oil prices worldwide will no doubt change subsidy spending, because a third of what we consume we import, so the bill will increase,” he said.
Slovakian delegation arrives in Egypt in December for investments in Suez Canal Corridor
A Slovakian delegation will visit Egypt in early December to discuss the ways of enhancing the bilateral cooperation, announced Egyptian Ministry of Trade and Industry Tareq Qabil.
The Minister met on Sunday with Slovakian ambassador to Cairo Mrs. Tatyana Chusheva, discussed preparation measures for the visit the projects both sides to discuss, Youm7 reported.
The visit will witness signing of certain Memoranda of Understanding (MoUs) in many investment sectors, the Egyptian minister added.
The Slovakian delegation include CEOs of a total of 15 companies, particularly which are working in agriculture and electronic industry. The under-negotiation projects concern investment in Suez Canal Corridor, the Minister noted.
Egyptian authorities confiscate sugar at country’s largest food producer
(Reuters) Egyptian authorities seized sugar stocks at Edita Food Industries, one of the country’s largest food producers, on Saturday, a move that may force the company to suspend its operations, Edita’s chairman told Reuters.
At supermarkets across the country sugar has all but vanished, prompting media talk of a crisis and pushing the state to rapidly increase imports despite an acute dollar shortage and soaring global prices of the sweetener.
The government has blamed the crisis on local factories and profiteering traders hoarding stocks to push up price.
A supply ministry official told Reuters that 2,000 tons of sugar stocks were confiscated after Edita was unable to show original invoices for quantities held at its Beni Suef factory.
Edita, which holds local ownership of international brands Twinkies, HoHos and Tiger Tail in Egypt, Libya, Jordan and Palestine, denied it had hoarded sugar.