Pension overhaul FOLLOWING the tax and customs reforms undertaken by the Ministry of Finance (MOF), the ministry is planning to introduce an overhaul of Egypt's pension system. On the fringe of his meetings held with World Bank (WB) and International Monetary Fund (IMF) representatives in Washington, Minister of Finance Youssef Boutros Ghali revealed that the WB will help upgrade the current pension system and put in place new legislation by the middle of this year. According to Ghali, the proposed new law will widen the base of beneficiaries while not adding any more burdens on the state's budget. The impending law will also lower the percentage of a worker's contribution to his pension from the current 40 per cent to the around 12-17 per cent range which an employer, whether private or public, pays. The government will contribute the balance. Egypt's pension system currently covers 70-90 per cent of the labour force, including civil servants, public and private employees. The high rate of coverage will make it possible to lower workers' contributions. According to the new plan casual workers who are not employed in public or private companies will enjoy the same benefits as other workers. Workers will be given three options from which to choose: one is to start receiving a regular pension at the age of 60. A credit account is opened in which the worker deposits fixed monthly installments. Based on this he will have a previously-known sum of money upon retirement. Workers can also open personal pensions accounts in which they deposit different sums of money over the years, until retirement age. A worker would then have the right to withdraw this money upon retirement. The third option is to establish an investment fund for pension beneficiaries. This fund would be privately managed and the revenues from its investments routinely added to the initial value of the investment. A new free pension system will also be introduced. According to this system, all workers above the age of 65 will receive a monthly pension of LE100. Healthy growth WHILE it is still too early to measure the effects of the recent Dahab resort bombings on the local economy, indicators before the event showed a healthy performance. The economy grew by 6.1 per cent in the second quarter of 20005/2006, supported by a retreat in inflation to 3.1 per cent. The budget deficit which denoted the difference between the state's revenues and expenditures tightened in the three month period to reach 3.4 per cent of GDP, compared to 4.5 per cent during the same period last year. Tax receipts surged to LE44.2 billion and are expected to increase in the coming period, since the tax holidays enjoyed by many investment projects are about to end. This means that in the next couple of years the taxes paid by these formerly- exempted companies will be included. The balance of payments saw a $1.8 billion surplus in the first half of the year. Figures for the second quarter are not available yet. In the previous quarter, the deficit had stood at $103 million. Mohieddin for growth MINISTER of Investment Mahmoud Mohieddin has been chosen to join the Growth Commission which aims, over a two-year period, to deepen the understanding of economic growth for development and poverty reduction. Although the commission was formed by the World Bank, in conjunction with the Swedish, Dutch and UK governments as well as the William and Flora Hewlett Foundation, it will be acting independently. Its conclusions will reflect the views of commission members. The commission will be chaired by Nobel laureate and former Dean of the Stanford Graduate Business School Michael Spence. World Bank Vice President for Poverty Reduction and Economic Management Danny Leipziger will act as the commission's vice chair. The commission will also include Nobel laureate Robert Solow and economic ministers and experts from 18 countries. These include India, China, Indonesia, USA, UK Turkey, Korea, Singapore, Poland, Sweden, Peru, South Africa, Nigeria, Indian Western Isles, Mexico and Chile. The committee held its first meeting in Washington on 20 April. Still in time THE MINISTRY of Finance has decided to extend the deadline for submitting tax statements by judicial bodies 60 more days, so as to end 30. June According to the new income tax law, the deadline for delivering tax statements by judicial bodies is 30 April. Individuals already handed their statements a month before this date. The decision was made in response to claims made by companies and accounting firms which expressed their willingness to have more time in order to fill in their statements. According to Article 85 of the new law, a 60-day grace period can be given to a taxpayer upon his request if the claim is made 15 days before the deadline is over. "In this case, penalties of delay as ratified by the law do not apply to the taxpayer," said Ashraf Al-Arabi, senior advisor to the minister on tax policy. Early last month, Youssef Boutros Ghali, minister of finance made it clear at a press conference that the Tax Authority will not take any action against individuals who failed to submit their tax statements in due time. "This is the first time that the new law is applied, and we would like to encourage taxpayers to abide by the law. However, further delay will not be excused," said Ghali. Now that the deadline for submitting tax statements has been officially extended. Officials at the authority underline that the number of tax statements submitted by both individuals and judicial bodies have unexpectedly doubled, compared to those delivered in the same period last year. "This reflects a very positive attitude towards the new law, which we hope will continue to grow," said Ghali. Upper hand QATAR has frozen its bilateral free trade talks with the US. There are "issues that need to be solved first," said Nasser bin Hamed Al-Khalifa, Qatar's ambassador in Washington. The talks were suspended because of disagreement over preconditions set by the US, according to Al-Khalifa. "Sometimes powerful countries put preconditions that are not in the interest of smaller countries," he was quoted as saying. The ambassador questioned the need for a free trade agreement, adding that the framework of the World Trade Organisation (WTO) is sufficient for the two member countries to exchange trade and investment. "We do not need a free trade agreement with the US," he asserted. Al-Khalifa categorised the countries signing free trade deals with the US as ones which are receiving financial support from the US, requesting preferential treatment in US markets or soliciting new investments. "As far as Qatar is concerned, it needs none of these from America," said A-Khalifa adding that "the US government has no control over private American companies." The ambassador said that "Qatar is a major destination of investment for US companies in the Middle East, since it has laws supporting foreign investment. We do not accept preconditions or preferential treatment. Our major export is gas and it is needed throughout the world." Qatar owns the world's third largest reserves of natural gas. It is a member of both the Organisation of Petroleum Exporting Countries (OPEC) and the World Trade Organisation (WTO). Sharia hotels A $2.3 BILLION Sharia - compliant real-estate development fund has been created in Dubai to own and develop an international new-concept hotel chain abiding by the principles of Islamic law or Sharia. The first hotel and serviced apartment project is scheduled to open for business in Dubai in the summer of 2008. The fund was created by KM Properties, a member of the UAE-based Al-Rostamani Enterprise family conglomerate. KM Properties has also established a Sharia - compliant Hospitality Operator Company that will operate Sharia-compliant properties throughout the Middle East and Asia. Interest in BA THE GOVERNMENT has begun examining the non-binding expressions of interest received for the purchase of 75 to 80 per cent of the Bank of Alexandria (BA). The examination, which is scheduled to last for almost four weeks, is being carried out by the Ministry of Investment and a committee including representatives from the ministries of finance and investment, as well as the Central Auditing Agency (CAPMAS), the Central Bank of Egypt and the Capital Market Authority. BA is 100 per cent owned by the Egyptian government. The deadline for receiving expressions of interest was 28 April. Roadshows for the bank were held in Dubai and London on 18 and 20 April respectively. In attendance were representatives of the Mashreq Bank, Abu Dhabi Commerical Bank, the Abu Dhabi Investment Authority and Dubai Development and Investment Authority, in addition to representatives from the Commerical International Bank, Chartered Bank and BNP Paribas. Following the examination of expressions of interest a shortlist will be made of companies which qualify financially and technically. The shortlisted company will be allowed to carry out due diligence of the Bank of Alexandria. Parties that wish to qualify for participation in the Strategic Sale process must also fulfill certain criteria. Such parties must be an established and reputable financial institution, possess a commercial banking license, and own the resources and expertise ensuing that Bank of Alexandria becomes a financially and commercially strong bank after privatisation. The authorities say that parties wishing to bid as a consortium need to note that the latter must include one member who fulfills these criteria. The consortium must also intend to acquire a shareholding in excess of 51 per cent of shares in the Bank of Alexandria. Citigroup Corporate and Investment Banking is advising the Ministry of Investment on the sale. MOI had said that it intends to make available five per cent of the bank's shares to the bank's employees. It says that any residual shares will be sold by way of initial public offering on the Cairo and Alexandria Stock Exchange after the Strategic Sale has been completed. On June 2005 the Bank of Alexandria was the fourth largest commercial bank in Egypt, measured by total assets and customer deposits. Bank of Alexandria has a network of 188 branches and outlets in Egypt. On 28 February 2006, in accordance with International Financial Reporting Standards, Bank of Alexandria owned total assets of LE39.8 billion, customer loans of LE7.9 billion, customer deposits of LE30.7 billion and shareholders' equity of LE4.6 billion. Last chance for bid TODAY the deadline ends for companies wishing to submit proposals for Egypt's third mobile license. The National Telecommunications Regulatory Authority (NTRA) had postponed the deadline for accepting applications from 17 April to 4 May, after several interested companies requested to be given more time to prepare the required documentation. Until press time, NTRA had not announced which companies had actually applied for the license. Twenty-one companies have withdrawn the information booklet outlining the terms of competing for the third license. These included Telenor, Telecom Egypt, MTC, MTN, Telecom Italia and Qtel. Amr Badawy, head of NTRA, had said at a recent press conference that NTRA will attempt to conclude the technical evaluation as soon as possible. He added that he expects the auction for the license to take place in July. A committee has been formed to study the various technical offers. The winning companies will be graded out of 1000 points. Among the criteria according to which a company will receive or lose points is whether or not it has a local partner. Companies meeting the technical criteria will then be invited to participate in an auction for the license. "The manner in which the auction will be carried out remains to be seen," said Badawy. This will be announced to the companies that technically qualify for the auction. Badawy suggested that if two companies make a similar financial bid the one that is the most technically qualified will win. The value of the license is not clear, but NTRA has placed a minimum of LE2.5 billion as the starting price. In addition the winning company will pay a minimum of three per cent of its annual revenues to the government. The auctioning will help specify the value of the third generation license, a service which the third operator will have to offer. Badawy has put the value of the 3G license at 20 per cent of the sum to be paid up front and 40 per cent to be paid on the revenues. To facilitate the establishment of the third operator, the new company will temporarily share the network of the existing two operators. For example, local roaming will be allowed with the current two networks. However, Badawy explained that this will be allowed only after it had set its network in certain areas. And the roaming will be with one or the other companies in any one location. Number portability will also be allowed by virtue of which subscribers will be allowed to move from one network to another while keeping their number.
