Local currency outlook revised FITCH Ratings, the international rating agency, has revised the outlook on Egypt's long-term local currency rating of BBB to stable from negative. The BBB rating indicates that the agency currently has a low expectation of credit risk. Long-term foreign currency was affirmed at BB+ with a stable outlook, while short-term foreign currency stabilised at B. The country ceiling also remained stable at BB+. International credit ratings assess the capacity to meet foreign currency or local currency commitments. In a press release announcing the revision of the outlook, Fitch highlighted the reforms being undertaken by the government, including the customs and tax reforms. It said that "Egyptian political leaders, after an extended internal debate, have concluded that the country's medium-term economic prospects are being undermined by the prolonged lack of reform." Discussing the newly introduced reforms, the agency's Senior Director of Sovereigns James McCormack said that "recurring themes in these initiatives are reducing the bureaucratic burden of doing business in Egypt, which is considerable, and denying the opportunities for corruption, which have usually been well exploited." But the agency warned of the risks associated with the change in direction of economic policy. "The success of the programme depends in part on the response of the private sector, which could save tax cuts rather than put them towards consumption or investment expenditures." Such a decision, the press release stated, "may be influenced by whether the reform commitment is perceived as credible. That depends on establishing a longer track record." More power THE EGYPTIAN Electricity Holding Company (EEHC) is set to receive 160 million euros from the European Investment Bank's Facility for Euro-Mediterranean Investment and Partnership (FEMIP) for the construction of two 750 Mega Watt natural gas-fired combined-cycle power generation modules. The combined-cycle gas turbine technology delivers high energy efficiency with low environmental impact. One of the units will be installed at the Talkha-Damietta power station in the Nile Delta and the other at the Al-Kuriemat power station 90kms south of Cairo. The projects, scheduled to start commercial operation in 2007, will be implemented by EEHC's wholly-owned subsidiaries East Delta Power Production Company and Upper Egypt Electricity Production Company. While designed to burn natural gas, the new modules can also operate on distillate fuel as an emergency backup. The Egyptian Natural Gas Company (GASCO) will supply gas to the new units. FEMIP focusses, in its funding, on developing the private sector and financing social and economic infrastructure supporting this development. LNG to France in 2005 THE GAS industry in Egypt is thriving. This month, Egypt will for the first time export Liquified Natural Gas (LNG) to Spain. The LNG will come from the Damietta port on the Mediterranean which now hosts one of the biggest and perhaps most highly advanced plants for liquifying natural gas worldwide. Built at a cost of $1.3 billion in investment, the plant is 20 per cent owned by the Egyptian General Petroleum Corporation (EGPC) while 80 per cent of the shares belong to the Spanish/Italian company Union Fenosa. The total capacity of the plant is estimated at 7.5 billion cubic metres annually and through the three years of construction it provided jobs for at least 6,000 people. In the meantime, two other plants for liquifying gas are being completed in Edku in the Delta with a total capacity of 10 billion cubic metres annually. The project is being carried out for an investment estimated at $1.9 billion. The shareholders are the EGPC, British Gas and the Malaysian Petronas, in addition to Gas De France. Export of LNG to France is planned to commence next May, with other European countries, including Italy, and the United States to follow by next October. Al-Watany increases capital AL-WATANY Bank of Egypt (WBE), a private sector bank, has announced an increase in its paid-in capital of LE185 million. The capital increase will take place through a public offering of 18.5 million shares, at a par of LE10 per share. The public offer will commence in 15 days and will remain open for two months with the issuer maintaining the right to close the subscription after 10 days if the issue is over-subscribed. It is worth noting that the new shares will not be eligible for FY04 profit distribution. WBE was established in 1980 and has a free float of 48 per cent. It is considered a medium-sized bank in terms of the size of its capital and total assets. EU-Egypt cooperation A SENIOR official delegation from the European Bank for Reconstruction and Development (EBRD) visited Cairo last week, Mona El-Fiqi reports. During his visit to Cairo, Peter Reith, executive manager of the EBRD, met the governors of four Egyptian banks -- Suez Canal Bank, the National Bank of Egypt, Commercial International Bank (CIB) and Banque Du Caire -- to discuss potential economic cooperation opportunities with his bank. In a press conference, Reith announced that during his visit, he signed a protocol of cooperation with Suez Canal Bank which would enable it to benefit from the Trade Facilitation Programme provided by the EBRD. Reith explained that although his bank is not currently investing in Egypt, his visit was intended to promote the development of Egyptian trade, both imports and exports. Moreover, Reith said that more Egyptian businessmen should be able to benefit in the future from the bank's Trade Facilitation Programme, which provides financial assistance to private sector companies that win tenders for projects in Eastern European countries. Tareq Rushdi, head of internal audit at the EBRD, said that although Egyptian companies have the capacity to win many of the project tenders which his bank issues, they usually miss out on the opportunity because there is not enough time left to apply when they receive the information about the opportunities . Rushdi added that the EBRD tries to stay in touch with the Egyptian banks so that they are fully informed of the project tenders on offer. The EBRD was established in 1990 to provide financial assistance to companies investing in Eastern Europe countries. Every minute counts THE EGYPTIAN Association for Political Economy recently hosted a lecture by the Director-General of the Bibliotheca Alexandrina Ismail Serageldin on the Egyptian economy at the beginning of a new century. The lecture centred on Egypt's future economic goals and challenges. Serageldin said he believed an Egyptian economic reform programme must go hand in hand with progress in advanced scientific applications and technology which can speed up the pace of growth and utilise the potential of a young work force. He said Egypt should place unemployment, which he estimated to be around 30 per cent of the work force, at the centre of the country's policy-making strategy and warned that if policy changes are not made, Egypt will have 525,000 unemployed people per year, meaning that every minute an additional Egyptian youth will be unemployed. To solve the problem the economy must create 1.8 million jobs per year. According to Serageldin, this type of job creation can only take place if Egypt can reach six to seven per cent GDP growth levels, complemented by a sharp rise in savings and investment.
