Egypt, Elsewedy review progress on Ain Sokhna phosphate complex    US employment cost index 3.6% up in year to June 2025    Egypt welcomes Canada, Malta's decision to recognise Palestinian state    Pakistan says successfully concluded 'landmark trade deal' with US    Sterling set for sharpest monthly drop since 2022    Egypt, Brazil sign deal to boost pharmaceutical cooperation    Modon Holding posts AED 2.1bn net profit in H1 2025    Egypt's Electricity Ministry says new power cable for Giza area operational    Egypt's Al-Sisi, Italian defence minister discuss Gaza, security cooperation    Egypt's FM discusses Gaza, Nile dam with US senators    Aid airdrops intensify as famine deepens in Gaza amid mounting international criticism    Egypt exports first high-tech potato seeds to Uzbekistan after opening market    Health minister showcases AI's impact on healthcare at Huawei Cloud Summit    On anti-trafficking day, Egypt's PM calls fight a 'moral and humanitarian duty'    Egypt strengthens healthcare partnerships to enhance maternity, multiple sclerosis, and stroke care    Egypt keeps Gaza aid flowing, total tops 533,000 tons: minister    Indian Embassy to launch cultural festival in Assiut, film fest in Cairo    Egyptian aid convoy heads toward Gaza as humanitarian crisis deepens    Culture minister launches national plan to revive film industry, modernise cinematic assets    I won't trade my identity to please market: Douzi    Sisi sends letter to Nigerian president affirming strategic ties    Two militants killed in foiled plot to revive 'Hasm' operations: Interior ministry    Egypt, Somalia discuss closer environmental cooperation    Egypt's EHA, Huawei discuss enhanced digital health    Foreign, housing ministers discuss Egypt's role in African development push    Egypt reveals heritage e-training portal    Three ancient rock-cut tombs discovered in Aswan    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Egypt's Irrigation Minister urges scientific cooperation to tackle water scarcity    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Recognizing challenges key to success
Published in Daily News Egypt on 02 - 12 - 2005

CAIRO:Tom Walter has a tough job doing business in Egypt.He is chairman and managing director of ExxonMobil Egypt, the local subsidiary of one of the leading global marketers of fuels and lubricants. In this country, the market remains over-regulated, heavily distorted by state subsidies and sees only modest growth.
But this environment makes his advice all the more valuable to newcomers. ExxonMobil is one of the sponsors of the current Egypt Invest 2005 Conference, and the day before the conference,Walter looked forward to sharing his experiences, saying that they ".can help others who are considering investments in the country to see where the opportunity lies, understand what the challenges are and recognize that they can overcome those challenges.
Walter also has advice for the government. Due to subsidies, fuel prices in Egypt are amongst the lowest in the world, and margins for fuel marketers are regulated. "We can improve our returns by being more efficient in the way we operate, but yet the returns over the past number of years have not been very good.So we would encourage the government to look for ways to improve the returns or improve the regulatory leeway in the downstream business.
One of the first reform measures implemented by the Ahmed Nazif cabinet, which took office in July 2004,was to reduce subsidies on diesel fuel. The price for diesel had been unchanged for 10 years and was raised by 50 percent, from LE 0.4 to LE 0.6 per liter.A government official at the time estimated that the true cost per liter should be around LE 2. Prior to the change, the government spent some LE 5 billion on subsidizing diesel.
The budget deficit for fiscal year 2005/2006, the first budget presented by the Nazif government, amounted to 9.2 percent of Egypt's GDP, raising the eyebrows of local and international analysts who were thus far pleased with the cabinet's performance.
Subsidies on food and energy make up almost half of the government's expenditures,but the issue of subsidies is the most sensitive surrounding economic reforms in Egypt and the public has a close eye on it at all times.When gas stations began selling 92-octane gasoline in February at LE 1.4 per liter, compared to 90-octane gasoline at LE 1 per liter,accusations were immediately voiced that this was a backdoor attempt to introduce higher prices.
One possible option out of the dilemma is better targeting of subsidies.Parliament has discussed handing out fuel subsidy cards similar to the food subsidies system,which would allow low-income drivers to buy fuel at lower costs then others.
Walter, who has been in Egypt for two years after holding various posts at ExxonMobil in Africa, says that he is unable to predict whether the government will further reduce fuel subsidies in the future, but hopes that the government's own interests will help.
"What I see in the government, they are very serious about creating a welcoming and sustainable business environment, and that means not only creating an environment where businesses can work well, but also creating a fiscal environment for the government that is sustainable in the long run.
A reduction of subsidies would not only improve the state's fiscal situation, but would also have positive effects on the environment. An estimated two thirds of the vehicles circulating on Cairo's streets are older then 10-years.A price hike would prompt car owners to replace their vehicles with newer models that consume less fuel and blow fewer toxins into the air.
From his office on the Corniche, Walter has a superb view of the Nile. He says that a few days ago, the smog covering Cairo grew so thick that he was barely able to see the other bank, just a few hundred meters away.
To date, last fall's cut of diesel subsidies remains the only reform measure taken directly affecting the business of marketing fuels and lubricants in Egypt; public fuel marketers still maintain a strong market share. The government has started to privatize companies in the refinery segment of the energy sector, but there are no reliable indications that the down-stream businesses might soon follow.
But Walter says he welcomes any competition induced by privatization and shows a great deal of confidence."This would not be a concern to me. There might be a little turbulence in the market, but if the government decides to go that way, it'll be fine.
Walter also suggests modernization of those parts in the regulatory framework governing the technology used in logistics. "We have regulations that are quite a few years old; they need to be reviewed in light of modern technologies that would allow us to operate more efficiently, said Walter, citing the limited size of underground tanks permissible in Egypt.
ExxonMobil has been in Egypt for more then 100 years and today has some 400 employees and indirectly gives job opportunities to up to 8,000 more through contractors and dealers, says Walter. Its annual sales amount to more then $500 million, accounting for two thirds of ExxonMobil's sales in Africa, while its office in Egypt also oversees activities in other North Africa countries. It is also busy implementing a global fuel marketer trend to incorporate retail stores into service stations to compensate for modest growth rates in their core business. Walter says that the 11 retail stores are among the best selling ExxonMobil's stores worldwide.
Although his market has not received full attention from reformers thus far,Walter lauds the cabinet and says the company has nonetheless significantly benefited from the economic reform program implemented. This has prompted ExxonMobil to invest more in its operations in Egypt, and Walter hopes to share his expressed optimism with potential investors during Egypt Invest 2005. "Hopefully a few people might hear that and say 'Hey, we are going to try that too.,' said Walter.


Clic here to read the story from its source.