Egypt News - Property, Apartments, Villas, Land, Businesses For Sale in Egypt.
News 01 June 2006
Egyptian Economy Growing Fast
Egypt has a story to tell. Economic growth for the first quarter of 2006
year reached 6.1 per cent, with inflation going down to around three per
cent. Egypt's foreign currency reserves currently stand at almost $23 billion,
thanks to higher net capital inflows generated from tourism and Suez
Canal revenues. Foreign direct investments grew in 2004/2005 to reach
$ 3.9 billion, which is an increase of around $2 billion from the year before.
The improved macro-indicators directly reflect the multi-faceted approach
to reform recently adopted by the Egyptian
government. When the new cabinet headed by Nazif was sworn in, in the
summer of 2004, it tackled the immediate and pressing problems of investors,
especially regarding the customs and tax regimes which many saw as over-
bureaucratised and not offering sufficient incentives. Reforms in these
two domains in particular have helped reinstate confidence in the economy.
With its renewed emphasis on providing a better investment environment,
the government is now hoping to attract the foreign investment needed to
generate jobs in a market which absorbs some 700,000 new entrants every
year. To this one may add a backlog of unemployed youth, some of whom have
been without a job for over a decade. "Domestic investment is simply
not sufficient to attain the desired growth rates of seven to eight per
cent." says Tareq Allouba, International Finance Corporation (IFC)
senior investment officer.
While striving to make investors' life easier, the government has also begun
to speed up privatisation. The new momentum which the privatisation process
has gained was lauded recently by an International Monetary Fund (IMF) mission
which described it as "exceeding expectations". The banking sector
has also undergone reforms that are changing the face of the industry. The
government's stake in joint-venture banks is now being speedily divested,
with the long-awaited privatisation of the first of the four main public
sector banks underway. Last April, interested buyers submitted their proposals
for the purchase of a 75 to 80 per cent stake of the Bank of Alexandria.
Two other public sector banks, Banque du Caire and Banque Misr will be merged
together later this year. With the finalisation of sale of Bank of Alexandria,
and the merger of the two public sector banks, only two public sector commercial
banks will be remaining in business.
The Egyptian banking sector is one area that has received an influx of foreign
investment, with the entry of the Greek Piraeus Bank which purchased the
Egyptian Commercial Bank and the expansion of the existence of Calyon Corporate
and Investment Bank, part of the French Credit Agricole Group, through its
purchase of the Egyptian American Bank. Société Général
also grew its presence in the Egyptian market by buying out Misr International
Bank. And the Lebanese Blom Bank took over Misr Romania Bank. Also, a consortium
including Ripplewood Holdings, Eton Park Capital Management and RHJ International
purchased the National Bank of Egypt's share in Commercial International
Bank.
However, banking sector reform is not comprised of privatisation only. The
Central Bank of Egypt (CBE) is working on establishing an inflation targeting
regime, through which it has introduced a new range of tools that will create
a more coherent and functional monetary policy. The mechanisms of a free
currency exchange market are also in place. The inter-bank market that allows
banks suffering a shortage of dollars to borrow from those with a surplus
-- has insured that hard currency will be available and also eliminated
the parallel market. Along with strong foreign currency earnings, this has
further boosted confidence in the Egyptian pound.
The telecommunications and information technology sectors have also undergone
major structural changes. Foremost amongst these was the privatisation last
November of 20 per cent of the formerly state-owned fixed line operator
Telecom Egypt. The
telecommunications sector is currently being eyed by international investors.
A number of consortiums, 11 in all, which also include international operators,
have presented their proposals for a third mobile licence. The government
will also announce yet another lucrative licence for an international gateway
in the summer.
Developing the manufacturing sector is yet one more area that the government
has been working on. This is being carried out in cooperation with the private
sector through Public-Private- Partnerships. The objective of this endeavour
is to smooth out the difficulties faced by industries, and provide them
with the training needed to develop their export potential. Textiles, food,
and furniture industries top the list of candidates regarded as promising.
There are several remaining areas concerning which the government needs
to improve the investment environment however. "Egypt is one of the
least efficient countries in the world when it comes to enforcing contracts,"
says Allouba. He adds that it takes on the average some 55 procedures to
enforce a contract in Egypt, compared to only 14 in Greece and Tunisia,
15 in Denmark and 16 in Ireland. Registering property will take up to an
average of 193 days and cost some six per cent of the value of property
registered.
The burgeoning budget deficit is yet another persistent problem which is
draining a significant portion of government revenues. According to the
Economist Intelligence Unit, the budget deficit widened to attain 9.6 per
cent of GDP in the fiscal year 2004/05. The unit has also forecast a deficit
of 10.2 per cent of GDP for 2005/2006. Widening the deficit further is the
fact that some LE93.7 billion, which comprise 50 per cent of total expenditure
of the 05/06 budget, have been earmarked for subsidies, grants and social
benefits. Of these, LE35.4 billion was also earmarked for direct subsidies
which cover basic commodities and services, aside from energy subsidies.
The government seems bent on resolving the question of subsidies this year,
however. While it is not planning to cancel them altogether, it is thinking
of re-channeling the existing subsidies. Total abolishment is viewed as
a politically sensitive question that can lead to social unrest. The government
is already propagating the view that society needs to re-think of the viability
of subsidies on petroleum products, which are estimated to rise to some
LE40 billion in the 2006/07 budget. The expected rise will in part be due
to the higher oil prices coupled with increased consumption. Anticipated
subsidies on petroleum will exceed those which are currently directed to
the health and education sectors combined.
Weak public finances were a major constraint on Egypt's credit rating, that
was cited by Fitch Ratings last Thursday. The rating company affirmed Egypt's
foreign currency Issuer Default rating (IDR) at BB+ and local currency IDR
at BBB, both with Stable Outlooks. It also affirmed the short-term rating
and the Country Ceiling at B and BB+ respectively.
"Egypt's sovereign ratings strike a balance between impressive progress
on economic reform and a strong external position on the one hand, and weak
public finances, continuing data deficiencies despite some improvements
and a perceived rise in political uncertainty on the other," says Paul
Rawkins, Senior Director in Fitch's Sovereign team. Fitch had given Egypt
a similar rating at the end of 2004, a couple of months after Ahmed Nazif's
government took office.
Credit ratings are an assessment of the relative ability of an entity to
meet its financial commitments. Issuer Default Ratings are relative measures
of default probability.
Short-term credit ratings give primary consideration to the likelihood that
obligations be met on a timely basis. Country ceiling ratings reflect Fitch's
judgment concerning the risk of capital and exchange controls imposed by
the sovereign authorities that would prevent, or materially impede, the
private sector's ability to convert local currency into foreign currency
and transfer to non-resident creditors.
Fitch said in a press release that the gross general government debt of
113 per cent of GDP for the fiscal year 2005/06 remains far above the BB
median of 47 per cent. It added that "budget outcomes remain uncertain,
and a continuing lack of central control over public finance is a cause
for concern that, left unaddressed, could trigger a negative rating action."
Another issue that the government must contend with is that the average
Egyptian citizen has not yet enjoyed the positive impact of adopted economic
reforms. Allouba says, "this process takes time, and it cannot be expected
that the benefits of reform will be felt immediately after they are undertaken."
But he adds that the situation whereby Egypt suffers a severe disparity
in income distribution and in which a small minority enjoys the economic
benefits of the current climate, while the vast majority lives under severe
hardship, creates social tensions that need to be urgently addressed. Allouba
says that there is no longer the luxury of time to wait for the long- awaited
"trickle-down effects" of economic reform to happen.
Another question towards which Fitch expresses concerns is that of perceived
procrastination on political reform. The rating company says that the "untrammeled
progress of economic reform stands in marked contrast to the more halting
pace of political reform, and the attendant rise in political risk."
Fitch also advised that sustained economic reforms between now and the next
elections due to be held in 2011 should do much to address Egypt's political,
social and demographic challenges
Visa on arrival for Indians visiting
Egypt
Egypt will soon issue visa-on-arrival (VOA) for Indian tourists, which would
give Indians the option of applying for visa after arriving in Egypt.
This was decided by the Egyptian tourism ministry recently. Before VOA was
granted, it took a week for getting a visa to Egypt, which has an embassy
in New Delhi and a consulate in Mumbai.
“Around 57,000 Indians visited Egypt in 2005, a growth of 25 per cent
from the previous year. After the grant of VOA, the numbers will be even
better in future,” said Sami Mohammad, Councellor, Egyptian Tourist
Authority (ETA), Mumbai.
ETA expects the number of Indian tourists to Egypt to double in a couple
of years. In March, ETA Chairman Ahmed Al Khadem had visited India to promote
Egyptian tourism.
Over 8.6 million foreign tourists visited Egypt in 2005, a growth of 10
per cent from the previous year. Egypt, in the past, had offered VOA to
US, Canada, western European countries, Malaysia, Korea and Japan.
Tourism is a major contributor to Egypt's Gross Domestic Product (GDP) and
the largest foreign currency earner. The European market constitutes the
largest generating market for International Tourist Arrivals (ITA) to Egypt.
Of late, Meetings Incentives Conventions and Exhibitions (MICE) tourism
is gaining momentum.
“Egypt is a recent destination identified by Indian travellers. It
is a place which offers a blend of modernism with ancient culture. It is
a gateway to Europe, West Asia and Africa,” said an official in Cox
& Kings, the Mumbai-based tour operator.
Cultural tourism is the most popular, from which the country generates over
$ 3.5 billion. Every year, the country invests hundreds of millions of dollars
in conserving pyramids, ancient architecture and museums.
Currently eight flights operate between India and Egypt. Egypt
Air flies directly twice a week from Mumbai to Cairo.
Emirates, Qatar Airways, Gulf Air and Syrian Airlines offer connecting flights
to Egypt anywhere from the Gulf.
Tour operators like Cox & Kings, Emirates Holidays, Thomas Cook and
Kuoni have come up with attractive offers both for packaged tours and fully
independent traveller (FIT) for Egypt
Egypt Sets Currency Ceiling to Defend Export
Competitiveness
Boutros-Ghali is to sell Egyptian pounds to prevent its currency appreciating
below 5.75 per dollar to defend competitiveness of its exports and jobs,
the finance minister said.
Egypt would ``prefer'' for the currency not to appreciate in a range stronger
than 5.70 to 5.75 per dollar, Youssef Boutros- Ghali said in an interview
in the Red Sea resort of Sharm el- Sheikh,
where about 1,200 mainly Arab political and business leaders are gathering
for the annual Middle East meeting of the World Economic Forum.
A stronger currency ``reduces your competitiveness, so your exports go down
and what concerns us, employment goes down,'' Boutros-Ghali said in an interview.
Merrill Lynch & Co. said last month Egypt's currency may gain against
the dollar as faster economic growth boosts foreign currency reserves.
The dollar has declined 5.4 per cent versus the pound since December 2004,
when Egypt's central bank set up an exchange for banks to trade currencies
to improve their supply to the market. The pound, which the government floated
in 2003, closed yesterday at 5.77 pounds per dollar.
Egypt last year reported record income in foreign currencies from tourism,
oil and gas sales, and fees on ships passing through the Suez Canal that
links the Mediterranean and Red seas.
Economic growth in the most populous Arab nation will accelerate to 6 percent
in the fiscal year to June 30 on more investment and exports, compared with
5.2 percent last year, Boutros-Ghali said.
The central bank sold the equivalent last calendar year of $12 billion to
prevent the Egyptian pound appreciating beyond its ``comfort zone,'' Boutros-Ghali
said. Foreign exchange reserves are as much as $23 billion, he said.
``Egypt continues to run sizable surpluses on its current and capital accounts
while its economic recovery is gaining momentum,'' New York-based Merrill
Lynch said in an April 21 report.
``The country's relatively high real interest rates, a large build-up of
international reserves, high international oil prices and the prospect of
further privatization suggest some eventual appreciation,'' it said, without
being more specific.
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Hotel For Sale Luxor
Hotel for sale in Egypt - Luxor City Centre
Location: Luxor
Category: * * * *
Ref: GA01
Price: P.O.A.
Egypt Real Estate
Property for sale in Egypt - Apartment
Location: Luxor
Ref: PJ5007
Price: £ 43,000
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Ref: EA226
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Ref: CC5014
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Ref: EA222
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Location: Sharm El Sheikh
Ref: PJ5001
Price: £ 28,000
Details: Beds:1 | Baths:1 | Built M2 - | Pool: Yes |
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Ref: PJ5000
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Real Estate for sale in Egypt - Apartment
Location: Luxor
Ref: G7296
Price: £55,000 GBP
Details: Beds: 2 | Baths: 1 | Built: M2 - | Plot: M2 - | Pool: -| | Garage: -