Chinese lenders make USD 3.1 bn in funding available for Carbon Holdings’ USD 10.9 bn petrochem complex: A group of unnamed Chinese lenders have made USD 3.1 bn in backup funding available for Carbon Holdings’ Tahrir Petrochemicals Corporation (TPC), Suez Canal Economic Zone (SCZone) deputy head Mahfouz Taha tells Al Mal. According to Taha, TPC will be able to dip into these reserves if other funding is delayed or falls through. The USD 10.9 bn petrochemicals facility is being financed by a USD 5.4 bn debt package through institutions such as UK Export Finance, Germany’s Euler Hermes, and the US Overseas Private Investment Corporation.

TPC is expected to reach financial close in 3Q2018. Principal construction, which should begin before year’s end, should take about four years from the initial drawdown of funds, with trial operations set to start within 38 months of the start of construction. The world-scale petrochemicals facility is expected to deliver USD 8 bn in projected annual exports and produce raw materials that can be used in a variety of industries.

FT singles out TPC as an example on where FDI should be going: Egypt should be focused on “prosaic industrial investment” that can open up more avenues for job creation, the FT says in an opinion piece. Egypt has been on the right track, with measures and developments that have helped sustain its performance throughout the current EM sell-off, such as fuel subsidy cuts, cooling inflation rates, rebounding tourism, and high interests that “have attracted hot money into local currency bonds.” Going forward, however, the country needs to focus attracting investments to key industries to ensure a more sustainable and organic type of growth. The publication sees projects such as Carbon Holdings’ Tahrir Petrochemicals Complex as “the kind of key intermediate industry that has helped drive economic growth in Asian “tigers” such as Korea and Taiwan.”

Natgas market deregulation gets in full swing as regulator to officially begin issuing import permits: The board of directors of the new natural gas market regulator approved that it begin issuing and revoking licenses for private sector natural gas industry players, according to an Oil Ministry statement. The regulator — established under the Natural Gas Act, which deregulated the market and opened it up to the private sector — will begin its work “in the coming period,” according to the statement. Natural gas companies are currently gathering the necessary paperwork to submit their requests for a license to distribute natural gas, ministry sources said, Al Shorouk reports.

So, when are we going to see the first import permit issued? We will likely see the first private sector import licenses issued by the end of 2018, sources added. Previous reports had said that the board would issue the first LNG import license to the private sector by the end of February, but we have yet to see any progress on that front. While it remains unclear which company will make the first draw, it is a safe assumption that it will likely go to Alaa Arafa’s Dolphinus Holdings, which had signed a USD 15 bn natural gas import agreement with Israel earlier this year. We had heard last year that EGAS gave BB Energy, Fleet Energy, and Qalaa Holdings’ TAQA Arabia preliminary approval on natural gas import licenses, which would need to be ratified by the new regulator.

Fitch’s BMI Research sees monetary easing cycle continuing this year: Fitch Group’s BMI Research expects the CBE to resume the monetary easing in the next two quarters, as it looks to boost private sector growth, the firm said in its North Africa report. The easing will take place gradually, as the CBE must also weigh the inflationary impact of last month’s subsidy cuts to fuel, electricity and water. BMI Research forecasts that inflation growth will average 15.2% y-o-y in 2018 and 12.1% in 2019. The central bank must also take care not to drive away foreign portfolio inflows lured by the attractive interest rates. As such, the firm expects the CBE to cut interest rates by a further 200 bps in 2018 and another 300 bps in 2019.

BMI also sees Egypt’s successful macro fundamentals story as underpinning continued portfolio inflows in the short term. “Strengthening confidence in the Egyptian economy and still attractive real interest rates are likely to drive a modest appreciation of the pound in the near term,” the firm said. “Beyond 2018, monetary easing is likely to fuel a very gradual depreciation as less attractive real interest rates in an environment of monetary policy normalisation across developed markets weigh on the exchange rate,” the report added.

Inflation and oil prices are our biggest risk factors: The biggest risks to these gains are any larger than expected inflation numbers resulting from the subsidy cuts, in addition to rising oil prices, the report noted.

BMI projects that Egypt’s real GDP growth for 2018 will come in at 4.8%, far lower than the government, IMF and World Bank’s expectations. It even forecasts that GDP growth will slip in 2019 and 2020 to 4.7% and 4.3% respectively.

On the regional level, we’re not the only ones straining under the weight of higher oil prices, which have raised the risk profile of North African nations. Morocco and Tunisia appear to hold the biggest economic and political risks in the region. The report sees Brent crude prices averaging USD 73/bbl in 2018, rising to USD 77/bbl in 2019.

On the flipside, Capital Economics is warning that Egypt may go the way of Argentina. The reason? Egypt’s large foreign currency debt, which Capital estimates to be at around 30% of GDP at the end of 2017, up from less than 15% of GDP in 2015. “Large foreign currency debt burdens have been at the heart of the problems that have afflicted a number of emerging markets in recent years, most recently in Argentina. One of the main reasons why a build-up of sovereign foreign currency may be a source of concern is that it leaves the government exposed to swings in the exchange rate,” notes the report. “If the EGP weakens, that pushes up the local currency cost of servicing hard currency debt,” says Capital Economics.

That said, the risks of turning into another Argentina through a destabilising fall in the currency appears to be low, especially following the EGP float in 2016, notes the report. Furthermore, the government has the IMF Extended Fund Facility to keep it grounded in its fiscal consolidation measures.

Any slip-ups in the reform agenda could risk a slide of Argentina proportions: “Any signs that progress on fiscal consolidation is stalling and that the shift towards more orthodox policymaking is going into reverse would cause investors to take flight and put renewed pressure on the pound,” the report noted. It added that Egypt’s FX debt-to-GDP ratio, coupled with its already precarious fiscal situation puts it on a very slippery slope should that risk come to pass.

(We are unable to link to either report for copyright reasons)

EXCLUSIVE- FinMin wants to start selling gov’t bonds on the EGX this fiscal year: The Finance Ministry has begun taking steps towards selling government bonds on the EGX, and has begun coordinating with the central bank to get the ball rolling on that, Finance Minister Mohamed Maait told us in an exclusive interview. A legislative pipeline is being readied to help establish a market for government bonds on the bourse, with an eye towards getting passed in the current legislative cycle, he added. Expects bond sales on the EGX to begin in the current fiscal year, but did not give any indication as to when. The government firmly intends to only sell long-term bonds as part of its plan to rely on long-term debt. It will not be selling short-term treasuries on the stock market.

Maait sets the record straight on Egypt tapping the global sukuk market in FY2018-19: Thanks to a very busy legislative cycle, Egypt will not be issuing Islamic Sharia-compliant bonds in USD or EUR in the current fiscal year, Maait tells us. There currently is no legislative framework in place that will make that possible, and due to an already stacked legislative cycle, Maait does not see it happening this year. Maait is setting the record straight following news reports last week which stated that Egypt would indeed be issuing sukuks in FY2018-19.

Ride-hailing apps Uber and Careem are not in talks over a potential merger or acquisition, Careem spokesperson Maha Aboul Enein told Al Mal yesterday. Bloomberg had reported late on Tuesday night that the ride-sharing companies were discussing a potential consolidation that could either see them merge their operations or see Uber fully acquire it Middle Eastern rival. Aboul Enein dismissed the news as a “rumor,” claiming that Careem is trying to build its own leading platform in the Arab World and working to expand into new markets and bolster its presence in existing ones. We had heard that Careem was close to closing a new funding round meant to “bolster its position as Uber’s largest competitor in a fast-growing market.”

LEGISLATION WATCH- The Council of State’s legislative division signed off yesterday on draft legislation that would establish Egypt’s first sovereign wealth fund, Al Shorouk reports. The law is expected to govern the structure and functions of the fund, which will have authorized capital of EGP 200 bn and initial paid-in capital of EGP 5 bn. Planning Minister Hala El Saeed hopes the law will pass during the current legislative term. A reading of a draft in April had claimed that the law would give the fund financial and legal independence. El Saeed had said last month that the fund would launch at the end the year, with a roadshow to draw in private investment set to take off in 1H2019. The private sector will be allowed to buy stakes of over 50% in sub-funds and affiliated companies, she had also said.

In other legislative news, a draft Data Protection Act is expected to be presented to the House of Representatives in October, after the start of the new legislative session. The 51-article bill is currently being drafted and finalized by the Justice Ministry before it’s presented to the Madbouly Cabinet, said Mohamed Hegazy, the head of the ICT Ministry’s legislative committee. Under the law, only companies with permits to share user data will be allowed to do so, with the condition being that they obtain users’ prior approval, according to Hegazy. He tells Al Mal that the bill is “compatible with the principles of the European Union’s General Data Protection Regulation” on data privacy and treatment, as well as user accountability.

The law will also allows users the right to take legal action against data breaches and misuse of private information, he adds. It will also set fines of up to EGP 5 mn for violations as well as prison sentences of up to three months, based on the severity of the crime. The Information Technology Industry Development Agency (ITIDA) will be the sole authority responsible for implementing the new law. We had first heard of legislation for data protection in November last year.

Public Contracts Act sets conditions for awarding direct order contracts: Also IN legislation, the Public Contracts Act (previously known as the Tenders and Auctions Act) reportedly sets seven conditions under which the government would be allowed to bypass the tendering process and award contracts via direct order. For example, if only one company is truly qualified to take on the project or if the project too time-sensitive to wait for a tender. You can view the full list here courtesy of Al Shorouk. The act — which decentralizes tendering procedures and streamlines the selection process for winning bids — received a preliminary nod from the House of Representatives on Monday and is expected to come to a plenary session vote soon.

EU lifts additional inspection requirement for Egyptian strawberries: The EU Health and Food Safety Commissioner has agreed to remove Egyptian strawberries from its list of high-risk crops and cancel its requirement for additional inspections, Agriculture Export Council head Abdel Hamid El Demerdash said, Youm7 reports. The commissioner had noted in March that Egyptian strawberries and peppers had improved in quality and begun meeting European food safety regulations in 2H2017. Imports of Egypt’s strawberries were banned by several countries — including Saudi Arabia — over high levels of residual pesticides. The Agriculture Ministry has since moved to impose more stringent inspection measures on agricultural product exports.

Top appeals court overturns decision placing Morsi, Aboutrika on terror list: The Court of Cassation overturned yesterday a ruling placing ousted president Mohamed Morsi, retired football star Mohamed Aboutrika, and hundreds more on the terror list. The court also sent the case back to a lower court for a retrial. The defendants had initially been placed on the watchlist for their alleged connections to the Ikhwan. Aboutrika’s legal status remains unchanged and he is still on the terror list from a separate criminal court ruling from April, lawyer Mohamed Osman said, Ahram Online reports. The story is topping coverage of Egypt in the foreign press this morning, with Bloomberg, Sputnik and Xinhua among those taking note.