** #1 – Global FDI slumped in 1H2018, but Egypt remains Africa’s top destination: Global FDI fell 41% y-o-y in 1H2018 to USD 470 bn, according to UNCTAD’s latest investment trends monitor report (pdf). The slump was driven mostly by “large repatriations by United States parent companies of accumulated foreign earnings from their affiliates abroad following tax reforms.” Developed countries such as the US, Switzerland, and Ireland also saw the sharpest decline in FDI, while developing regions, including Africa and Latin America saw their FDI inflows dip only slightly.

Egypt remained the most attractive destination for FDI in Africa in the first half of this calendar year, with the total inflow up 24% compared to 1H2017, according to UNCTAD. Egypt’s net FDI inflows had dipped in the state’s 1 July-30 June 2017-18 fiscal year to USD 7.7 bn, down from USD 7.9 bn the previous year.

FDI into Africa as a whole was down slightly at 3% as inflows to Egypt and South Africa were offset in large part by a 17% slump in allocations to “resource-dominant Western Africa.” “The volatile global economic environment and mixed commodity price trends are important factors behind weakened FDI in Africa. Also, the expected growth in FDI inflows to Africa due to advances in regional integration has yet to materialize; the African Continental Freetrade Agreement, once in operation, may trigger new investor interest in the continent.”

Developing economies accounted for two-thirds of global FDI inflows, with emerging markets accounting for five of the world’s top 10 “host economies” for FDI in the first half of this year. Among top FDI earners at all stages of development, China was the world’s largest recipient of FDI, followed by the UK, the US, and the Netherlands.

** #2 – World Bank pledges USD 3 bn loan for infrastructure projects, Sinai development: Investment and International Cooperation Minister Sahar Nasr reached a final agreement with the World Bank to extend a USD 3 bn loan “over the coming months,” according to a ministry statement (pdf). The funding will be directed towards supporting the government’s development drive in the Sinai Peninsula, as well as financing infrastructure, transport and agriculture projects elsewhere in the country and general backing for Egypt’s economic reform program, the statement says. Talks for the funding had been ongoing since April. We had reported in an exclusive back in July that Cairo was seeking USD 2 bn in World Bank funding. It remains unclear whether the USD 3 bn in funding package includes a USD 500 mn loan Prime Minister Mostafa Madbouly had requested from the bank for social housing development.

The news comes as Investment Minister Sahar Nasr is courting European investors on a roadshow that has taken her to Luxembourg, according to a ministry statement (pdf). In addition to sit-downs with government and Luxembourg stock exchange officials, Nasr is meeting with execs in industries including banking, materials, and chemicals. Look for a return visit by a Luxembourg trade delegation in the not-so-distant future.

Nasr is meeting today with the EU’s top “neighborhood policy” boss, according to a European Commission statement picked up by Al Masry Al Youm.

** #3 – Are the Ruskies finally restoring flights to Sharm and Hurghada? President Abdel Fattah El Sisi and Russian President Vladimir Putin are reportedly set to reach an agreement that would allow the resumption of direct flights between Russia and Red Sea destinations including Sharm El Sheikh and Hurghada when they meet in Moscow today, according to a State Information Service (SIS) statement (pdf). The statement provides few further details, but suggests that the two countries have already reached common ground and that El Sisi and Putin will be dotting the i’s and crossing the t’s.

A long time in the making: We’ve had our fingers crossed since August that the Russians could be making a comeback to Hurghada and Sharm after Russian tour companies began kicking the tires on travel packages to offer once flights resume. Direct air travel between Cairo and Moscow resumed last April, following protracted negotiations over security concerns after the 2015 Metrojet crash.

Putin and El Sisi are also expected to discuss military cooperation, according to Russia’s TASS. Trade ties and the latest developments at Egypt’s Dabaa nuclear plant (being built by Rosatom) and the Russian Industrial Zone will also be on the agenda.

El Sisi and Russian Prime Minister Dmitry Medvedev touched on some of these issues when they met yesterday, according to an Ittihadiya statement. The president also visited the Federation Council, where he delivered a speech on a wide range of topics, from bilateral ties to ideological and religious extremism and the political course in Libya and Syria, according to a readout of the speech.

The Moscow trip is getting end-to-end coverage in the domestic press. It is front-page news Al Ahram, the government-controlled newspaper of record, and dominated the airwaves on talk shows last night. Masaa DMC’s Osama Kamal zeroed in on the potential resumption of direct air service to Sharm and Hurghada (watch, runtime: 9:10), while Cairo University Political Science Professor Moataz Abdel Fattah spoke with Hona Al Asema about what he said was Russia’s increasingly important regional role (watch, runtime: 8:14). Yahduth fi Masr’s Sherif Amer noted that El Sisi’s address to the Russian Federation Council was the first ever to that body by a visiting head of state (watch, runtime: 5:25).

** #4 – EXCLUSIVE- FinMin looking at regulatory changes to allow sovereign sukuk issuances; eyes 2019 for maiden issuance: The Finance Ministry plans to introduce legislative amendments that could pave the way for the issuance of a sovereign sukuk offering as early as 2019, a senior government official tells us. The framework would explicitly make possible the issuance of sharia-compliant bonds in USD or EUR, a plan shelved since 2013. The ministry reportedly believes sukuk could be a cornerstone of its long-term debt-management strategy, which sees the government borrowing USD 20 bn over the course of the next four years.

Background: Finance Minister Maait had told us back in September that the government was unlikely to issue sukuks this fiscal year as there was no legislative framework in place allowing it. Recent legislative and regulatory changes allowed sukuk for corporates, but did not explicitly authority sovereign issues.

Ministry eyeing two-year local currency bonds? The same official tells us the Finance Ministry could introduce a two-year local-currency bond as it adjusts the tenor and local- / foreign-currency mix of its borrowing.

EXCLUSIVE- Gov’t looks to keep Korean companies happy as it drums up Asian interest in eurobond issuance: The Finance Ministry is forming a working group with the Korean embassy to resolve any outstanding concerns of Korean companies operating here, a senior government official tells us. The move comes as the Finance Ministry looks to address any lingering hiccups in a key trade and investment relationship as it tests Asian appetite for an upcoming USD 5 bn eurobond issuance, the source said. Finance Minister Mohamed Maait has reportedly met with Seoul’s ambassador to Cairo multiple times over the past few weeks to get a tally of some of the issues South Korean companies face.

The move highlights the pressure the government is feeling to ensure successful bond and stock issuances over the coming months in the midst of the emerging markets selloff. Some analysts are seeing the 11% drop in Sarwa Capital’s shares on its opening day of trading and the ever-rising yields on government bond issuances as a sign that Egyptian capital markets are feeling the strain of the selloff.

INVESTMENT WATCH- Infinity Solar plans to invest USD 400 mn in solar and wind power projects through 20201, a company official told Al Mal. The company aims to develop as much as 400 MW of capacity in Cairo, the Red Sea and Aswan, the official said, all under the Independent Power Producer (IPP) framework. In the works are three solar power facilities with a combined capacity of 130 MW, the first of which is slated to come online in April 2019 in the world-scale Benban solar complex, where Infinity was the first company to complete a solar plant earlier this year. The company had also recently obtained licenses for two wind-powered stations with a combined capacity of 100 MW.

Gas import era ends as Höegh Gallant FSRU leaves Egypt this week: The Höegh Gallant floating storage regasification unit (FSRU), until recently the final critical link in Egypt’s natural gas import chain, is set to leave Egypt before the week is out, Oil Minister Tarek El Molla told Reuters, marking another milestone in Egypt’s cessation of gas imports. Höegh has agreed with Egypt to amend the terms of a five-year contract for the FSRU that will see the Norwegian company hired as an LNG carrier to a third party, Höegh said in a statement on Monday.

Egypt to make Höegh whole: The amendments also stipulate that the state’s EGAS will compensate Höegh for the rate difference between the original FSRU contract and the new LNG carrier agreement. Egypt will also compensate Höegh for equipment installed on the Ain Sokhna jetty for 3Q2018. “The amended contract is expected to become effective in October 2018 and will run to April 2020, the termination date of the original five-year FSRU contract.”

Background: El Molla officially pulled the plug on Egypt’s natural gas imports in September. That’s when the country received its final shipment of imported liquefied natural gas as we switch from being a net importer to a net exporter thanks to recent world-scale natural gas finds. Egypt’s total gas production output reached 6.6 bcf/d in September after capacity from the Zohr gas field hit 2 bcf/d.

REGULATION WATCH- FRA to introduce regs next year on credit scores for margin traders: The FRA is planning to implement next year recently-passed regulations that allow brokers to unilaterally sell shares belonging to clients trading on margin if their credit score falls below a certain threshold, Al Mal reports. Earlier this year, the FRA approved allowing brokers to sell a client’s shares in a margin trade, without their consent, if a client’s iScore falls below 400 points. The regulations stipulate, however, that the client be given a grace period to bring up their credit rating.

LEGISLATION WATCH- Parliament’s housing, econ committees to discuss amendments to Real Estate Tax Act this month: The House of Representatives’ economics and housing committees are expected to meet sometime this month to discuss proposed amendments to the Real Estate Tax Act, housing committee chair Rep. Alaa Waly tells Al Masry Al Youm. The proposed changes cover everything from the new real estate tax formula to how rented properties would be taxed, how properties would be appraised, and avenues for appeals. Waly stressed that parliament will not be scrapping the tax, but noted that President Abdel Fattah El Sisi has called for the amendments to be “revisited” to be more considerate of low-income citizens. According to Waly, his committee will be done with the proposed amendments before the end of 2018. He made no mention of the fate of the Returns Act — the rival legislation drafted by some MPs who are unhappy about the proposed changes to the Real Estate Tax Act.

The House Industrial Committee will meet on 21 October to discuss proposed amendments to the law governing the Federation for Egyptian Industries, Industry Committee chair Farag Amer said, according to Al Masry Al Youm. The proposed changes include tweaking the fee paid by new manufacturers for their membership in the federation as well as regulating the procedures for dissolving the federation’s board of directors. Manufacturers are required as part of their licensing and incorporation procedures to pay dues to the federation.

** #5 – Freezone companies are trying to wiggle out of paying into Universal Healthcare scheme: A number of freezone companies are objecting to paying the 0.25% tax on sales revenue to fund the new universal healthcare scheme, as stipulated under the Universal Healthcare Act, unnamed company representatives said. By their logic, freezone companies are exempt from paying taxes and fees under the Investment Act, which means that they should also be exempt from paying the 0.25% tithe. A government source noted, however, that the levy is not a tax that can be waived — it applies to all companies operating in Egypt, regardless of whether they’re onshore or offshore for customs purposes. The act — part of the Sisi administration’s EGP 600 bn health coverage plan — also sets premiums for employers of 4% of each employee’s monthly salary, while employees are required to pay premiums of 1% of their salary into the system. The El Sisi administration began rolling out the first phase of the act in July.

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