LEGISLATION WATCH- The House of Representatives voted into law yesterday amendments to the Capital Markets Act that pave the way for the introduction of new financial instruments. The act saw amendments to some 45 articles, the most extensive change to the law since it was first issued 26 years ago, Investment Minister Sahar Nasr said on Tuesday, AMAY reports. Nasr also noted that there are more amendments to the act in the pipeline.

So, what’s new? Readers of Enterprise are likely familiar from our past coverage with most of the major changes. They include:

• Setting up a framework for companies and the government to issue sukuks. Details of procedures for issuance will be laid out in the executive regulations, but what you would need to look out for is that the law prohibits holding more than one sukuk issuance at a time.
• Allowing for trading of futures contracts and the opening of an exchange for futures. The amendments also set a minimum capital base of EGP 20 mn for brokerages looking to trade on futures exchanges.
• Allowing for the establishment of a commodities exchange as well as privately-owned stock exchanges. Private exchanges would face licensing fees of no more than EGP 100k.
• Reducing listing fees to 0.002% of the value of the financial instrument or stock to encourage smaller companies to list.
• Tightening penalties for violators of the act by setting a fine of no less than EGP 20 mn and prison terms of no more than five years.
• Setting up a federation for non-banking financial companies similar to the Federation of Egyptian Banks.

No short selling or short-term bonds yet? Would-be shorts and issuers of short-term paper will have to wait a while longer, it seems—we could find no reference to either in official documentation released yesterday. The Financial Regulatory Authority (FRA) had said that short-selling will be part of the executive regulations of the act, which are currently still being drafted. We had noted that FRA had been trying to squeeze short-term debt instruments into the act, but that appears to not have made it. We assume these would either be included in the upcoming regs or introduced to the law later under the additional amendments that Nasr signaled yesterday.

You can read the full Capital Markets Act courtesy of Youm7 or skim a side-by-side comparison of the old and new law from Al Mal (if you can decipher it).

LEGISLATION WATCH- The House also gave a preliminary nod yesterday to the amended Consumer Protection Act, according to Youm7, which stands out among all of the Ismail government’s economic legislation as the only one that is clearly statist and anti-free-market. The latest draft of the act has not yet been released, so there are still some questions on what is in the law.

What we know about the Consumer Protection Act: The latest to come out of the act is that it enshrines the powers with any humorless Consumer Protection Authority (CPA) head to ban advertising he or she believes is misleading or harmful, the newspaper notes. Newly revealed features of the law include consumer protection provisions in e-commerce. The law will also force retailers to print a breakdown of prices on their goods including profit margins, media reports suggest (take that with a heaping cup of salt, folks). The new law also lays out guidelines for product recalls as well as enforcing stricter penalties for those violating consumer protections regulations on quality and health issues. The proposed bill would also make the CPA an independent regulator under cabinet and not under the Supply Ministry. We’ve also noted previously regulations in the act that would impact auto dealerships.

Perhaps the most burning question for the private sector (and one which the government hasn’t mentioned in over a year) are provisions on price controls. From what we’ve been hearing, the CPA can move to regulate and institute price controls on goods it deems essential or strategic after receiving sign-off from cabinet.

LEGISLATION WATCH- The Ismail cabinet introduced its proposed Cyber Crimes Act to the House yesterday, Al Shorouk reports. A number of MPs have noted (approvingly, we add) that the law would make it easier to run surveillance of social media, but would oblige the security and policy services to seek authorization before tracking any one specific individual. The Cyber Crimes Act will expand the definition of online crime to include “spreading false news on Egypt,” which will apply to all media outlets.

Cabinet has also introduced amendments to the Traffic Act.

LEGISLATION WATCH- The Natural Gas Act is now in effect: The Ismail Cabinet appears to have finally signed off on the long-awaited executive regulations to the Natural Gas Act, according to a statement carried by Reuters. The Natural Gas Act — which effectively deregulates the industry by allowing the private sector to import and distribute natural gas and reducing the state’s role to that of market regulator — was approved by the House of Representatives last August. While details on the contents of the regs have yet to emerge, officials had said last year that they would outline the exact role and duties of the new state regulator, which is meant to lead the state’s gradual transition out of the industry by 2022, monitor market activity, and issue licenses for natural gas imports (that at least four companies have applied for already). The regulations are also expected to offer incentives that will attract investments to the LNG, petrochemicals, and fertilizers industries. Oil Minister Tarek El Molla had previously said that foreign companies would be allowed to export Egypt’s oversupply of natural gas in five years’ time. The state had tapped Logic Management Consulting to advise on the setup of the gas market regulator. We’ll have more once we get our hands on a copy of the executive regulations.

LEGISLATION WATCH- Amendments to the Customs Act will expand exemptions for production inputs. The Finance Ministry announced changes to the Customs Act designed to expand exemptions and tighten loopholes for tax dodgers. The amendments will expand temporary exemptions for productions inputs throughout the value chain and, for the first time, include packaging equipment on the list items eligible for temporary exemptions. Goods that have been imported to be refined and then re-exported will also receive temporary exemptions, according to a ministry statement.

Tightening loopholes: The amendments, which received cabinet approval last week, reduce the duration of temporary licenses to one year with the possibility of a one-year renewal period, down from four years right now. The move is meant to tighten supervision on temporary exemption grants, the statement reads. Importers who want to use for other purposes goods that were originally imported as production inputs must pay the full custom duties and an additional penalty tax. That tax has been reduced to 1.5% from 2%.

Reducing congestion at customs: The amendments will also reduce the time goods are allowed to remain in storage at Customs Authority before being claimed to six months.

In other customs-related news, Trade and Industry Minister Tarek Kabil extended the grace period for importers to comply with amendments to the Importers Registry Act by another six months, the ministry said in a statement on Tuesday. The amendments include increasing the minimum capital for individuals to be registered to EGP 500k from EGP 10k, for limited liability companies to EGP 2 mn from EGP 15k, and for joint-stock companies to EGP 5 mn. The law also imposes stricter penalties for violation of import regulations.

Egypt is “really important for us,” BP CEO Bob Dudley told CNBC's Steve Sedgewick. “[BP] invested more money in capital last year in Egypt than any other country in the world. So people are very surprised about that we've been here for 50 years, we're producing lots of gas natural gas.” Dudley adds that, despite the major political events since 2011, BP has “never missed a day of production.” He also praised the performance of the current government, saying “the governments have been good but this government is actually great. President on down has always said I'm going to cut through the red tape. Tell me what needs to be done. It's excellent. The Prime Minister, Energy Minister, all of them one team. So that's really rare. Now in a world where a government just works to move things fast quickly helps track.”

FDI in oil and gas sector up to USD 10 bn this year: Investment by international oil companies reached USD 10 bn so far in FY2017-18, Oil Minister Tarek El Molla said in an interview with Al Borsa. This will likely increase, as the ministry plans to issue exploration tenders, including in the East Mediterranean and in the Nile Delta region sometime in 2H2017-18, said El Molla. The ministry plans to float tenders in the West Mediterranean once seismic mapping of the area is complete and a marketing strategy for the field has been developed. He added that the Red Sea and South Egypt areas will also see tenders for the very first time once geological data has been collected.

El Molla once again reassured IOCs that Egypt is committed to paying its arrears, noting that they now stand at USD 2.3 bn since the last USD 2 bn payment was made in June 2017. He noted that these were lowest levels of IOC-debt since 2013. (The question remains, though: What about small- and mid-sized players, who have seen their receivables balloon at the same time as the global majors are being paid out?)

Pay attention, Israel and Jordan: “Our first priority when Egypt begins exporting is to meet previous export commitments we have made and but were unable to meet over the past few years,” said Tarek El Molla. The statement (toned down and buried as it is) likely carries significant implications for energy politics in our little neighborhood. Israel Electric won a USD 1.76 bn international arbitration award against state petroleum companies EGPC and EGAS and pipeline operator EMG for halting gas supplies to Israel five years ago. The arbitration case remains a primary sticking point preventing exports from Israel’s Leviathan gas field to Egypt. Prime Minister Sherif Ismail has said there will be no open discussion of gas imports from Israel until the arbitration award is cleared. Egypt’s gas contracts Jordan had also been severely disrupted back then on the back of attacks on Egypt’s pipeline.

El Molla also signed contracts with Baker Hughes to set up an online platform to market Egypt’s discoveries, AMAY reports. The database is one of a series of tools announced by El Molla on Monday which aim to spur further oil and gas investments.

M&A WATCH- Shuaa Capital is assessing potential acquisitions in Egypt’s financial services industry, Bloomberg reports. The expansion could also come through faster hiring, Chairman Jassim Alseddiqi also suggested. Shuaa has plans to become one of Egypt’s five largest brokerages “as soon as this year” and has already applied for investment banking and asset management licenses. CEO Fawad Tariq Khan had said that “now is the time to invest in Egypt,” but cautioned that “his biggest concern in Egypt is whether authorities will push ahead with the remainder of its economic program.” (Call us state apologists, but we respectfully draw Mr. Khan’s attention to the LEGISLATION WATCH stories above on that last point.)

EFG Hermes replaced Elsewedy Electric on the MSCI Global Small Cap Index (pdf). The move is part of the MSCI Global Standard Indexes’ semi-annual review.

INVESTMENT WATCH- China’s Wuhan to invest in EGP 500 mn building materials factory: China’s Wuhan Corporation has signed a partnership agreement earlier this week with a consortium of unnamed Arab investors to establish an EGP 500 mn building materials factory in the Suez Canal Economic Zone, Al Borsa reports. Matouk Bassiouny was reportedly tapped as legal counsel to Wuhan on the transaction, while TMS Law Firm advised the group of Arab investors.

Will the Trump administration unfreezing the c. USD 200 mn in military aid it withheld from us last year? Foreign Ministry spokesperson Ahmed Abu Zeid said the US would release the full USD 1.3 bn in military aid to Egypt in its FY2018 budget and will do so in again in FY2019. His statement came in response Hona Al Asema’s Lamees Al Hadidi questioning remarks made by US Secretary of State Tillerson that US military aid to Egypt amounted to USD 1 bn. The Trump Administration had gone to the US Congress to request the funds for Egypt, added Abu Zeid (watch, runtime: 4:10).

Are Abu Zeid’s remarks corroborated by the US budget? That appears inconclusive when looking at the Trump Administration’s FY2019 budget proposal (pdf). “The Budget also dedicates significant security and economic assistance to other key partners in the region, including Egypt,” the proposal reads, without listing a figure. It lists USD 3.3 bn to Israel and USD 1.3 bn to Jordan. Defense News, however, seems to say that Egypt is indeed in line to receive USD 1.3 bn in military assistance, while Jordan will fact receive USD 350 mn. It also says that US President Donald Trump is requesting a USD 1 bn cut to the State Department’s Foreign Military Financing program for 2019 to USD 5.3 bn (draw your own conclusions as to what that may mean for Jordan; either way, it seems a bit odd to us). Trump said Monday that aid expenditures in the Middle East were “a mistake,” erroneously claimed that the United States has spent USD 7 tn in the Middle East over the past 17 years, according to the Washington Post. As we noted yesterday, analysts expect Egypt and a number of key allies will be spared the cuts.

Speaking of Tillerson, the Secretary of State urged the GCC to restore unity and resolve the Qatar dispute, Reuters reports.

Genena detained by military prosecution for 15 days: Military prosecutors ordered former head of the Central Auditing Organization Hesham Genena to be detained for 15 days pending investigation of his claim that he holds incriminating evidence against the Supreme Council of Armed Forces, state news agency MENA reported, according to Reuters.

Genena’s detention comes two days after the release of his interview with HuffPost Arabi, in which he threatened to release the evidence if former military chief of staff Sami Anan is subjected to harm in military detention. Genena had been one of Anan’s top aides during the latter’s short-lived presidential bid.

Meanwhile, Anan’s son distanced himself from Genena’s comments to HuffPost Arabi. Speaking to Dream TV’s Wael El Ebrashi on Monday night, he said that it would not make sense for his father to incriminate the military council to which he once belonged. He also added that he would take legal action against Genena for “spreading pro-Ikhwan rumors and propaganda”.

MOVES- CAPMAS has a new boss. President Abdel Fattah El Sisi appointed Khairat Mohamed Barakat as the new head of state statistics and census agency CAPMAS, Al Shorouk reports. Barakat succeeds Abu Bakr El Gendy, who became Local Administration Minister in last month’s limited cabinet shuffle.

Turkish President Tayyip Erdogan has warned Cyprus not to “overstep the mark” in the eastern Mediterranean after the Cypriot government accused the Turkish military of blocking an Eni drill rig from exploring for natural gas since Friday, Reuters reports. “Our warships and security units are following all developments in the region with the instruction to do whatever is necessary,” he said. Cyprus President Nicos Anastasiades declined to comment on Erdogan’s remarks, but said there was no cause for worry.