INVESTMENT WATCH- iPhone manufacturer Foxconn eyeing Egypt opportunities: Prime Minister Sherif Ismail met on Wednesday with execs from Taiwanese electronics giant Foxconn Group to discuss potential partnerships in manufacturing, according to a cabinet statement. The meeting comes one day after representatives of the company, formally known as Hon Hai Precision Industry Co., met with executives from the Arab Organization for Industry (AOI) and ICT Minister Yasser El Kady to discuss a potential collaboration to locally manufacture tablet devices for the Education Ministry. Education Minister Tarek Shawki separately told Al Mal yesterday that the Education Ministry received seven offers from international technology companies to supply tablets for schools.

Don’t expect an imminent announcement, but still: One doesn’t get a meeting with the PM if one’s intentions aren’t serious — and haven’t been seriously vetted.

IPO WATCH- Eastern Company to sell additional stake on the EGX after Eid Al Fitr: The Eastern Tobacco Company will be the first state-owned enterprise to float additional shares on the EGX under the government’s privatization program immediately after the Eid Al Fitr break (which ends around 17-18 June), Public Enterprises Minister Khaled Badawy told the press yesterday. The government expects to raise around EGP 2.5 bn from the sale of 4% of the Chemical Industries Holding Company’s (CIHC) stake in Eastern, Badawy said.

The sale could be split in two stages, each offering 2% of the company’s shares, CIHC boss Emad El Din Mostafa tells Al Mal. The offering will be priced at the average share price in the one-month period immediately after the company’s board of directors approved the transaction, he adds. Badawy had announced on Monday that Eastern Company’s board signed off on the sale, the proceeds from which will be used to fund the restructuring of other companies in CIHC’s portfolio. The move would ensure the CIHC retains a 51% stake of the tobacco-maker, with 49% in free float.

Background: The Ismail Cabinet had announced earlier this month that the government was hoping to raise as much as EGP 15-18 bn from the first phase of the privatization program, which will run from June to end of 2018 or early 2019, and see four-six state-owned petroleum and petrochemical industries companies offer additional stakes and list new shares on the EGX. A cabinet committee that includes the ministers of investment, finance, petroleum, and public enterprises is overseeing the privatization program, candidates for which include some 23 companies.

INVESTMENT WATCH- British American Tobacco is planning to invest GBP 30 mn in Egypt over the next 12 months to add new production lines to its factories, General Manager Steven Harvie announced yesterday. The company plans to focus on marketing its Pall Mall cigarette brand during the coming period, in addition to developing other products, according to Harvie. A portion of the investment will also be used to set up the company’s new head office New Cairo.

TE cozying up to China: Telecom Egypt and China’s Huawei Technologies signed a USD 200 mn long-term financing agreement with a number of Chinese financial institutions, including the the Bank of China and the China Export and Credit Insurance Corporation (Sinosure). The four-year loan, which Huawei facilitated for TE with “competitive financing conditions,” will be used to finance the roll out of TE’s 4G services and “the deployment of transmission and core networks,” TE said in a press release yesterday (pdf). “TE has several strategic long-term expansion plans to be delivered in the coming years. To achieve such plans we have worked on attaining long-term financing at the lowest possible cost as well as the most convenient payment terms to match our cash flow generation,” CEO and Managing Director Ahmed El Beheiry said. “The facility benefits Telecom Egypt by providing a simplified purchasing process through a packaged financial solution, while it allows Huawei to further expand its business in Egypt.”

The news comes as TE is still reportedly seeking a USD 200 mn short-term facility from the African Export-Import Bank, which sources said will be used to finance the USD 90 mn acquisition of MENA Cables from Orascom Telecom Media and Technology, as well as other investments in telecom infrastructure.

Industrial license issuances are up 25x since Industrial Permits Act: Cutting red tape is doing wonders for industry, with the number of permits for plants growing 25x since the Industrial Permits Act was signed into law last summer, Industrial Development Authority head Ahmed Abdel Razek said. The authority has issued 8,400 licenses since the law came into effect versus 340 the year before, he tells Bloomberg in an interview. The law effectively cuts the wait-time to receive approval for permits to seven or 30 days (depending on the licensing track) from a previous average of 600 days.

Domestic and foreign manufacturers alike are driving demand for licenses: “A lot of existing investors are expanding, and many foreign investors started to enter the Egyptian market after they found a good investing environment,” he added. “Half of the requests for land on my waiting lists are by foreign investors.”

What’s next for the Authority? Making more land available for industrial use, said Abdel Razek. To attract more interest, the authority plans to offer about 30 mn sqm of land for industrial purposes through 2020, up from 9.5 mn sqm in the period between 2007 and 2016. In a separate statement to the press, he said that the government is planning to introduce to the House of Representatives a new law governing the formation and management of industrial zones following the Eid break.

Egypt’s foreign debt obligations reached USD 82.9 bn at the end of December 2017, or around 36.1% of GDP, up from USD 67.3 bn at the end of December 2016, according to the central bank’s March statistical bulletin report. Egypt settled USD 8.6 bn of its debt service between July and December 2017. Government officials had previously said that Egypt’s foreign debt levels remain within a safe range, especially as the country plans to repay some USD 12 bn in dues this year, including USD 850 mn to international oil companies.

BUDGET WATCH- President Abdel Fattah El Sisi will reportedly receive the FY2018-19 state budget “within days” after it comes to a vote at the House of Representatives. The bill contains a number of scenarios for how to adjust for a potential surge in global oil prices, sources with knowledge of the matter tell Al Mal. The rise in global oil prices has been a source of concern, as state estimates put the barrel at an average USD 67 in the budget. Oil prices, however, have been on a steady incline, trading at levels not seen since 2014, with Brent crude briedly crossing the USD 80/bbl mark in recent weeks. Some MPs had called on the government to amend its fuel price projections if it hopes to meet its target budget deficit of 8.4% of GDP. But with subsidy cuts still in the offing, the government appears confident it can plug the gap. Analysts see fuel prices rising by c. 60% next fiscal year.

CABINET WATCH- The Ismail Cabinet signed off yesterday on an EGP 70 bn overdraft for the FY2017-18 state budget to cover “necessary expenditures,” according to a statement. The statement does not provide further details on the decision, but Vice Minister of Finance Mohamed Maait had told Enterprise last week that Cabinet was looking into raising the budget’s overdraft on account of higher oil prices. The government had assumed oil would average EGP 55/bbl but Egypt has reportedly been importing fuel at USD 75/bbl as oil now trading at a high not seen since 2014.

The Council of Ministers also signed off on a USD 500 mn loan agreement with the World Bank aimed at supporting the state’s K-12 educational reform strategy. The new system will be implemented as of the new academic year starting in September for kindergarten and students in the first years of primary and secondary education. The Education Ministry plans to do away with the education system currently in place by 2026, minister Tarek Shawki had said earlier this week. The revamp is expected to cost a total USD 2 bn when all is said and done.

New financing for development of electricity grid: The government has allocated EGP 25 bn to develop the country’s electricity grid over the next two years, Electricity Minister Mohamed Shaker told reporters yesterday, according to Al Masry Al Youm. Ministers also signed off on a USD 198 mn loan from the Arab Fund for Economic and Social Development earmarked for the nation’s power grid.

Also at yesterday’s cabinet meeting, ministers approved:

• The Military Production Ministry’s MoU with China’s GCL Group to establish a USD 2 bn solar panel factory;
• Taking the necessary measures to select a company to manage and operate the Grand Egyptian Museum;
• A bundle of decisions and recommendations from the ministerial committee for the resolution of investment disputes;
• A presidential pardon for an unspecified number of prisoners ahead of Eid Al Fitr.

EXCLUSIVE- New tariffs on luxury goods, tariff cuts on production inputs coming in December? The government is preparing to announce changes to import tariffs that will come into effect in December, sources tell Enterprise. Changes reportedly being considered by the Higher Tariffs Committee include higher tariffs on luxury goods, our sources tell us, stopping short of providing additional detail. President Abdel Fattah El Sisi imposed in late 2016 a series of higher tariffs on luxury imports.

Production inputs for glass, plastic and paint manufacturing will see customs duties reduced, as their tariffs are currently higher than those of the finished products, sources added.

Private sector being consulted on changes: Business associations and export councils have sent recommendations to the tariff committee. The Federation of Egyptian Industries sent its recommendations last month, Mohamed El Bahey, head of the taxes and customs division of the FEI, confirmed. The plastics division suggested that industrial cleaners and other chemicals be put up for review by the committee, division head Khaled Aboul Makarem tells us.

The Electricity Ministry will create just one company to operate the three Siemens-built combined cycle power plants rather than setting up one company per station, unidentified government sources said. The Egyptian Electricity Holding Company (EEHC) had said in December it was in the process of establishing three separate companies to manage the plants in Burullus, Beni Suef, and the new administrative capital, but determined it would be simpler and more cost-effective to make do with one company, according to the sources. The EEHC is currently in the process of selecting one of five candidates to head the company, and is expected to make a final choice in two weeks’ time. The government will only IPO the company once the state fully eliminates electricity subsidies in 2022, the sources confirmed. The three fully commissioned plants are expected to be inaugurated next month with a combined production output of 14.4 GW.

Who is benefiting from Egypt’s economic growth? Professional freelancers and contractors, according to data from contractor recruitment and management firm 6CATS International. The country saw a 73% y-o-y increase in hires of freelance professional between January and May of this year, on the back of a growth in business activity. “There’s certainly been a growth in business activity in Egypt that is leading to a significant increase in demand for contract professionals to plug talent gaps. What we’re seeing is that this positivity is being reflected across multiple areas, ranging from pharma and technical engineering to solar energy and offshore oil & gas,” CEO Michelle Reilly said of the statistics.

This increase was equally split between local professionals and European nationals. “For contractors, and the agencies that place them overseas, Egypt is certainly likely to be a destination of choice in the near future,” Reilly added. She noted, however, cumbersome employment and visa requirements for foreigners to work here.

Egypt’s favorite footballer could miss the start of the World Cup, according to Liverpool’s club physiotherapist. Mohamed Salah’s shoulder injury might keep him off the pitch for three to four weeks, according to Reuters. The Liverpool striker is “totally focused on recovery,” physiotherapist Ruben Pons said. Egyptian Football Association head Hany Abu Rida confirmed that Salah will not play in Egypt’s inaugural World Cup match against Uruguay but is expected to be on the pitch when the Pharaohs face off against Russia on 19 June, Al Masry Al Youm reports. Salah is in Spain for treatment after he sustained an injury at the hands of Real Madrid’s Sergio Ramos during the Champions League final last Saturday.