INVESTMENT WATCH- Mars to double investment in Egypt to EGP 2 bn this year: Mars Wrigley Confectionery plans on doubling its investments in Egypt to EGP 2 bn by year’s end, which “reflect[s] Mars’ confidence in the Egyptian economy,” said Mars Wrigley Confectionery Global President Martin Radvan. The announcement came at the inauguration yesterday of the first phase of its EGP 750 mn expansion of its 6 October City factory, which will include the commissioning of two new production lines, the company said in a statement (pdf). Mars expects these latest expansions will grow its exports out of Egypt to USD 100 mn by the end of 2018, Regional President for the Asia-Australia, Middle East & Africa Region Ehab Abou Oaf said. Around 80-90% of the factory’s output is earmarked for export to 20 markets in the region. The new production lines will add 79 new products to its lineup once the second phase of the expansion is complete in six months’ time, said the factory’s director, Ahmed Al Hiraky. The expansion will see total capacity rise to 70k tons per year at the end of 2018, up from 50k tons now.

The move shows that “American companies want to be part of the growing momentum in the Egyptian economy,” US Chargé d’Affaires Thomas Goldberger said in a statement from the US embassy (pdf). Trade and Industry Minister Tarek Kabil lauded the expansions as a “message” to foreign investors that Egypt is an attractive market.

Domestic chocolate manufacturers are looking to follow in Mars’ footsteps. Sima Food Industries plans to add two new production lines to its chocolate factory, while the Alexandria Confectionery & Chocolate Company — which produces Corona chocolate — will begin constructing a new 6 October City factory this year, Al Borsa reports.

INVESTMENT WATCH- Fine Hygienic Holding plans to invest EGP 120 mn this year to add new tissue and diaper production lines, Egypt Head of Sales and Marketing Ahmed Kattan tells Al Mal. Part of the investment has also been earmarked for expanding its fleet of distribution trucks and opening new sales points. The company also intends to increase its exports over the coming period by tapping into new African markets.

M&A WATCH- Saudi Arabia’s Marei bin Mahfouz Group has reportedly bought a 25% stake in DBK Pharma, signaling that the firm might have once and for all abandoned plans to relist on the EGX, according to Al Mal. The group acquired the shares for EGP 38.7 mn, and these were bought from family members of chairman Hamdy El Debeky, said Madani Law Firm’s Zahra El Madani, legal adviser on the transaction. Al Mal suggests a share sale was called off because it had not generated enough buzz. El Debeky had said last September that the firm’s IPO would take place in 4Q2017. Sources close to the transaction also said that the company is in talks with other investors to sell another 20% of the company.

Egypt’s banking laws need to be “completely revamped,” says Amer: What is the most pressing concern for the central bank these days? A “complete revamp” of its banking laws to introduce “sharp and crisp” governance for the sector, CBE Governor Tarek Amer told Bloomberg on Tuesday. “We don’t want people to feel relaxed in the banking system. Our objective in regulation isn’t just to defend financial stability,” he said. Amer is of course referencing the Central Bank and Banking Act, amendments to which the CBE has been cooking for about a year now. “The objective is to be able to achieve financial stability by bringing financial intermediation to the market in a real way.” Authorities will first have to win broad support in parliament and society for the overhaul, he said. Amer’s Bloomberg interview is part of a package of coverage of regional central bank governors that the business information service has put together. You can check out the full thing here.

“Egypt's first interest rate cut since exchange rate liberalization has been made possible by an improvement in macro-economic stability, underpinned by more orthodox policy settings under the country's IMF program,” Fitch Ratings said on Tuesday. The CBE’s 100 bps rate cut earlier this month came on the back of annual headline inflation dropping to 17.1% in January, Fitch said while noting that inflation in Egypt is well above peers and remains a sovereign rating weakness. The ratings firm believes that inflation will fall further this year but remain in double digits, averaging at around 13%, assuming further subsidy reform in July leads to energy price increases, especially given higher oil prices. “Even so, we expect the CBE to cut rates further this year (another 200-300 bps) even as global rates rise, while maintaining positive real interest rates. These factors were reflected in our revision of the Outlook on Egypt's 'B' sovereign rating to Positive last month.”

However, “relatively weak governance, security and political risks continue to weigh on the rating,” read the statement. These risks appear to be balanced out by the fact that reforms have not led to a visible social backlash. Fitch notes that “the authorities have minimized the potential for opposition figures to build political momentum ahead of next month's presidential elections.”

Renaissance Capital MENA CEO Ahmed Badr squarely disagrees with the political risk argument. Instead, he sees a potential growth in inflation as the biggest risk facing the reform agenda. “Egypt has never been as politically stable as it is today … So I don't think the presidential elections actually represents any risk and the security situation is completely fine,” Badr told Bloomberg TV. “I’m more worried about the potential for inflation to rise again in July, simply because of the subsidy cuts,” he added. It is with that mindset that he feels the CBE will approach the monetary easing cycle. “I expect the CBE to keep interest rates as high as possible for as long as possible.” Badr notes how the CBE has traditionally beaten expectations by general being more conservative on monetary policy.

As for the positive macro outlook, you’ll get no arguments from Badr on that. With signs including USD being available for investors, market sentiment across all asset classes for Egypt is positive, a far cry from the hesitant approach investors took just one year ago, says Badr.

You can catch the full interview here and cycling forward to minute 40:00 (watch, runtime: 47:59)

Saudi follows in the footsteps of Egypt: Badr also see parallels between the rise in inflation in Saudi Arabia and the spike in Egypt’s inflation a year earlier. He also drew parallels between the skittish reactions of the markets to both country’s inflation figures. Likewise, Badr expects to see a pickup in investor interest in Saudi Arabia as it goes through its own economic reforms (watch, runtime: 2:16).

FIRST LOOK- Import companies can how have a non-Egyptian manager -Shahid Law Firm. Our friends at Shahid Law Firm tell us that they have obtained official confirmation from the General Organization for Export and Import Control (GOEIC) that “the day-to-day management and financial control of import companies can now be handled by non-Egyptians, provided that the requirement of appointment of an Egyptian import administrator is at all times satisfied.” The news, which Shahid will be sending in a note to clients today, comes pursuant to recent amendments to the Importer Registry Act (law 121 of 1982), which for the first time allows non-Egyptians to own up to 49% of the share capital of an import company. “While the amendments clearly stipulated that only the import administrator must be Egyptian, neither the amendments nor the executive regulations of the Law determined whether this nationality requirement extends to the company’s management; hence the pressing need for clarity,” the firm said.

The Electricity Ministry has reportedly drawn up a list of 10 contractors it will recommend to Russia’s Rosatom to work on the USD 30 bn Dabaa nuclear power plant, ministry sources told Al Mal on Tuesday. Among the leading names included in the list are Elsewedy Electric, Orascom Construction, Arab Contractors, Hassan Allam, and Petrojet, the source added. The ministry had compiled the list along with the ministries of housing and public enterprises. 20% of construction work on the power plant has been slated for Egyptian companies, amounting to USD 4 bn in contracts, according to the newspaper.

Elsewedy Electric has already begun talks to establish a consortium to bid on contract work for the power plant, CEO Ahmed Elsewedy tells the newspaper. The company plans to secure a large portion of the work on the power plants, he added without providing details.

DP World, SCZone launch phase one of Ain Sokhna multi-use zone: DP World and the Suez Canal Economic Zone (SCZone) signed contracts to start development work on the 30 sq km first phrase of their integrated industrial and residential zone in Ain Sokhna, according to a joint statement (pdf). They plan to begin signing contracts with companies to begin operating out of the zone in March, SCZone Chairman Mohab Mamish said. “We are pleased to move ahead with the development of this promising new project, which has the potential to substantially increase foreign investment into Egypt’s economy,” said DP World Chairman and CEO Sultan Ahmed bin Sulayem at the signing yesterday.

What is it? The 75k sqm zone will be managed by DP World, which holds a 49% stake in the project. It will also include a 20,000 sqm residential development. The agreement for the project was signed during November’s World Youth Conference.

What industries are being targeted? Phase one will prioritize auto parts, food processing, petrochemicals, electronics, building materials, textiles, and medical equipment projects, Mamish added.

New natgas regulator board meets for the first time, no word on when first import license will be issued: The new natural gas market regulator’s board of directors met for the first time yesterday after the Ismail Cabinet signed off on the full formation, Al Ahram reports. Appointees to the board include GASCO head Hisham Radwan, EGAS deputy head Magdy Galal, Competition Authority boss Mona El Garf, and MP Mohamed El Sewedy. Chaired by Oil Minister Tarek El Molla, the board discussed their plans to bring the new regulator online now that the executive regulations to the Natural Gas Act have been issued, allowing private sector players to enter the market.

No word on the first import permit: Sources had said earlier this month that the board would issue the first LNG import license to the private sector before the end of February, when it convened for the first time. El Molla made no reference to the claims, but said that all entities working in the industry would have to request regulator approval. The minister also said that the board was still in the process of setting the fees and terms for the state’s agreements with natural gas companies to allow them to use its infrastructure for the transportation and distribution of LNG. Alaa Arafa’s Dolphinus Holdings has already signed a USD 15 bn natural gas import agreement with Israel and Egypt is also close to finalizing a similar pact with Cyprus.

LEGISLATION WATCH- We’re starting to see a trickle of news on the next wave of economic legislation.

First off, the new Insurance Act, which the Financial Regulatory Authority (FRA) is drafting with an eye to tighten regulation of the sector, will include amendments that govern pension and private social welfare funds, said FRA deputy head Reda Abdel Moty. These changes include raising a fund’s minimum capitalization to EGP 100k from a current EGP 1,000. The law will also put a cap on the number of subscribers to the fund, he added. Abdel Moty appears to frame this as part of a wider crackdown on the number of unregistered welfare funds, which will be subject to asset freezes in a forthcoming enforcement drive, according to Al Mal.

Amendments to the Economic Courts Act are stalled. The Council of State (Maglis El Dawla) has reportedly raised objections to what it says the lack of input from ministries and government agencies impacted by the law. In its review of the law, the Council says that the CBE, the Financial Regulatory Authority, and the Finance Ministry should have been consulted as per the constitution, AMAY reports. The amendments, which are meant to expedite the dispute resolution process, also grants Economic Courts jurisdiction over criminal violations of the Capital Markets Act, the Anti-Money Laundering Act, the Collateralized Assets Act, and the Civil Aviation Act, according to Youm7. The law will presumably undergo a rewrite by the Ismail cabinet before being introduced to the House of Representatives.

It also looks like plenary discussions in the House on the Consumer Protection Act will take place next Sunday, Consumer Protection Authority chief Atef Yacoub said, according to AMAY.

In other legislative news, the Universal Healthcare Act will cover overseas medical treatment in some cases, Health Minister Ahmed Rady said yesterday, without elaborating. The law’s executive regulations are currently with the Council of State for review and should before the new scheme is implemented in July.

The European Bank for Reconstruction and Development (EBRD) approved EUR 148 mn in loans to Egypt for the Kafr El Sheikh Kitchener Drain depollution project. The first EUR 69 mn loan will be directed towards rehabilitating the drainage system. The bank is also providing a EUR 79 mn facility to finance the purchase of containers and tractors to collect municipal solid waste and construct up to six treatment facilities, and five sanitary landfills. A third component of the depollution project will likely be financed by the European Investment Bank, according to the EBRD.

It looks like Abdul Latif Jameel might be back after all: It appears that Abdul Latif Jameel is indeed returning to renewable energy in Egypt by participating in the Electricity Holding Company’s tender for a 600 MW solar power plant in the West Nile area. The firm will be bidding on the project through its subsidiary Fotowatio Renewable Ventures (FRV), which will partner with Infinity Solar, senior Infinity Solar exec Taymour Aboulkheir tells Al Borsa. FRV is listed among the 18 companies and consortiums (pdf) competing for the project.

It looks as if the delay in the return of Russian flights is unrelated to ground handling services, as Russian Transport Minister Maxim Sokolov suggested on Monday. Egyptian officials signed an agreement covering ground handling services with Aeroflot’s general manager during Russian President Vladimir Putin’s visit to Egypt last year, the head of the Egyptian Aviation Services company, Mohamed Kamel, tells Al Ahram. All the required paperwork for the resumption of direct air travel between Cairo and Moscow was completed during Putin’s stay, he adds, noting that Russian officials appeared more concerned with security measures at the time. Kamel confirmed that Cairo Airport was ready to receive Russian flights. EgyptAir Chairman Safwat Musallam had said that flights with Moscow, which had been hoped would begin about two weeks ago, were postponed until April to ensure significant demand.