By Mohsen Allam By Courtesy of Ministry of Trade and Industry Minister Rachid and Russian Minister Khristenko sign a memorandum of understanding By Mohamed Allouba The good news: Mobinil has broken the 10-million barrier. The bad: EDGE is off —for now. By Courtesy John Samples Egyptian officials claim to still be going with the flow despite rumors that the Arab natural gas pipeline was suspended over price disagreements.

By Fatima El-Saadani

Disagreements erupted between Dubai-based Emaar and its Egyptian partner, Shafiq Gabr’s ARTOC Group earlier this year, with Emaar accusing Gabr of poor management of the joint venture’s projects.

After lengthy discussions, an agreement was reached by which Emaar would buy out ARTOC’s 60% stake in Emaar Misr. On March 25, the Cairo and Alexandria Stock Exchange’s Listing Committee rejected Emaar Misr’s request to list its shares on the market’s unofficial schedule, stating that the applicant had not submitted financial statements for a full financial year and that the company’s profits were not generated by its operations and therefore did not meet the listing requirements calling for at least 1% of a listed company’s profits to be from its operations. Emaar Misr said it would appeal the rejection of its listing application.

The CASE listing was intended to be a means of selling ARTOC’s share in the company according to financial daily Al-Alam Al-Youm. Running the deal through the CASE would have allowed ARTOC to avoid being taxed for the sale.

By the beginning of April, Emaar had bought Gabr’s 60% share for $141.9 million — considerably lower than the $162 million figure that was originally quoted in the press — as Emaar refused to pay for Emaar Misr’s latest advertising campaign and unspecified investments. As the deal was finalized, Gabr agreed to pay the taxes on the transaction amidst rumors that ARTOC’s next move would be to start up new projects with unnamed partners.

News was leaked that the Holding Company for Tourism and Cinema (HCTC) was taking steps to cancel its contract with Emaar Misr regarding land in Sidi Abdel-Rahman. HCTC expressed concerns regarding the completion of the planned project due to the escalating conflict between Emaar and Gabr.

HCTC charged that Emaar Misr had violated clauses in its contract with the holding company when it began marketing and actually selling housing units in its North Coast project Marassi without having finalized the contract with HCTC, without getting the land in its name and without having paid for the land in full.

Emaar Misr revealed plans to start two mega-projects in Egypt with combined investments of LE 9.75 billion ($1.7 billion). The first is a LE 5.75 billion ($1 billion) upscale integrated housing complex on an area of 3.8 million square meters in New Cairo, offering 5,000 residential units and a variety of facilities. The second project is a LE 4 billion ($700 million) housing and commercial development on an area of 670,000 square meters on the Cairo-Alexandria desert road. Additionally, Emaar is considering jumping on the budget-housing construction bandwagon that Orascom Hotels and Development (OHD, bt100 number 32) has spearheaded.

The nation in brief

On April 10, Minister of Trade and Industry Rachid Mohamed Rachid and Russian Minister of Industry and Energy Viktor Khristenko signed a memorandum of understanding establishing Egypt’s first Russian industrial zone. The zone will host facilities to produce cars and car parts, aircraft and aircraft components, heavy engineering industries and electronics manufacturing.

A statement from the trade and industry ministry explained that the zone, built on an area of one million square meters, is estimated to attract investments of around $550 million and generate $700 million in exports over the next five years. An estimated 100-120 Egyptian, Russian or joint venture factories will be built in the zone.

Egypt’s imports from Russia currently stand at $1.1 billion, mostly machinery, wheat, wood and wood products, iron, steel and fertilizers. Egypt’s exports to Russia come up to only $100 million worth of agricultural goods, including fresh fruits and vegetables, cereals, oil seeds, herbs, spices and essential oils, as well as carpets, home furnishings and chemical products.

According to the statement, Russian investment in Egypt reached $45 million whereas Egyptian investments in Russia reached $250 million. The two countries signed the MOU as they are negotiating a free-trade agreement, the finalization of which is pending Russia’s membership in the World Trade Organization. With the number of Russian tourists visiting Egypt reaching one million in 2006, the service sector is also set for a boom, as the MOU will discuss cooperation on services such as tourism, banking and contracts.

Egypt has been marketing its duty free access to European, African and Middle Eastern markets through its many preferential trade agreements. The Russian industrial zone, for instance, will grant Russia access to new markets. This deal comes after several other international agreements, including a free-trade agreement with China and a deal with a private-sector company to boost trade with Kazakhstan.

During Khristenko’s visit to Cairo, the two parties agreed that they might collaborate on building Egypt’s nuclear power plant to supply the country with electricity. Egypt had announced last September that it would restart its nuclear program — which had been halted after the Chernobyl disaster more than 20 years ago — by building a 1,000 megawatt nuclear power plant on the Mediterranean coast.

The government has come under fire from the United Nations’ nuclear watchdog, the International Atomic Energy Agency, for not officially declaring its atomic energy research, given that Egypt has signed a nuclear non-proliferation treaty and is a supporter of a nuclear-weapons-free Middle East.

Egypt’s energy shortage has increased as its energy consumption has gone up by an average 7% per annum without matching increases in energy generation.

Channel NewsAsia, the pan-Asian finance and business television network, is coming into Egypt for an in-depth look at the economy for the first time, according to business analyst Chad Craigg. As part of the satellite channel’s Middle East coverage, which will also include Dubai and Oman, CNA will do sector-by-sector stories on the opportunities Egypt offers to Asian investors. The channel will also air 30-minute “Who’s Who?” segments on business figures.

CNA is broadcast in English via satellite to 75 million viewers in 26 countries around Asia and the Middle East.

An Egyptian delegation from the Ministry of Electricity and Energy headed to South Sudan late last March to undertake feasibility studies to develop power stations in the region. Minister of Electricity Hassan Younes quoted the cost of LE 37 million for the project, to be paid from a LE 154 million Egyptian grant. The power stations will be built in Juba and Wau to boost development efforts in the region. Egypt has engaged in the construction of a number of schools and hospitals in South Sudan and has plans to unveil a Juba branch of Alexandria University.

Lead asset manager Robeco has made its debut into the Egyptian market as strategic partner to local asset-management company, Obelisk Portfolio and Investment Fund Management, by means of a loan convertible into a stake of up to 49% of the company. Established in Cairo in early 2007 by former Cairo and Alexandria Stock Exchange (CASE) Chairman Sameh El-Torgoman, Obelisk is in partnership with New York-based Baron Group Holdings.

The Netherlands-based Robeco is Rabobank Group’s asset management arm, offering a product range that encompasses fixed-income and equity investments, as well as balanced accounts, money-market funds and alternative investments.

Within the framework of this new partnership, Obelisk will undertake asset management business in Egypt and the Middle East using managed accounts and investment funds. Robeco, which is following a strategy of maintaining its presence in emerging markets, is to launch a Luxembourg-based MENA equity fund, for which Obelisk will act as the adviser.

Robeco already has emerging market operations focused on India, China and the Middle East — including Bahrain and Saudi Arabia, with Egypt as the third Middle-Eastern venture.

Dutch banking group ABN-AMRO is on the verge of a buyout, takeover or merger — depending on which rival business or consortium is successful in winning over the trust of ABN-AMRO shareholders and Dutch regulators.

News broke in late April that UK-based Barclays had made a $91-billion merger offer to ABN-AMRO shareholders. The ‘merger’ — a takeover in almost all but name — would see the combined group retain the Barclays name, locate its head office in Amsterdam, and shed at least 20,000 jobs.

Soon after the announcement of the proposed Barclays deal, a consortium of three European banks — the UK’s Royal Bank of Scotland, Spain’s Santander and Belgium’s Fortis — announced a $98.1 billion bid for the bank as part of a plan that would see ABN-AMRO broken up into its individually lucrative pieces, particularly the US-based LaSalle Bank.

Although the breakup offer is cash-heavy and therefore more lucrative to shareholders, analysts see the Barclays offer as more likely to gain approval from Dutch regulators. The final deal, expected to rise to over $100 billion, will be among the largest in corporate history.

Mobinil’s (bt100 number 6) announcement that it had finally reached its self-set target of 10 million subscribers in early April coincided with a visit from France Telecom (FT) CEO, Didier Lombard.

Besides awarding the 10 millionth subscriber a trip to France, Mobinil held a press conference in which it discussed its plans for the company’s future in light of Egypt’s dynamic telecom sector on the eve of the launch of the country’s first ever 3G network by Etisalat.

Mobinil CEO Alex Shalaby was proud to inform the press that an agreement had been reached with the National Telecommunications Regulatory Authority (NTRA) on the issue of EDGE services that Mobinil had launched at the beginning of 2006. The disagreement focused on whether EDGE was using technology that is more advanced than the 2G license Mobinil has paid for (see “It’s All About the ARPU,” bt April 2007, page 32).

As Mobinil agreed to discontinue EDGE usage and invest in expanding its infrastructure to improve its services, the NTRA agreed to give Mobinil another one million subscribers under the 018 prefix. The discussions with the NTRA also granted Mobinil (and Vodafone Egypt) the go-ahead on offering their prepaid customers lifetime validity. Shalaby revealed that Mobinil would make its final decision regarding 3G in three months time.

Lombard said that FT is planning to expand its presence in Egypt by increasing its staff by 400 to 1,500 and establishing a research and development (R&D) center in Cairo as part of the company’s strategy to place more investment in the region.

The R&D center will work with the group’s teams at Orange Business Services and Egyptian mobile operator Mobinil, in which FT has a 71.3% stake. The planned Cairo-based R&D facility is the largest of FT’s three global centers.

Computer Associates, one of the world’s largest information-technology management-software companies, organized an educational technology briefing in Cairo last month. The goal of the briefing was to help IT organizations provide efficient and improved IT services to meet the growing business demands of Egypt’s booming economy.

The company asserted that its financial solutions could possibly help Egypt meet the Basel II capital framework and other global regulatory requirements that are becoming increasingly mandatory, especially for banks operating internationally.

“IT should be looked at as an investment, not an expenditure,” says Toni Prince, CA Regional Manager of Egypt, Levant and Libya. “As Egypt opens its economy up for foreign competition, this is the kind of technology that will bring it up to speed.”

World leading science and technology company, The Dow Chemical Company, has inaugurated a new polyurethane systems market development and prototyping laboratory in Egypt as part of its strategic expansion plan.

The lab will assist in the creation of new products to meet the growing needs of the local customer base across the Middle East, India and Africa, and will support the continuous development of innovative polyurethane-based fully-formulated products to serve a wide range of applications including appliances, construction and footwear applications. Elastomers (rubber products) will be provided for the oil and gas industry while flexible systems will be used in the furniture and transportation industries.

Dow has annual sales of $49 billion and employs 43,000 people worldwide. More than 30 years ago, Dow launched its export office in Egypt, followed by Dow Mideast Systems and the polyurethane systems facility in 1997. In 2006, Dow experts helped wrap the 85-ton granite statue of Ramses II in a VORACOR™ rigid polyurethane foam system to ensure its safe relocation from the heart of downtown Cairo to the site of the Grand Egyptian Museum near the Pyramids.

Prior to flying to Doha to attend the Gas Exporting Countries Forum (GECF), Minister of Petroleum Sameh Fahmy clearly stated Egypt’s opposition to the idea of establishing an OPEC-style cartel for gas exporting countries.

The rejection of the proposal, according to Fahmy, was based on Egypt’s strategy to maintain transparency in international gas markets. Egypt is the world’s eighth largest exporter of gas and the sixth largest exporter of liquefied natural gas.

Speculations are that the world’s largest natural gas producers, particularly Russia and Iran, plan to create a gas cartel equivalent to the OPEC, which sets quotas and prices as a form of buffing their political muscle.

Jordanian and Egyptian officials dismissed news reports that the Arab gas pipeline project was suspended due to differences between the two countries. The report claimed that Egyptian gas flow to Jordan was suspended after the supplier reneged on a pricing agreement.

The agreement had been signed in 2003 to build a 360-kilometer pipeline from El-Arish, through Sinai to Aqaba and northwards to the Syrian border. The pipeline would carry Egyptian gas to Jordan and then on to Syria, Lebanon and Turkey.

Egypt had agreed to supply Jordan with 2.3 billion cubic meters of gas per year at preferential prices for 15 years — with the gas to be used to generate 85% of Jordan’s electricity.

In the last week of April, Egypt and Lebanon signed an agreement by which Egypt will supply natural gas to Lebanon through the Arab natural gas pipeline within a year’s time. bt