Closing loopholes in Egypt-Libya ties

A COMPREHENSIVE customs and trade agreement was signed last week to boost Egyptian-Libyan bilateral economic relations, Mona El-Fiqi reports

A new customs and trade agreement was signed during the meeting of the Bilateral Committee for Boosting Trade Relations Between Egypt and Libya, held 9-12 August in Cairo.

The agreement was signed by Egyptian Minister of Foreign Trade Youssef Boutros Ghali and Libyan Secretary of Economy and Trade Public Committee Abdul-Qader Omar Al-Kheir.

In a press conference Ghali announced that the agreement is considered an update to a currently applied bilateral agreement signed by both countries in 1990.

Closing loopholes in the 1990 agreement was the explicit aim of the meeting of the Bilateral Committee, an aim meant to increase the trade volume between both countries. According to the Central Authority for Public Mobilisation and Statistics, trade volume between Egypt and Libya was $113 million in 2002.

Aiming at a commercial exchange boost, the agreement included an article defining the standard specifications of products for both countries, one of the main obstacles hindering trade volume growth between Egypt and Libya.

Though imports of both countries have been mutually free of customs duties since the application of the 1990 agreement, Egyptian exporters meet some problems in the Libyan markets.

Exporters have to pay non-customs duties and taxes locally imposed on foreign imports. The new agreement exempts Egyptian exports from these non- customs local tariffs. However, some Egyptian exporters continue to feel that Libyan decrees banning the importation of certain products into the Libyan market is a problem.

There is a public, or state-centred, aspect to the provisions of the agreement. It provides that if required specifications and prices are met then imports from the other country will receive favoured status for government-sponsored importation.

The agreement also gave final treatment to issues that have previously interfered with trade, such as dumping, subsidies, exports and imports control and intellectual property rights. To avoid redundancy in dealing with such issues, both sides approved that international commercial regulations should be applied.

A department responsible for solving the commercial disputes between businessmen in both countries was also established.

The Egyptian side is considering a draft agreement to encourage the flow of direct investments between both countries, which was presented by the Libyan delegation.

Libya's over 100 projects in Egypt, worth LE6 billion, make it the third largest Arab investor in Egypt.

In spite of the proximity of the countries, bilateral trade volume is still moderate. Egyptian exports to Libya are variable, such as food products, textiles, carpets, ceramics, pharmaceuticals and chemical products.

Sharp drop in profits for MIB

MISR International Bank (MIB) posted an 87 per cent drop in its net profits for the first half of 2003. MIB, Egypt's third largest private sector bank, recorded net profits of LE13 million compared to LE97.3 million in the corresponding period of the previous year.

Bank sources attributed the decline in profits to a new Central Bank regulation. Banks are now obligated to state the value of their foreign currency assets in their budgets according to the value of the dollar when the assets were purchased. The differences in evaluation, according to the bank sources, burdened the bank with LE157 million worth of losses during the period.

Nevertheless, Prime Securities has upgraded its recommendations to the bank shares to accumulate which means that it is asking the bank's shareholders to keep and even increase their investments in the bank as it has positive future potential.

A research report issued by Prime attributed the upgrade to "The improvement in MIB's asset quality which has a high impact on the bank's valuation."

This improvement, as the report put it was based on the drop in the bank's non-performing loans (NPL) during the second quarter of 2003, a development seen to be as "the sign of the beginnings of a turnaround". An earlier Prime report on the bank pointed out that MIB's value driver is the extent to which the NPL ratio deteriorates and the percentage of NPLs that are recoverable.

One of the bank's weak points that the report highlighted is its holdings in Misr Exterior Bank, which is considered a significant underperforming investment as its non-performing loans alone count for 11 per cent of the overall non-performing loans portfolio in MIB. The decline in profits triggered a moderate fall in the bank's shares, which closed at LE13.17.