Al-Ahram Weekly Online   4 - 11 June 2009
Issue No. 950
Published in Cairo by AL-AHRAM established in 1875



A LONG sought-after free trade agreement (FTA) between Egypt and the US is no longer on the agenda, according to Egyptian Minister of Trade and Industry Rachid Mohamed Rachid. Addressing the American Chamber of Commerce in Cairo (AmCham) this week, Rachid said that both countries are "not excited about [FTA] discussions anymore". "There has been significant progress taking place even without an FTA," he said, pointing out that an FTA is merely a tool. According to Rachid, trade volume between the two countries doubled since 2004 (reaching $8.4 billion in 2008), as have US investments and tourism.

Rachid, who returned Friday from a visit to the US, said that there is a strong wish from both governments to open a new page in their economic relationship where there will be a higher level of commitment and cooperation. During the visit, both sides agreed to expand the number of Qualified Industrial Zones and to include two new areas in Upper Egypt, namely Beni Sweif and Minya. Furthermore, both governments have committed themselves to identifying, within three months, a new framework of cooperation with the objective of doubling trade and investment again in the coming four years. In the same context, the Egypt-US Business Council will be overhauled to ensure that the private sector will play a positive role in the new relationship.

Highlighting the importance of cooperation with the US, Rachid said that success in reform and growth could not be achieved without partnering with and being engaged in the US economy. In the meantime, he said, Egypt is a market that the US cannot ignore. He pointed out that the combined trade of the US with Oman, Morocco, Jordan and Bahrain, with whom the US has an FTA, is $2 billion, compared to $8.5 billion with Egypt alone, which does not have an FTA with the US.


THE DISPUTE between France Telecom (FT) and Orascom Telecom (OT) is heating up with both parties standing their ground. This week, Hisham El-Alaili, head of Asia, Africa and the Middle East for FT, renewed his company's intention to establish its rights and to execute the arbitration ruling in its favour to buy out Orascom Telecom's 28.75 per cent share in Mobinil, which owns 51 per cent in the Egyptian Company for Mobile Services (ECMS). El-Alaili did not specify how FT would be able to do that, saying he is not a legal expert.

In a press release, FT had said that it will "use all national and international legal channels to challenge the market authorities' rulings and re-establish its right". And that it will no longer be able to pursue its tender offer for ECMS shares.

Speaking to the press Monday, El-Alaili stressed that the situation both companies find themselves in today was not sought after by FT and that it was OT that sought arbitration in the first place. He also stressed that it was not FT's intention to take over ECMS and it would welcome OT to stay on as a shareholder. Further he said that even if OT relinquished its share in ECMS, his company is keen on finding another strong local investor to partner with.

The dispute emanates from Egypt's Capital Market Authority (CMA) having said that by buying OT's share in Mobinil and becoming a majority shareholder in ECMS, FT needs to make a tender offer to all ECMS shareholders at the same price it is paying OT for its Mobinil shares. But FT disagrees. El-Alaili said that Mobinil has other assets that ECMS does not. He was disappointed that the CMA had refused FT's offer of LE237 per share, which he described as "generous". In a press release FT said the price represents a 58 per cent premium on the 5 April 2009 closing price (the last price before the arbitration ruling was announced) and a 43 per cent premium on the latest six-month weighted average.

El-Alaili added that following the CMA's ruling FT was approached by private shareholders who were willing to sell their shares to FT at LE230 per share. An FT press release said Orange Participations, a subsidiary of FT, has "secured commitments for more than three per cent of the issued share capital of ECMS, representing more than six per cent of the free float of ECMS. Furthermore, Orange Participations is currently in discussions with other potential sellers." Orange Participations said that the implementation of the sale is subject to approval by the CMA.

Coming clean

INVESTORS wishing to tap into Egypt's banking sector may soon get their opportunity. Central Bank of Egypt (CBE) Governor Farouk El-Oqda announced last week at a press conference in Cairo that by 2011 the CBE plans to sell its stake in the United Bank as well as in the Arab African International Bank (AAIB). Reuters reported that El-Oqda would like to offer AAIB on both the Egyptian and Kuwaiti exchanges. He also said he would prefer the United Bank to be offered via the stock exchange.

CBE owns almost all of United Bank, which was formed in 2006 from the merger of a number of smaller banks. It owns around 49 per cent of AAIB with the Kuwait Investment Authority owning a similar share, Reuters said. It added that El-Oqda stated he did not have a specific structure in mind for the proposed sales. He did not say how much of United Bank would be sold, but said he wanted to be "completely or partially" out of the bank by 2011.

During the same press conference El-Oqda made it clear that the next three years will not see the sale of other public sector banks, including Banque du Caire whose sale plans were put on hold with the global financial slowdown. He said that the current structure of the market is very satisfying, with 45 per cent of the market share going to public sector banks, 25 per cent to private banks, and 30 per cent to Arab and foreign banks. El-Oqda also announced that the CBE is moving on with its second phase of banking sector reform, which is mainly characterised by a move towards compliance to Basel II requirements and a restructuring of specialised public banks such as the Arab Egyptian Land Bank and the Industrial Development Bank.

Dedicated to lending

A NEW portfolio company specialising in microfinance has set up shop in the Egyptian market. By the name of Tanmeyah, the new company has been established by Citadel Capital (CC), the private equity firm with investments of more than $8.3 billion. The aim of establishing the company is to help small business owners and low-to-middle income entrepreneurs gain access to loans and financial services.

Finance Unlimited, CC's arm for investments in regional financial services sector, will own a 51 per cent stake in Tanmeyah. Some 25 per cent of the remaining shares will be owned by the company's management, and 24 per cent more by the Egyptian Gulf Bank. With capital of LE35 million, company management said it is aiming for 15 branches within its first three months of operation. It plans to expand to 400 branches throughout Egypt with a strong presence in rural governorates where unemployment rates are high and access to finance is minimal.

The company will not be financing start-ups. Amr Abouesh, executive chairman of Tanmeyah, said in a press release that, "the entrepreneurs are required to have completed at least one year in their business cycle before they can qualify for a loan." He added that, "loan officers, who are generally going to be members of the urban and rural communities that we are targeting, will be trained to go out into the field and identify potential candidates with existing small businesses."

The size of loans will range between a minimum of LE4,000 and a maximum of LE35,000. "The nature of the microcredit scheme requires that loans be short in duration with a typical repayment cycle of four months to one year," said the press release.

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