Al-Ahram Weekly Online   22 - 28 October 2009
Issue No. 969
Economy
 
Published in Cairo by AL-AHRAM established in 1875

briefs


Africans come together

AFRICAN trade ministers are scheduled to meet in Cairo on 27 October for three days to agree on a common position in preparation for the upcoming negotiations on the Doha Development Agenda (DDA) due to take place at the seventh WTO ministerial meeting in Geneva, 30 November. Egypt currently heads the African Group in the WTO. Also expected to take part are the trade ministers of India, Mexico, China and Brazil. The conference will examine the effect of the global slowdown on the WTO and the liberalisation of trade. African countries are expected to insist that development be at the heart of the DDA.

Transport opportunities

INVESTMENT opportunities in the transport sector were highlighted last week by Egyptian Transport Minister Mohamed Mansour during a meeting organised by the American Chamber of Commerce in Egypt (AmCham).

The minister spotlighted investment opportunities, but mentioned funding as a major challenge. "Some 33 highways and 18 bridges are under construction... [and] work is in progress for the third line of the underground metro," said Mansour. He added that 200 new railway stations are planned for coming years.

Further, two river ports are tendered in Alexandria and Qena. "The government is allocating LE20 billion for seaport infrastructure projects over the next 2-3 years," Mansour revealed.

While pointing out opportunities, Mansour also mentioned achievements in the transport sector. He pointed out that some 2,300 kilometres of roads have been built across Egypt since 2005, including 360 kilometres in Upper Egypt.

Contrary to expectations Mansour pointed out that "Egyptian seaports and terminals exhibited strong resilience to the [global financial] crisis as traffic increased by around two per cent, unlike global seaports that suffered a severe decline in their traffic and revenues, averaging 20-25 per cent."

Safe and profitable

DURING an educational seminar for the media, Adel El-Wali, executive director at investment bank HC said that in the past five years earnings of mutual funds have surpassed those of bank deposits, even taking into account reduced earnings during the past year.

He demonstrated that mutual funds are the answer for someone who wants to invest in the stock market yet lacks experience. He stressed that mutual funds are managed by experienced managers who are able to choose their investments carefully, taking into account the risks involved. It also enables investors to invest in a large portfolio, which eliminates the risks associated with investing in a limited number of stocks.

Local remedies

ONE of the most preferred painkillers to Egyptians, namely Panadol, will soon be manufactured locally. An agreement was recently signed between Alexandria Pharmaceuticals and the English GlaxoSmithKline (GSK) consortium to start producing 17 products of Panadol, including the liquid form, suppositories and tablets over the next three years. The new line is expected to generate LE220 million for the Egyptian company, with the local product sold at 50 per cent of the price of its imported equivalent.

A new line of prosperity

THE INDUSTRIAL Development Authority (IDA) has just given the Egyptian Fertilisers and Chemical Industries Company (Kima) in Aswan the go ahead to establish a new production line for nitrogen fertilisers. Scheduled to start production by 2012, the new line will cost LE400 million and is expected to generate some 1,500 jobs.

The initiative comes as part of an overall plan to build 1,000 new factories as a means of developing Upper Egypt and bringing more investment to deprived areas.

The new production line is set to give an annual output of 600,000 tonnes of urea and a similar amount of ammonium nitrate -- both are nitrogen-fixing fertilisers.

According to Amr Assal, chairman of the IDA, 60 per cent of the production costs, estimated at LE700 million, will be recouped by replacing electricity with natural gas as the main source of energy for the project. "The cut in production costs will be directed towards financing small and medium-sized enterprises in Upper Egypt," he said.

Crises in the balance

AN OFFICIAL report released last week said the global economic crisis has had a mixed impact on the Egyptian economy. Last week the Ministry of Economic Development issued a report evaluating the impact of the international financial crisis on the Egyptian economy, Mona El-Fiqi reports. The report, entitled "A Follow Up of Economic and Social Performance During the Fiscal Year 2008/2009", said the crisis had reduced the growth rate from seven per cent to 4.7 per cent in 2008/2009, with a subsequent increase in unemployment. Furthermore, less employment opportunities are expected in the coming few years.

Minister of Economic Development Osman Mohamed Osman said the study was conducted to measure the negative impact of the crisis on the Egyptian economy and to make an economic forecast for the coming year.

The report said that governmental intervention and the continued high level of demand in local markets had lightened the impact of the international crisis on the Egyptian economy. Commenting on the report, Osman said that the growth rate achieved was higher than what the government had expected at the beginning of the crisis.

Moreover, the report stated that successful monetary policies applied by the Central Bank of Egypt helped control the budget deficit. As a result, the negative impact on people's living standards and poverty rates was minor.

According to the report, economic sectors that were badly affected by the crisis were those directly related to international markets, while other sectors succeeded to increase their share in growth due to the application of government policies aimed at improving the environment of internal markets. These include IT, construction, infrastructure, wholesale trade and transportation. Some other sectors remained unchanged, such as agriculture and social services, including education and health.

The most negatively affected sectors, according to the report, are Suez Canal revenues, tourism and oil exports. Moreover, the remittances of Egyptian workers abroad dropped from LE9.4 billion in 2007/2008 to LE7.6 billion in 2008/2009.

Due to the reduction in the international demand and price instability, Egypt's oil exports decreased by 24 per cent in 2008/2009. Foreign direct investment was reduced by 38.7 per cent (from $13 billion in 2007/2008 to $8.1 billion in 2008/2009) while revenues from Egyptian investments in the financial sector worldwide were also reduced by 41 per cent due to a reduction in interest rates worldwide.

Investments in the industrial sector were also reduced, from LE42 billion in 2007/2008 to LE30 billion in 2008/2009.

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