Egypt’s capital outflow gets trumped by its entrepreneurial spirit

Egypt’s capital outflow gets trumped by its entrepreneurial spirit
Much of Egypt's buffer comes from President El-Sisi’s economic reforms that led to the emergence of mega real estate projects, new cities, massive improvements in infrastructure and the expansion of the Suez Canal. (Shutterstock)
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Updated 23 March 2022

Egypt’s capital outflow gets trumped by its entrepreneurial spirit

Egypt’s capital outflow gets trumped by its entrepreneurial spirit
  • Gulf Cooperation Council companies are showing avid interest in enterprising Egyptian firms

RIYADH: The entrepreneurial climate in Egypt looks upbeat despite the looming fallout of the Russia-Ukraine crisis, the pandemic and domestic growth hiccups.
Much of the nation’s buffer comes from President Abdel Fattah El-Sisi’s economic reforms that led to the emergence of mega real estate projects, new cities, massive improvements in infrastructure and the expansion of the Suez Canal.
“The country has a lot of growth potential. There’s so much happening in terms of investment and improvement, especially in the last two years, with the overhaul of roads, bridges, metro systems and railways,” Shehab Moubarak, owner of Brick and Mortar, a Cairo-based real estate company, told Arab News.
The business optimism is not only shared by the locals but also nurtured by an increasing number of GCC companies that are looking to invest in Egypt. One of them is Saudi-based IDAR Contracting, a real estate company planning to set shop in Egypt besides venturing into the region’s food and beverage business.
“We recently conducted a survey and were amazed by the country’s economic openness, impressive growth, and the sheer size of its ongoing government projects,” Ahmad Yaman, owner of IDAR Contracting, told Arab News.
The government of Egypt has been working in overdrive to invite new companies into the country, and the outcome has given a considerable fillip to domestic entrepreneurship.
“New laws, allowing foreigners to be sole owners of their companies and facilitating foreign currency transfers, are encouraging factors. The officials also offered us a location for a plant in their industrial zone,” said Yaman.
Some of the other GCC companies eager to explore emerging opportunities in the north-eastern African nation include the Lebanon-based Kamp Hospitality Group. The restaurant chain, which has carved a name for itself Riyadh, plans to franchise its Kampai restaurants in Egypt.
“We plan to open ten restaurants in Egypt in the next four years,” said Henri Farah, CEO of Kamp Hospitality Group, while disclosing his expansion plan.

HIGHLIGHTS

Egypt has been working in overdrive to invite new companies into the country, and the outcome has given a considerable fillip to domestic entrepreneurship.

Last year, Abu Dhabi-based Aldar Properties acquired a majority stake in Egypt’s Sixth of October for Development and Investment Company, or SODIC, for 6.1 billion Egyptian pounds or $386.8 million.

The shopping spree also reverberated in the e-commerce space when the Saudi Arabia-based B2B platform Sary recently acquired Egypt-based Mowarrid.

Impact of Ukraine crisis

The shimmering entrepreneurial streak is encouraging in the light of the Ukraine crisis that has cast a dark shadow on the prospects of the country’s foreign direct investment, or FDI.
According to a seminal paper “Egypt emerges as a top FDI destination” by economics scholar Hebatallah Ghoneim released last year, the country had the highest FDI rates in Africa in 2021 despite the universal pandemic clouding the continent from an economic standpoint.
“Nearly 90 percent of the FDI in Egypt originates from the European Union, Arab states, the UK, and the US,” said Ghoneim in the paper, while pointing out that the investment pie was fairly diversified and not dependent on one country.
To make matters worse, the Egyptian stock exchanges in Cairo and Alexandria have recently witnessed a considerable capital outflow. According to a recent Reuters article, the country has seen hundreds of millions of dollars leave its treasury markets since the Russian invasion of Ukraine.
“The forecasted growth of the next financial year beginning July was six percent, but we do not know how the growth will be impacted by the Ukraine crisis. The government’s priority, for now, is to provide for the population with basic necessities,” said Mosbah Qotb, an economic analyst and journalist, in an interview to Arab News.
The problem doesn’t end there. A recent paper by the Middle East Institute warned of an impending food crisis in Egypt, given the country’s high reliability on grain imports and the farming sector’s inability to produce enough to meet the country’s needs.
According to Qotb, Egypt imports 80 percent of its wheat from Ukraine. Other imports from Ukraine include corn and sunflower oil, which could further worsen inflation in the region. Also, on the anvil is the dwindling tourism prospect that may not show signs of revival in the immediate future.

Depending on fundamentals
But not everything is as gloomy as the prevailing economic climate as the Egyptian government’s foreign exchange reserves, currency stability, and infrastructure momentum have reinforced the country’s growth outlook.
“The reassuring factors are that foreign reserves are at a satisfying level of around $40 billion, and the government strategic wheat reserves are sufficient for four months, after which local wheat production will be available in the market,” said Qotb.
He further pointed out that currency stability fueled by significant remittances from the diaspora amounted to nearly $33 billion. Exports in 2021 hit a record high of $45.2 billion. And to top it, unemployment levels were in the acceptable eight percent range.
“In addition, the Suez Canal earnings, amounting to $6 billion in 2021, are expected to rise by 10 percent this year,” he added.
The analyst believes that the country’s growth is also being nourished by its vibrant startup industry, thanks to a smart young and educated population that’s had a positive ripple effect on the medical and education sectors.
GCC comes calling
Of late, Gulf Cooperation Council companies have been showing avid interest in enterprising Egyptian firms. A stellar example of this move happened last month when First Abu Dhabi Bank offered to buy a controlling stake in Egypt’s biggest investment bank EFG Hermes, which is valued at $1.18 billion.
Last year, Abu Dhabi-based Aldar Properties acquired a majority stake in Egypt’s Sixth of October for Development and Investment Company, or SODIC, for 6.1 billion Egyptian pounds or $386.8 million. The shopping spree also reverberated in the e-commerce space when the Saudi Arabia-based B2B platform Sary recently acquired Egypt-based Mowarrid.
Still, the road to revival won’t be simple as a lot will depend on how Egyptian entrepreneurs will steer the course of the businesses through these tough times to their advantage.


G7 joins EU on $60-per-barrel price cap on Russian oil

G7 joins EU on $60-per-barrel price cap on Russian oil
Updated 03 December 2022

G7 joins EU on $60-per-barrel price cap on Russian oil

G7 joins EU on $60-per-barrel price cap on Russian oil
  • US Treasury Secretary Janet Yellen said in a statement that the agreement will help restrict Putin’s “primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies”

WASHINGTON: The Group of Seven nations and Australia joined the European Union on Friday in adopting a $60-per-barrel price cap on Russian oil, a key step as Western sanctions aim to reorder the global oil market to prevent price spikes and starve President Vladimir Putin of funding for his war in Ukraine.
Europe needed to set the discounted price that other nations will pay by Monday, when an EU embargo on Russian oil shipped by sea and a ban on insurance for those supplies take effect. The price cap, which was led by the G7 wealthy democracies, aims to prevent a sudden loss of Russian oil to the world that could lead to a new surge in energy prices and further fuel inflation.
US Treasury Secretary Janet Yellen said in a statement that the agreement will help restrict Putin’s “primary source of revenue for his illegal war in Ukraine while simultaneously preserving the stability of global energy supplies.”
The agreement comes after a last-minute flurry of negotiations. Poland long held up an EU agreement, seeking to set the cap as low as possible. Following more than 24 hours of deliberations, when other EU nations had signaled they would back the deal, Warsaw finally relented late Friday.
A joint G-7 coalition statement released Friday states that the group is “prepared to review and adjust the maximum price as appropriate,” taking into account market developments and potential impacts on coalition members and low and middle-income countries.
“Crippling Russia’s energy revenues is at the core of stopping Russia’s war machine,” Estonian Prime Minister Kaja Kallas said, adding that she was happy the cap was pushed down a few extra dollars from earlier proposals. She said every dollar the cap was reduced amounted to $2 billion less for Russia’s war chest.
“It is no secret that we wanted the price to be lower,” Kallas added, highlighting the differences within the EU. “A price between 30-40 dollars is what would substantially hurt Russia. However, this is the best compromise we could get.”
The $60 figure sets the cap near the current price of Russia’s crude, which recently fell below $60 a barrel. Some criticize that as not low enough to cut into one of Russia’s main sources of income. It is still a big discount to international benchmark Brent, which slid to $85.48 a barrel Friday, but could be high enough for Moscow to keep selling even while rejecting the idea of a cap.
There is a big risk to the global oil market of losing large amounts of crude from the world’s No. 2 producer. It could drive up gasoline prices for drivers worldwide, which has stirred political turmoil for US President Joe Biden and leaders in other nations. Europe is already mired in an energy crisis, with governments facing protests over the soaring cost of living, while developing nations are even more vulnerable to shifts in energy costs.
But the West has faced increasing pressure to target one of Russia’s main moneymakers — oil — to slash the funds flowing into Putin’s war chest and hurt Russia’s economy as the war in Ukraine drags into a ninth month. The costs of oil and natural gas spiked after demand rebounded from the pandemic and then the invasion of Ukraine unsettled energy markets, feeding Russia’s coffers.
US National Security Council spokesman John Kirby told reporters Friday that “the cap itself will have the desired effect on limiting Mr. Putin’s ability to profit off of oil sales and limit his ability to continue to use that money to fund his war machine.”
More uncertainty is ahead, however. COVID-19 restrictions in China and a slowing global economy could mean less thirst for oil. That is what OPEC and allied oil-producing countries, including Russia, pointed to in cutting back supplies to the world in October. The OPEC+ alliance is scheduled to meet again Sunday.
That competes with the EU embargo that could take more oil supplies off the market, raising fears of a supply squeeze and higher prices. Russia exports roughly 5 million barrels of oil a day.
Putin has said he would not sell oil under a price cap and would retaliate against nations that implement the measure. However, Russia has already rerouted much of its supply to India, China and other Asian countries at discounted prices because Western customers have avoided it even before the EU embargo.
Most insurers are located in the EU or the United Kingdom and could be required to participate in the price cap.
Russia also could sell oil off the books by using “dark fleet” tankers with obscure ownership. Oil could be transferred from one ship to another and mixed with oil of similar quality to disguise its origin.
Even under those circumstances, the cap would make it “more costly, time-consuming and cumbersome” for Russia to sell oil around the restrictions, said Maria Shagina, a sanctions expert at the International Institute for Strategic Studies in Berlin.
Robin Brooks, chief economist at the Institute of International Finance in Washington, said the price cap should have been implemented when oil was hovering around $120 per barrel this summer.
“Since then, obviously oil prices have fallen and global recession is a real thing,” he said. “The reality is that it is unlikely to be binding given where oil prices are now.”
European leaders touted their work on the price cap, a brainchild of Yellen.
“The EU agreement on an oil price cap, coordinated with G7 and others, will reduce Russia’s revenues significantly,” said Ursula von der Leyen, president of the European Commission, the EU’s executive arm. “It will help us stabilize global energy prices, benefiting emerging economies around the world.”
 

 


As IMF funding delayed, Pakistan expects $3bn from friendly country

As IMF funding delayed, Pakistan expects $3bn from friendly country
Updated 03 December 2022

As IMF funding delayed, Pakistan expects $3bn from friendly country

As IMF funding delayed, Pakistan expects $3bn from friendly country
  • An IMF review for the release of its next tranche of funding has been pending since September
  • Pakistan's finance minister, Ishaq Dar, said all targets for the IMF's ninth review had been completed, adding that withholding a tranche despite that would not make sense

ISLAMABAD: Pakistan expects to secure $3 billion in external financing from a friendly country in two weeks, its finance minister said on Friday as the South Asian country awaits IMF funding.
An International Monetary Fund (IMF) review for the release of its next tranche of funding has been pending since September, leaving Pakistan in dire need of external financing.
Pakistan’s finance minister, Ishaq Dar, said on Friday in an interview with Geo News TV that all targets for the IMF’s ninth review had been completed, adding that withholding a tranche despite that would not make sense.
Pakistan secured a $6 billion bailout in 2019 under an Extended Fund Facility (EFF), that was topped up with another $1 billion earlier this year.
“We continue to engage in discussions with the government over policies to address the humanitarian and rehabilitation needs of the floods while promoting macroeconomic and fiscal sustainability,” the IMF’s resident representative in Pakistan, Esther Perez Ruiz, said in a statement.
Dar said Pakistan’s foreign reserves, which have dropped to $7.5 billion, will be shored up with a $3 billion financing from a friendly country in the next two weeks.
That is hardly enough for a month of imports for Pakistan, which has been facing a widening current account deficit and a balance of payments crisis.
“All the requirements for the ninth (IMF) review are completed,” Dar said, adding that the international lender was “behaving abnormal” by not completing the review.
Pakistan will make alternate arrangements in case of any delay from the IMF, he said.
“If the money doesn’t come, we will manage, no problem,” he added.

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Dubai’s Careem celebrates 1bn rides

Dubai’s Careem celebrates 1bn rides
Updated 02 December 2022

Dubai’s Careem celebrates 1bn rides

Dubai’s Careem celebrates 1bn rides
  • Family trip back home to India brings delight to employee
  • Super app had 10th anniversary in July 

 

DUBAI: Hailing app Careem has celebrated the completion of 1 billion rides across the Middle East, North Africa and Pakistan.

The billionth journey was completed by Captain Razak Uppattil, who has completed 10,500 rides since joining Careem four years ago. 

To commemorate the milestone, the Dubai-based super app gave Uppattil a trip back home to visit his family in India.

He said: “It’s the people that I get to meet from all over the world that I really enjoy.

“I have three children back home in Kerala, India, and I am so excited I’ll see them soon.”

Genera Tesoro, who was Careem’s 1 billionth passenger, was given a year of ride-hailing trips to mark the milestone. 

Careem, which marked its 10-year anniversary in July, is now operating in more than 100 cities in 14 countries. It recently expanded its fleet in Qatar by more than 50 percent ahead of the World Cup.


Saudi Arabia’s PIF announces establishment of Aseer Investment Company

Saudi Arabia’s PIF announces establishment of Aseer Investment Company
Updated 02 December 2022

Saudi Arabia’s PIF announces establishment of Aseer Investment Company

Saudi Arabia’s PIF announces establishment of Aseer Investment Company
  • AIC will unlock a wide range of investment opportunities for domestic and international investors across number of sectors

RIYADH: Saudi Arabia’s Public Investment Fund has established a company to operate as its investment arm in the Aseer region of Saudi Arabia.

The Aseer Investment Company will promote and stimulate local and foreign direct investment to develop and transform the region into a year-round tourism destination.

AIC will unlock a wide range of investment opportunities for domestic and international investors across number of sectors including tourism, hospitality, healthcare, sports, education, food, and many other fast-growing domestic industries.

The company will contribute to fostering public-private partnerships, creating jobs for the local community and promoting the region’s tourism and attractive investment opportunities.

“Aseer Investment Company aims to become a leading facilitator of broad-ranging investment opportunities in Aseer, Raid Ismail, head of Direct Investments for the Middle East and North Africa at PIF said.  

“AIC will promote the region’s rugged mountains, stunning nature, and storied culture, preserve its ancient history and heritage, and transform it into a world-class tourist destination for visitors from across the globe in line with PIF’s strategy and Vision 2030,” he added.

The establishment of the company is in line with PIF’s strategy to unlock the capabilities of promising sectors in Saudi Arabia, support the country, and in line with Asir’s region position as a leading investment destination.

Saudi Arabia is offering investment opportunities worth $6 trillion in the travel and tourism sector through to 2030.

Speaking at the World Travel and Tourism Council Global Summit in Riyadh on Nov. 29, the Saudi Minister of Tourism, Ahmed Al-Khateeb said: “We built our tourism industry against the backdrop of a global disaster (COVID-19 pandemic). And we now have $6 trillion of investment opportunities through 2030,” said Al-Khateeb.

Saudi Arabia’s tourism sector will create 1 million jobs by 2030 and the Kingdom will welcome 100 million visitors, said Qusai Al-Fakhri, CEO of the Saudi Tourism Development Fund earlier this year.

The sector will create one of every three new jobs in Saudi Arabia in the next decade, as the nation focuses more on the growth of non-oil sectors, said Al-Fakhri.

Talking about the progress of the Saudi tourism sector at the Future Hospitality Summit in Riyadh, he said: “Last year, with the support of the tourism ecosystem, and the larger government ecosystem and enablers, Saudi Arabia achieved record levels of domestic tourism that is remarkable globally.”

Al-Fakhri also noted that the tourism sector is expected to contribute 10 percent to the Kingdom’s gross domestic product by the end of this decade.


TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell
Updated 01 December 2022

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

TASI slips 74 points to close at 10,840 amid investor ambiguity: Closing bell

RIYADH: Saudi Arabia’s benchmark index on Thursday fell 74.26 points to close at 10,840.74 after touching a peak of 10,957.64 at 10:20 SAST, reflecting a sense of ambiguity among investors. 

The parallel market Nomu also finished its trail 497.85 points lower at 18,903.74 after snowballing to 18,778.82 at 11:53 SAST. 

The advance-decline ratio, however, bucked the trend, with 126 stocks of the listed 219 heading north and 75 turning south. The total trading turnover was SR4.86 billion ($1.29 billion). 

Sahara International Petrochemical Co., in a regulatory filing on Thursday, announced a 15 percent cash dividend or SR1.50 per share, resulting in a dole out of SR1.087 billion for the second half of 2022. The company’s share price picked the drift and closed 5.72 percent higher to SR37.90. 

Taiba Investments Co. on Thursday also announced that it awarded a construction contract worth SR283 million to Orient Construction Company Weavers Ltd. to build a four-star Novotel hotel project in Madinah. The stock closed lower at SR26.90 after peaking at SR27.10. 

Meanwhile, Arabian Internet and Communications Services Co. (Solutions) informed Tadawul just before closing about its agreement with Saudi Telecom Company worth SR372.92 million to provide technical, administrative and logistical services. The share closed slightly lower at SR246. 

The Capital Market Authority on Thursday also Saudi Arabian Amiantit Co.’s request to increase its capital through a rights issue worth SAR 346.5 million. 

There was a blip of a bullish wave in the Software & Services index, which closed up 401 points at 36,540.33. The Healthcare Equipment & Services index also increased 103.04 points to close at 9,380.2.  

However, some of Thursday’s biggest losers were the Saudi British Bank, the National Company for Learning and Education, Arab National Bank, The Company for Cooperative Insurance and Bank Albilad. 

The Diversified Financial index was under the weather in November as it recorded the steepest decline of 15.9 percent in the Gulf Cooperation Council in November. 

A Kamco Invest research report highlighted that the Saudi Stock Exchange witnessed the after all the constituents of the index reported declines. 

Barring the Consumer Service index, the monthly sectoral performance chart declined across the board.  

The Utilities and Capital Goods indices were next with a decline of 15.2 percent and 11.7 percent, followed by Consumer Durables & Apparel and Materials indices with declines of 10.8 percent and 10.6 percent, respectively.