This record is a partial extract of the original cable. The full text of the original cable is not available.

221638Z May 05

UNCLAS SECTION 01 OF 04 CAIRO 003889 
 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA, AND EB/IDF 
USAID FOR ANE/MEA MCCLOUD 
USTR FOR SAUMS 
TREASURY FOR MILLS/NUGENT 
COMMERCE FOR 4520/ITA/ANESA/TALAAT 
 
E.O.  12958: N/A 
TAGS: ECON EFIN ETRD EINV ENRG EWWT SENV EG
SUBJECT: EGYPT MONTHLY ECONOMIC REPORT: MARCH AND APRIL 2005 
 
 
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Summary 
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¶1.  (U) In this edition: 
 
Banking and Finance:  Parliament considers amendments to the 
Banking Law and the first foreign medical insurer enters 
Egypt's market. 
 
Telecom and IT:  The Government of Egypt (GOE) announces 
plans for a public offering of shares in Telecom Egypt, 
while the Minister of Communication and Information 
Technology leads a delegation to the CeBit exhibit in 
Germany.  Alkan Holdings sells part of its stake in 
Vodofone, Raya announces a public offering, Inmarsat 
introduces Regional Broadband Global Area Network technology 
to Egypt, Bank of Alexandria concludes a deal for an IT 
upgrade, and Egypt hosts a "smartcard" technology 
conference. 
 
Energy and Oil:  Parliament approves deals in the energy 
field, British Petroleum announces a new gas discovery, 
while British Gas begins delivery of gas to a new processing 
facility.  Russian firm Gazprom signs a cooperation 
agreement with the Egyptian Gas Holding Company. 
 
Transportation:  A new airport opens in Al Alamein, and Suez 
Canal revenues reach $260.8 million in February 2005. 
 
Environment:  Researchers discover new fossils in the Valley 
of the Whales, Ethiopian Prime Minister Zenawi praises the 
current status of the Nile Basin Initiative, and Egypt and 
the EU sign an agreement for tourism development in the 
south Sinai.  End Summary. 
 
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Banking and Finance 
------------------- 
 
¶2.  (U) In mid-April the GOE referred to the Shura Council 
and People's Assembly a bill amending Banking Law 88 of 
¶2003.  The amendments will:  1) allow banks to establish 
credit bureaus; 2) prohibit bank managers from managing more 
than one bank under the CBE's supervision, which will remove 
most public banks chairmen from the boards of joint venture 
banks; 3) exempt securities issued by the CBE from taxes and 
fees; 4) facilitate banks' foreclosure on real estate used 
as collateral for loans; and 5) reduce the minimum capital 
requirement for foreign exchange bureaus from LE 10 million 
to LE 5 million. 
 
¶3.  (U) In April the British "BUPA" medical insurance 
company received a license to operate in the medical 
insurance market.  BUPA is the first foreign company to 
acquire such a license.  The company will operate under BUPA 
Egypt Insurance, with an authorized and issued capital of LE 
100 million and LE 30 million, respectively.  The company is 
expected to start operations in July 2005. 
 
-------------------------------- 
Telecommunications and Info Tech 
--------------------------------- 
 
¶4.  (U) Minister of Communication and Information Technology 
Tarek Kamel, on a visit to London in March, indicated that 
Telecom Egypt (TE) would sell 20% of the company in a public 
offering by the end of 2005.  In TE's last two bond 
issuances, demand substantially exceeded the initial offer, 
raising LE 3.38 billion and LE 2 billion respectively. 
Foreign investment funds from the U.S., UK, Belgium and the 
UAE participated in the two previous bond sales.  Press 
reports indicate that France's Orange Telecom has offered to 
purchase a majority stake in TE for $5 billion.  TE 
representatives have indicated that the GOE is likely to 
accept the French company's offer, seeking to complete the 
sale by December 2005.  Contacts in the telecom sector have 
expressed skepticism, however, that the deal could be 
completed by the end of the year. 
 
¶5.  (U) Also in March, Kamel led a delegation of 19 Egyptian 
telecom and IT company representatives to the annual CeBIT 
Information and Communication Technology exhibition in 
Hanover, Germany.  The delegation reportedly concluded 
several deals with foreign firms, valued at $1.2 million. 
Egyptian firm SoftLock signed three agreements with Byte 
University (UK), the Taiwanese company JPCC Link and the 
German firm Aiexistance.  The Ministry of Communication and 
Information Technology (MCIT) also signed an agreement with 
a leading French telecom company to invest $50 million in 
Egypt's IT sector.  Kamel announced at the exhibition that 
Egypt would host an Arab-African preparatory meeting for the 
second conference of the World Summit on Information 
Society. 
 
¶6.  (U) In mid March, the Egyptian conglomerate Alkan 
Holdings announced the sale of part of its stake in Vodafone 
Egypt.  The Chairman and founder of Alkan Holding, Mohamed 
Mahmoud Nosseir, indicated that proceeds from the sale would 
be used to finance new tourism projects.  The sale will 
reduce Alkan's overall stake in Vodafone to 5 percent. 
Vodafone recently announced profits of LE 777.9 million for 
the first nine months of FY 2004/05, a 4.6% decrease from 
the same period in FY 2003/04. 
 
¶7.  (U) On March 28, Inmarsat Ltd, a global satellite 
communications provider, announced that it would begin 
marketing its Regional Broadband Global Area Network 
(Regional B-GAN) services in Egypt.  Regional B-GAN will 
offer mobile data communication to industries operating in 
remote areas where telecommunication and/or high-speed data 
communication are not currently available.  R-GAN services 
operate at twice the speed of current terrestrial General 
Packet Radio Service (GPRS) services. 
 
¶8.  (U) In late March, the state owned Bank of Alexandria 
concluded a deal worth LE 23.7 million with Infosys 
Technologies, an Indian IT Company, to computerize and 
improve the bank's operations, including electronic banking, 
and customer relations management, among other things.  Bank 
of Alexandria is undergoing management and operational 
restructuring, in anticipation of privatization by the end 
of 2005. 
 
¶9.  (U) In April, the Egyptian firm Raya announced it would 
hold an initial public offering (IPO) of LE 400 million. 
Raya conducted a promotional road show for the IPO in the 
Gulf region during the second half of April.  Bahraini firm 
Biltone Securities and Investment will manage the IPO.  In 
2004, Raya expanded its operation in the Gulf region, 
Algeria and the U.S., recording profits of LE 29 million 
pounds, up from LE 4.9 million in 2003. 
 
¶10.  (U) On April 11, the third international conference and 
exhibition for "smartcard" technology was held in Cairo. 
International experts discussed the challenges facing the 
Egyptian banking sector, particularly switching from 
magnetized to smartcard technology for credit and debit 
cards, in line with international standards.  Use of 
smartcard technology in e-government transactions was also 
discussed. 
 
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Oil and Energy 
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¶11.  (U) In the second week of March, British Petroleum (BP) 
Egypt announced a new gas discovery in the Ras El Barr 
concession in Egypt's Nile Delta region.  The announcement 
indicated that a new well, 70 kilometres northeast of 
Egypt's Mediterranean city of Port Said, had tested at 22- 
million cubic feet per day.  It added that the natural gas 
was of high quality with no impurities.  Hesham Mekawi, 
President of BP Egypt, indicated that the proximity of the 
discovery to existing infrastructure would allow for quick 
development of the new well at minimal cost.  A joint 
venture company, Gupco (grouping BP and the state-owned 
Egyptian General Petroleum Corp), will operate the 
development. 
 
¶12.  (U) In late March, Aleksei Miller, head of the Russian 
natural gas monopoly Gazprom, signed a cooperation agreement 
with the Egyptian Gas Holding Company EGAS.  The agreement 
serves as the basis for the further development of bilateral 
cooperation in the exploration, processing and 
transportation of gas.  According to Miller, a special 
Russian-Egyptian group will be set up to devise specific 
projects for gas cooperation. 
 
¶13.  (U) Also in late March, the Shura Council Committee for 
Industrial Production and Energy approved measures taken by 
the Minister of Petroleum to conclude two new oil and gas 
exploration agreements and to amend four additional 
agreements comprising a total investment of $843 million. 
 
¶14.  (U) In mid April, British Gas (BG) and partners 
PETRONAS and the EGAS delivered the first gas shipment from 
the offshore Simian Sienna fields to the liquid natural gas 
(LNG) processing center at Idku.  Also in mid-April, BG and 
partners Edison International and EGAS delivered the first 
gas shipment from the Rosetta Phase Two operation to the 
Egyptian domestic market.  BG Group's Executive Vice 
President and Managing Director Stewart Fysh indicated that 
both events were significant developments in Egypt's energy 
sector.  Gas from the Simian Sienna fields would eventually 
be shipped to high value markets in Western Europe and the 
U.S., while gas from the Rosetta Phase Two operation would 
fill Egypt's growing domestic demand.  Gaz de France has 
signed a 20 year sales and purchase agreement for Egyptian 
LNG, much of which will be shipped from the Idku production 
facility starting in June 2005. 
 
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Transportation 
-------------- 
 
¶15.  (U) In late March, the second "Build, Own, Operate, and 
Transfer" private airport in Egypt started its commercial 
operations at Al Alamein on Egypt's north coast.  A charter 
flight arrived from London on March 21, the same day the 
airport was inaugurated by the Ministers of Tourism and 
Civil Aviation.  Reports indicate that weekly charter 
flights between Italy and Al-Alamein will also be scheduled. 
KATO Group, chaired by Egyptian businessman Ibrahim Kamel, 
is the largest shareholder in the airport. 
 
¶16.  U) Suez Canal revenue reports for February were issued 
in early March.  Revenues increased by about 9% to $260.8 
million in February 2005 compared to February 2004.  A 3% 
increase in tolls came in force on February 1, 2005. 
 
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Environment 
----------- 
 
¶17.  (U) During the first week of April, the press reported 
discovery of a 15-meter long, 40 million year old whale 
fossil in the Valley of the Whales northwest of Fayoum oasis 
in Egypt's Western Desert area.  Dr. Philip Gingerich, 
Professor of Geology and Director of the Museum of 
Paleontology at the University of Michigan, is the head of 
the research team that made the discovery.  According to 
Gingerich, the fossil is the best-preserved remains of the 
"King Lizard" whale.  The fossil will be shipped to the U.S. 
for further study and then returned to Egypt.  An MOU was 
also signed between the University of Michigan and the 
Egyptian Environmental Affairs Agency to cooperate in 
finding ways to protect the Valley of the Whales, including 
possibly declaring it a natural heritage area and/or 
developing a scientific/tourist facility at the site. 
 
¶18.  (U) At an April 17 meeting between Ethiopian Prime 
Minister Meles Zenawi and President Mubarak in Cairo, the 
two leaders discussed, inter alia, the Nile Basin Initiative 
(NBI).  Zenawi expressed satisfaction regarding the current 
status of NBI discussion.  Zenawi had earlier criticized 
Egypt's Nile water policy and its negative effect on 
Ethiopia.  Also during Zenawi's visit, the Egyptian and 
Ethiopian foreign ministers signed two agreements relating 
to the standards for importation of meat from Ethiopia and 
training of Ethiopian nationals in the management and 
tourism fields. 
 
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Tourism 
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¶19.  (U) During the first half of April, the EU and Egypt 
signed a regional development project agreement under which 
the EU will provide LE 460 million for development of 
infrastructure and tourism facilities in the south Sinai 
area. 
 
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Economic Statistics 
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¶20.  (U) 
 
Exchange Rate: 
                              (03/31/05)         (04/30/05) 
Egyptian Pounds/$             Buying Selling Buying Selling 
Avg. Bank/Bureau Rate         5.788  5.815   5.786  5.811 
 
Capital Market: 
                               (03/31/05)   (04/30/05) 
Capital Markets Authority Index     1528         1619 
Hermes Financial Index             32650        36251 
EFG Index                          17182        19313 
Value of Traded Securities         13414         7894 
(LE millions/month) 
Volume of Traded Securities        394.8        166.6 
(million shares/month) 
Interest Rates: 
(percent, monthly comparison) 
 
Interbank Overnight                  9.8         10.8 
T-bills (182 days)                    NA           NA 
T-Bond (maturing 01/06)        No Trading  No Trading 
T-Bond (maturing 04/09)        No Trading  No Trading 
 
Foreign Reserves: 
(US $ billion, official gov't figures) 
 
                               (02/2005)      (03/2005) 
                                17.230    18.043