THE CENTRAL BANK OF EGYPT (CBE) released Balance of Payments (BOP) figures for the first half of FY2007/2008 (July to December 2007). The merchandise trade deficit rose to $11.3 billion, up 71% from $6.6 billion in 1H FY2006/2007. Exports grew strongly, by 22.8% year-on-year (Y-o-Y) to $13.1 billion, but were outpaced by the growth in imports, which rose by 41.2% Y-o-Y to $24.4 billion, a reflection of both Egypt’s strong economic growth and increasing demand for some goods, but also by global price rises in commodities, amongst other items. Tourism receipts climbed to $5.6 billion in 1H FY2007/2008, up from $4.3 billion a year before, and workers’ remittances also showed very strong growth, rising to $4.0 billion, from $2.7 billion in 1H FY2006/2007. The Current Account registered a deficit of $245.7 million, down from a surplus of $1.9 billion in I H FY2006/2007. The net inflow of Foreign Direct Investments in the first half of FY2007/2008 rose to $7.8 billion versus $7.2 billion last year. The overall balance achieved a surplus of $3.1 billion in 1H FYO7/08 versus $2.9 billion in the corresponding period in 2007. Egypt’s Net International Reserves (NIR) registered a new high of $$32.9 billion at the end of February 2008, up from $32.1 billion in January 2008. NIR had been rising steadily since October 2004 when they registered $14.8 billion. The increase in NIR could be due to the inflow of foreign currency from the execution of the sale of the cement arm of Orascom Construction Industries (Am Cham member) to Lafarge and to portfolio investments targeting the Egyptian stock market.
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ETISALAT, NIGERIA’S FIFTH MOBILE phone company, has unveiled its new network. Hakeem Bello-Osagie, chairman of Emerging Markets Telecommunications Services, or EMTS, owners of the license operated by Etisalat, said that the company is expected to use a marketing strategy of reduced tariffs to take market share from established operators in Nigeria. EMTS, a Nigerian firm, entered into partnership with Mubadala Development Co. of the United Arab Emirates following Mubadala’ s acquisition of a Unified Access License that includes a mobile phone license from the Nigerian government in January 2007 for $400 million. Etisalat has acquired a 40% stake in EMTS and operates the license in Nigeria. Saoud Al Shamsi, Etisalat’s chief executive officer, said the company has built a network that spans the Middle East, Africa and Asia. Nigeria has more than 40 million mobile phone subscribers. Operators include MTN, Globacom, Celtel and Visafone.
THE MOROCCAN CITY OF FEZ HOSTED A book fair devoted to women writers in early March 2008. Dozens of Moroccan writers, poet and literary publishers convened March 7th in Fez for the first-ever Women’s Book Fair. The event offered Moroccans the chance to meet writers and discuss gender issues, as well as enjoying various theatrical and musical displays. Female academic’ students, activists, journalists and housewives attended the two-day event entitled “Female Writers of Yesterday and Today”. Feminine Creativity Association, one of the oldest defenders of women’s rights in Morocco, co-sponsored the event with the Mubadarat (Initiatives) Association “We felt that women’s creative writings, when so highlighted, become significantly prominent. However, when they are presented in a joint spat with men’s writings, the latter’s writings dominate,” Tanana said. “In ordinary book fairs, important women’s books would be kept on shelves. They don’t appear amidst the congestion of writings,” Roughly 85% of attendance was Moroccan and Arab female writers.
NIGERIA’S DECISION-MAKING FEDERAL Executive Council (FEC) has approved total loan package of $37.9 million for the development of the agriculture sector and poverty eradication in the country. The Rome- based International Fund for Agricultural Development (IFAD) will contribute $27.78 million, representing 67.8 per cent of the total loan, as well as a total grant of $386,800 towards the initiative. The Ford Foundation will provide a total grant of $500,000, the Nigerian government $6.17 million (15 per cent of the loan), the participating institutions $4.762 million and the beneficiaries (farmers) $785,100. The interest- free loan, payable over 40 years, has a moratorium on payment of 10 years, but will attract a service charge of 0.75% of the amount outstanding. The loan is aimed at the execution of a programme that will grant rural farmers direct access to credit. Some 345,000 beneficiaries from 23 of the country’s 36 states will benefit from the programme.
THE FIRST SEEDS OF THE ORASCOM DEAL were sown at a conference in London, where Bruno Lafont, chief executive of Lafarge, the world’s largest cement company, spoke alongside NassefSawiris, a member of Egypt’s richest family and chief executive of Orascom Cement. “There were two speakers in the cement sector and we were sitting close together,” Lafont explains with a Gallic laugh. “We had never met before. I was interested to know how [Orascorn] was doing business. What was he doing differently from us? I spent five years in Turkey and I learned there that entrepreneurs can have different approaches that can be extremely smart.”
Lafont and Sawiris met again last summer. Lafont was impressed that Orascom had begun as a local, general construction business and was therefore able to anticipate demand for materials much earlier than Lafarge. Orascom had a presence in Egypt, Algeria, northern Iraq, the UAE and Pakistan and has plants under construction in Saudi Arabia, Syria, Nigeria, South Africa, North Korea and Turkey. Lafarge, by contrast, was only in Egypt and Turkey, though it had announced plans to build 45m tones of new cement capacity — about 25 new plants — in 20 countries, mostly emerging market by 2010. But Orascom would give Lafarge another 45m tones of cement capacity by the same date. Little surprise then that a takeover was decided upon. The deal includes $40MM equity, and leaves Sawiris with an 11.4% stake in Lafarge. Shares in Lafarge, a leading member of the CAC 40, rose 13% on the announcement as investors and analysts backed the deal.
-From Business, a UK Weekly, January 3-8, 2008
By Toyin Akinosho
THE VERYTOP OF THE LISTING ON THE Cairo and Alexandria Stock Exchange (CASE) is Orascom Telecommunications, 57% of which is owned by the Sawiris family. Next on the list is Orascom Construction, almost 70% owned by the same family. The third largest company on CASE, Africa’s second largest stock exchange, is another family owned company, which doesn’t have anything to do with the Sawiris. Abdel-Azziz Ezz is the chairman and managing director of both Alexandria National Iron and Steel(ANSDK), which is Number 3 on the CASE top 10 and Ezz Steel Rebars (Ezz Steel), which shows up on Number 9.
To understand how significant these four, family owned companies mean to the size of the Egyptian economy, we must understand this:
Egypt’s top 10 companies on the CASE make half the money on the exchange and if an exchange is a barometer of the health of an economy, then it means they simply dominate the economy. Whereas combined net profits for bt100-Egypt’s largest and most actively traded 100 stocks-grew to $2,457 billion in 2004 from $1,487 billion, the gulf between the top 10 and the rest of the list continued to widen. With combined revenues of $8,980 billion in 2004, the top 10 accounted for 57.91% of bt100’s revenues, and their $1,381 billion in net profit was 56.19% of bt 100 profits.
THE NATIONAL BANK OF EGYPT IS TO increase its paid-in capital by 2 billion Egyptian pounds ($349.4 million) to EGP4.25 billion($742.42Million) The decision was approved at the company’s general assembly meeting, as part of the government’s plan to strengthen the financial standing of the state-owned bank, which has 23% market share. The bank is currently leading a consortium to establish a satellite business channel in Egypt with an initial investment cost of $15 million. The bank will make a 20% contribution to the capital of the new company. The Cairo Alexandria Stock exchanges banque MisrBanque Misr, Housing and Development Bank, Telecom Egypt, Credit Agricole Egypt and Misr Insurance Company have all expressed interest in participating in the project.
Joseph Stiglitz
THE IMF HAS DONE A GOOD JOB OF persuading many that its ideologically driven policies were necessary if countries are to succeed in the long run. Economists always focus on the importance of scarcity and the IMF often says it is simply the messenger of scarcity: countries cannot persistently live beyond their means. One doesn’t, of course, need a sophisticated financial institution staffed by Ph.D. economists to tell a country to limit expenditures to revenues. But IMF reform programmes go well beyond simply ensuring that countries live within their means.
There are alternatives to IMF-style programmes, other programmes that may involve a reasonable level of sacrifice, which are not based on market fundamentalism. Programmes that have had positive outcomes. A good example is Botswana, 2,300 miles south of Ethiopia, a small country of 1.5 million, which has managed a stable democracy since independence.
At the time Botswana became fully independent in 1966 it was a desperately poor country, like Ethiopia and most of the other countries in Africa, with a per capita annual income of $100. It too was largely agricultural, lacked water, and had a rudimentary infrastructure. But Botswana is one of the success stories of development. Although the country is now suffering from the ravages of AIDS, it averaged a growth rate of more than 7.5 percent from 1961 to 1997.
Botswana was helped by having diamonds, but countries like Congo Republic (formerly Zaire), Nigeria, and Sierra Leone were also rich in resources. In those countries, the wealth from this abundance fueled corruption and spawned privileged elites that engaged in internecine struggles for control of each country’s wealth. Botswana’s success rested on its ability to maintain a political consensus, based on a broader sense of national unity. That political consensus, necessary to any workable social contract between government and the governed, had been carefully forged by the government, in collaboration with outside advisers, from a variety of public institutions and private foundations, including the Ford Foundation. The advisers helped Botswana map out a programme for the country’s future. Unlike the IMF, which largely deals with the finance ministry and central banks, the advisers openly and candidly explained their policies as they worked with the government to obtain popular support for the programmes and policies. They discussed the programme with senior Botswana officials, including cabinet ministers and members of Parliament, with open seminars as well as one- to-one meetings.
Part of the reason for this success was that the senior people in Botswana’s government took great care in selecting their advisers. When the IMF offered to supply the Bank of Botswana with a deputy governor, the Bank of Botswana did not automatically accept him. The bank’s governor flew to Washington to interview him. He turned out to do a splendid job. Of course, no success is without blemishes. On anther occasion, the Bank of Botswana allowed the IMF to pick somebody to be director of research, and that turned out, at least in the view of some, to be less successful.
The differences in how the two organizations approached development were reflected not just in performance. While the IMF is vilified almost everywhere in the developing world, the warm relationship that was created between Botswana and its advisers was symbolized by the awarding of that country’s highest medal to Steve Lewis, who at the time he advised Botswana, was a professor of development economics at Williams. (He later became president of Carleton College.) The vital consensus was threatened two decades ago when Botswana had an economic crisis. A drought threatened the livelihood of the many people engaged in raising cattle and problems in the diamond industry had put a strain on the country’s budget and its foreign exchange position. Botswana was suffering exactly the kind of liquidity crisis the IMF had originally been created to deal with; a crisis that could be eased by financing a deficit to forestall recession and hardship. However, while that may have been Keynes’s intent when he pushed for the establishment of the IMF, the institution does not now conceive of itself as a deficit financier, committed to maintaining economies at full employment. Rather, it has taken on the pre-Keynesian position of fiscal austerity in the face of a down-turn, doling out funds only if the borrowing country conforms to the IMF’s views about appropriate economic policy, which almost always entail contractionary policies leading to recessions or worse. Botswana, recognizing the volatility of its two main sectors, cattle and diamonds, had prudently set aside reserve funds for just such a crisis. As it saw its reserves dwindling, it knew that it would have to take other measures. Botswana tightened its belt, pulling together, and got through the crisis. But because of the broad understanding of economic policies that had been developed over the years and the consensus-based approach to policy making, the austerity did not cause the kinds of ‘cleavages in society that have occurred so frequently elsewhere under IMF programmes, Presumably, if the IMF had done what it should have been doing providing funds quickly to countries with good economic policies in times of crisis, without searching around for conditionalties to impose — the country would have been able to wend its way through the crisis with even less pain (The IMF mission that came in 1981, quite amusingly, found it very difficult to impose new conditions, because Botswana had already done so many of the things that they would have insisted upon.) Since then, Botswana has not turned to the IMF for help.
The assistance of outside advisers independent of the international financial institutions had played a role in Botswana’s success even earlier. Botswana would not have fared as well as it did if its original contract with the South African diamond cartel had been maintained. Shortly after independence, the cartel paid Botswana $20 million for a diamond concession in 1969, which reportedly returned $60 million in profits a year. In other words, the payback period was four months! A brilliant and dedicated lawyer seconded to the Botswana government from the World Bank argued forcefully for a renegotiation of the contract at a higher price, much to the consternation of the mining interests. Dc Beers (the South African diamond cartel) tried to tell people that Botswana was being greedy. They used what political muscle they could through the World Bank, to stop him. In the end, they managed to extract a letter from the World Bank making it clear that the lawyer did not speak for the Bank. Botswana had the opportunity to renegotiate the whole relationship. The new agreement has so far served Botswana’s interests well, and enabled Botswana and Dc Beers to maintain good relations.
Ethiopia and Botswana are emblematic of the challenges facing the more successful countries of Africa today: Countries with leaders dedicated to the well-being of their people, fragile and in some cases imperfect democracies, attempting to create new lives for their peoples from the wreckage of a colonial heritage that left them without institutions or human resources. The two countries are also emblematic of the contrasts that mark the developing world:contrasts between success and failure, between rich and poor, between hopes and reality, between what is and what might have been.
– Excerpted from the book Globalisation and its Discontents. Prof Stiglitz is the 2001 winner of the Nobel Prize for Economics
Over The Past five years, No- Frills Airlines have taken a huge bite out of what was holiday companies’ bread and butter, flights to the sunspots of the Mediterranean…. While total leisure and air travel in Britain has more than doubled in the past decade, from 20 million to 50 million, package holidays’ share of the market has dwindled from nearly 90% to less than half – The Sunday Times Of London
CAIRO-BASED NATIONAL BANK OF EGYPT, the largest commercial bank in the North African country, will assert its presence in China by opening a branch in Shanghai in 2007, according to the Dubai-based al Bayan daily. If it happens, it would be a unique reversal of movement of business between Africa and China. Chinese companies are widely reported as moving to Africa and not vice versa. “We applied for a license to open a branch in May 2006 to the Chinese authorities and we expect to start operations in 2007,” the newspaper quoted Taaref Naaour, head of the bank’s representative office, which was established in 1999 in Shanghai.
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