EGYPT'S ECONOMY: September 10 PRESS ROUND-UP

UNCLAS CAIRO 001749

SIPDIS

STATE FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECON EINV EFIN ETRD EAGR ENRG PGOV EG
SUBJECT: EGYPT'S ECONOMY: September 10 PRESS ROUND-UP


1. (U) The following are notable economic news stories that appeared
over the past week in the Egyptian press:

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Preparing for Free Trade Negotiations with MERCOSUR
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2. (U) Minister of Trade and Industry Rachid Mohamed Rachid affirmed
Egypt's commitment to conclude a free trade agreement with Southern
Common Market (MERCOSUR) countries, including Argentina, Brazil,
Paraguay and Uruguay. This development came during a meeting held by
the Minister on August 31 with MERCOSUR countries' ambassadors in
Cairo. Rachid stated that MERCOSUR is considered the largest
industrial and economic group in Latin America, and the fourth
largest economic group in the world. An agreement would pave the
way for a large increase in the volume of trade between Egypt and
the MERCOSUR countries (Al Ahram, 9/1/2009).

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Debate over the Location of Egypt's First Nuclear Plant
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3. (U) Scientists, engineers and businessmen disagree on the best
location for Egypt's first nuclear power plant. On August 30,
several nuclear scientists and engineers requested that President
Hosni Mubarak intervene to stop the businessmen, who are involved in
Egypt's tourism sector, from trying to take El Dabaa area (located
in the northwest) away from the Nuclear Power Plants Authority
(NPPA). Previous media accounts have stated El Dabaa is not a
suitable location for a nuclear power plant and should instead be
designated for business and tourism projects. On August 31, Yassen
Ibrahim, the Chairman of NPPA, indicated that 70% of the site
selection studies required by Australian consultant Worley Parsons
have been completed. He added that El Dabaa remains the best place
for the power plant. If the site location is changed, the project
would be delayed for more than three years. Tourism experts and
businessmen such as Ibrahim Kamel, the chairman of KATO Investment
(one of Egypt's large private companies with manufacturing,
aerospace, real estate, tourism, and banking interests) noted that
establishing tourism projects in this North Coast area would be more
profitable than building a nuclear power plant. Fouad Sultan, former
Minister of Tourism, explained that the choice of El Dabaa as the
location for the first nuclear power plant was made 20 years ago,
and that it is no longer feasible because of the increase in tourism
in the area (Al Masry Al Youm, 8/31/2009, Al Ahali, 9/2/2009, Al
Alam Al Youm, 9/2/2009).

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Suspending the Asset Management Program
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4. (U) The Ministry of Investment (MoI) is considering suspending
its asset management program - a GoE administered plan where public
companies would be sold but the government would retain a two-third
stake in strategic companies such as aluminum, cement,
pharmaceuticals, and fertilizers. In its place, the government would
introduce a new system called "privatization derivatives". The
derivatives include limited privatization, such as leasing and
partially-selling assets and divesting from joint venture companies
but do not involve selling off entire public companies. The MoI has
already started using the privatization derivatives system in the
business sector. Sources indicated the decision to suspend the sale
of entire companies was not carefully studied. Media accounts also
pointed out that the Minister of Investment still believes in the
importance of having the asset management program, despite the need
to privatize a significant number of public companies.
Al Masry Al Youm, 8/31/2009).



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Oil Spill in the Suez Canal
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5. (U) On August 28, a Panama-flagged oil tanker broke in two as it
traveled through the Red Sea Canal, spilling 60 tons of fuel. The
tanker was headed to the Suez Canal for maintenance work and was
only carrying the 60 tons for its own usage. By September 1, the
Suez Canal Authority had towed the stricken tanker away from the
southern entrance to the Suez Canal; normal shipping was not
disrupted. Ahmed Fadel, Chairman of the Suez Canal Authority, said
the ship did not severely pollute the area and was towed away from
other ship moorings (All local newspapers, 8/28/2009, 9/2/2009).

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Egyptian Natural Gas Goes to Lebanon
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6. (U) On August 31, Sameh Fahmy, Minister of Petroleum, announced
that Lebanon will begin receiving Egyptian natural gas through the
Arab pipeline next month. He added that the gas would be exported to
Lebanon via Syria in a pilot program on September 8 and will start
pumping commercial quantities on September 15. The Lebanese Minister
of Energy Alan Taparian indicated in May 2009 that Lebanon will
receive 30 million cubic feet of natural gas via the Arab pipeline
(Al Ahram, 9/2/2009).

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GASC Imposes Strict Wheat Quality Specifications
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7. (U) The General Authority for Supply Commodities (GASC) announced
that it imposed strict quality specifications for its wheat
purchases. GASC Vice Chairman Nomani Nomani stated that GASC
increased the test weight requirement for US wheat from 58 lb/bushel
to 58.5 lb/bushel and its minimum protein content requirement by 0.5
percent to 9.5 percent. Nomani affirmed that these are normal
procedure so that US origin specifications would match the
specifications of wheat of other countries. He pointed out that
Egypt requires a minimum protein content of 11.5 percent for Russian
wheat and 11 percent for French wheat. GASC also spelt out a maximum
cadmium and lead content of 0.2 percent and set pesticide and
fumigation residues at a maximum of 0.1 percent for wheat of all
origins. The new tender terms also state that bids should reflect
the rules and regulations of Egyptian's quarantine services. The
debate in Egypt over wheat quality became politically heated after
the government rejected two Russian wheat shipments earlier this
year over quality concerns (Al Masry Al Youm, 9/3/2009).

Scobey