EGYPT'S ECONOMY: October 26 PRESS ROUND-UP

UNCLAS CAIRO 002039

SIPDIS

STATE FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECON EINV EFIN ETRD EAGR ENRG PGOV EG
SUBJECT: EGYPT'S ECONOMY: October 26 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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Egypt Rejects World Bank's Call for Electricity Price Increase
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2. (U) Aktham Abu El Ella, Undersecretary of the Ministry of
Electricity, announced that the Ministry rejected World Bank
proposals for price increases in electricity. The World Bank
submitted a study to the Government of Egypt (GOE) recommending six
different methods to increase prices on electricity during peak
hours, bringing Egypt's prices closer to global standards. The GOE
heavily subsidizes the cost of electricity, and rejected price
increases on the grounds that they would be a difficult financial
burden for many citizens (Al Masry Al Youm, 10/18/2009, Al Shorouk,
10/19/2009).

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Egypt Protests EU Ban on Egyptian Potatoes
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3. (U) Saad Nassar, Senior Advisor to the Minister of Agriculture,
is protesting the European Union's new ban on importing Egyptian
potatoes. Egypt and the EU have been in a dispute for the past two
months over whether the number of detections of brown rot, a plant
disease, in potato shipments from Egypt actually exceeds the limit
agreed to by Egypt and EU plant quarantine authorities, which caused
the EU to impose the ban. The EU maintains that its move is legal
under the terms of the Egyptian-European Partnership framework,
while Egypt has suggested that the EU's ban amounts to unfair
protectionism (Al Masry Al Youm, Al Ahram, 10/21/2009).

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Agreement Will Link the Egyptian and London Stock Exchanges
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4. (U) The Al-Mal newspaper reported that the Egyptian Stock
Exchange signed an agreement with London Stock Exchange linking the
two markets. The agreement will allow foreign investors to have full
access to Egyptian companies, and Egyptian investors will have
direct access to British and American companies. The new system will
be formally implemented in the second quarter of 2010 (Al Mal,
10/22/2009).

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EGX Suspends Trading to Fight Speculation
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5. (U) The chairman of the Egyptian Stock Exchange (EGX) temporarily
suspended trading on 26 companies on October 11, citing severe
speculation. Directors of four different securities brokerages
praised the step as a mechanism to fight irrational movements of the
stock prices, while some of the companies whose stocks were
suspended argued the exchange should have issued a warning before
taking action against them. To date, very few of the 26 companies
have been able to return to being traded on the exchange, with the
majority still suspended (Al Alam Al Youm, Al Mal, 10/14/2009).

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Big Losses for Public Weaving Companies
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6. (U) New estimates indicate that the 35 Egyptian public weaving
companies will suffer annual losses of LE2 billion (US$364 million),
roughly the same amount the companies lost last year. The new
estimate led to calls for rapid privatization of the companies,
based on the public sector's inability to modernize and labor
inefficiency, which make it unable to compete with the private
sector. (Al Alam Al Youm, 10/18/2009).


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Internal Disagreement in the NDP over Privatization
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7. (U) Egypt's Minister of Investment Mahmoud Mohieddin and the
Secretary General of the ruling National Democratic Party (NDP),
Safwat El-Sherif, took contradictory stances over the country's
privatization program. Mohieddin asserts that the government will
move forward with selling private shares in state-owned enterprises,
while El-Sherif stated that the program was not a priority (Al-Mal,
10/25/09).

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Egypt to Allocate New Stimulus Funds
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8. (U) The Egyptian Minister of Economic Development Osman Mohamed
Osman announced that the government is planning to allocate an
additional LE10 billion (US$1.8 billion) in economic stimulus money,
on top of the original LE15 billion (US$2.7 billion) stimulus
package it had budgeted in response to the global economic crisis.
90% of the new LE10 billion outlay will be devoted to water,
sanitation, and infrastructure projects, Osman stated (al-Mal,
al-Masry al-Youm, al-Akhbar, 10/25/09).

SCOBEY