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Recent Developments in the Egyptian Economy Ministry of Investment Sep 2009 Growth & Investment Investment and Economic Growth EGP Billion Private Investment 6.9 150 100 3.4 3.2 3.2 4.6 4.1 66 50 32 10.986 10.055 10.722 8.658 7.693 6.202 5.548 6 46 37 34 32 Per Capita Income Real Economic Growth 7.2 7.1 12 8 134 114 10 6 97 8 4 4.7 7.069 5.742 2 4 Percent 0 0 2 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 1 2 3 4 5 6 7 8 9 00 00 00 00 00 00 00 00 00 0 /2 1 /2 2 /2 3 /2 4 /2 5 /2 6 /2 7 /2 8 /2 0 0 0 0 0 0 0 0 0 20 20 20 20 20 20 20 20 20 Source: Ministry of Economic Development Unemployment Rate 12 9.6 9.2 9.4 9.1 10.9 11.1 9.8 9 8 6 9.2 8.2 8.8 9.8 8 10.5 10.5 10 10 9 4 2 0 2008/09 2007/08 2006/07 2005/06 2004/05 2003/04 2002/03 2001/02 2000/01 1999/00 1998/99 1997/98 1996/97 1995/96 1994/95 1993/94 1992/93 Source: CAPMAS 2 Growth & Investment Comparative Sectoral Growth Rates (Semi annual) 2008/2009 30 2007/2008 27.9 25 18.35 20 14.9 15 10 6.85 5 6.05 7.95 7.85 9.4 4.8 4 2.15 1.35 0 Petrol gas Extraction Oil&and Gas Transportaion Transportation Transformation Manufacturing Manufacturing Source: Ministry of Economic Development 9 8 7 6 5 4 3 2 1 0 construction & Building Construction Suez Canal Receipts Suez Canal Receipts Tourism Tourism Quarterly Growth Rates % 7.7 7.4 6.5 Jul y -s ept 07/08 6.7 5.8 Oct - Dec 07/08 Source: Ministry of Economic Development Jan - Mar 07/08 Apr - Jun 07/08 Jul y -s ept 08/09 4.1 4.3 4.6 Oct - Dec 08/09 j an - Mar 08/09 Apr - Jun 08/09 3 Public vs. Private Investments Private Investment / Total Investment 80.0% 66.8% 70.0% 57.3% 60.0% 49.4% 50.0% 62.6% 46.6% 56.8% 48.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2002/2003 2003/2004 2004/2005 Private vs Public Investment 160 2005/2006 2007/2008 2008/2009 Private investment as percentage of GDP Public Investment Private Investment EGP Billion 134 140 114 87 80 66 60 34 34 42 50 46 49 58 14.0% 11.4% 12.0% 97 100 15.0% 16.0% 120 40 2006/2007 67 37 10.0% 8.0% 8.6% 8.1% 13.1% 10.9% 9.2% 6.0% 4.0% 2.0% 20 0.0% 0 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 Source: Ministry of Economic Development 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 4 120 60 0 Average Establishment 2002- 2004 Average Establishment 2005- 2007 Average Establishment 2008 30/12/2007 - 3/1/2008 6/1/2008 - 10/1/2008 13/1/2008 - 17/1/2008 20/1/2008 - 24/1/2008 27/1/2008 - 31/1/2008 3/2/2008 - 7/2/2008 10/2/2008 - 14/2/2008 17/2/2008 - 21/2/2008 24/2/2008 - 28/2/2008 2/3/2008 - 6/3/2008 9/3/2008 - 13/3/2008 16/3/2008 - 19/3/2008 23/3/2008 - 27/3/2008 30/ 3 / 2008 - 3/4/2008 6/4/2008 - 10/4/2008 13/4/2008 - 17/4/2008 20/4/2008 - 24/4/2008 27/4/2008 - 1/5/2008 4/5/2008 - 8/5/2008 11/5/2008 - 15/5/2008 18/5/2008 - 22 /5/2008 25/5 /2008 - 29/5/2008 1/ 6 / 2008 - 5 / 6 / 2008 8 / 6 / 2008 - 12/ 6 / 2008 15/ 6 / 2008 - 19/ 6 / 2008 22/ 6 / 2008 - 26/ 6 / 2008 29/ 6 / 2008 - 3/ 7 / 2008 6/7/2008 - 10/7/2008 13/7/2008 - 17/7/2008 20 /7 /2008 24 / 7 /2008 27 /7 /2008 31 / 7 /2008 03/08/2008 07/08/2008 10/08/2008 - 14/08/2008 17/08/2008 - 21/08/2008 24/08/2008 - 28/08/2008 31/08/2008 - 4/09/2008 07/09/2008 - 11/09/2008 14/09/2008 - 18/09/2008 21/09/2008 - 25/09/2008 28/09/2008 - 02/10/2008 05/10/2008 - 09/10/2008 12/10/2008 - 16/10/2008 19/10/2008 - 23/10/2008 26/10/2008 - 30/10/2008 02/11/2008 - 06/11/2008 09/11/2008 - 13/11/2008 16/11/2008 - 20/11/2008 23/11/2008 - 27/11/2008 30/11/2008 - 04/12/2008 14/12/2008 - 18/12/2008 21/12/2008 - 25/12/2008 28/12/2008 - 1/1/2008 04/01/2009 - 08/01/2009 11/01/2009 - 15/01/2009 18/01/2009 - 22/01/2009 25/01/2009 - 29/01/2009 01/02/2009 - 05/02/2009 08/02/2009 - 12/2/2009 15/2/2009 - 19/2/2009 22/2/2009 - 26/2/2009 01/03/2009 - 05/03/2009 08/03/2009 - 12/03/2009 15/03/2009 - 19/03/2009 22/03/2009 - 26/03/2009 29/03/2009 - 02/04/2009 05/04/2009 - 09/04/2009 12/04/2009 - 16/04/2009 19/04/2009 - 23/04/2009 26/04/2009 - 30/04/2009 03/05/2009 - 07/05/2009 10/05/2009 - 14/05/2009 17/05/2009 - 21/05/2009 24/05/2009 - 28/05/2009 31/05/2009 - 04/06/2009 07/06/2009 - 11/06/2009 14/06/2009 - 18/06/2009 21/06/2009 - 25/06/2009 28/06/2009 - 02/07/2009 05/07/2009 - 09/07/2009 12/07/2009 - 16/07/2009 19/07/2009 - 23/07/2009 26/07/2009 - 30/07/2009 02/08/2009 - 06/08/2009 09/08/2009 - 13/08/2009 16/08/2009 - 20/08/2009 23/08/2009 - 27/08/2009 Establishment of Corporations (Weekly) 200 180 168 160 140 139136 136 103 40 172170 169 167 187 148 142 152 167 165 174 173 169 153 152 141 147 110 100 80 Source: GAFI – Ministry of Investment 165 181 146145 148 137 133 131 121 120 115 114 111 154 115114 108 105 103 95 77 153 167 138 134133 134 133 128 115 134 130 128 128 132 123 124 114 94 84 139 140 134 144 128 118 113 118 162 151 141 140 143 135 136 120 112 124 125 94 111 107 55 72 40 43 20 5 300 304 306 505 584 624 585 594 574 514 503 479 429 466 551 554 683 663 613 676 660 783 744 701 702 683 632 603 553 542 685 700 576 540 800 2009 / 8 2009 / 7 2009 / 6 2009 / 5 2009 / 4 2009 / 3 2009 / 2 2009 / 1 2008 / 12 2008 / 11 2008 / 10 2008 / 09 2008 / 08 2008 / 07 2008 / 06 2008 / 05 2008 / 04 2008 / 03 2008 / 02 2008 / 01 2007 / 12 2007 / 11 2007 / 10 2007 / 09 2007 / 08 2007 / 07 2007 / 06 2007 / 05 2007 / 04 2007 / 03 2007 / 02 2007 / 01 2006 / 12 2006 / 11 2006 / 10 2006 / 09 2006 / 08 2006 / 07 2006 / 06 6 Source: GAFI – Ministry of Investment 505 504 600 420 430 376 452 397 433 387 382 500 2006 / 05 2006 / 04 2006 / 03 2006 / 02 2006 / 01 0 331 400 293 Establishment of Corporations (Monthly) 900 200 100 Foreign Direct Investment 14 13.2 12 11.1 10 8.1 8 6.1 6 3.9 4 2.1 2 0.5 0.4 2000/2001 2001/2002 0.7 0 Source: Central Bank of Egypt 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 7 Fiscal and Monetary Policies Fiscal Deficit/ GDP 15.0% 9.5% 10.0% 10.4% 8.2% 9.6% 7.3% 8.00% 6.6% 8.0% 5.0% 0.0% 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09b 2009/10 Interbank Rates Net International Reserves Lending Rate Source: Ministry of Finance May-09 Apr-09 Mar-09 Feb-09 Jan-09 2008 2007 9 15.1 14.2 14.1 14.8 14.8 2006 14/08/2008 14/06/2008 14/04/2008 14/02/2008 14/12/2007 14/10/2007 14/08/2007 14/06/2007 14/04/2007 14/02/2007 14/12/2006 14/10/2006 14/08/2006 14/06/2006 14/04/2006 14/02/2006 14/12/2005 14/10/2005 14/08/2005 7.65 22.9 2005 9.5% 9 14/02/2009 8.65 34.6 33.43 33.05 32.17 31.18 31.2 19.3 2004 1 28.6 2003 9.65 11 11. 10.5% 10. 14/12/2008 10.25% 10% 10.75% 10.65 11 10.75% 10.5% 14/10/2008 Interest Rate % 11.65 12.5% 2002 12. 1 11.5% 12.65 2001 13 40 35 30 25 20 15 10 5 0 13. 2000 13.65 Deposit Rate 8 Fiscal and Monetary Policies 14.0% 15% 11.70% 10% April 09 June 09 9.00% 4.70% 5% 6.80% jun09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 Jul-07 Apr-07 Jan-07 Oct-06 Jul-06 0% Apr-06 4.2% 16.40% 14.30% 11.80% 12.82% Jan-06 3.8% 3.2% 3.1% 2.8% 2.4% 2.4% 17% Oct-05 7.3% 6.2% Jul-05 0.0% 20% Apr-05 2.0% 23.60% 9.3% 4.9% 4.0% 10.9% Jan-05 6.0% 11.4% Aug 08 YoY change in CPI Oct-04 8.0% 11.1% 9.1% 25% Jul-04 10.0% 11.7% Annual inflation Rate 12.0% 9 External Sector Exports USD Million 40000 29,356 25,169 30000 13,833 18,455 22,018 20000 7,078 7,121 8,205 10,453 10000 0 1 2 3 4 5 6 7 8 9 0 0 /2 0 0 /2 0 0 /2 0 0 /2 0 0 /2 0 0 /2 0 0 /2 0 0 /2 0 0 2 / 00 01 002 03 04 005 06 007 08 20 20 2 20 20 2 20 2 20 USD Million Imports 52,771 50,342 60000 50000 30,441 37,834 14,637 18,286 40000 24,193 30000 16,441 14,820 20000 10000 0 01 02 03 04 05 06 07 08 09 /20 1/20 2/20 3/20 4/20 5/20 6/20 7/20 8/20 0 0 0 0 0 0 0 0 0 0 20 20 20 20 20 20 20 20 20 Current Account 3418.1 4000 3000 -33.4 2910.6 1943 2695.6 1751.9 2000 888.3 614.2 1000 2008/2009 2007/2008 2006/2007 2005/2006 2004/2005 2003/2004 -3000 2002/2003 -2000 2001/2002 -1000 2000/2001 0 -4000 -5000 -4424.3 10 Source: Central Bank of Egypt External Sector Source: Ministry of Finance Source: Ministry of Finance Source: Central Bank of Egypt Source: Central Bank of Egypt 11 Trading Indicators 2004 - 2008 Volume of Trading Value of Trading Billion Security EGP Billion 600 500 400 300 200 100 0 530 42 2004 161 2005 287 363 130 2006 2007 2008 2009 Jan - May 30 25 20 15 10 5 0 25.56 16.79 15.09 5.31 2.43 2004 2005 9.08 2006 2007 2008 2009 Jan - May Average Daily Trading Value EGP Million 1800 1600 1400 1200 1000 800 600 400 200 0 1,569 1,111 1,318 1,111 609 146 2004 2005 2006 2007 2008 2009 Jan - May 12 Risk & Return analysis for S&P Board Market Index- BMI Risk & Return analysis for S&P Board Market Index- BMI (2004-2009) Average Standard Deviation 04-09 42% 41% 40% 39% 38% 37% 36% 35% 34% 33% 32% 31% 30% 29% 28% 27% 26% 25% 24% 23% 22% 21% 20% 19% 18% 17% 16% 15% Turkey Hungary Russia Poland Argentina India South Africa Thailand Mexico Chile Peru Brazil Czech Republic China Taiwan Egypt Indonesia Morocco Phillipines Malaysia Israel 0% 5% 10% Average Rate of Return 04-09 15% 20% 25% 30% 35% 40% 45% 50% 13 Egyptian Market since 2004 Annual Return 200% 146% 150% 122% 100% 51% 50% 32% 10% 0% -50% -56% -100% 14000 12000 10000 8000 6000 4000 2000 0 EGX30 Returns: January 2004:425.28% 15 July 2004:295.17% January 2005:136.36% January 2006-2.97% January 2007-12.96% January 2008-42.47% January 2009:32.05% EGX30 Index 11786.51 6069.62 3559.09 14 P/E Ratio & Market Capitalization Trailing P/ E Ratio for Liquid Stocks Times 24 19.60 19.72 19 16.30 14 31/5/2009 11.65 9.45 9 4 Market Capitalization EGP Billion 910 810 710 610 510 410 310 210 110 10 55.60% 33.87% 182 343 69.04% 426 Market Capitalization 70.37% Percentage 84.81% 52.56% 631 760 471 As percent of GDP 130% 110% 90% 70% 50% 30% 10% 15 Net Portfolio Investments and Foreigners & Arabs Trading US$ Million 4000 2000 0 -2000 -4000 -6000 -8000 -10000 2,764 Net Portfolio Investments 831 -937 -1,374 -8,890 2004/05 2005/06 2006/07 2007/08 Jul - Mar 2008/09 Net Trading of Foreigners and Arabs in The Egyptian Market US$ Million 2000 1500 1,475 1,114 1000 1,095 954 500 0 -500 -1000 -1,025 -1500 2004/05 2005/06 2006/07 2007/08 July - Mar 2009 16 The Asset Management Program 35,000 Settling SOEs Debt 31,483 30,000 25,000 20,000 24,524 19,514 15,000 10,000 9,659 9,659 5,000 0 Proceeds of the Program EGP Million 14612 16000 13607 14000 12000 10000 8000 5643 6000 3983 4000 1541 543 2000 0 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 to date 17 Financial Sector Reform Program Phase I: 2005-2008 Reform Objective Main Components of the Reform Program Time Frame Improve the soundness and efficiency of the financial sector through comprehensive structural and financial reform, which would ultimately boost economic growth and development as well as enhancing competitiveness, and financial innovation. 1. Reforming the Banking Sector 2. Restructuring the Insurance Sector 3. Deepening the Capital Market 4. Developing a well-functioning Mortgage Market 5. Activating other Financial Services 2005-2008 18 Financial Sector Reform Program Main Implemented Reforms of Phase I: 2005-2008 1- Reforming the Banking Sector - Merging six banks. - Settling 65% of public sector NPLs. - Privatizing Bank of Alexandria - Divesting 13 cases of public sector banks holdings in JV banks. 3- Deepening the Capital Markets - Establishing a special registrar for qualified auditors at the CMA. - Introducing Margin Trading, Short Selling, Same Day Trading, Market Making Activity, and Securitization. - Issuing the legislative framework for organizing Acquisitions. - Issuing the new Egyptian Accounting Standards in compliance with the International Accounting Standards. - Issuing the legislative framework for combating insider trading. - Issuing regulations to organize and introduce investment funds, and organize exchange traded funds, money market funds and real estate funds. - Establish the Nile Stock Exchange (Nilex) for SMEs. 2- Restructuring the Insurance Sector - Merging Al-Shark and Egypt Re in Misr Insurance. - Establishing the Holding Company for Insurance. - Restructuring the boards of public insurance companies. - Establishing a State Fund for compensation - Amending the insurance law and allowing corporation to act as insurance brokers. - Raising the minimum issued capital to EGP 60 million for life and non-life insurance companies. - Reducing stamp duties on insurance policies for life, property and casualty insurance. 4- Developing a well functioning Mortgage Finance - Introducing more flexibility to income recognition rules and regulations. - Reducing the registration fee to a maximum of EGP 2000 . - Establishing the Egyptian Mortgage Refinance Company. - Raising the maximum subsidy obtained from the Mortgage Finance Subsidy and Guarantee fund from EGP 10,000 to EGP 15,000. - Activating the role of insurance in mortgage finance activity. - Standardizing contracts of mortgage finance to facilitate the securitization process. 19 Financial Sector Reform Program Impact of Reforms of Phase I: 2005-2008 Insurance 2004/2005 2007/2008 2 Companies and 2 Banks 10 companies and 2 banks Mortgage finance 16 Million 2.6 billion Evaluation experts 75 117 4.2 Intermediaries 203 234 0.6 1.1 Auditors 23 45 70% 49% Investors 3 4371 2004/2005 2007/2008 0.8% 1.1% 20 33.4 Investments 16.3 29 Equity 3.8 8.5 Volume of Premiums 4.3 7.4 Paid Claims 2.4 Net profits Premiums/GDP Assets Public Companies Market Share Capital Market Mortgage Finance Institutions 2004/2005 2007/2008 Value traded 83.7 Billion 553.2 Billion Monthly Average value of trade 0.6 Billion 46.1 Billion 3 Billion Paper 19.9 Billion Paper 270.9 Billion Paper 1659.3 Billion Paper 3.64 Billion 123.8 Billion 875 Thousand 1.6 Billion Volume Monthly Average volume of trade Total acquisitions The number of registered investors Financial Sector Reform Program Phase II: 2009 - 2012 Phase II of the program comprises generic and sector specific reform measures. The generic reform measures aim at: 1. Increasing the efficiency of regulation and shifting it from a rule-based to a risk-based regulation to ensure the soundness of the financial system. 2. Improving access to finance. 3. Developing the financial culture. 4. Developing and deepening the markets through introducing new instruments and encouraging financial innovation. Main Pillars of the Reform Program The sector specific reform measures aim at: 1. 2. 3. 4. 5. Improving bank’s Efficiency for financing economic growth. Developing and deepening the Insurance Market Deepening and improving the efficiency of Capital Markets on both the equity and fixed income sides. Further activation to, and increasing the efficiency of the Mortgage Market 21 Activating Financial Leasing and Factoring activities GOE’s Stimulus Package Measures aiming at boosting economic growth amid the international financial crisis and its negative implications on developing and emerging countries. 1. - Availing and lowering the cost of credit Reducing interest rates. Exempting credit extended to SMEs from the reserve requirement. 2. - Increasing public spending and subsidies Investing EGP 30 bn in infrastructure projects (budget and PPP) Sales tax exemptions of a magnitude of EGP 1 bn on capital goods. Full Tariff exemptions on imported capital and 250 items of intermediate goods. Increasing Export subsidies by EGP 2.6 bn. 3. - Promoting investments Revising measures that had an adverse impact on investments. Intensifying promotional campaigns. 4. - Supporting the Capital Markets More flexibility on dealing on treasury stocks and tender offers More flexibility in reporting financial investments by companies via amendment of the Egyptian Accounting Standard (in compliance with IAS). 5. Legislative reforms 22