09.15.11
Cablegate: Government Site in Egypt Launched by Bill Gates
Summary: A good demonstration of how Microsoft and Gates manage to manage governments by proxy
According to the following Cablegate cable, the Ministry of Investment (MOI) in Egypt is not quite working on its own. “On behalf of MOI,” says ¶6, “Microsoft Chairman Bill Gates launched a website, www.investment.gov.eg in January 2005, to serve as Egypt’s investment portal.”
Since when does Bill govern Egypt or run its economy? There is a lot of other interesting stuff in the cables below, but it is probably of most interest to Egyptians who wish to understand how Mubarak’s regime has harmed them by giving control to imperialists who export weapons (at taxpayers’ expense).
UNCLAS SECTION 01 OF 03 CAIRO 005350
SIPDIS
SENSITIVE
STATE FOR NEA/ELA, NEA/RA, AND EB/IDF
USAID FOR ANE/MEA MCCLOUD
USTR FOR SAUMS
TREASURY FOR MILLS/NUGENT/PETERS
COMMERCE FOR 4520/ITA/ANESA/TALAAT
E.O. 12958: N/A
TAGS: ECON [Economic Conditions], EFIN [Financial and Monetary Affairs],
ETRD [Foreign Trade], EINV [Foreign Investments], EG [Egypt]
SUBJECT: UPDATE ON EGYPT'S PRIVATIZATION PROGRAM
REF: A. CAIRO 4374
B. CAIRO 1329
Sensitive but Unclassified. Please protect accordingly.
-------
Summary
-------
¶1. (SBU) Since taking office in July 2004, Prime Minister
Nazif's administration has reinvigorated the GOE's program
to privatize state-owned industries. Under the leadership
of the new Ministry of Investment, the revitalized program
aims to speed up privatizations by making public enterprises
more efficient - and thus more attractive to potential
investors - while also introducing good corporate governance
principles. The effort has paid off for the GOE, which
completed a total of 19 privatizations from July 2004 to
March 2005, generating LE 2.9 billion ($500 million)
compared with five transactions generating LE 81 million
($14 million) in the period July 2003-March 2004. The GOE
has promised even bolder steps in the near future for
divestiture of formerly "strategic" industries. Labor
issues remain a concern, but the GOE has indicated that it
will deal with workers' concerns on a case-by-case basis as
public companies are privatized. It is doubtful, however,
that the GOE would approve any deals that would result in
massive layoffs, particularly in an election year. End
summary.
-------------------------
Privatization revitalized
-------------------------
¶2. (SBU) The GOE privatization program has undergone a
complete makeover in concept and implementation in the last
year under the Nazif administration's new Ministry of
Investment (MOI). Minister of Investment Mahmoud Mohieldin
has been the driving force behind revitalization of the
program, which he refers to as "asset management."
Mohieldin has used his political weight, as a key member of
the NDP economic policy apparatus, to garner support for
broadening the scope of the program to include all public
enterprises, the more competitive companies as well as those
with large workforces that could be negatively affected by
privatization. He has made privatization a focal point of
the macroeconomic reform effort led by the Minister of
Finance, the Minister of Foreign Trade and Industry and
Nazif himself, all of whom agree on the goals of stimulating
private sector-driven growth and "marketing Egypt" as a
destination for foreign investment.
-------------------------------------------
Pre-Nazif: Privatization in fits and starts
-------------------------------------------
¶3. (U) The GOE has two categories of public enterprises:
wholly state-owned companies regulated by Law 203 of 1991,
and joint venture companies (including banks) with a public-
private ownership mix, regulated by Law 159 of 1981. When
the privatization program began, the 314 wholly state-owned
companies were grouped according to the type of economic
activity they conducted and put under the supervision of
holding companies (HCs). The HCs managed the privatization
of their affiliate companies, eventually dissolving when all
of their affiliates had been privatized. This process
created a conflict of interest, especially for the HC
chairmen. Working efficiently to privatize all of their
affiliates meant that the HC chairmen worked themselves out
of a job. Privatization was therefore a slow, sporadic
process and after more than a decade of fits and starts,
liquidations and restructuring, there were still seven HCs
with 139 affiliate companies.
¶4. (U) In 1999, after a cabinet change, the GOE decided to
include the sale of public shares in joint venture companies
under the rubric of the privatization program. The Ministry
of Economy and Foreign Trade (now the Ministry of Foreign
Trade and Industry) began an inventory of joint ventures and
their shareholder structure. After a lengthy research
process, the number of joint venture companies and banks was
found to exceed 600, all with different percentages of
public ownership. In early 2000, the entire privatization
program, including wholly state owned companies and joint
ventures, was consolidated under the Ministry of Public
Enterprises, where it remain until being subsumed by the new
MOI in the July 2004 cabinet change.
-------------------------
Privatization under Nazif
-------------------------
¶5. (U) Soon after MOI took over managing the privatization
program, a three-pronged effort was undertaken to remake
public enterprises by: 1) restructuring and re-engineering
public companies to make them more efficient, and ultimately
more attractive to potential purchasers; 2) implementing
good corporate governance principles in all public
companies; and 3) aggressively pursuing the advertisement
and sale of public companies. As part of the effort to
introduce corporate governance principles, MOI published an
OECD-based code of conduct for corporate governance and
disclosure in public companies and began publishing the
minutes of companies' general assembly meetings to increase
transparency. MOI also created a ministerial committee to
assist investors in resolving disputes arising from
privatization transactions. The committee has already
reportedly resolved 18 disputes, including several long-
standing disputes from privatizations that occurred in the
pre-Nazif era.
¶6. (U) MOI also began a campaign to advertise the newly
revamped privatization program. The thrust of the ad
campaign was that the GOE was committed to removing
obstacles that had blocked or slowed privatizations in the
past. Labor and debt issues would be dealt with on a case-
by-case basis, foreign private sector interest was
encouraged rather than feared as it had been under previous
administrations, and no sectors were off-limits or
"strategic" as in the past. On behalf of MOI, Microsoft
Chairman Bill Gates launched a website,
www.investment.gov.eg in January 2005, to serve as Egypt's
investment portal. The GOE then took its investment
campaign to the May 2005 World Economic Forum in an effort
to drum up more foreign investment.
¶7. (U) The result of MOI's efforts has been a rekindling of
interest among foreign investors. A list of 41 local and
international financial institutions, including Citibank,
Goldman Sachs and Merrill Lynch, are now working with MOI as
advisors/consultants on privatization. A number of
prominent foreign companies - such as Ciments Francais, La
Farge Titan and Michelin - concluded multi-million dollar
deals to purchase public companies such as Suez Cement (ref
B). From July 2004 to March 2005, the GOE completed 19
privatizations, generating LE 2.9 billion in revenue,
compared with only five transactions that generated LE 81
million in the period July 2003-March 2004. MOI expects the
total value of privatizations in fiscal year 2004/2005 to
exceed LE 3 billion, almost double the aggregate value of
sales for the period 2001 through June 2004. The budget for
fiscal year 2005/2006 (July 2005-June 2006) projects
revenues from privatization will reach LE 5 billion (ref A).
----------------------
Privatization expanded
----------------------
¶8. (U) As noted above, MOI has included in the
privatization program companies that were not previously
slated for sale. Prior administrations considered certain
companies "cash cows" that were too valuable for the GOE to
sell. Likewise, certain sectors, such as petrochemicals and
telecoms, were considered "strategic" and therefore off
limits to private ownership, especially foreign private
ownership. In June MOI sold 20% of the GOE's stake in Sidi
Krir petrochemical company on the Cairo and Alexandria Stock
Exchange (CASE) for LE 70/share. The company's shares have
dominated trading by volume and value on the CASE in the
last several weeks and recently closed at LE 105/share. A
number of other high profile companies are also in the
pipeline, including petroleum company AMOC and Eastern
Tobacco Company (one of the GOE's "cash cows"). MOI has
also indicated it will offer a significant stake in Telecom
Egypt by the end of 2005. Shares of several public
companies, possibly including Telecom Egypt, will also soon
be registered on the New York Stock Exchange to further open
channels for foreign investment. (Note: An update on
privatization in the banking sector will be sent septel.
End note).
------------
Labor issues
------------
¶10. (SBU) One of the difficult issues for the GOE as it
divests its public assets is the reaction of labor. The GOE
deals with excess labor in companies to be privatized by
offering early retirement packages, which are largely funded
by proceeds from privatization. Senior GOE officials
continue to provide public reassurances that labor issues
will be resolved amicably and a safety net will be provided
for workers affected by privatization, in keeping with the
GOE's general policy of protection of low-income earners.
The MOI is working on a new early retirement system designed
to more closely address workers' concerns and improve the
financial management of privatization proceeds that will be
used to fund the early retirements.
¶11. (SBU) Nevertheless, in state-owned enterprises,
particularly those burdened with surplus manpower like
textiles, iron, and steel, concerned workers have expressed
opposition to privatization through their representatives in
parliament, through strikes and in the opposition press.
The proposed sale of shares in Suez and Torah Cement
Companies late last year triggered strikes that were
resolved only after MOI obtained the purchaser's commitment
not to lay off workers for three years (ref B). Mohamed
Hassouna, Advisor to the Minister on Privatization Affairs,
told Econoff that MOI is "keeping channels open to workers,"
and cooperating with the Egyptian Trade Union Federation
(ETUF) on a case-by-case basis to resolve potential problems
with privatization deals. It would be surprising, however,
for the GOE to conclude any deals that risk large-scale
layoffs from labor-intensive industries prior to Egypt's
October elections.
CORBIN
Also see the following Cablegate cable in which ¶9 speaks of Kamel holding a “meeting with USG [US Government] officials and on the Hill, and [how he] also met with Microsoft Chairman Bill Gates and executives from Intel, Cisco, and Oracle.”
UNCLAS SECTION 01 OF 04 CAIRO 005344
SIPDIS
STATE FOR NEA/ELA, NEA/RA, AND EB/IDF
USAID FOR ANE/MEA MCCLOUD
USTR FOR SAUMS
TREASURY FOR MILLS/NUGENT/PETERS
COMMERCE FOR 4520/ITA/ANESA/TALAAT
E.O. 12958: N/A
TAGS: ECON [Economic Conditions], EFIN [Financial and Monetary Affairs],
ETRD [Foreign Trade], EINV [Foreign Investments], ENRG [Energy and Power],
EWWT [Waterborne Transportation], EG [Egypt]
SUBJECT: EGYPT MONTHLY ECONOMIC REPORT: MAY-JUNE 2005
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Summary
-------
¶1. In this edition: More Egyptian companies make it into
international emerging market stock indices and the GOE
signs an S&T agreement with the EU. The Ministry of
Communication and Information Technology announces a third
mobile phone license will be issued and minister Tarek Kamel
visits the U.S. Orascom Telecom purchases an Italian
telecom. President Mubarak inaugurates a new liquid natural
gas facility, the Ministry of Petroleum announces new oil
and gas deals as well as new oil discoveries, and Egypt and
Israel sign an MOU on gas exports. Air traffic controls go
on a "go-slow" strike and Suez Canal revenues increase 18%
over last fiscal year. End summary.
--------------------------
Macroeconomic Developments
--------------------------
¶2. In mid-May Morgan Stanley International (MSI) announced
the addition of seven Egyptian companies to its emerging
markets indices, bring the total number of Egyptian
companies on MSI indices to seventeen. MSI increased
Egypt's weight in its indices, which cover all emerging
markets, from 0.77% to 0.78%. The change raises Egypt's
market capitalization in the MSI indices to $1.22 billion.
The seven new companies included are EFG-Hermes Holding,
Egyptian American Bank, Egyptian Financial and Industrial
Co., Ezz Rebars, Egypt Beni Souef Cement, Olympic Group and
Sinai Cement. The companies were chosen based on largest
private sector ownership, market capitalization and trading
activity in the Egyptian market. Other Egyptian companies
included in the MSI indices include domestic blue chips like
Commercial International Bank, AlWatany Egyptian Bank,
Eastern Tobacco, Media Production, EIPICO, Mobinil, Nasr
City Construction, Misr International Bank, Orascom
Construction and Orascom Telecom Holding.
----------------------
Science and Technology
----------------------
¶3. S&T Conference: On May 28, PM Nazif opened the First
National Conference for Scientific Research in Egypt. About
4,000 Egyptian scientists and researchers, including
Egyptian expatriate scientists, and various Cabinet
ministers attended the two-day event. The conference
focused on soliciting feedback from the S&T community on
development of a new strategy for promoting scientific
research, services and technology in Egypt. For the first
time in recent memory, ministers fielded direct questions
from working-level Egyptian scientists and listened to their
opinions on S&T issues. Minister of Foreign Trade and
Industry Rashid discussed plans to increase private sector
funding of R&D projects and Minister of Higher Education and
Scientific Research Salama noted that his ministry would
establish a fund to support R&D.
¶4. The conference produced a series of recommendations to
shape a new national S&T strategy for Egypt. The most
significant decision was to increase the GOE budget
allocation for scientific research by 10-50%. The increase
would include salaries and administrative costs for
scientific institutions. The conference action plan will be
published at the end of July. (Comment: PM Nazif's
commitment to increasing the S&T budget and the presence at
the conference of reform-minded ministers such as Rashid
indicates that the GOE is serious about reform in the field
of scientific research. Private sector involvement will be
key, however, and the GOE's ability to attract foreign
investment in S&T will depend on continued commitment to
macroeconomic reform. End comment).
¶5. EU-Egypt S&T Agreement: On June 21, PM Nazif attended
the signing of a new S&T agreement between Egypt and the EU.
According to Fawzi El Refaei, President of the Egyptian
Academy of Scientific Research and Technology, the agreement
aims to expand S&T cooperation and provides for Euro 11
million in funding for S&T projects. The agreement allows
Egyptian scientists and research institutions to apply for
funding of specific R&R projects from EU sources. El Refaei
indicated that funding from this agreement would be
channelled into areas of development identified in Egypt's
new S&T strategy.
--------------------------------
Telecommunications and Info Tech
--------------------------------
¶6. In mid-May, Minister of Communication and Information
Technology (MCIT) Tarek Kamel announced that the GOE would
soon issue a license for a third mobile phone operator. The
RFP would be issued in 3-4 months and proposals would be
reviewed by early 2006, with the goal of getting the third
operator in place by mid-2007. Kamel indicated that MCIT
anticipated LE 2.5 billion in licensing fees from the new
operator. The coming RFP would be "technology neutral,"
i.e., either GSM or CDMA. According to a study by the
National Telecommunications Regulatory Authority (NTRA),
Egypt's mobile market growth rate is currently 12%, but is
expected to reach 25% within five years.
¶7. In late May, the Information Technology Industry
Development Authority (ITIDA) invited Egyptian and
international firms to apply for e-signature licenses under
Law 15 of 2004, which regulates e-signatures. According to
ITIDA, use of e-signature technology will encourage new
investment in e-commerce and e-business projects and
facilitate access to global e-business sectors. Details of
the licensing requirements can be found at
www.itida.gov.eg/csp.
¶8. Also in late May, Orascom Telecom (OT) announced the
$130 million sale of its controlling stake in Libertis, a
GSM company in the Democratic Republic of Congo, and
Libertis' operator Oasis Telecom. Also in late May, Naguib
Sawiris, CEO of OT, announced the purchase of Wind, the
telecom subsidiary of Italian conglomerate Enel, by the
newly established "Weather Investments." Sawiris owns 73.9%
of Weather Investments and Enel owns the remaining shares.
OT plans to eventually transfer 51% of its shares to Weather
Investments. The total cost of the purchase was Euro 17.2
billion.
¶9. MCIT Minister Kamel made his first official visit to the
U.S. June 18-28. The delegation included the Chairman of
NTRA, the President of Telecom Egypt and representatives
from approximately 20 Egyptian IT firms. Kamel held meeting
with USG officials and on the Hill, and also met with
Microsoft Chairman Bill Gates and executives from Intel,
Cisco, and Oracle. The visit led to establishment of a U.S.-
Egypt IT consultative council. Kamel also witnessed the
signing of several business deals, including a $5 million
agreement between Egypt's QuickTel and Qualcom to service
wireless networks in Egypt. The minister also announced
that NTRA would soon issue licensing terms for Voice-over
Internet Protocol (VoIP) service in Egypt.
------
Energy
------
¶10. On May 30, President Mubarak inaugurated the liquefied
natural gas (LNG) plant at the Mediterranean Gas Complex in
Damietta. The LNG facility is owned and operated by the
Spanish Egyptian Gas Company (SEGAS), which is 80% owned by
Union Fenosa Gas (50% Union Fenosa of Spain and 50% ENI of
Italy), and 20% owned by Egyptian State Holding Companies.
The $1.3 billion facility was built by a joint venture of
Halliburton KBR, JGC Corporation of Japan, and Tecnicas
Reunidas of Spain. The output of the facility, 5.5 mt/yr,
has already been committed for the next 25 years. The
Mediterranean Gas Complex near Damietta is a joint
investment between the Italian AGIP and British Petroleum.
¶11. In mid-June, Petroleum Minister Fahmi announced that
the GOE had signed 36 new oil and gas exploration agreements
over the last year for a total investment of $250 million.
The agreements will result in the drilling of 55 new wells
in the Western Desert, the Nile Delta, and off the
Mediterranean coast and Gulf of Suez. Foreign investors in
the agreements include British Gas, Malaysian Petronas,
International Egyptian Oil Company (an Italian subsidiary of
AGIP) and Apache. Announcement of the new exploration
agreements was followed by three new oil discoveries in late
June. The largest was at Ras Gharib-Amr, a 50-year-old oil
field in the Gulf of Suez, 2 km offshore. The discovery was
the first at Ras Gharib-Amr in the last 40 years. The
second discovery was at El Tamad, approximately 90 km
northeast of Cairo. This was the first on-shore oil
discovery in the northern Nile Delta region. The third
discovery was at El Diyur in Egypt's Western Desert. Total
reserves from the new discovery were estimated at 70 million
barrels of crude oil.
¶12. Egypt-Israel Gas Agreement: On June 30, Fahmi signed
an MOU with Israeli National Infrastructures Minister
Binyamin Ben-Eliezer, clearing the way for a long-awaited
$2.5 billion commercial gas deal between Eastern
Mediterranean Gas (EMG) and the Israeli state-owned
Electrical Company (IEC). While the commercial details
remain to be determined, EMG will export approximately 25
billion cubic meters of gas over 15 years from the Egyptian
port of El Arish to the port of Askalon in Israel. EMG is
an Egyptian-registered company 25% owned by Israel's Merhav
Group. Egyptian businessman Hussein Salem owns another 65%
of EMG and the Egyptian Gas Holding Company owns the
remaining 10%.
¶13. The MOU provides a "political umbrella" for the
commercial agreement, and commits the GOE to providing gas
to EMG and the GOI to providing tax exemptions for equipment
and materials. Completion of the project is expected to
take two years. Announcement of the MOU was coordinated
with announcement of cooperation between the GOE and the
Palestinian Authority on gas exports. Headlines of some
opposition papers tried to portray the MOU as an attempt to
appease the USG and deflect pressure for further political
and democratic reform.
--------
Aviation
--------
¶14. In early May, Egyptian air traffic controllers went on
a "go-slow" strike, their second in the span of two months,
to protest the Ministry of Civil Aviation's penalization of
8 air traffic controllers for delays at Sharm El Sheikh
airport. The Association of Egyptian Air Traffic
Controllers threatened to bring air traffic to a total halt
if the penalties were not lifted. Controllers also demanded
a doubling of salaries over three years, better health
insurance and better promotion opportunities. The strike
ended after Minister of Civil Aviation Shafik promised to
look into the strikers' demands for better pay and
conditions. Aviation officials indicated that the
controllers conducted the go-slow in line with International
Civil Aviation Organization standards, but failed to
announce the go-slow to the airlines in advance. Unofficial
reports indicated that losses from the go-slow amounted to
$31 million.
---------------------------------
Suez Canal and Maritime Transport
---------------------------------
¶15. In early May, the Suez Canal Authority indicated that
revenues from Suez Canal tolls during FY 2004/2005 would
exceed $3.2 billion, compared to $2.82 billion during FY
2003/2004. During the first 9 months of FY 2004/2005 (July
2004- March 2005), revenues increased by $369 million to
$2.446 million, up 18% from the previous year. A recent
study by the Ministry of Transportation indicated that total
revenue from port facilities, excluding customs, duties and
taxes, increased in 2004 by 25% to L.E. 2.24 billion.
-------------------
Economic Statistics
-------------------
¶16.
Exchange Rate:
(05/31/05) (06/30/05)
Egyptian Pounds/$ Buying Selling Buying Selling
Avg. Bank/Bureau Rate 578.79 581.22 578.24 580.84
Capital Market:
(05/31/05) (06/30/05)
Capital Markets Authority Index 1644 1789
Hermes Financial Index 36344 41772
EFG Index 19599 22692
Interest Rates:
(percent, monthly comparison)
Interbank Overnight 9.49 9.55
T-bills (182 days) 9.88 8.39
T-Bond (maturing 01/06) 4.15 4.15
T-Bond (maturing 04/09) 5.50 5.50
Foreign Reserves:
(US $ billion, official gov't figures)
(04/2005) (05/2005)
18.470 18.712
Egyptian companies would be better off integrating Free/open source packages that not only help create jobs in Egypt but also give the country more control of its own. █
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