Pak Directory of Pakistan Business News and Tourism

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Introduction

If you plan to build a successful future in business, management, marketing, accounting or finance, then we believe that KBU School of Business, Hospitality & Tourism Management (SBHTM) is the ideal place to help you realise your aspiration.

The mission of SBHTM is to educate students who will eventually be future business leaders who can make a difference to society. The achievement of our students since their graduation and the various positions of leadership they hold in the business sector is a testimony to the commitment of the College in providing quality business education. SBHTM trains students to be equipped with the essential skills to analyse and interpret the changing world of business; and be well prepared to enter a wide range of business careers.

We are proud to be able to offer practical and relevant programmes that give graduates an edge in employability. The development of professional and transferable skills is a key feature in every module in order to ensure that our graduates continue to be well-placed in the job market.

SBHTM offers business programmes at Foundation, Diploma and Degree Levels. The 3+0 Degree programmes in Business is conducted in collaboration with Anglia Ruskin University, and Sheffield Hallam University, UK.

Bloomberg

Bloomberg
Majority of U.S. Workers Lost Jobs, Wages or Hours, Pew Says
June 30, 2010, 11:56 AM EDT

By Timothy R. Homan
June 30 (Bloomberg) -- More than half of U.S. workers were either unemployed or experienced reductions in hours or wages since the recession began in December 2007, according to a private report.

The worst economic slump since the 1930s has affected 55 percent of adults in the labor force, the Washington-based Pew Research Center, a nonpartisan organization, said today. The survey found that 32 percent of employees where jobless at some point during the past 30 months.

The pace of hiring suggests it will take years for the world’s largest economy to recover the more than 8 million jobs lost during the contraction. A slow rebound in employment stifles consumer spending, which accounts for about 70 percent of the economy.

“A unique feature of the Great Recession is that, for the first time, the majority of the unemployed workers had lost their jobs for good,” Pew said in the report. “Households have adopted a more fiscally conservative path since the recession started.”

The majority of Americans, or 54 percent, say the economy is still in recession, while 41 percent say it is beginning to recover, the study showed. The National Bureau of Economic Research, which is responsible for determining U.S. business cycles, has not declared an end to the recession.

The survey of 2,967 adults was conducted by telephone from May 11 through May 31. The margin of error is plus or minus 2.2 percentage points, Pew said.

--Editors: Carlos Torres, Christopher Wellisz

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz cwellisz@bloomberg.net

PRABHU CHAWLA

Editor, India Today

Prabhu Chawla is Editor, India Today, and Editorial Director of the India Today Group of publications. In his 25 years as reporter and editor, he has written extensively on events that changed the political course of India and the people who engineered them.

Prabhu launched the regional editions of India Today in Hindi, Tamil, Telugu, Malayalam and Bengali, and hosts a weekly talk show Seedhi Baat on Aaj Tak. His no-holds barred encounters with newsmakers in politics, business and culture have made this widely watched programme one of its kind on Indian TV.

Before joining India Today, Prabhu was a lecturer in economics at Delhi University. He has also been the editor of The Indian Express and The Financial Express.

He has won several national awards, including the GK Reddy Memorial Award for investigative reporting and current affairs and the Feroze Gandhi Memorial Award for excellence in journalism. He was awarded the Padma Bhushan in 2003.

Business Today by Whitney Fitzsimmons

About The Programe
Business Today provides a comprehensive wrap-up of business news across the Asia Pacific region.

From the latest company reports to the big issues facing Asian economies, along with expert analysis of market trends, BT gives you all the facts you need to take advantage of the opportunities shaping business and finance.

BT's team of specialist reporters help make sense of the fast-moving world of finance, reporting on the issues shaping the news agenda, as well as insightful interviews with opinion leaders and innovators.

If you not only want to know what the market is doing but why, then Business Today is the best way of keeping in touch with what is happening in business.
Contact Us »

Whitney Fitzsimmons
Whitney Fitzsimmons is a well-known face throughout the Asia Pacific region and has been a presenter with the ABC's international channel, Australia Network, for the past five years.

She is the host of Business Today, Australia Network's leading business and finance program, broadcast daily throughout the Asia Pacific region with a viewing audience of 40 million, and has been anchoring the program since it began in August 2006.

In this role she has interviewed many key business leaders, analysts and politicians, about critical economic and financial issues concerning the region. Most notable interviews include Helen Liddell, Britain's High Commissioner to Australia; Simon Crean, Australia's Minister for Trade; Dr Marie Pangestu, Indonesia's Minister of Trade and Lalit Mansingh, India's former Foreign Minister.

Previously Whitney was a news presenter for Australia Network and anchored major world events such as the July 7 London bombings; the devastation of Hurricane Katrina; the Palestinian elections and the demise of Israeli Prime Minister, Ariel Sharon.

In her role as a news presenter, Whitney also took the opportunity to interview leading world figures, such as Lord Chris Patton, Britain's last Governor of Hong Kong; Vikram Seth, award-winning author; Dr David Nabarro, UN System Coordinator for Avian and Human Influenza and Don McKinnon, Secretary General of the Commonwealth.

During her seven years at the ABC, Whitney has been a senior producer for the award-winning national current affairs program, Lateline. She has also reported on general and business stories nationally for the ABC's domestic news service.

In 2008 she was awarded a fellowship from the Asia Pacific Journalism Centre. She has also anchored the summer edition of the ABC's national Midday news bulletin and the current affairs programme AustraliaWide.

Before joining the ABC, Whitney worked as a freelance reporter and producer for the Seven Network, Sky News Australia, radio 2GB, 2CH and 3AW, filing general news and business stories daily. Prior to her freelance work, Whitney spent two years as a reporter and producer for the global financial network CNBC.


Alicia Barry
Alicia joined Business Today in 2007 as an experienced finance journalist. She has reported on many significant events, extensively covering the recent financial market turmoil and the global food crisis.

Alicia began her career as a radio journalist before developing a passion for financial news which led her to a position with Sky Business News in Sydney. For the two and a half years she was a significant member of the business team and honed her reporting and interviewing skills.

She is currently completing a post-graduate diploma in Investment and Financial Markets and has a journalism degree from Charles Sturt University.

Scott Alle
Scott joined Business Today in October 2007 as supervising producer.

He got his start in television in 1989 after completing a Business degree, majoring in Communications at the Queensland University of Technology in Brisbane.

He then worked as a reporter for the Nine and Ten Networks in Australia, covering everything from crime to business and sport, before joining the ABC in 1995. Since then he has reported on major financial and business stories including the Asian Financial Crisis, the dot.com meltdown and, more recently, the US sub-prime mortagage crisis.

He is also a regular traveller to Asia, with close family and friends in Singapore and Hong Kong, enabling him to get a firsthand appreciation of the issues facing economies in the region.

Today Business

The Chinese Real Estate Bubble: Waiting to Burst?
Written by:
Andrea Schiller
Luxury cars roll down the streets, million dollar penthouses float above. Women and children walk into high-end stores while men walk along the streets in pressed suits. What may sound like Fifth Avenue in Manhattan is far from it. Instead, Shanghai, is taking the main stage as the Chinese real estate market skyrockets. In Shanghai, China’s most populous city, apartments in the financial district are selling for $45 million dollars a piece. Better yet, three to four of them are selling a month. Some apartments are adorned with Swarovski crystal embedded in the doors, crocodile skin bedposts and Versace chairs resting on the floors. Apartments are selling for $2,300 per square foot, beating out the average Manhattan apartment cost of $1,900 per square foot, a shocking find. Currently, becoming a homeowner has become one of the main proprieties in the lives of the middle class. Chinese economic policies have allowed nine out of ten middle class urban families to purchase a home.

Hedge fund manager Jim Chanos is calling China “a treadmill to hell”, as "China is too dependent on driving growth through property development." And grow they have. Real estate prices in 70 cities have risen 11.7% since last year and $560 billion in residential property was sold. Investment in real estate has reached $96.6 billion in the first quarter; a 35% increase from last year and the government is planning to spend $59 billion in subsidized housing across the nation.

It is no surprise that China is in the midst of a real estate boom, but could this instead be a real estate bubble? “China the greatest is bubble in history with a massive misallocation of wealth”, says James Rickards, Senior Managing Director for Marketing Intelligence at Omnis, Inc., “it is a bubble waiting to burst”.

Does this scene remind you of something you’ve seen in the past? It should. The United States faced a very similar situation a few years ago. Real estate values soared and many quickly became rich. But, like every bubble that forms it must eventually burst. If China’s real estate bubble bursts as many predict it will, the consequences will be dire. When other booms have collapsed, national economies have been destroyed, but China offers a unique situation. If the Chinese economy were to crash, the rest of the world would be significantly affected since China is the fastest growing large economy and a critical tool in pulling the world out of recession. Cities such as Beijing have already implemented control measures to prevent the easy credit that has helped finance China’s development. In a city where the average resident makes $5,000 a year, 1,100 square foot apartments are easily selling for $200,000. People are buying things they simply cannot afford.

Let's see what will happen within the decade. Will the Chinese be making bank, or running from the bank?

Thanks to Wikimedia for the photo.

News Focus

June 2010
A Smarter Way?
New “smart cards” are supposed to revolutionize the country’s subsidy system, but the early returns have been patchy.

By Michael Kaput

It is roughly the size of a credit card, and with one swipe it will change the way millions of Egyptians go about their daily lives.

Come July, if all goes according to plan, almost 12.5 million families here will have electronic cards that will be the key to accessing scores of social benefits, from food subsidies to health care.

But the government, officials concede, has set ambitious targets. Time lines are tight — another 5 million cards must be distributed by July 1 — and the technology is complex, leaving little wiggle room for a program that will cover essential services.

At the end of last month, 7.5 million cards, one per family, were in circulation across the country, a drive that is quickly pushing paper ration and pension cards into the trash bin.

Its part of an effort to streamline the delivery of government services to the public that could eventually see everything from the distribution of petrol to buying metro tickets go electronic.

Two services that use the new smart cards are already active: A rationing function that tallies a family’s allotment of subsidized sugar, oil, rice and tea, and another that distributes social solidarity pensions. A third, electronic health insurance, is undergoing pilot testing.

The technology could mean not only big savings for the government, but also huge advances in how services are delivered in both the private and public sectors.

In some places, though, the strain is showing. Last month, the scene at one card distribution center in Maadi was chaotic, with dozens of people crowding the distribution window and angrily waving ID cards in the air and demanding service. The center accepts paper ration cards and puts people on track to receive the new smart cards.

“I have been coming for a week and still haven’t gotten a card,” says Rageb Mahmoud Hussein.

Because people rely on the card to collect basic services, the delay has gone from an inconvenience to a real problem.

“People are fed up,” says Hussein. “People can’t get food. The process is too long.”

The project, which began with a test run of about 90,000 cards in the Suez governorate in 2006, is run by a constellation of government ministries and private companies.

While the ministries of state for administrative development, social solidarity and civil aviation are behind the plan, the heavy lifting is being done entirely by a consortium of private companies.

The result is public services gone private: Every aspect of the program has been outsourced.

“We don’t own any of it,” says Tarek Saad Badr, program director for the national databases program at the administrative development ministry, which is helping spearhead the smart card program.

Although the new cards are poised to reshape the way the public accesses government services, those services will remain unchanged.

For food subsidies, the new system works in largely the same way as the old: Families bring the smart card to their grocer, who checks their monthly allotment of subsidized goods and then distributes them accordingly. But instead of tallying numbers on paper cards and in store ledgers, the smart card will be swiped at the store’s point-of-sale machine (akin to a credit card reader) and a database will crunch the numbers and update quotas.

Access to social pensions will follow a similar process. The card can be swiped at one of the 4,000 Egypt Post offices across the country. Much like the old system, pensioners swipe the cards and receive cash in return. Most of the offices are now equipped to distribute social pensions, according to Waleed Sadek, a business development consultant at SMART Card Applications Co., one of the companies involved in the project.

The early returns have been positive, say those involved in the program.

“I think it is a good system,” says Khaled Ahmed, manager of the Egypt Post branch on Mohamed Farid Street in Downtown Cairo. “It organizes the process of handing out subsidies to the people, unlike the prior system, which was not very specific.” Ahmed’s branch is currently processing cards for about 1,900 customers which will be distributed at the end of May and beginning of June.

While smart card technology is nothing new, the infrastructure behind the system has techies and technocrats alike buzzing with ideas for future applications that could span public and private sectors. The smart card network cross-checks family information with national databases every time the card is swiped. That allows up-to-date compilation of key statistics on everything from how many people are in a family to how much sugar they bought last month to what level of subsidized healthcare they should be receiving.

“The number of applications that can be implemented using this infrastructure we are now building with the government is basically limitless,” Sadek says.

With that information at their fingertips, the government can pinpoint things like which subsidized goods are most needed in the market and accurately track how they are being distributed, reducing both abuse and waste along the subsidy supply chain, which the administrative development ministry admits is rife with corruption.

Less corruption and more efficiency directly translates into savings. The government estimates it will save over 20% on food subsidies alone through precise placement of goods and reducing corrupt practices, says Sadek.

“When you talk billions, that’s a lot,” he says.

The technology’s future applications could make those savings look like pocket change. According to Sadek, one such application could be used to handle the monthly salaries of civil servants electronically. With nearly six million people in Egypt employed by the government, that would free up more cash for circulation and improve the efficiency of civil servant payments.

Beating the System

Despite the fact that many of the smart card users are uneducated, they have taken to the new technology well, says Sadek. “We have people who are totally illiterate and can still handle the terminals.”

But more of a concern than whether people can be taught to use the system is how to regulate the way they use it.

A common practice for some grocers under the old subsidy system was to engineer an extra paycheck by overstating numbers to receive monthly quotas of goods at subsidized prices without distributing them to citizens.

These could then be sold on the black market for significant profit, multiple times their subsidized price.

This duplicity — more goods paid for by the government and less actually distributed to people — is one thing the state hopes to eliminate with the new program.

But that’s going to cut into lucrative profits made by grocers playing the old system. According to the administrative development ministry, grocers were scraping a meager 1.5% profit on the sale of subsidized goods under the old system, leaving little question as to why corruption blossomed.

Alia El Mahdy, economics professor and dean of the political science and economics department at Cairo University, says that the government needs to offer an incentive to curb corrupt practices.

Beyond acknowledging the need to make the new subsidy system a win-win for both grocers and citizens, the administrative development ministry has not yet outlined incentives that will directly benefit grocers.
Private Matters

The smart card project is unique because it’s largely a private venture.

The three main companies behind its implementation, SMART Card Applications, the Aviation Information Technology Company (AVIT) and FirstData, are overseeing the process in its entirety, from manufacturing to distribution, training and database management.

Some of these tasks are further outsourced to companies like MasriaCard, a regional smart card provider that has already manufactured 2.5 million cards and has plans for an additional 4.5 million, according to MasriaCard project manager Rana Nasie.

Amr Ahmed, a data center and technical support manager at AVIT, says the project is nearing completion, with Cairo being the last major area to see smart cards go live.

But whether the entire country will be covered by the July deadline is anyone’s guess. And getting them to those who need them in a timely fashion is something else entirely.

For Badr, however, the project’s goals are crystal clear. “Either we have [all the cards out on] the first of July, or we go home.” bt

Profitable Pollution

It makes good sense to take care of the environment,especially if you can make money from exporting dirty air

By James Chester

The thick clouds of pollution hanging over Cairo might suggest that cleaning up is the last thing on the program for Egyptian industry. But from the immaculately landscaped gardens of Alexandria Carbon Black’s factory to the windswept headlands of the Gulf of Suez, heavy industry and the Ministry of Electricity have found a business case for reducing pollution — exporting hot air is profitable business.

To meet greenhouse gas emission targets established under the 1997 Kyoto Protocol (see box The Kyoto Protocol, pg 112), developed countries have options beyond just reducing their own emissions: They can either trade the carbon allowances handed out by Kyoto among themselves, or they can pay for projects in developing countries that reduce those countries’ emissions of greenhouse gases.

This is called the clean development mechanism (CDM), and its currency is carbon emissions reduction credits (CERs) that can be sold either directly to polluting industries in a wealthy country or indirectly via a broker or fund manager (see sidebar The Carbon Market, pg 108).

Worldwide, the CDM market was worth 12 billion (LE 101 billion) in 2007, an increase of almost 200% over 2006 figures. Including the value of allowances that are traded between developed countries, the entire carbon market was worth 40 billion (LE 336 billion) in 2007.

TriOcean Energy is opening what it believes to be the first consultancy firm in the country focused on encouraging CDM investment. The CDM division aims to “introduce the environmental aspect to all the industrial projects that are happening in Egypt. The first [reason] is the fact that the environment is already suffering [] and you need to reduce that as much as you can,” says Ahmed Zahran, CDM business development manager. “The second is that currently, due to the Kyoto Protocol, you can actually make money out of that. So instead of being an absolute cost on your income statement, [reducing pollution] could actually contribute to your income resources. That’s what we’re trying to do — increase environmental awareness and create income revenues as well for companies from doing that.”

Egypt is in a perfect position to take advantage of this growth industry. The combination of a favorable investment climate, potential for emissions reductions across a range of heavy industries and abundant renewable energy resources make Egypt the most attractive place to invest in CDM in the Middle East.

So far three local projects have tapped into the market and are already selling CERs. A further 56 projects are in various states of readiness, and the opportunities offered by the sector promise many more to come.
The Egyptian Market

While Egypt is not up there with the CDM heavyweights (China has 1,295 projects, Brazil has 189 and Mexico 180) it does have some aces up its sleeve. Each of the three CDMs running now is a flagship project.

Abu Qir Fertilizer Company (ABUK.CA, bt100 number 25) has the first and biggest nitrous oxide reduction scheme in Africa and the Middle East. Veolia Environmental Services has the only landfill gas capture system in Africa and the Middle East. Zafarana wind farm on the Gulf of Suez is responsible for making Egypt the biggest producer of wind energy in the Middle East.

From the current portfolio of 59 projects, optimistic government forecasts predict that six to seven million CERs will be delivered (representing seven million tons of carbon dioxide reduced) before the end of 2010.

Zahran explains that heavy industry is not the only place where pollution can be reduced: “You could be a fantastic CDM investment environment if you have lots of natural resources that you’re not using — lots of renewable energy sources. It happens that Egypt is [] very polluted on one side and on the other side you have the best locations worldwide for wind energy. It’s very obvious that you have a huge potential for solar energy as well. [] It’s about how much potential there is for the reduction of your own use of fossil fuels.”

Although investment in renewable energy is being encouraged by the government, Dr. El Sayed Sabry Mansour, coordinator of the “designated national authority” for managing CDM project applications, claims the concept of selling pollution is hard to grasp for Egyptian industry. Not only this, but the mechanism, which he says is “not yet grown up sufficiently,” takes a long time to implement.

“The difficulty that CDM projects face in developing countries is the time taken for all the long steps from the [application letter] to national approval to international approval,” says Mansour. The process usually takes several years.

Mansour also points out that large projects must spend $200,000 to $300,000 (LE 1.1–1.6 million) on the whole registration process, while it costs smaller projects around $60,000 (LE 318,000). Nevertheless, while the high cost is a discouraging factor, no applicants have failed to gain CDM status so far.

Although the government has been running workshops since 2004, and three high profile CDM projects are up and running, businesses are not rushing to sell credits. The major reason behind this, and also the biggest challenge facing the government, brokers and foreign companies in Egypt, is the lack of awareness, first of what CDM is, and second, of what it can do for business.

Companies like Abu Qir Fertilizers and Veolia Environmental Services, however, are clearing the way, and brokers like TriOcean are spreading the word that from factories to landfills, being green doesn’t just feel good — it looks good on the balance sheets too.
Pioneers of Industry

Heavy industry does not need to be destructive. At state-owned Abu Qir Fertilizers, an Austrian CDM investor proposed the installation of machinery to reduce nitrous oxide emissions. This was the first such project in Egypt, and it has been selling CERs since September 2006.

Hani Riskalla is general manager of Carbon Egypt, the company created by the Austrian carbon trader to manage the CDM and sell the carbon credits. He describes the difficulty his company faced.

“At the beginning of the project, when we came with the idea, it was not easy to sell it. It was something brand new in this country, and we had a lot of explanation for the people in order to convince them that what we are saying is for their benefit — it’s a win-win situation, on both sides,” he says. Carbon Egypt was the first company to negotiate an Egyptian CDM.

Apart from reducing nitrous oxide emissions by roughly 98%, one of the benefits at Abu Qir is the initiative donating 3% of CER revenue to a social fund. Riskalla explains the distribution of the income: “One hundred percent of the CERs belong directly to Carbon Egypt because we did the project [] Abu Qir didn’t finance anything [] In return we are paying Abu Qir, as a fee for using their facilities, 30% of the income for the CERs.”

Out of the total CER revenue, 2% goes to the United Nations Framework Convention for Climate Change (UNFCCC), which is the regulating body for all CDM projects worldwide, and 6.5% to the Egyptian Environmental Affairs Agency. The 3% to the social fund pays for infrastructure development in the Abu Qir area and the 30% for Abu Qir is extracted from the remainder.

Thirty percent may sound low, but it represents revenue from around 1.6 million CERs every year. The company said that total income from carbon credits was approximately 12 million (LE 101 million) per year. Keep in mind that Abu Qir had no investment costs at all, or any risk, and Carbon Egypt pays for all maintenance costs.
Money from Waste

Veolia Environmental Services (Veolia ES), known locally as Onyx Alexandria, is a different kind of enterprise. Owned by the French company Veolia Environnement, Veolia ES is one of four global Veolia subsidiaries, and the second biggest waste treatment company in the world.

The company was contracted in 2000 by the Alexandria governorate to overhaul waste-disposal facilities for the region. To deal efficiently with the waste, two landfills were constructed at Borg El-Arab and Hamam, both to the west of the city. Landfills are prone to giving off waste gases, but both facilities were built without methane-flaring systems — which capture and burn the methane produced by rotting garbage, preventing it from hitting the atmosphere — as it was unprofitable. Methane from landfills accounts for 4% of greenhouse gas emissions worldwide. Egypt has five other projects to reduce landfill gases, three of which are due to deliver CERs this year, according to the government.

Unlike Abu Qir, Veolia ES initiated and paid for its own CDM (under the guidance of the parent company) and unlike many projects, it did not sell all of its CERs in advance to one buyer. Hassan Abaza, business development and communication director for Veolia ES explains.

“We sold only 30% of the production [to a World Bank managed fund] because we thought that after we developed the project and assured better gas captures we could sell the rest at better prices,” he says, adding that the advance payment of 30% of the CERs’ worth was used to pay for installing the gas flaring equipment.

Veolia ES expects to generate approximately 3.7 million CERs over the 2006-2016 period, even though it only started delivering this year. This means that the total amount of landfill gas not emitted will be equivalent — in terms of its potential but unrealized effect on the environment — to 3.7 million tons of carbon dioxide.

The company’s philosophy is decidedly green. Mohab Abd Elkader, engineering, transfer and waste treatment manager, says: “We would have done [the project even without CDM]. We are an environmental company — we protect the environment from pollution and one of [our activities] is to collect this gas. But this investment is not to the same level as the CDM needs, so we added more equipment in order to [qualify for] CDM.” By expanding its project, 70% of the gases were flared and the company realized a profit on its $3.1 million (LE 16.4 million) investment.
Carbon Black Magic

Alexandria Carbon Black (ACB), with a similarly green philosophy, is the most recently registered CDM project, on July 27. Although the company was one of the first to start the process (in 2003), it has not sold any carbon credits yet. All that remains is for an independent auditor to verify the emissions reductions, which could take anything from three months to a year.

Like Abu Qir and Veolia ES, ACB has a strong commitment to the environment, and to corporate social responsibility. Global Marketing Head Rahul Kohli says that the company pays for health facilities in the local community and provides free food at Ramadan. The signs bearing quotes from Nelson Mandela and birthday wishes for warehouse workers on-site attest to the feel-good philosophy at ACB.

But it’s not just words. “We have state of the art equipment for making sure our environment is clean. All the water that we use is recycled. For doing all this there is a commercial benefit [] any effluent is a loss,” says Kohli. “So the philosophy our founder had was why should we let anything go? You do two things. One, you satisfy your commercial objectives. At the same time, you ensure that the plant gives an indication to people that we’re disciplined. It’s not just for show that we do something like this.”

Kohli is referring to the company’s waste gas capture system that has qualified for CDM. The investment cost was LE 55.46 million. Without selling carbon credits, it would have taken over 18 years to see a return on the investment. Now, ACB can expect to make a profit within six years, with an 18.5% return on its original investment over the initial period of CER crediting, which in ACB’s case is seven years.

The project protects the environment in two ways: Gases that would have been emitted are recycled, and secondly, the waste gas generates electricity, which replaces electricity from fossil fuels.

This, however, leads into another obstacle for CDM in Egypt. A company like ACB can generate electricity that goes towards reducing pollution, but it is almost impossible to sell it to the grid.

Fortunately for ACB, a nearby plant (AFCO) buys the electricity without it ever going into the national network. Companies like Veolia ES are not so lucky. Because of current government subsidies on electricity, it is not cost effective (even with revenue from carbon credits) to sell electricity to the government provider. This means that energy from fossil fuels continues to be used when it could be generated from industrial waste.

The situation looks likely to change within the next three years, as the subsidy regime is dropped (see “Taking Away the Trough” by Jeff Neumann and Andrew Schurgott, pg 38) and the electricity market opens up to private investors. This can only be a good thing for CDM and the environment, with more projects claiming credits through generating energy.
The Future of Energy

Renewable energy is the area with most potential in Egypt, in terms of selling carbon credits. CDM provides the impetus for movement of funds and green technology from the developed world to developing countries. Indeed, the World Bank States and Trends of the Carbon Market 2008 report estimates that “in 2007 alone, CDM has leveraged $33 billion [LE 175 billion] investment in the field of clean energy.” Out of all types of CDM projects worldwide, renewables made up the largest group at 29%, followed by energy efficiency at 20%, according to Point Carbon, a Norwegian carbon market analyst.

Currently two large hydropower projects have been approved as CDM projects by the government, and the first solar/natural gas combined cycle power plant is in its final phase of construction. While solar power is judged by most to be too expensive now, the hydropower projects at Naga Hammadi and Assiut will be generating nearly one million CERs annually within the next two years.

However, it is wind energy that has everybody talking. The government’s New and Renewable Energy Authority (NREA), under the Ministry of Electricity, manages Egypt’s wind farms. The authority currently has 305 megawatts (MW) of installed capacity in over four sites in Zafarana and 5 MW in Hurghada. This is enough to power a city the size of Port Said, excluding heavy industry use. Egypt has a total current capacity of 21,500 MW from all power sources.

Just one of the Zafarana sites is selling CERs so far, but three more are in the final phase of qualification. Rafik Yussef Georgey, a technical consultant for NREA, sees the future in wind.

“I don’t think there will be any competition [between wind and hydro] in the future. We have already exploited 95% of our hydro potential,” he says.

The accredited 120 MW project in Zafarana cost around LE 684 million to build. It generates 211,922 CERs every year, representing 211,922 tons of carbon dioxide not emitted from natural gas power stations. This might not sound very impressive, but the renewable energy portfolio is due to deliver 20% of Egypt’s electricity by 2020, and wind is the lynchpin of the NREA strategy.

Dr. Mohamed Elkhayat, director of technical affairs at the NREA Wind Energy Department, claims that Egypt is on-track to produce 7,200 MW of wind energy by 2020. The closest competitor in the region, he says, is Morocco, which has a total of 124 MW capacity, and will produce 600 MW by 2015.

The secondary benefit is that natural gas supply can be conserved. “I think it is a strategic decision because of the talks about Egyptian natural gas reserves and how long they will last,” says Georgey. “In any case, they should be kept as a strategic reserve for future generations.”

The CDM accredited wind farm in Zafarana was fully funded by a soft loan from the Japanese Bank for International Cooperation (JBIC). While JBIC is a major financier for CDM projects in Egypt, KfW and Danida (German and Danish development banks) are also major players.

The CERs are sold to Japanese Carbon Finance, which is owned by JBIC. Nevertheless, the government was not obliged to sell the first seven years’ worth of credits to the supplier of the loan. Georgey explains. “Japanese Carbon Finance requested to purchase the CERs from the project but this does not mean we are obliged to sell CERs to whoever installed this project. In fact we are very hard with negotiations — we only accept the best price.”

Georgey also explains why the project was credited for seven years. “For the CDM, the rules specify clearly that you only do it for seven years and renew it twice for another 14 years, or for 10 years without renewal. The wind project’s expected lifetime is not less than 20-25 years. This is the only issue. If you are not sure of the future of CDM then you had better [commit to] sell [credits] for 10 years because you’re not sure what’s going to happen. If you are sure it’s going to be renewed, then you go for seven years.”

The fact that the NREA is basing its renewable energy strategy on the CDM is a show of faith in the mechanism. This is an example of the power of CDM to change existing patterns of business. Without the incentive of carbon credits, it is very difficult to fund a wind farm in this country, even with favorable loans.

However, with the electricity market opening up and renewable technology becoming cheaper and more accessible, a healthier balance can be maintained. As private companies generate and sell electricity over the national grid, Egypt’s energy industry will diversify further, leading to more investment opportunities for carbon traders.
Is It Really Green?

One of the most common criticisms of CDM is that it does not really reduce pollution; it just moves it around the world. This is not strictly correct. Thanks to Kyoto, developing countries do not have to restrict economic growth. Instead they can continue to set up factories and increase electricity use. CDM means that at least some of the resulting pollution is abated, and revenue is earned at the same time.

The concept of ‘additionality’ makes sure pollution is moved not duplicated. Any reduction project that would have happened anyway does not get accredited by the UNFCCC, which reviews all potential projects. An applicant must prove that its emissions reduction project is ‘additional,’ i.e. the project could not occur without the funding realized from carbon credits.

The problem with additionality is its arbitrary nature. “It’s an argument, basically,” says Zahran. “You can have two identical projects, one in India and one in Egypt, both for fuel switching projects [when a dirty fuel like oil is switched to a cleaner one like natural gas], both using the same methodology and both are in very similar circumstances. Both apply for CDM acceptance and one could get accepted and one could get rejected. The same could even happen for two factories or two installations next to each other [] It all depends on how you present your project and how good your argument is.”
Next Steps

Although the European Union will impose tighter limits on the amount of pollution companies can import from CDM projects after 2012, it is likely that demand will continue to grow worldwide. Australia ratified Kyoto last December and Japan’s share of the market continues to grow. Analysts consistently predict the entry of the United States into the carbon market, but not before 2012.

Amin Zayani, a CDM research assistant at TriOcean Energy likens the situation to “the US joining the Second World War.” A potential US carbon market is valued at $1 trillion (LE 5.3 trillion) by 2020, according to New Carbon Finance, a United Kingdom-based advisory and analysis firm.

Copenhagen plays host next year to the conference that will decide the future of Kyoto. After 2012 comes a second commitment period for developed countries, but it is not a done deal. It is, however, very unlikely that ‘Kyoto countries’ will back out before this second period.

But what would happen if Kyoto ended after its first or second commitment period? Riskalla considers that benefits to industry will already have been realized. “If the Kyoto Protocol were to end [and there was] no market for the CERs, who knows? We cannot foresee what will happen afterwards. At least it is going to bring a better environmental climate for the people living around [Abu Qir]. At least you don’t have emissions [ and] you have a unit free of charge.”

If the government tightened environmental regulations and the company had to cut emissions anyway, or if the carbon market dried up, the company would still have profited, and the equipment paid for by Carbon Egypt would still belong to the fertilizer plant.

The fact that the government and private businesses in this country both plan to receive CDM revenue long after the first Kyoto period, as indicated by plans to build a raft of renewable energy plants and renew seven-year contracts across the nation, is a sign of faith in the mechanism.

The CDM does bring revenue, and in the case of renewables, it stimulates investment in technology and implementation. Companies that do implement CDM projects are responsible for significantly improving the lives of people living nearby.

It sounds pretty complicated and it might not save the world, but from fuel-switching at brick kilns to barrages on the Nile, CDM is already bringing investment, technology and employment. And more than anything, the realization that cleaning up doesn’t have to be a chore — in Egypt, it pays to be green. bt
The Carbon Market

Many people imagine the carbon market as a frontier land of carbon cowboys, or they think of hemp-shirted do-gooders looking to save the planet. It is a lot less ephemeral than one might think, and slightly more regulated. However, this is still a market where people sell the right to emit an invisible substance.

Essentially, the global carbon market consists of the European Union, Russia, Japan, Australia, New Zealand and Canada. Each country is allowed to emit a certain amount of greenhouse gases. The allowances can be traded between countries — this is called emissions trading. It is also possible for a developed country to invest in an emissions reduction project in another developed country; this is ‘joint implementation’ (JI). The third mechanism is CDM.

Ahmed Zahran, CDM business development manager at TriOcean Energy explains: “There are now two kinds of certificate on the market. One is assigned by the UNFCCC [United Nations Framework Convention for Climate Change] directly to developed governments and then the governments assign them to installations [and they are traded]. And then you have other certificates that are issued by the UNFCCC through the CDM mechanism to developing countries in exchange for the projects they are doing and then those CERs are used for compliance []. So any company can be compliant using a combination [of the two].”

When a carbon credit is generated from a CDM, it is sold as a primary CER. The prices can vary wildly for primary CERs, according to the deal-making skills of the participants and the ‘quality’ of the credit. A CER from a reliable project (i.e. it is more likely to deliver the credits) now costs around 12 (LE 101). The transaction methods also vary enormously: Abu Qir Fertilizer Company never deals with its own CERs in any capacity — their creation and management being left up to Carbon Egypt — and receives 30% of their value in cash. Veolia Environmental Services, on the other hand, organized the entire process in-company, sold 30% of its CERs in advance and waited for a more receptive market to sell the rest. As a buyer, there are some good deals to be had if companies do not understand the relatively new market.

The primary CER is sold directly to a polluting company in a developed country, in which case the deal is done, or it is sold to a fund manager. If the latter, it then becomes a secondary CER, which can now sell for over 21 (LE 176). This could be managed by the World Bank, a national development bank or it could be a more shady hedge fund. The idea, as with any other financial venture, is to spread the risk: A global fund manager like EcoSecurities, which plans to sell 171 million CERs by 2012, accumulates carbon credits in advance from a range of projects.

It is standard for a CDM project or its broker to sell up to 100% of its CERs in advance to fund the project. The CERs sold are without backing and a fund can spread the risk over a variety of projects (anyone remember the sub-prime mortgage crisis?) and therefore sell for less than emissions credits, which are available when sold.

The biggest single market by far is the EU Emissions Trading Scheme (EU ETS), which trades CERs and EU allowances (EUAs), the allowances originally handed out to EU countries. Recently, because of perceived risk of the more unreliable CERs, the price difference between secondary CERs and EUAs reached double digits in May and June but the gap has closed somewhat, and at press time, it was around 5 (LE 42). The World Bank reported a doubling in the number of EUAs traded and the value of EUA trades from 2006 to 2007, taking the EUA market to $50 billion (LE 265 billion) in 2007. Secondary CERs represented 17% of EU ETS carbon trading last year.

This may just seem like a string of acronyms and numbers. What it means is that traders within the EU bought and sold 1.65 billion tons of hot air and that although CERs are not as reliable as EUAs, they still make up a sizeable proportion of the market. It is important to understand the importance of the EU market, as it purchases almost 90% of the 592 million tons of carbon dioxide equivalent traded worldwide as CERs.
The Kyoto Protocol

Everyone has heard of the Kyoto Protocol, but what does it actually mean for Egypt? The basic premise is that 37 developed countries, plus the European Union as a single entity, are committed to reducing their emissions of six greenhouse gases. Egypt and another 142 developing countries have no obligations to cap their emissions.

A rich nation is given a set number of carbon allowances, which can be traded on a number of markets, the biggest of which is the EU Emissions Trading Scheme. The United States is not part of Kyoto, but American companies do trade carbon credits on a voluntary exchange.

The six greenhouse gases measured under Kyoto are carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. Each gas has a different effect on the atmosphere and not all are as damaging as each other, so for the sake of standardization, there is an equivalency rating. For example, nitrous oxide (N2O) is far more damaging than carbon dioxide, so one ton of N2O counts as 296 tons of “carbon dioxide equivalent” (CO2e). The high value of N2O accounts for the massive profits realized on CDM projects at fertilizer plants. One ton of CO2e equals one carbon credit.

Reductions should be by at least 5.2% collectively from 1990 levels, with each country’s carbon allowance calculated according to its level of industrialization. The protocol was ratified by Egypt in January 2005 and Australia was the most recent developed country to join, in December 2007. The first commitment period lasts from 2008 to 2012, and negotiations are currently underway for implementation of the second commitment period, from 2012 to 2016.

Even though the first commitment period didn’t begin until this year, the treaty came into force in 2005, and pipeline projects in Egypt plan to deliver credits up to 2030.

After the Match...

June 2010
With a powerful history and amazing wildlife, South Africa is more than just a venue for football’s biggest prize.

By Michael Ide


This month, hundreds of thousands of football fans will flock to South Africa for the first FIFA World Cup to be held on African soil. The country will be in the spotlight, trying to prove itself as a world-class tourist destination. With stunning nature parks and wildlife, sprawling cities, a diverse culture and great wine, football matches may not be the most memorable part of a trip to the Rainbow Nation.


Originally built around massive gold mines, Johannesburg is the economic and cultural heart of the country. Unfortunately, due to the high crime rate in the city center, it’s best to stay in Melville, Johannesburg’s northern suburb.

The area is significantly safer and has an active nightlife, but is close enough to town that you can easily arrange day trips. But for such a large place, there is surprisingly little to entice a tourist into the city proper.

To understand the context of other historical sites in South Africa, it is important to visit the Apartheid Museum, which documents the struggle against white domination of this diverse nation (there are 12 official languages).

Apartheid, the governing philosophy of the South African government for almost five decades, ended in 1994 with the country’s first fully democratic election, a vote that elevated Nelson Mandela to the presidency. With the motto “A history forgotten is a future lost”, the museum is meant to document how South Africa overcame apartheid, as well as the hardships suffered under it.

Soweto, the south-western township of Johannesburg, came to international attention during anti-apartheid riots in 1976 that quickly spread throughout the rest of the country. Although the protests were eventually quelled, leaving 600 dead, many people consider them to be the beginning of the end of apartheid.

Soweto has changed a lot since then. With over 1 million people, many of them in the rapidly growing professional class, it is no longer just an appendage to Johannesburg. Some parts of Soweto are still rough and its sheer size makes wandering around on your own impractical. To get the most out of a visit to Soweto, sign on to an organized tour so you can see the spots where history unfolded and get a taste of the daily rhythms of life in South Africa’s largest township.
The Big Five

From Johannesburg you can fly directly to Kruger National Park, though the drive across the province of Mpumalanga, which houses the reserve, isn’t too difficult. Travelers to Kruger have the chance to see the Big Five: lions, elephants, buffalo, leopards and rhinos (the park has both white and black rhinos). You will have to be lucky to spot a leopard, which is both rare and elusive, or a black rhino, which is endangered with a population of less than 4,000 worldwide, but seeing the rest is virtually guaranteed. Although you can safely travel in the park by yourself, you are better off hiring a guide who knows the area and the animals’ habits.

If you like to fish, head west from Kruger to Sabie, also in Mpumalanga. Primarily a logging town, the natural beauty and great fly fishing has made this a popular spot for South African tourists looking for a weekend out of the city. The town itself is only a few kilometers across, set on the side of a large hill, with hiking trails in every direction. Any of the hotels can provide you with maps of the most common trails and most can set up a tour if you want.

Between Sabie and its neighbors, Graskop and Pilgrim’s Rest, you can find fly fishing, rappelling, whitewater rafting and the Big Swing a cable swing that takes you across a gorge at speeds over 150 km/h.
View from Table Mountain

The first Europeans to settle in South Africa were employees of the Dutch East India Company, who set up a small outpost for ships sailing around the Cape of Good Hope from Europe to the East Indies. The Cape Colony eventually came under British control and the Afrikaners, descendants of the original Dutch settlers, spread out over the rest of southern Africa to avoid British rule.

This quirk of history can still be felt in Cape Town today. For one, the mix of people in Cape Town is staggering. While most areas in South Africa are dominated by one tribe or another, Cape Town is the center of the Coloured community, which descended from the black, whites and Malays who lived together in the Cape Colony. Add in people of every other ethnic group in South Africa and a reasonably large expatriate community and you get a cultural mix that is hard to beat.

The most recognizable part of Cape Town’s landscape is Table Mountain, with its distinctively flat top. The three-hour hike to the top is enjoyable enough in itself, but the panoramic view of Cape Town once you get there is unparalleled. While guides are available, they really aren’t necessary; local walking groups meet on a regular basis to hike up the mountain and many of them would be happy for you to join in. And if the hike seems like a bit much for you, there is a cable car that can take you directly to the top.

Across Table Bay is Robben Island, where anti-apartheid activists including Mandela and Jacob Zuma, the current South African president, were imprisoned. Now the prison has been turned into the Robben Island Museum. The museum tours include a trip around the island, which also housed a mental institution, a leper colony and a quarantine center, and a tour of the maximum security prison guided by a former political prisoner who was held there.

If the sightseeing is becoming a bore and you need an adrenaline kick, Cape Town is famous for shark diving. The idea is pretty straightforward. Go underwater in a big cage, throw some bloody meat in the water and wait for the Great Whites to show up. It’s important to check water conditions before going out (water clarity can vary dramatically, greatly affecting your experience), but it isn’t often that you can get up close to 1,000 kg of muscle and teeth and feel secure. If you want to end the day with some dancing or live music, head to Long Street in the city center, or go to the Waterfront if you are looking for a more subdued, upscale night out.

During your stay in Cape Town, take time out to visit Stellenbosch, less than an hour’s drive away. South Africa produces some of the world’s best wine and Stellenbosch is in the heart of the wine country. Even if you prefer not to attend wine tastings, the cheese and chocolate tastings will get your palette going, and it is hard to imagine a more idyllic end to your trip than a picnic in the vineyards of South Africa. bt

Corporate Cloning

June 2010
Corporate Cloning
Investors are jumping onto the franchising bandwagon. Here’s how to get in on the act.

By Nadine El Sayed


It took Raymond Kroc, the founder of McDonald’s, years of tinkering before he figured out what cuts of meat make the best burgers, the fastest way to pour milkshakes and exactly how much chicken to put into a McNugget.

The results of Kroc’s ingenuity were history making. McDonald’s went from a roadside burger shack to one of the world’s biggest companies in under two decades.

While not everyone can do that, experts say a growing number of local business people are benefitting from the wisdom of Kroc and other iconic business figures by jumping on the franchising bandwagon.

In 2009, local investors poured LE 42 billion into franchise operations, up from LE 22 billion in 2004, according to the Egyptian Franchise Development Association, an industry group. Its general secretary, Hussein Abou El Fath, says that figure is expected to double in the next three years.

The fervor was evident at the recent MENA International Franchise Exhibition, held last month in Cairo. The expo, which serves as a platform for franchisors and franchisees from 19 countries, attracted 19,000 visitors, a six-fold increase from five years ago.

The prospect of time-tested international business models creating jobs at home has attracted government backing. The Social Fund for Development has created a specialized department that provides loans of up to LE 3 million to potential franchisees.

Marwan Abd El Razek, head of the unit, says during the start-up and growth phase, many businesses take serious risks due to lack of experience. Under a franchise agreement, those risks aren’t so prevalent.

“You have the image and perception of the franchisor. You don’t have to build a brand from scratch or re-invent the wheel.

While there are benefits, not every franchisor is a McDonald’s or a Starbucks. Untested business models, sky-high royalties and lackluster corporate marketing can put an end to your business before it gets off the ground.

With that in mind, Business Today spoke with experts on what to look for when considering a venture into the world of franchising.
Some industries are hot, others are burned out

The country can’t seem to get enough of Chili’s and Starbucks; food chains make up around 23% of the franchises in Egypt.

Abou El Fath says while the market is not yet saturated and restaurants will remain the most franchised chains for a while, there are alternatives out there.

Look for innovative business concepts. It doesn’t have to be an earth-shattering idea, but one that sets you apart. Abd El Razek says a prime example is Safe Tech, a tire service center that looked to outdo small garages by employing techniques used in Formula One. It became an instant hit.
Full disclosure is key

The more information you can get from a franchisor, the better.

Scrutinize the company’s disclosure document, which should list the firm’s capital, the number of outlets owned, any legal issues concerning the business, other franchisees, their contracts, countries of operation the list goes on.

“You have to ask to see this document. It is crucial to your decision,” says Abou El Fath.

But sorry, don’t expect to learn about what really goes into a Big Mac. You won’t get to see trade secrets like recipes.
Money talks and you need someone who speaks the language

If math isn’t your strong suit, then call in an accountant when it comes time to review the disclosure documents.

For instance, one thing a bookkeeper should look at is inventory: If the franchisor has a lot of stock, you need to understand why.

“Is this why he wants to open an outlet — to distribute the extra inventory,” says Abd El Razek.

“Is this because the product is seasonal? It may be because the product is obsolete and he can’t sell it.”

The same principle applies to legal matters. Hiring an expert who can explain the contractual fine print is money well spent.
Read the manual

You pay money for the brand name, but arguably the most valuable thing you’re getting is the franchise’s business manual. It should offer detailed instructions on setting up an outlet, running the business and marketing. If it doesn’t, run.
You’re paying for more than the inventory

“Franchising is a very fast way to transfer technology. You sign today and get the technology tomorrow,” says Abou El Fath.

But don’t be fooled; the system makes the business, not the stock. Marketing strategies, correct use of inventory, staff development and the ability to perform even the most minor tasks efficiently can make the difference between success and failure. It’s the know-how that you’re really paying for.
Ask for references

If the franchisor is reputable, they will probably be happy to give out the contact numbers of other franchisees. These people are a good resource for finding out how well the business is doing and whether there are roadblocks you need to be wary of.

“If he doesn’t have any franchisees and you’re the first, then this is a risk you’re taking,” says Abd El Razek.

See how many outlets the franchisor has and how successful they are. If they only have a couple of outlets, check to see how long they have been open and whether they are expanding. If they have the resources to grow but aren’t, that could be a sign the business is stagnant.
Educate yourself

Choose a franchise that will teach you and your staff marketable skills that will allow you to stay in business if the franchising contract isn’t renewed.

Abd El Razek says fast food franchises generally don’t offer training that applies beyond the scope of the company; most of the menu items are ready-made and the processing is minimal.

A better route for personnel development would be to set up a traditional restaurant where the staff receive corporate training and the franchisee is left with valuable knowledge post-contract. bt

Going Nowhere Fast

June 2010
As Cairo careens towards total gridlock, officials searchfor a solution.

By Jessica Gray

It is 3pm on Talaat Harb Street in Downtown Cairo and traffic is at a crawl. Bumper to bumper, old jalopies and overpriced SUVs jostle for every extra inch of headway. When there is no headway left to make, drivers lean on their horns in frustration, the piercing beeeeeeeeeep! egging others to do the same.

The crowded streets and earsplitting honks are nothing new to veteran taxi driver Ayman Ibrahim. Leaning back in his old black-and-white taxi, Ibrahim says he’s used to sitting around idle as he ferries passengers throughout the city.

“For every eight-hour shift, I spend four hours sitting in traffic,” he says with a shrug, adding that things have gotten significantly worse since he began driving a taxi 10 years ago, a sentiment shared by many Egyptians.

Things have gotten so bad that city planners recently predicted the average speed in greater Cairo will slow to a paltry 11 km per hour within five years if nothing is done to ease congestion. (It should be noted that some of the commuters Business Today spoke with were surprised that wasn’t already the case.)

Always a hot topic, President Hosni Mubarak cast the issue of gridlock into the limelight last month by meeting twice with ministers to discuss road-building projects. Those included the Safft El-Laban corridor, scheduled to open this summer, which would link Tharnat Bridge near Cairo University with the Ring Road. Also on the agenda was an effort to connect high-traffic streets with expressways, Al-Masry Al-Youm reported. City planners and the governor of Cairo also convened in May to discuss ways to convince drivers to turn to public transport ahead of the near-total standstill that accompanies Ramadan.

Experts put the blame on ongoing construction, a lack of public transportation and the significant number of new cars being licensed each year.

Ironically, while there are several infrastructure projects designed to ease congestion in the works, many are behind schedule and contributing to the nation’s traffic woes.

The third metro line is a prime example. Supposed to connect Cairo’s Downtown with the airport, the line’s construction is months behind schedule, with its completion set for 2017, yet another headache for drivers already being re-routed around construction clogging roadways in Abassiya and Ataba.

“If my working day is eight hours, it becomes 12 when you factor in traffic,” says pharmacist Metwally Abdel Aziz.

The government’s plan to put an end to the seemingly endless congestion includes building a 26,000-square-meter underground garage in Tahrir Square set to open in 2011, sectioning off bits of Downtown as pedestrian-only zones, digging another tunnel and making more ministry services available by phone or online.

But drivers are not sold on the ideas.

A 2009 survey by the Information Decision Support Center, a think-tank funded by Parliament, shows that people believe traffic is getting worse. More than three-quarters of respondents said they struggle with traffic jams on a daily basis, with the same number claiming the gridlock was harmful to their health. They ranked the Giza governorate as the worst traffic offender, with Cairo, Qalyoubeya in Upper Egypt and Alexandria following close behind. (The worst time for traffic, according to respondents: From 1pm to 3pm.)

Cairo officials say they are doing their best to improve the situation by investing in public transport. In April, the first of 1,500 modern public buses, each with room for 50 passengers, took to the streets. However, urban planners say rolling out the new buses, painted fire-engine red, should only be the tip of the iceberg.

“There are a lot of reasons [for the city’s traffic congestion] but I think the biggest one is that there is a lack of transport,” says Dr Mostafa Madbouly, who spoke to bt over the phone while stuck in traffic. Chairman of the state-run General Organization for Physical Planning, Madbouly says Cairo lacks the resources to move its booming population of 16 million around.

Three million people use the metro every day, despite the fact it only boasts two lines. According to the Organization for Physical Planning, there are 4 km of metro line for every million people in the city. The capital does not compare well to similar-sized cities like Bangkok and Sao Paolo, which average 20 km and 30 km per million citizens respectively.

A fourth metro line is on the drawing board to connect Sixth of October City with Giza’s Pyramid Street and Nasr City. However, the extension’s completion is still years away.

Egypt did not prioritize urban planning and the development of public transport until recent years, which led to both overcrowding and a slapdash transport network. For example, half of the people in the country use private microbuses every day.

One major question is how to convince drivers to give up their air conditioned vehicles. Despite a chronic lack of parking in city centers, suburban car owners are reticent to join the public transit crowd, even with the advent of new buses. Most say they are resigned to the traffic and plan for it when they step into their vehicle, sometimes leaving two hours early in the hopes of being on time.

“I would never consider taking public transit,” says Ain Shams’ Aly Mohamed, even though he admits spending a great deal of time in often fruitless searches for parking spots.

The growing number of new vehicles on the streets add to the congestion as well. In 2009, 150,000 new cars were registered in Cairo alone. Commuters along Cairo’s Ring Road, Autostrade and Cairo-Alexandria Desert Road are also feeling the pinch as settlements in Sixth of October City and New Cairo continue to expand. This trend is being actively promoted by officials as part of the Cairo 2050 plan that is slated to rejuvenate the Downtown area for businesses, while luring residents to outlying communities currently under construction.

Dr. Martin Fleming, vice president of corporate strategy at IBM, says a metropolis like Cairo shouldn’t have to wait four decades to see results. By collecting tolls on high-traffic roads, issuing a universal public transport pass, warning drivers about jams and publicizing metro, train and bus schedules, cities can dramatically cut down on congestion.

“There needs to be a plan and broad approach. There is no magic solution or silver bullet that can be effective in the absence of having a plan. Egypt is among the fastest-growing countries in the world. That growth needs to be accompanied by the expansion of the business and commercial infrastructure to allow the future growth to continue at the same impressive rate,” says Fleming.

Fleming says all these tactics, alone or working together, could benefit Egypt as long as authorities set out clear goals, something drivers say they don’t expect to see in the near future. bt

Tug of War

Algeria muddies the waters of a potential Orascom Telecom asset sale.

By Mariya Petkova


It’s six months into 2010, and already Orascom Telecom has wracked up a year’s worth of banner headlines. Ramadan musalsalat (series) don’t have as much drama as the Sawiris family’s top company.

First, there was the well-publicized feud with the Algerian government that saw Orascom slapped with an almost $600 million (LE 3.3 billion) bill for back taxes.

Then there was, finally, an end to the company’s epic three-year dispute with France Telecom over the firms’ joint ownership of Mobinil.

And now, there is a conflict that is perhaps the juiciest of all.

As May came to a close, Orascom was reportedly in talks to sell off some of its assets — or possibly merge with — South Africa’s MTN, the biggest telecom company on the continent.

Analysts though, are divided about the prospects for a deal, which is facing several hurdles, not the least of which is a threat by Algiers to nationalize Orascom’s highly profitable Algerian arm, considered a key to the deal.

“If the complications in Algeria [] escalate further, we believe it is possible that MTN could withdraw from the deal altogether,” says Sally Gerges, an analyst at Beltone Financial.

On April 28, days after rumors of a potential deal began swirling, Orascom announced that it was holding talks with MTN over some of its operations. However, the company was silent when it came to discussing exactly which assets were on the table.

A shortage of cash could be pushing Orascom towards a deal, say analysts. The company’s first-quarter profits were down 32%, significantly below projections.

Its most profitable performer, Algeria-based Djezzy, posted $412.5 million (LE 3.2 billion) in revenues, $50 million (LE 275 million) lower than 1Q2009. Djezzy was also handed a $597 million (LE 3.3 billion) fine for back taxes from 2005 through 2007, a bill that Orascom has paid but is disputing in Algerian courts.

Analysts point out that in 2002 overwhelming debt from license acquisitions prompted Orascom to sell its operations in Jordan and Yemen and some of its assets in sub-Saharan Africa.

“We think all African operations [], with the exception of the Egyptian Company for Mobile Services (ECMS, known as Mobinil), are probably on MTN’s wish list,” says Amr Hussein Elalfy, director of research at CI Capital Holding. (He said it was unlikely Orascom would give up Mobinil, in which it owns as 34% stake, after fending off a takeover effort by partner France Telecom.)

But whether Orascom can actually mount an asset sale is in doubt.

As rumors about the Orascom-MTN deal spread at the end of April, the Algerian government was quick to announce its opposition, claiming the first right of refusal and threatening to withdraw Djezzy’s license.

The maneuver has been largely perceived as politically motivated; it followed rising nationalist sentiments stoked by a pair of World Cup qualifying matches between Egypt and Algeria.

Observers say Algiers sees the situation as an opportunity to buy out that country’s biggest mobile operator.

According to Gerges, Djezzy is a key element in the MTN-Orascom negotiations, since it accounts for as much as 37% of Orascom’s total revenues, and any potential deal would most likely include a sale of Djezzy.

Beltone’s prognosis is that a possible acquisition of Djezzy by the Algerian government would be at the lower end of the unit’s valuation.

Orascom might be able to circumvent the Algerian government by putting together a deal through the different holdings that control Djezzy, Mike Millar, head of research at Naeem Brokerage, told Reuters.

But NematAllah Choucri, vice president of research at HC Brokerage, sees another potential, albeit improbable, scenario: “OT could overcome the difficulties in Algeria if MTN acquires OT and not just the African assets.”

Analysts agree that this option, acquiring Orascom Telecom Holdings (OTH), is unlikely.

“If MTN acquires OTH, it may have to bid for minority shareholders’ shares which could imply the delisting of OTH, one the market’s blue chips,” says Choucri. “OTH has a big market cap so this could influence the market’s daily turnover.”
New Horizons

MTN’s interest in buying out OT’s African assets comes from concerns that its own African assets may be maturing.

“MTN is trying to secure growth for the long-run,” says Kaplan, explaining MTN’s motivation to seek a deal with Orascom.

The biggest three MTN operations are in South Africa, Nigeria and Iran. “South Africa is slowing down; it’s quite a saturated and mature market,” says Kaplan. “Nigeria is still growing but the growth is slowing down, so give it two years and Nigeria will become a lot more mature.”

MTN has operations in 21 countries around the world stretching over Africa and Asia.

Although MTN and Orascom share a similar geographical focus, none of their markets overlap, which favors a merger-acquisition deal.

To offset this sluggish growth, the South African telecom is searching for markets with long-term potential.

“MTN is looking at Orascom because Orascom’s got a couple of good markets in it,” says Irnest Kaplan, managing director of Kaplan Equity Analysts in South Africa

“It’s a good company and it’s got a lot of potential.”

Having already gone through one failed merger with Bharti Airtel, India’s biggest mobile operator, MTN might be willing to broker a deal even without Djezzy.

“If Algeria is excluded from this deal [] MTN will re-evaluate and look at the other businesses inside Orascom, and perhaps they’ll be able to get a deal on some of the others,” says Kaplan. “It doesn’t necessarily mean that if Algeria is not in, MTN will walk away.”

Although speculation is rampant, one thing that is certain is that observers are keenly watching what the future will hold for Orascom, which claims 7% of the Egyptian stock exchange market capitalization.

The Egyptian government has not taken any action or issued any statement on the subject. When approached for comment, both the Ministry of Communications and Information Technology and the National Telecom Regulatory Authority refused to discuss the matter. bt

Washed Up

Pollution, unchecked irrigation and armed bandits decimate what was once one of Egypt’s most productive fishing grounds

In the towns surrounding Lake Manzala, the air used to hang thick with the scent of saltwater and the day’s catch.

Along the lake’s shore, children hopped between the rails of hand-built dinghies while fishermen prepped nets for the day. Local markets bustled from a lucrative trade that once supplied the country with 30% of its total catch.

Located on the northeastern edge of the Nile Delta, Manzala has historically been host to one of the country’s largest fishing communities, with over 300,000 people finding their days work in the lake.

Separated from the Mediterranean by a sandy ridge, the lake once spanned five governorates and was connected to the sea via several channels.

The exchange of water between the lake and sea had been largely beneficial to the Manzala community, with the circulating waters maintaining an environmental balance and allowing fish to repopulate with ease.

At least that’s how it was supposed to work. Over the past two decades, the situation in Manzala has changed drastically.
“The lake was like heaven for us. We could live, fish, swim and eat out of it. Everyone would go back home satisfied with what he got at the end of the day,” says 37-year-old Manzala fisherman Youssry Ibrahim. “But now we are crying out for help. We can see the lake being stolen right in front of us.”

Recent years have seen the lake shrink to a mere 25% of its original size, and instead of being replenished with Mediterranean water, it’s being pumped full of sewage. Local wildlife has suffered, and as a result so have the fisherman who depend on the lake for their livelihoods. Extreme pollution has rendered the remaining fish hazardous, eliminating vast numbers of jobs. But the combination of factors that are turning Manzala into an environmental wasteland have seeped into the local community as well. A population influx has fueled the area’s degradation and simultaneously sapped it of its main revenue source, leaving inhabitants of the nearby fishing towns with empty nets and empty wallets.
Changing tides

From the edge of the shallow lake it is difficult to see the below the water’s surface. Sprawling leaves from the Ward el Nil, or Egyptian White Lotus, have spread and now cover the lake’s surface. The plant lives in fresh water, and while it can survive amid heavy pollution, it isn’t usually found in saltwater.

Manzala has always been brackish, with direct connections to the Mediterranean ensuring salinity. The fact that the Ward el Nil can grow in Manzala demonstrates the extent of the changes that have altered the fundamental characteristics of the lake — primarily a result of excessive pollution.

The Bahr el Baqar drain transports water 170 kilometers from eastern Cairo and feeds directly into Lake Manzala, dumping three million cubic meters of fresh water, untreated sewage, industrial waste, organic toxins, heavy metals and bacteria into the water each day. Hydrogen sulfide and methane bubble on the lake’s surface, sending greenhouse gases into the air.

The Bahr el Baqar drain is one of five major drains that feed into Manzala, and their combined discharge has decreased salinity, raised sediment levels and endangered the health of the northern delta population.

“The amount of water coming from the drains is much more than that coming through the channels from the sea. It changed this area from brackish water to fresh water, where the types of fish that live in the sea would not live,” says Professor Alaa El-Haweet, of Alexandria’s National Institute of Oceanography and Fisheries.

The lake used to host a wide variety of high-value saltwater fish. Sea bass and mullet, for which Manzala was known, sold well in markets throughout the country. But today it seems only a few species of freshwater tilapia can survive. What remains of the fish population in the lake is heavily contaminated and unsafe to eat. A 2007 United Nations Development Program report notes the extent of the damage, stating that the “tilapia show a high frequency (85 percent) of organ malformation and discoloration, caused by environmental and contaminant stress.”

A 2009 study published in the Research Journal of Microbiology states that: “Lake Manzala water samples as well as the fish samples were found to have very high pathogenic bacteria contents; some of these pathogens produce dangerous extra cellular products that are virulent.” Also mentioned in the study’s findings were high levels of ammonia and nitrates, as well as samples of dangerous bacteria strains such as E. coli and salmonella — found in both the lake and its fish.

But somehow this hasn’t stopped local fisherman from attempting to harvest and sell fish, though revenues are unsurprisingly down these days. The trade quite simply seems to be hard wired into the community.

“We don’t send our kids to school here, we all grow up working in fishing and we take our children and try to teach them what we’ve learned. It is the only profession we know”, says Abdel Kareem El-Refa’i, a practicing fisherman, the head of the fishermen’s union in the town of Matareya and a member of the Lake Manzala development committee.

The continuation of fishing in Manzala does, however, help explain the growing health problems that have emerged in the lake’s surrounding regions. Intestinal diseases have become widespread among the populations that rely on the lake for food and water.

“Sailing your boat on the lake today is exactly like knowing that you are going to die in advance,” says 55-year-old fisherman Rashad El-Refaie. “The lake is dead now. And whoever eats the lake’s fish risks getting sick because of all the different pollutants.”
Rising Pollution

Authorities claim that they are working to save Manzala. From 2002 to 2007 the United Nations Development Program collaborated with the Egyptian Environmental Affairs Agency (EEAA) to produce a 60-acre engineered wetland at the base of the Bahr el Baqar drain. Flow from the drain is slowed by reeds planted in the engineered area, allowing sediment and pollutants to settle while cleaner water pushes through to the lake. But while wetlands have proven to be an inexpensive and efficient alternative to chemical treatments for polluted water, the project was capable of treating only 25,000 cubic meters of water each day, 1/120 of one drain’s daily output.

As recently as 2007, the European Union was collaborating with the EEAA on an additional segment of the Manzala wetlands project, the task being a particular concern as the lake has increased pollution levels in the Mediterranean. That project hoped to boost treatment to 50,000 cubic meters per day, though still a far cry from making a discernible impact.

“The problem with the government’s efforts here [] is that it tried to get rid of the existing pollution in the lake, but not to stop the actual source of pollution,” says El-Haweet.

And while local and international governments have made small gains towards improving the quality of the lake, those who depend on it have yet to see the type of change they had hoped for.

“We are not asking for a lot, we are just asking for someone to put a strict plan [in place] to clear Manzala of the people that are threatening us, remove the sewage water, and bring back the water from the Mediterranean to get the fish back here,” says Ibrahim.
On dry land

In the 1970s, the government embarked on a series of land reclamation projects to boost agricultural production and make room for urban expansion in lakeside towns.

Southern and western portions of the lake were dried and by the early 1990s, the lake was just 25% of its former size. But the falling water levels also made water exchange with the Mediterranean slow. And instead of replenishing water from the nearby sea, the drains that pour into Manzala changed the basic composition of the lake.

“We grew up knowing the lake as 750,000 acres. Now they say it is only 100,000 acres, and I can tell you that there are less than 10,000 acres for the fishermen to work in,” says Mohamed El-Sehrawy, who represents Matareya in the local assembly and is a people’s assembly candidate. El-Sehrawy himself was once a fisherman but the deteriorating conditions forced him to abandon the trade.

El-Sehrawy’s decision to leave the fishing industry was by no means unique. With poor conditions in Manzala, a large percentage of its fishermen could no longer support their families and were forced to leave the lake. According to locals, some managed to illegally emigrate across the Mediterranean to Italy and Greece, while others were caught last year fishing off the coast of Somalia. Another popular story among the fishermen is the high number of former Manzala residents caught fishing in Saudi Arabian waters.

And the migration of fishermen from Lake Manzala has led to overfishing in other lakes. Last month, the fish authority in Fayoum announced that fishing will be banned until the end of June to allow fish to reproduce, as the number of fish in Lake Qaroun has decreased drastically due to excessive harvesting by record numbers of fishermen.
Illegal land reclamation

Nasser Aboul Naga, a fisherman from Matareya, has noticed that the decline of Lake Manzala has had consequences quite separate from the environment.

“I was out fishing with other fishermen when [bandits] attacked us,” he says, recounting an incident from early May. “They stole our fish, took our boat and even our clothes. They even hit me and broke my arm.”

As the economy surrounding the lake has suffered, so too has the reach of public services like law enforcement, giving way to what locals claim is an increasing level of lawlessness. While the government continues to rent dried parts of the lake to residents, some have taken to bringing in equipment to dry shallow sections on their own, creating small islands in the middle of Manzala. It’s a practice that has been going on for years.

“The government would rent five acres to one person, and the next day they would wake up and find that this person stole maybe an extra 15 acres,” says El-Sehrawy.

Fishermen and local officials have lobbied to put an end to the practice, which they claim is contributing to rising crime rates, but according to Naga their complaints have had little effect.

“The problem is not the absence of laws, but the difficulty of applying those laws,” says El-Haweet. “Although the law prohibits drying parts of the lake, people are still doing it. When I was younger we used to go on campaigns to stop people, and in the end we would find out that people of influence are backing this up.”

The practice of creating illegal islands in the lake has a direct impact on how and where the fisherman can attempt to work, but more pressing, they say, is the wave of violent crimes perpetrated by the island inhabitants against them.

“Across the whole lake you notice islands that people are illegally living on. They make them so close to one another with tiny passages between each and every one, but if a poor fisherman tries to come near them, he risks being beaten up or shot, and the authorities cannot stop it,” says El-Sehrawy.

For their part, authorities are trying to curb the violence that has become associated with the illegal land grabs. “We are doing our best to catch people all the time, but it is really hard,” says Akram Hatem, head of Matareya General Authority for Fish Resources Development.

But given the progress of initiatives to clean the lake and restore the fishing industry to the Northern Delta, residents of Manzala’s surrounding towns have little faith that the future will bring improvements.

“Unfortunately, we neglected Manzala for a long time,” says El Haweet.

“Then, when the time came to try and save it today, we are just attempting solutions to fix the holes temporarily.” bt