In The Sun And Wind?
say renewable energy is perfect for Egypt's remote areas,
but the government appears less than enthused
lack water and, since they're far off the electrical grid, they lack
the power to get it. But what do remote areas of Egypt have plenty of?
Sun and wind. Yet as experts gathered in March to discuss the natural
benefits of applying solar and wind power in isolated villages, they
said another factor is slowing experimentation: government
at a recent US-Egypt conference on the use of renewable energy in
remote areas said they are frustrated by the Egyptian government's
apparent resistance to nontraditional means of generating power. Even
a government official in attendance said he doubted the Ebeid
government would give sufficient support to self-sustaining
alternative energy sources because leaders are fixated on an
infrastructure clustered around the Nile.
to the Nile, we have the national power grid. If you ask any man
working in the Ministry of Electricity [how to provide power for
remote areas], he will say to you, 'We would extend the national
grid'," said Abdel Rahman Aly, deputy chairman of the Land
Reclamation Authority. "I am completely pessimistic about
renewable energy in Egypt, because in order to do that, you have to
work in a decentralized way of thinking, which does not exist at all
four-day workshop on Renewable Energy and Development of Remote Areas
was organized by the US National Renewable Energy Laboratory and
Egypt's New and Renewable Energy Authority at the Gezirah Sheraton in
mid-March in conjunction with a larger environmental conference by the
Arab Academy for Science and Technology.
said remote rural areas can tap underground water in a cost-effective
way by using a "hybrid" combination of diesel-fueled
generators, windmills and some types of solar power. Isolated tourist
areas could benefit from using solar-energy collectors to heat water.
pointed to the East Oweinat "mega-project" in the south of
the Western Desert as a perfect opportunity to combine renewable
energy and water management. But some said government officials have
been slow to take the cue. A subsidiary of DaimlerChrysler is planning
an electrical power plant in East Oweinat supplemented by three wind
farms and some solar generators. Daimler officials want to reduce
reliance on diesel generators for water wells because diesel has
seeped into the water table, endangering the local potable water
market for wind turbines has grown an average of 40% every year for
the past seven years, with worldwide generating capacity increasing by
over 30% in 2001 compared to the previous year. Farms are essentially
clusters of windmills that feed into a power grid. Each modern,
65-meter diameter mill can produce at least 1 megawatt of electricity
-- enough to power 800 North American or Western European homes.
currents are steadier and stronger higher in the air, and most of
today's mills stand about 90 meters above the earth to catch the best
currents. Proponents argue that wind power is clean and endlessly
renewable, while critics decry the amount of noise the farms make,
adding that they blight landscapes and (for reasons scientists have
yet to figure out) seem to lure birds to their deaths like candles
Egypt, wind power is stalled less by environmental activists than by
simple government disinterest.
bad news is we've been trying to convince the authorities about this
integrated approach since April 2000," said Ibrahim Marzouk of
the DaimlerChrysler subsidiary DC Services. "Unfortunately, up to
now, we have not yet reached the implementation stage." Marzouk
asked the conference's directors to help Daimler's case by mentioning
it in the event's official recommendations.
from the conservation arguments for generating energy from sources
other than petroleum, renewable energy could also be good business for
Egypt, attendees said. If Egypt became an exporter of solar cells, it
would find a ready market in Europe: Germany, while the world's
largest producer of solar cells, is using so many domestically that it
has turned to importing cells from Italy, said Moustafa Ghannam, a
professor in electrical engineering at Cairo University.
most modern solar plants now being tested in the US can generate
electricity almost 24 hours per day using superheated salts (see
Yehia Bahnas, president of BIC for Electronics, Environment &
Energy, said practical problems are discouraging the growth of an
Egyptian solar power component industry. Bahnas described several
frustrations with the Customs Authority. Enterprises such as Bahnas'
Cairo factory must pay 30% customs duties on some of the components
they need to import to assemble photovoltaic solar power modules. Yet
if the same type of module is assembled in another country and
imported whole, the tariff is just 10%. That removes some of the local
companies' competitive edge in costs, Bahnas said. "They should
give all of it 5%, even, to encourage the renewable energy," said
Bahnas, who is also a professor of electronics at Cairo University.
conference produced advice for the government. David Kline, an energy
and environmental researcher from the US National Renewable Energy
Laboratory in the state of Colorado, said the government could avoid
subsidies by providing other forms of support for renewable energies,
such as technical and administrative assistance for pilot programs.
interest in solar power in Egypt and the Mediterranean region appears
to be growing: Italy has earmarked ¤20 million (LE 82 million) to
study how to harness the power of the sun throughout the
Mediterranean, while the World Bank is spending $50 million (LE 231
million)to build hybrid generator plants in Egypt, India, Morocco and
Mexico that use a hybrid technology of solar troughs and natural gas.
businessman Bahnas was optimistic about the future for solar power.
Bahnas noted that both of Egypt's existing mobile phone service
providers are pursuing solar power projects. He also sees a possible
application in the Smart Village technology business park under
construction in Sixth of October. Plans call for erecting a curved
metal sheet over a six-story building to keep it from getting
overheated by the sun's rays. Bahnas realized the sun-shield would be
a perfect spot for solar-collection panels. The panels would cost LE
4.5 million, but Bahnas estimated that the solar power would reduce
the building's electrical costs by more than 60% and would last for 25
pitched the idea to the Ministry of Communication and formation
Technology. He's still waiting for an answer. bt
is bogged down in a bad climate, but
the government gets some good marks for creativity
slow-moving privatization train appears stuck in low gear in 2002,
thanks to potential investors' reluctance to enter the unsteady
economy and the government's hesitance to sell bigger and more
desirable properties. The impact of both factors has only been
deepened by domestic currency troubles and signs of war in Israel and
the Occupied Territories.
to that the occasional spate of bad luck or apparent lack of
coordination within the government. Either factor could explain why
the Nile Hilton in Cairo is still government-owned today.
state Holding Company for Hotels and Tourism put the Nile Hilton up
for bids in March 2001 and attracted at least three interested
parties: an Egyptian group, a group from elsewhere in the Middle East
and another from abroad, according to a high-ranking government
official who spoke on condition of anonymity. Each was serious enough
to send a representative to research the property and meet with the
holding company, although a second official says the parties were
sounding less enthusiastic after 11 September.
in January came the unwelcome surprise: After winning a dispute in
court, the Ministry of Finance presented the hotel with a whopping
bill for overdue taxes -- about LE 180 million. The prospective buyers
were not eager to assume the unforeseen liability, and the possibility
of a sale is now on hold. The second official minimizes the episode,
calling the debt a "legal problem" that the different arms
of the government are sure to resolve.
problems within its sphere of control and beyond it, the government is
nevertheless getting good grades from analysts for some recent strides
in privatization. As well as making progress in bringing private
sector involvement to Egypt's airports, privatization overseers in the
government are also introducing creative approaches to the sell-off of
some state-owned manufacturing concerns.
one example of flexibility, officials at the Ministry of Public
Enterprise (MPE), which oversees privatization, say they're willing to
divide properties into multiple, smaller sales if they find serious
interest. One instance of "asset unbundling" came together
in recent weeks: Officials say they are finalizing deals to sell Al
Nasr Glass and Crystal's two factories in Yasin and Mostorod
separately. (A leading producer of bottles and medical ampoules, Al
Nasr has high revenue capacity but, as is typical of many businesses
on the privatization list, high debts. The company's LE 4.4 million in
profits on sales of LE 90 million in fiscal 1999-2000 went primarily
to servicing the company's interest payments on debt.)
government says 29 properties, mostly factories, have been split off
and privatized in that manner since the fourth quarter of 1999, 16 of
them under long-term leases, 13 in outright sales.
the same time, the MPE appears to be responding to criticisms about
the government valuation procedure. Asking prices for government
companies are declared by the Central Auditing Authority. While the
general assembly of a holding company has the leeway to sell for less,
they risk rebuke from the People's Assembly and the press. Critics say
the process is too rigid and prevents holding companies from reducing
an asking price to meet the realities of what investors are willing to
response to questioning in the People's Assembly, Public Enterprise
Minister Mokhtar Khattab said it would be worth considering a sort of
auction for state-owned companies that are financially failing -- that
is, accepting the top bid submitted regardless of the valuation.
Meanwhile, the privatization of Abou Zaabal Fertilizers at the end of
2001 escaped some of the usual valuation restrictions because it was
structured as a "lease-to-own" deal rather than an outright
sale. The consortium Semad Misr will lease the company for three years
before buying it for a total cost of LE 182.8 million.
name of the game is responding to the market -- understanding what the
market perception is, which means serious investors," says
Mohamed Hassouna of the Public Enterprise Office, which advises the
MPE on privatization. "There are steps being taken. The whole
thing is not stagnant."
adds, however, that complaints about the inflexibility of the
valuation system might be overstated. He says his recent search of
government records showed that since the end of 1998, holding
companies have opted to sell at least 15 properties at below the
initial valuation. The average was about 20-25% below, although the
holding company for a telephone production manufacturer went under the
valuation by 33% in 2000.
recently, the Arab Trade and United Trade companies were sold in March
at 25% below valuation -- albeit to their own employee shareholder
associations, a friendly sort of sale that's usually immune to
political fallout. Hassouna declined to name all of the properties,
saying he first had to submit his full report to the minister.
case by case. You might find out that the holding company wouldn't
accept 10% below the valuation because this company is good, healthy,
profitable -- maybe they just need to do more marketing,"
Hassouna explains. "In other cases, they would accept even 30%
below the valuation because of the situation of the company, distress
or challenges in the near future." Holding companies might accept
lower proceeds from a sale if it averts the potential
"opportunity cost of keeping the company under public sector
ownership without injecting cash, bringing in new technology and
opening up markets," Hassouna says.
in a rut
government ownership of industry is considered a cornerstone step for
a country to get in shape to compete in the new global economy, and
Egypt's pace of privatization is considered slow by world standards.
The government's creative approaches can only do so much in the face
of external factors that have impeded Egypt's long-running program to
shed the socialist legacy of state ownership.
Egyptian pound's continual slide against the US dollar makes investors
reluctant to buy Egyptian businesses. Once they exchange dollars for
pounds in order to buy the property, they will lose value on their
investment if the pound continues to dip, not to mention incurring
difficulty in importing materials or components. Investors' caution
toward the region following the 11 September terror attacks on the
United States appears to have worsened with the Israeli military
crackdown in the Palestinian territories.
you're an investor sitting in Europe or New York and you're seeing on
CNN everything that's happening and predictions of the whole Gulf
being engulfed in war, you're not even going to be thinking of this as
a place to invest," says a privatization analyst who declined to
chilled climate has hardly encouraged the government to let go of its
large properties, those that represent the majority of government
ownership in the economy and that would be most tempting to investors:
utilities, banks, oil and insurance firms.
privatization of electricity and distribution companies is still in a
holding pattern. Mohamed Elsobki Jr., director of the Egyptian
Electric Regulatory Agency, told a US-Egyptian energy conference at
the Gezirah Sheraton in March that his regulators are still seeking
internal data from state-owned electricity companies to determine
their true efficiency, a fact-finding mission that is a prerequisite
to future rate restructuring.
state-owned phone company, Telecom Egypt, will not be offered for sale
unless telecom market conditions improve worldwide, Communications and
Information Technology Minister Ahmed Nazif has said in several recent
public comments. And while international aid bodies at the World
Bank's February conference in Sharm El-Sheikh urged Egypt to get
moving on selling off at least one state-owned bank and insurance
company, that appears to be a recommendation, not a requirement for
receiving the $10.3 billion in aid over three years pledged at the
significance of the assets that are now being sold is immaterial
compared with what needs to happen in privatization," said
another privatization analyst who requested anonymity.
state companies that are for sale include a lot of tough sells. Of 49
properties advertised in January 2001, just 13 have been partially or
fully privatized. Two of those were liquidated, meaning all assets
were sold off and the company closed.
then, 57 properties have been advertised, with several more expected
this year. A few of the current offerings are repeats from last year's
list, but the largest portion consists of 49 financially
distressed classification means that half or more of a company's
equity is eaten up by carried losses. Many of these are aging
businesses with bloated payrolls and outdated equipment, although some
own valuable plots of land. They include more than a dozen cotton
spinning and weaving plants, many export-import and wholesale trading
firms, and a variety of manufacturing concerns from concrete to
other words, the distressed firms are not the typical prizes coveted
by investors. Yet since they were first advertised in September, 24 of
the distressed firms have attracted letters of interest from possible
bidders, according to the Public Enterprise Office.
interest comes in part because the MPE is offering special incentives
with the distressed companies that go far beyond a straight sale. To
make the debt-ridden properties more attractive, their holding
companies will absorb old debts, shift excess employees, and try to
remove undesirable elements of the companies' assets. The inducements
have earned praise from analysts.
bright spot is the progress of private-sector involvement in airports,
the so-called BOT deals in which private firms build and operate the
facilities before transferring them to the government. The Marsa Alam
facility opened in November, and construction is underway on
facilities in Sharm El-Sheikh, Bahareya and Farafra Oasis, while the
Luxor Airport project to be undertaken by JV Aeroport de Paris is in
the planning stages. BOTs could get more government attention now that
airport regulation has been moved into its own agency, the Ministry of
will remain government-owned in Egypt as they are in developed
countries. But their managers are moving toward a corporate culture in
which private-sector-style rules are followed in accounting and
administration. After studying modern management trends in early March
at a conference organized by USAID contractor Carana Corp., key
employees of the Civil Aviation Holding Company were inspired to hold
a follow-up summit on the direction of Egyptian aviation policy with
representatives of the Ministry of Tourism, Cairo Airport and the
Ministry of Electricity and Energy is making no apparent moves toward
selling its electricity distribution companies. But it plans in 2002
to enlist private companies to build four generating plants under BOOT
agreements (the extra O is for the period during which the private
firm owns the facility so as to qualify for loans). The ministry says
it expects to award BOOTs this year for two gas/steam generating
plants in Nubaria, a solar/gas plant in El Kuremiat and a windmill
farm in Zaafarana.
Egypt hopes for the economic and political storm clouds to disperse,
the government can take active steps such as reforming its
exchange-rate structure. Or it can more aggressively promote clusters
of businesses in advertising campaigns locally and abroad, suggests
securities manager Nevine El-Tahry.
don't blame the government for not wanting to offer [its more
attractive holdings] right now because everything is so cheap. It may
not be the best timing," says El Tahry, who heads ABN Amro Delta.
"But maybe they can start focusing. Instead of offering all the
companies at the same time so it's just 'we're getting rid of losing
companies,' start focusing by industry. Pick up everything in that
sector so you can easily target what the client base would be
interested in. Road-show what they actually have, then put that
bidding process out in public after having made a great effort on the
advertising side." bt
temporary closure for alleged labor act violations
uncertainty about the regulation of the the dotcom world
dotcom firm in Cairo closed for business last month -- not for
financial reasons, but because the police seized all its employees and
computers. When it became clear that the only possible charge against
Skill-link.com was failure to have a license that it didn't need to
have, the firm reopened two days later.
was after key employees spent the night in lockup at the Dokki police
station waiting to be questioned.
raid on Skill-link, which operates a website matching jobseekers with
employers, left its CEO fuming over what he called police ignorance of
the internet. "They never bothered to investigate. They just went
the easy way," CEO Sherif Samy says. "Nobody bothered to
visit us to say, 'I have a few questions,' or to ask someone to come
down to the police station to ask questions."
a possible lapse in due process, the episode highlights how
authorities can become confused in applying old laws to new
technology. Job-search websites in Egypt currently operate in freedom
from some of the red tape that restricts old-fashioned recruiting
operations because the internet is simply not mentioned in many
existing business regulations.
after Skill-link's run-in with the law, local website operators noted
soberly that if the government ever tried to make the pre-internet
rules apply to them, the bureaucratic slowdown would kill them in
their competition with rival sites based outside Egypt.
was away from the office when he got the frantic call from one of his
employees at around 1100 on 2 April. Six officers from the Ministry of
Interior's unit for expatriate workers had entered the office on
Musaddaq Street and were rounding up employees and computer equipment.
The colonel leading the raid told Samy by phone that his firm was
believed to be "exporting labor without a license." Samy
headed over. (The Interior Ministry press center was unavailable for
comment on Samy's account.)
license requirement is Egypt's response to a serious problem:
unscrupulous recruitment operations that defraud jobseekers with false
promises of jobs in other countries. The scams involve taking money
from the jobseeker, ostensibly to arrange a work permit or contract.
Either the promised job doesn't exist, or the pay and working
conditions are not what was promised. Egypt requires recruitment firms
that arrange foreign work contracts to register with the government so
that they can be inspected and tracked.
that requirement doesn't apply to Skill-link because the firm does not
serve as a middleman inking a contract between employer and employee.
Instead, as with most job websites, jobseekers and employers find each
other by posting CVs and want ads on the site, free for jobseekers, by
fee for employers.
argument was not persuasive to the police squad. Nor was a letter on
the subject that Samy had obtained from his lawyer years earlier as a
precaution against this sort of misunderstanding. The officers packed
up 16 computers and two unconnected computer monitors as evidence.
They rounded up the 17 people in the office, including two visitors
who didn't work for Skill-link, and took them to the unit's
headquarters near Al Azhar.
to Samy, the police released the visitors and most of the employees
after four hours. But police kept Samy, his accountant and his
webmaster, transferring them to the Dokki police station. By that late
hour, no prosecutors were available to question the detainees, so the
trio spent the night in a basement holding cell. (Samy says he's
grateful the Dokki police gave them their own cell separate from other
inmates and allowed Samy's driver to fetch blankets to make the
concrete floor more comfortable.)
deputy prosecutors general in Dokki who questioned the trio the next
day quickly saw there was nothing to the case, Samy says. The
investigating officer could not provide answers when asked to name any
jobseeker or business for whom Skill-link had arranged a foreign job,
Samy says. The prosecutor released them, and, after renting a truck to
transport the computers, they were back in the office at 1700, a day
his own investigating, Samy believes the hassle originated with an
employer in Abu Dhabi who, dissatisfied with Skill-link's referrals,
complained to the local Egyptian labor attaché. That official
forwarded the complaint to the Ministry of Labor, where another
official, finding that Skill-link was not licensed to export labor,
forwarded the complaint to the police. Samy shudders to think how long
he would have been out of business if the prosecutor hadn't grasped
how his website is not like a recruiting firm -- just an electronic
in truth, the distinction is not always so clear-cut. For one,
Skill-link, like other job site firms, sometimes interviews jobseekers
in person when an employer has expressed interest. Samy says such
"pre-screening" is for quality control, sniffing out
exaggerated CVs and weeding out mismatches. But Skill-link screeners
only pass along their impressions; they don't approach the stage of
job offer and contract-signing that is envisioned in the license
requirement, Samy notes. In that sense, Skill-link is like a newspaper
classified ad section, Samy says.
Samy argues that a website is not like a newspaper or magazine when it
comes to another government requirement. By law, all ads in print
publications for foreign job openings must be registered with the
government in advance (the registration number appears in fine print
at the bottom of the ad). The law does not mention internet sites;
Samy is not going to be the one to invite the government to close that
would mean that, if I have a bank in Dubai who wants a treasurer,
instead of posting a job vacancy in 30 seconds, they have to send it
to the local embassy, send it to me by courier, then I have to send it
to the Ministry of Labor for them to authorize it and be happy -- and
then publish it," Samy says. Competing websites like
Emirates-based Bayt.com operate free of the Egyptian requirement.
tech industry leader says he would not dismiss the suspicion at the
base of the police raid -- that the internet is a possible medium for
deceptive recruiting practices in Egypt. Sayed Ismail, chairman of the
Egyptian High-Tech Association, said local tech professionals told him
about an Egyptian who was operating an "amateur" website in
late 2001 that invited jobseekers to meet him to arrange foreign
employment. Smelling fraud, the professionals warned the operator to
cease. "The guy was wise enough to stop," Ismail said.
competitors at CareerEgypt.com in Cairo say they've never had a hassle
like Samy's. But the raid did inspire some nervous hypotheticals about
internet overregulation. "The internet relieves you of many of
the laws, and it's not restricted to anyone. If any employer wants to
put a job on an Egyptian site, no one could stop him," says
Mostafa Hashish, CareerEgypt business development manager. Red tape
"just doesn't work with a dot-com," he adds. bt
the inconvenience to Skill-Link, the raid raises questions about how
the government is regulating the online world. Existing legislation
could see Egyptian firms fall behind their competitors in the Gulf.