Dec 17, 2014

How Sheikh vs Shale will cost Egypt EGP1.9billion

There has been a lot of euphoria on the levels savings on government subsidies due to the fall of oil prices to mid-fifties per barrel. Yet it is important to understand some of the downstream impacts of this oil crash, particularly on the Egyptian economy. These impacts will include reduced investment in the Egyptian Oil field (already not recovered), changes in costs of many manufacturing input costs, a reduction in tourist arrivals, along a few others. First though lets look at tourism.

The current free fall of oil prices has been an outcome of the Sheikh vs Shale cold-war. The Saudis are pushing prices so low to maintain their global market share against the booming US production. The Americans on the other hand are not too worried as this drop in prices has put a lot of economic pressures on countries they don't play nice with. Namely Venezuela, Iran and Russia.

This economic pressure has resulted in major pressures on the Russian economy (interest rates raised three times in a handful of weeks, going from 9.5% to 17%) this has ultimately put Russian ruble in free fall (losing around 50% of its value over the last 48 hours) and the Russian economy in panic. Pretty much there is a run on all stores to convert any and all currency into goods. You can only imagine how will this impact the Russian public's appetite for spending their diminishing disposable income on an all inclusive trip. And that is how we will be impacted. And this is how the Egyptian economy be impacted.

So how much are we going to be impacted? Well here are some guiding figures: In 2013 there were 2.4 million Russian tourists visiting Egypt, representing around 28% of all tourists coming to Egypt. They spent 23.7 million tourist nights and brought into the Egyptian economy around EGP 1.9 billion. Now that we are half way through the 2014/2015 season, it will be very important to look at travel cancellations and airport arrivals in the red sea to assess actual impact.

Aug 27, 2014

Cash Subsidies & Financial Inclusion

Over the years there have been thousands of hours invested in debating how to deal with the Egyptian budgetary drain, the  subsidies. The context of that debate hasn't been whether we need to have subsidies or not (we do need them) but rather is the current subsidy system economic (has little waste) and effective (reaches target audience). These debates have resulted in two different propositions, each presented by members on opposing economic ideologies.

The first is that the government should invest in improving the subsidy supply chains as well as the quality of the subsidies themselves. While this is a noble and expensive approach it fails to take into consideration a few things. For one that the government is really broke and doesn't have the financial or human resources to do such investments. More importantly that the government will have to deal with established enterprises benefiting from these supply chains. Seeing the government's track record it's difficult to see this really working.

The alternative approach, recommended by the liberals and capitalists, is to float the prices of goods and services, phase out the subsidies and price control mechanisms, and introduce a cash subsidy. This way the subsidy recipient can prioritize his expenditures based on his own realities and needs. Furthermore this should increase consumer expenditure and empower markets. Finally and most importantly, the government would have an easier job targeting subsidies to people that needed and therefore reducing waste. That would be done through linking subsidy levels with tax filings or wage level. Although there are many obvious challenges to implementing this (recipients gaming the system, subsidies increasing to match inflation levels, growth of oligopolies and monopolies) the main challenge is different. It is how do we connect millions of Egyptians (businesses and individuals) to the grid. The failure to do so would result in an uproar of all these people who will suddenly wake up to realize all the prices have gone up and they have no methodology of benefiting from the system.

In order to deal with such a challenge, the government must put a well plan medium term transition plan from in-kind to cash subsidies, where it would prioritize subsidy regimes that involve a high percentage of connected individuals (petrol subsidies) and leave to the end ones that have a high number of off-the-grid recipients (bread). Through-out this transition the government would be slowly changing the ratio of in-kind to cash subsidies all while creating awareness on the importance of connecting to the grid. But before anything, the government needs to figure how it will technically architect the system, the last thing it would need is to have parallel, dis-connected subsidy in cash regimes. This would only increase the chances of the system being gamed.

Recently India has been attempting to do a similar transition in its subsidy mechanism, it has been facing major challenges with the level of financial exclusion. Read more about India's experience here.

Aug 25, 2014

Jogging and Working-Out: Playlist

Over the last three months have started jogging again, my main incentive is to be slightly more active and to get over the slouching and couching I do all day long. In the medium term I wanna run a 10k race, under 55 minutes, all while I also added to my bucket list a goal of completing a half marathon.

I have noticed there are a lot of factors impacting how well I jog and how fast my pace is, these includes things like my last meal, how well I slept the night before and the weather. A surprising factor I discovered is the music I listen to. The better the beats the smoother and faster the 5K. 

Over the last few days I have been working on building a cross-genre, shufflable, playlist that should help me take my jog to the next level. So enjoy and let me know if there are other tracks you think are missing!




1 Know your Enemy Rage Against the Machine
Icky Thump
The White Stripes
In One Ear
Cage The Elephant
Cold Wind Blows
Backseat Freestyle [Explicit]
Kendrick Lamar
Check That Level
The Dirty Heads
Einstein Tech N9ne
Tech N9ne
Coming Undone
Ready Set Go (Remix)
Killer Mike, Big Boi & T.I.
Believe Me
Lil Wayne Ft. Drake
Lose Yourself
Beautiful Day
13 Don't Stop me know Queen
Katy Perry
Kanye West
I Will Wait
Mumford & Sons
Hall Of Fame
The Script Feat Will.I.Am
Dog Days Are Over
Florence And The Machine
Born To Run
Bruce Springsteen
21 Radioactive Imagine Dragons
Runnin' down a Dream
Tom Petty
23 Eye of the Tiger Survivor
Till I Collapse
26 Running on Empty Jackson Browne
Kickstart my heart
Mötley Crüe
Love Runs Out
The Loneliness of the Long Distance Runner
Iron Maiden
Seven Nation Army
The White Stripes
32 Bohemian Rhapsody Queen

Update: Below are some recommendations I received, what else do you think is missing
  1. Breath - The Prodigy
  2. Fire - Scooter
  3. The Real Me - The Who
  4. One - Metellica
  5. Seek and Destroy - Metallica
  6. Marathon - Rush

Aug 24, 2014

Suez Canal GICs

Was discussing the Suez Canal GICs this morning with a few bankers, they were discussing delays in issuance and yet another revision of the funding approach for this project. If anyone heard otherwise please advice.
1-There is a delay in the issuing of the Suez Canal GICs due to strong objections by small banks that only a couple of state banks (NBE, BM) are allowed to sell these GICs. The smaller (private) banks are afraid this monopoly would cause an exodus to state banks. They have escalated with CBE and awaiting response as it is unfair for state to guarantee for some but not all banks.
2- These GICs are supposedly not pay back any interest or coupons for the first two years
Regardless of my assessment of the need for, or even the merits and risks with this project, what I find most frustrating and idiotic is that even in the projects the government sees as a priority they completely lack of foresight and planning on how to bring such projects to life, whether that has to do with financing, supply chain or other operational components.
Such basic ineptness, combined with thorough dependance on propaganda, continues to waterdown the very little confidence in this government's ability to bring any real change to the economic well being of the citizens of this country.
I really hope that there are many instances, that I have failed to notice, of smart policy being developed and implemented.

Aug 5, 2014

The missing link: Egypt's civil society

I was reading an article this morning about the shifting coalitions in the US and how both the democrats and the republicans are trying to adapt their strategies to adapt, survive and win and that even included some senior republicans wondering if their alignment with the Climate Change is a hoax is of best interest or not of the party.

That really make me reflect on whether politics in Egypt, will be anytime soon, based on the ability to build and maintain dynamic coalitions that cut across diverse groups and agendas. Having been working for a political party for the last couple of years makes me appreciate the complexities of accomplishing such a feat. Particularly when you consider the structural and legal obstacles these parties are facing.

Let's step away from the politics of Egypt and look at something less divisive, say policies. Say for example a party would want to launch an educational reform policy that would focus on reducing private tutoring in public schools. In most, if not all, mature democracies such party would have to engage with the civil society groups (unions, interest groups, etc..) that already have legitimacy in representing the interests of the different partners (teachers, parents). As a party you couldn't just depend on your technocrats on developing the most effective policy, but you would engage with the civil society in developing the policies and laws that have the most chance of getting passed. The challenge here is that such interest groups are largely missing in Egypt and the ones that exists are a facade, with little legitimacy. That makes it difficult for political parties to mobilize grassroots around issues of their concern.

The legal infrastructure that supports having such a vibrant civil society is lacking, all while very little effort is being put in mapping, networking and empowering the few fragmented groups out there. In order for either to happen, we need to have a legal framework that encourages civil society to mature and organize itself in a way where it is representative of the different groups of society and their opposing interest. One existant you need to strengthen that with information and data, this includes and is not limited to: transparency on, and circulation of, government plans and progress reports, raw census data, as well as the freedom to run and publish polls without police supervision/approval.

For this country to move forward, to address the needs of its people, and the dreams its youth we need to change the way politics and civil society work and interact. We will only have stability and progress that we demand once we are able to have information about the interests of the people and have their actual buy-in on changes that impact them. This buy-in comes from representatives of these stakeholders. You can't do this without a strong, vibrant and independent civil society. And that can't be accomplished with a security comes first mentality.

That's why we should all be wary of the last 7 attempts to pass an NGO law, because all of the ones proposed since 2011, ensure the weakening of civil society not strengthening it.