Egyptian Economy Assessment (11/10/2006) A.        A stable Assessment for the Egyptian Economy: 1.                  In its most recent annual report about the Credit Rating of the Egyptian economy, Moody's reported the stability of the sovereign assessment of the economy at Baa3 for the local currency and Ba1 for the foreign currency, the agency highlighted that this assessment reflects the government perseverance in implementing the structural reforms. 2.                  The report also mentioned that the most important achievements of the past were the "open door policy" regarding foreign trade and the decrease in taxation required from the private sector and companies. On a similar note, these reforms including the ratification of the new banking law have ensured the independence of the Egyptian economy and improved the image of Egypt's investment climate abroad. 3.                  However, the report then gave an appraisal of the reforms undertaken that prove that the Egyptian treasury has taken the initiative and enforced transparency and this would inevitably enable the government to achieve its declared goal of decreasing the fiscal deficit by an average of 1 % yearly to reach 4 % yearly by 2010 / 2011. The report also mentioned that net Foreign Direct Investment had grown from more than < 3 % of the net GDP in the fiscal year 2003/2004 to 4.3 % 2004/2005 and then to 5.8 % from 2005/2006 comprising investments in the national oil and gas. 4.                  Moody's finally predicted that the Egyptian economy would grow by 6.8 % in the coming fiscal year. B.                cooperation with Russia:   1.                  In the light of the coming visit of the Egyptian president to Russia, the Minister of Trade and Industry will head a delegation of Businessmen and high level officials to prepare for the Egyptian-Russian summit to be held in the beginning of the next November. The visit will also include a number of meetings with the Chairmen of Russian companies and officials from Russian ministries of trade, industry and transport. 2.                  The discussions to be held will include a number of important economic issues that include the expedition of negotiations to establish A free trade agreement between the two nations, in addition to cooperation in the field of agricultural quarantines and the formulation of a green corridor agreement between the Egyptian and Russian quarantines as well as the establishment of a special economic zone for the construction of Russian factories in Egypt. Economic cooperation between the two countries currently centered around the attraction of investments and Russian technology to Egypt especially in the field of car parts and manufacturing of agricultural tractors, in addition to the establishment of joint partnerships with specialized Russian companies in the field of manufacturing oil and gas heavy equipment, not to mention the establishment of a joint venture industrial facility in Egypt to export its products to neighboring countries. The discussions will also include the reduction of the registration fees of Egyptian medicine in Russia and the renewal of the Iron and Steel Helwan complex. 3.                  on the other hand, Egypt aims at increasing its exports to the Russian market especially after Russia's anticipated acceptance in the WTO next year, whereby Egypt would be able to gain preferential treatment regarding the Russian market through the implementation of the bilateral agreement that was signed last year. 4.                  in connection with this, discussions will be undertaken for the establishment of a mechanism of cooperation between one of the Russian banks and the Export development Bank of Egypt, in addition to discussing the possibility of opening a maritime route between one of the Egyptian ports and one of the Russian ports. It is worth mentioning that a separate unit for the promotion of trade related cooperation with Russian has been agreed upon. C.                Roundtable on Energy: The roundtable for dialogue oil producing and oil consuming and OPEC countries will be held at the beginning of next November in Cairo in cooperation with the international Energy forum and the Egyptian Ministry of Petroleum. This conference has already been highly supported by a number of participating countries in this forum including the member countries in OPEC and outside OPEC as well as the countries exporting natural gas and the major industrial countries and the major consumers of petroleum and gas, in addition to the representatives of the international petroleum and energy organizations. The conference essentially aims at achieving stability in the oil prices through the enforcement of a practical and real framework for the future of the oil industry during the coming ten years as well as the establishment of practical solution to achieve stability in the price levels through the establishment of a price framework that would satisfy all major players in this vital industry.   D.                Export Oriented Investment projects: 1.                  The board of directors of the Port Said free zone area have agreed upon the establishment of an Egyptian shareholding company with 50 % Egyptian and 50 % Turkish capital with total investments amounting to 20 mn USD and total  capital amounting to 10 mn USD as a joint venture textile weaving and spinning and dyeing and finishing project between Egypt and Turkey. 2.                   It is worth mentioning that the net amount of Turkish investments in Egypt has increased considerably by 80 % and is expected to reach 2 bn USD during the coming five years. This boost in investment comes at the same time as five new developments in the Egyptian-Turkish trade and economy portfolio namely,: a.      The formulation of a free trade agreement between the two countries. b.     The trend in the Turkish business circles to maximize benefits from the QIZ protocol through establishing joint ventures in Egypt with the aim of exporting to US market. c.      The stability and progress of work on construction of a new terminal in Cairo Airport that is being undertaken by a Turkish company in cooperation with the National holding company for bridges and roads. d.     The participation of a delegation of Egyptian businessmen in the International Business Forum to be held in Istanbul next November. e.      The expectation of establishing new factories as joint ventures between the two countries different fields in textiles and chemicals and paint and electrical appliances and furniture manufacturing. 3.                  On a similar note, the board of directors also agreed upon establishment of the first Egyptian-Portuguese joint venture covering an area of 5000 sq m with the aim of renting special drilling rigs for offshore and onshore oil and gas operations, in addition to the maintenance of these rigs and granting of special technical assistance to operate them. On the other hand, the board also agreed to establish a Kuwaiti Investment project in the Port Said free zone area with the aim of manufacturing ready made garments and leather products with the aim of exporting all the production to foreign markets, The  board also agreed to establish another Egyptian- Kuwaiti joint venture on a land area of 4000 sq m to produce ready-made clothing for exportation.