The government’s “fix-all” economic proposal, DP World is old and new Dubai
By Farah Halime, rebel economy
The government has proposed tax changes and energy subsidy reforms to cut a budget deficit running at around 11 per cent of gross domestic product, Reuters reported in a broad story outlining the austerity measures.
An IMF team is in Cairo to negotiate a $4.8 billion finance package for Egypt. Talks are scheduled to end on 14 November. Some of the key details are as follows and mostly concern the biggest weight on the economy, ie energy subsidies:
– total elimination of the 95 octane petrol subsidy, a step that will be officially announced this week;
– raising the price of natural gas piped to homes, which will come into effect next month. The price increase would be “tiny”, officials have said;
– the government has delayed a programme to use smart cards to distribute canisters of cooking gas, or butagas, by several months to ensure the system works properly;
– the government would not touch the price of subsidised diesel; and
– the government had drafted a law to raise the sales tax on both commodities and services from 10 to 11 per cent. That includes tax on telephone services, and sales tax on other goods such as cars, cigarettes and tobacco, beer and alcoholic drinks, non-alcoholic beer, soft drinks, coffee beans, water-resistant cement and reinforced steel.
All these measures have already taken a long time to enforce, so it’s lucky Egypt’s lenders are putting up cash support.
The government said on Sunday it had received a third tranche of $500 million from Qatar, according to the same Reuters story; part of a $2 billion loan secured in August to help stave off a financial crisis and which Qatar is depositing at Egypt’s central bank.
The state news agency MENA quoted Finance Minister Momtaz El-Saeed as saying the third tranche of the loan arrived on 30 October and that the last tranche was expected to arrive “soon” but did not give an exact date.
But if donors fail to show up Egypt can rely on the thorough corruption investigators to retrieve billions of dollars and deposit in President Mohamed Morsy’s special “renaissance” account (into which generous citizens can also donate).
The only other detail in the report is that governmental authorities are working on collecting up to around $9 billion from specific persons associated with the former regime and who have been found guilty of corruption.
The report, which is quite fuzzy on details, does highlight an important fact: Mubarak and his cronies were not as rich as initially thought. In fact, to insist that the former president and his family are worth at least $70 billion only serves to glorify a regime whose biggest failing was to neglect rather than shrewdly steal mountains of cash.
The Wall Street Journal ran an eye-opening profile into the chief executive of DP World, the world’s third largest ports operator yesterday.
Mohammed Sharaf’s personal relationship with ships started long before he began work in the industry, when, in 1961, he was shipwrecked at just six months old.
MV Dara, the ship transporting him, his mother, brothers and sister sank after an explosion, just outside the port of Dubai. The incident cost Sharaf his mother, a sister and one brother, while another brother was considered lost. He survived with a caretaker before reuniting with his family in the UAE.
DP World, in some ways, represents the old and new Dubai.
It is a reminder of Dubai’s beginning as a successful sea port where a tiny settlement developed from a small fishing and pearl-diving community to an oil-rich sheikhdom.
But it is also an example of over-spending and spiralling debt. The company currently has a net debt of $3.5 billion and has had to let go of some of its key assets. Last month it said it was pulling out of its operations in the port of Vostochny, the largest container terminal in Russia’s far east and one of the key gateways for the country’s container network.