Thursday, July 16, 2015

Egypt struggles to meet burgeoning domestic energy demand

Energy World magazine
Renewables are only now beginning to feature in the northern African country of Egypt, which has yet to adopt nuclear energy. Rather, the government is dealing with relentlessly rising demand, writes Paul Cochrane in Cairo

The Egyptian energy sector is facing numerous challenges in the immediate and long term, mirroring how the country is struggling to secure political stability. Insufficient power supply is resulting in sporadic power cuts in the major cities, driving up sales of private generators. Billions of dollars are owed to international oil companies in arrears. As big a concern is Egypt remaining a net importer of energy to meet demand needs, with natural gas imports likely to continue until 2020 (despite the country’s healthy reserves), while ambitious targets for renewable energy may not be met.
The Egyptian government has been scrambling to get a handle on the energy situation, complicated by the political unrest in the country since the 2011 uprising that overthrew former President Hosni Mubarak. Even prior to the unrest, Egypt was struggling to meet its projected energy demand.
The instability made things worse, causing a drain on the state’s finances, economic growth spluttered, and energy and food subsidies rose to account for 20% to 25% of government spending, according to Middle East Economic Survey (MEES) figures. Foreign reserves also plunged, by nearly two-thirds as of 2015, according to International Monetary Fund figures, and the currency was devalued. 

Strapped for cash

Strapped for cash, the government in Cairo began to default on payments to foreign energy companies, owing $7.5bn as of June 2014, according to figures from Egypt’s ministry of electricity and renewable energy.
Natural gas exports plunged from 535bn cubic feet (bcf) in 2010 to 259 bcf in 2012, according to US Energy Information Administration (EIA) data, while domestic consumption of natural gas, which accounts of 53% of power generation, rose from 45 bcf in 2010 to 51 bcf in 2014; production is 5.4 bcf per day.
In 2013, the state started diverting its liquefied natural gas (LNG) away from its two exporting plants, with the one run by Spain’s UniĆ³n Renosa Gas, in Damietta, north-east Egypt, stopping that year, and the BG Group citing force majeure to shut its plant in January 2014.
President Abdel Fattah Sisi, elected in May 2014, has put energy at the top of his agenda, aware that the power cuts during the Muslim Brotherhood’s rule were a contributing factor in fuelling discontent with President Mohamed Morsi. Radical reductions to subsidies were imposed in July 2014, with prices of petrol, diesel and natural gas rising by 40% to 175% – an average of 76% – with fuel and electricity subsidies to be gradually eliminated over five years. 

Justin Dargin said "it is an impossibility for Egypt to be able to lower aggregate demand due to demographics."

Plans to reform power generation

At the World Future Energy Summit (WFES) in Abu Dhabi in January this year, Sisi announced a range of plans and reforms for the sector. Key measures included increasing oil and gas production, diversifying power production through the use of clean coal technology, nuclear energy and renewables. Sisi set a target of 20% of the country’s power supply to come from renewable energy by 2020, aiming to install 4,300 MW of solar and wind power within three years.
This would contribute to the 12 GW that needs to be added to the grid over the next five years, estimated to cost $12bn.
Energy consumption has surged over the past decade, rising from 57mn tonnes of oil equivalent (MTOE) in 2003 to 87 MTOE in 2013, according to the BP Statistical Review of World Energy 2014. In power production, Egypt has added 10.2 GW over the past 15 years, bringing installed generating capacity to 30 GW, but operational capacity is only between 22 GW and 23 GW due to a lack of fuel, according to ministry of electricity and energy 2014 figures.
While per capita electricity consumption is low by global and regional standards at 1,740 kWh (neighbouring Libya is 3,930 kWh and Saudi Arabia 8,150 kWh), according to World Bank data for 2011, it is burgeoning population growth that is driving up demand at an average of 7% a year. The population reached 85.5mn in 2014, up by 13mn on 2006 figures, according to the government’s Central Agency for Public Mobilisation and Statistics.
Reducing demand is not considered a possibility as a result. ‘It is an impossibility for Egypt to be able to lower aggregate demand due to demographics, with 1.3 children born every minute, so demand is going to continue to rise unless the state does a family planning programme like Tunisia did in the 1970s and 80s,’ said Justin Dargin, a UK-based Middle East energy expert at the University of Oxford. ‘But the subsidy reformation programme shows that the government is serious about mitigating the stark growth in energy demand.’ 

 Dr Elagamawy thinks the government forecast of 20% of energy to come from renewables by 2020 is optimistic. Around 15% could be achieved. 

Feed-in tariffs for renewables 

Subsidies aside, where the government is working to reduce conventional energy consumption
is at the household, company and industrial level by introducing last September a feed-in tariff scheme for renewable energy installations.
But while tariffs were released for photovoltaic installations, making use of Egypt’s abundant sunshine and ranging from less than 50 kWh for residential systems to over 20 MW, the scheme will not be available to all households.
‘Not all inhabitants are allowed to install a PV system, as there are certain requirements, like roof space, and the ability to make such investments,’ said Dr Hisham El Agamawy, energy advisor at the Egyptian Association for Energy and Environment (EAEE) and b former advisor to the country’s environment minister.
He believes the potential for smaller-scale solar power installations to be in the new residential and industrial cities springing up on the outskirts of the major metropolises, such as those being developed around Cairo.
Feed-in tariffs were also extended to wind power at the end of 2014. The country has three primary regions to generate wind power, at Hurghada on the Red Sea coast, in the Nile Valley, and in Gebel El-Zeit on the Gulf of Suez. ‘A lot of companies have been certified by the New and Renewable Energy Authority (NREA) to start installation and supply, ranging from 5 kW to 500 kW,’ said El Agamawy.
Indicative of interest in solar and wind power, in January, 177 international consortiums bid for 67 tenders to develop 4.3 GW of projects. According to the NREA, 40 are solar power projects, the rest wind energy projects. In February, the Bahrain-based Terra Sola Group proposed investing $3.5bn in a project aiming to develop solar photovoltaic technology in Egypt.
As for hydroelectricity, it already provides 3% of energy, according to the EIA, and room for further expansion is limited to meet agricultural needs. Expansion of renewables is therefore focused on major expansion of solar and wind, which currently together account for just 1% of current energy consumption. El Agamawy thinks that while the government forecast of 20% of energy to come from
renewables by 2020 is optimistic, around 15% could be achieved.
Mohamed Kassem, General Manager of Nanotech International for Industry and Trade, which develops solar systems, thinks the recent tenders will push production immensely.
‘Once these projects happen over the next couple of years, this should increase the percentage of solar power. With higher electricity prices due to the dismantling of fossil fuel subsidies, Egypt can try to close the price gap with the more expensive renewables, and the feed-in tariff makes it more attractive. We expect more investments,’ he said.
Dargin on the other hand is less optimistic. ‘It is still chaotic in renewables as they can’t get
primary production under control, so Egypt will be hard-pressed to increase to 20%. They are focused on doing anything necessary for energy demand, if that means importing coal, so be it. Environmental concerns are quite secondary,’ he added.


Coal imports, new nuclear? 

Coal has not been a part of Egypt’s energy mix – it relies on coal imports - but is considered more logistically viable than more gas and oil-powered plants. Clean coal technology is being pushed
by the government, in line with European Union (EU) regulations, and Cairo plans to offer tenders this year for coal plants to produce 4 GW. However, the government is facing opposition to coal power for environmental reasons. If the plans go ahead, El Agamawy said power plants will be located in the northern desert to ‘have minimal impact on Cairo or other governorates.’
Another possible avenue is nuclear. Cairo has considered nuclear power for decades but lacked the funds to move beyond research and development at its Dabaa nuclear site near Alexandria on the Mediterranean coast. There was renewed interest in 2011, with announcements to develop four nuclear power plants by 2025, and on a state visit to Moscow in 2013, former President Morsi invited Russian participation.
In February this year, Russian President Vladimir Putin visited Cairo, leading to an agreement with the Egyptian Nuclear Power Plants Authority for state-owned Rosatom to construct a nuclear power plant with a desalination facility. Two nuclear reactors of 1,200 MW each are to be built, with the prospect for a further two.
El Agamawy said there is not expected to be major opposition to the nuclear power plant due to the energy shortages, but had hoped the bid would have been competitive, as with the tender for the United Arab Emirates’ Braka plant, in Abu Dhabi. ‘We were surprised by this agreement, expecting an international tender to compare all nuclear technologies, especially after what happened in the Emirates when there was competition between French and Korean firms, but maybe the circumstances are imposed on us to cooperate directly with the Russians,’ he said.
Another pledge from Sisi at the WFES was to pay off its outstanding debts to international oil companies to get exploration and production back on track. As of December last year, Cairo had paid off a further $2.1bn. ‘There is still $3.1bn left to pay, but it has come to an agreement the international oil companies have more or less signed off on, so it is not just words and shows they’re [Egypt] putting their money where their mouths are,’ said Dargin. 

Gas, oil and LNG 

In the immediate term, Egypt is considering buying gas from Israel, and in March will receive its first shipment of imported LNG. Egypt’s petroleum ministry said in February that Egypt expects to stop importing gas and resume exports by 2020 as exploration and development projects gets underway. The official added that Cairo had inked 56 oil and gas exploration contracts worth $12bn since November 2013.
However, domestic demand for gas is set to continue outstripping production for years to come, while around 75% of gas reserves are in deep offshore waters, requiring greater investor investment and risk to extract.
‘These investments will take some time and massive investments to bear fruit. Considering the significant domestic investments and some reforms and caps on domestic demand, it is a possibility to export LNG in the future. But I think the strategic focus of Egypt in the short to medium term is to satisfy domestic and downstream demand. It is not like in the early 2000s with exports of LNG for revenues,’ said Dargin.

Photos by Paul Cochrane, except image of Justin Dargin, courtesy of Mr Dargin.

Accounting and Business in Egypt - After the revolution

Accounting and Business magazine

As political stability returns to Egypt, greater adoption of international accounting standards is seen as a key factor in galvanising the economy and foreign investment. By Paul Cochrane in Cairo

With the dust settling in post-revolutionary Egypt, economic reforms are on the agenda as the country seeks more foreign investment to get back on its feet. Improving auditing and accounting standards is on the to-do list to bolster capital inflows and the domestic economy.
Egypt has been on a rollercoaster ride since the uprising that ousted long-term president Hosni Mubarak in January 2011. The Muslim Brotherhood came to power in the elections a year later, ushering in a period of uncertainty. In July 2013, Mohamed Morsi, who had been elected president just 12 months before, was put under house arrest following major demonstrations. The leader of the coup, army chief Abdel Fattah Sisi, was elected president in May 2014.
The political turbulence has discouraged foreign direct investment (FDI), which dwindled from US$6.8bn in 2010 to around US$3bn in 2012 and 2013 (according to Central Bank of Egypt figures), and only gradually returned to something like its pre-revolution levels in 2014, when the World Bank valued FDI at US$5.53bn. However, economic growth is still sluggish, way below what is needed to absorb the 700,000 new entrants entering the workforce annually as a result of Egypt’s population growth, according to the government’s Central Agency for Public Mobilisation and Statistics.
Meanwhile, the International Monetary Fund (IMF) says that Egyptian foreign exchange reserves plunged by 50% between January 2011 and late 2014, and the US dollar exchange rate for the Egyptian pound has fallen from 5.70 in 2010 to 7.60 at the time of writing.
Numerous laws and reforms have been delayed because of the political instability. The new government is now planning to reintroduce legislation and some laws previously proposed under the Mubarak regime, such as a new investment law and an amended companies law. Over the past year, the Egyptian Institute of Directors, part of the Egyptian Financial Supervisory Authority, has drafted an updated code of corporate governance, based on Organisation for Economic Cooperation and Development (OECD) guidelines, that should be enacted this year.
There are also hopes that an Egyptian accounting standard for small and medium enterprises (SMEs), based on International Financial Reporting Standards (IFRS) for SMEs, proposed by the Egyptian Society of Accountants and Auditors prior to the revolution, will be implemented.
The supervisory authority has been active since its creation in 1997. In 2008, it established an audit oversight board. But while the financial sector is implementing international best practice, just 213 companies are listed on the Egyptian Exchange, compared with hundreds of thousands of companies not audited to the same standards.




Khaled Dahawy, professor of accounting at the American University in Cairo, says: ‘Unfortunately many SMEs are more interested in tax returns than income statements, so there’s a big mismatch with what we are asking to do. Accountants have become tax consultants.’
Microbusinesses, with fewer than four employees, make up an estimated 91% of Egyptian enterprises, employing 58% of the total workforce, while SMEs account for 8% of enterprises and 25% of the workforce, according to a Carnegie Middle East Center 2014 report, The private sector in postrevolution Egypt.
Mohanad Khaled FCCA, managing partner of BDO Khaled and ACCA voluntary representative for Egypt, says: ‘SMEs are an area we need to work on, as they contribute 80% to 85% of the GDP. That is huge. Imagine how much we need (as accountants) to cater for, as well as the parallel economy we’re not aware of.’
Mohamed Farid, chairman and CEO of Dcode, an economic and financial consulting firm in Cairo, conservatively estimates that if the informal sector were brought into the general economy, there would be a 40% to 50% increase in GDP. But to do that, simplified accounting standards should be applied to ease the cost and resources burden on SMEs, and there would need to be awareness campaigns about accounting processes.
‘The ultimate point is how to expand the role of auditors rather than be only for listed companies and corporations,’ says Farid.
As for the formal business sector, IFRS-based accounting standards were adopted in 2007. ‘They are to a great extent compliant with IFRS – say 95% – but there are four standards we couldn’t have translated due to legal and legislative reasons,’ says Khaled.


The missing four


The four omissions are current cost accounting (except investments), certain employee deductions of profit sharing (by law, not through income statement), general reserves for banks, and financial leasing. Egyptian account leasing legislation contrasts sharply with IFRS. ‘We are still lobbying for legislative change on that as accountants,’ says Khaled.
Implementation of the new standards is patchy outside blue-chip and profitable boutique businesses, however, despite Egypt having a developed accounting sector. Local firms have been expanding internationally and the top 12 global firms all have a presence in the country.
The Egyptian Society of Accountants and Auditors (ESAA), part of the International Federation of Accountants (IFAC), offers courses on the new standards to its 5,000 members, but there has been minimal IFRS outreach to the overall accounting community.
‘That is just 5,000 out of 100,000 accountants [in the country],’ Dahawy points out. ‘Many of our older gentlemen or ladies in accounting have no idea what the standards are. There needs to be mass education courses at low costs and with no exams, just pass or fail, as you can’t implement standards if people don’t know them.’ He would also like to see an accounting law defining the profession and qualifications.
Farid agrees it is not the rules and standards that need improving, but training. ‘There is room for improvement due to the vast number of personnel in this area and the diversity of their backgrounds [with a need for continuous training],’ he says.
As well as the usual tension between academic and technical training, Egypt faces particular issues. Different accounting standards are taught at universities, including IFRS, Certified Public Accountant (CPA) standards and US GAAP, along with the Egyptian standards themselves, published in Arabic.
The primary route to enter the profession is to train for three years at a firm and automatically become a certified accountant after eight years. The second track is through the ESAA, which requires examinations over a three-year period.




Differences in courses, standards and language ability can bring complications. ‘Now, even with CPA, the society asks you to sit two exams, law and tax, which is a disaster, as you may be fluent enough in English for the CPA, but not fluent enough in Arabic for the accounting and auditors exam. It’s a catch-22,’ says Dahawy.
Work was under way before 2011 to establish an Egyptian accounting body to govern the sector but, as with the SME standards, it was put on hold by the revolution. Khaled is hopeful that with more political stability and economic growth such a body will be created and other laws passed to drive development, including legislation on taxation, which is increasingly coming under global regulatory scrutiny.
Khaled says: ‘Accountants have their own ways to deal with tax matters, and that needs to change. It is on its way. It comes down to a number of things, the legal and administrative system. We have a reasonable legal framework; it is the administrative loopholes that, if I may say so, need to be mitigated.
‘One way to enforce taxation is if we make efforts towards introducing the parallel economy into the tax system.’
Dahawy sees an updated code of ethics as key to such change: ‘The previous code dates back to 1933, which is a disgrace. There is, in general, great confusion between what is legal and what is ethically correct, and there needs to be work to understand the difference.’
Such improvements would include greater oversight and enforcement of auditing laws. ‘I don’t recall anyone going to jail recently for an accounting problem, just one in 20 years,’ he says.
In the immediate term, Egypt has been pinning investment hopes on the results of the government-organised Egypt Economic Development Conference, held in March in the Red Sea resort of Sharm El-Sheikh. The aim of the conference was to attract US$10bn to US$20bn in investment, with some US$12bn earmarked for infrastructure projects, showing that Egypt is once again open for business.
While there is optimism, low oil prices may mean less than expected investment from the oil-rich Gulf countries. Ongoing attacks within Egypt on the security forces, conflict in neighbouring Libya, and instability in much of the Middle East may also influence investment commitments. In the medium term, greater adoption of international accounting standards could be critical in attracting FDI beyond infrastructure and high-profile projects.
Dahawy says: ‘To get the FDI that Egypt needs, there should be the stamp of something the investor understands. It’s in everybody’s interest that we move to internationally accepted standards, and more than that, implement them, which we are fighting to do right now.’

Monday, June 08, 2015

Qatar's World Cup blues: What happens if the tournament is revoked?

Middle East Eye

'Expect Amazing' is the slogan for the Qatar World Cup but if Doha loses the event, it could become 'Expect Embarrassment'

When Qatar won the bid in 2010 to host the FIFA World Cup 2022, petrodollars were widely considered to have influenced the vote. Allegations of bribery repeatedly surfaced, most damningly in France Football magazine's “Le QATARGATE” 20 page expose in 2013.

While not able to shake-off the accusations, Doha had a firm supporter in FIFA President Sepp Blatter, who enabled the controversial change of the event from summer to winter to better suit Qatar's sweltering climate.

Then in May, the Swiss authorities arrested members of FIFA for corruption. Would Blatter be next, and Qatar's champion pushed to the exit? The speculation was rife but the answer was - not yet. Blatter was re-elected 29 May and The Qatar Exchange (QE) - the country's stock market - reacted on the news once trading started on the Sunday, rallying by 1.23 percent.

Then Blatter resigned 2 June. The following day it was confirmed that the FBI as well as the Swiss attorney general were probing the 2018 and 2022 FIFA World Cup bidding process. The QE immediately dropped on the news (see below).

“The worry for Qatar has always been Blatter going, and that's now transpired,” said David Roberts, a lecturer in the Defence Studies Department of King’s College London and author of Qatar: Securing the Global Ambitions of a City State.

Media reports quickly emerged that property owners in Qatar would get burnt from the FIFA scandal, and that Doha was standing to lose $200 bn in infrastructure investment related to the tournament.

But would being stripped as the World Cup host be a serious economic loss for one of the world’s wealthiest countries?

Edd Brookes, Senior Director of DTZ Middle East, a real estate services company in Doha, said it was business as usual, dismissing the articles.

“The only people buying in Qatar at the moment are Qataris and GCC citizens, so [its] basically a local market. Frankly, land prices are where they were back in 2010,” he said. Brookes also dismissed Bloomberg's claim that the $18 bn Lusail City development - which is expected to house 200,000 people - was for World Cup tourists.

According to Brookes, that project had been planned in 2003, years before the bid was secured in 2010.

As for the new infrastructure - the railway, the Doha metro, the port, and a network of roads - it is all part of the Qatar National Vision 2030 strategy announced in 2008.

“They are lumping the whole construction industry [together] in comparison to [focusing] on a global event,” said Steven Humphrey, director and head of the cost consultancy programme at AECOM, an engineering design and services firm, in Doha.

“The government departments we have contact with are still pushing on strategy, which is not to do with one event but [with] the National Vision, a bigger philosophy. Perhaps the only impact of the [bribery] rumours, if true, is [slower] time frames and relaxed deadlines, which would actually be a benefit.”
An estimated $4 bn, however, is specifically required for the championship and the construction or renovation of eight stadiums.

“A couple of stadium replacements will still go ahead, so I'd say if something happens in the next two months, [Qatar may] lose perhaps a few stadiums, but the rest will stay as required for existing football clubs,” said Humphrey.

But economic losses are not the only things in play. Losing the championship is expected to have an overly negative effect on Qatar's football culture. Some 65 percent of Qataris surveyed did not attend any matches during the 2013 football season, with 72.8 percent saying heat, humidity, wind and dust were factors for non-attendance. Half of all respondents also said that “annoying behaviour” by crowds was an obstacle to match attendance.

Expect Embarrassment?

Where Qatar Inc. stands to lose the most if stripped of the event is its brand image, which the Gulf state has aggressively worked on, kick-started with Al Jazeera's broadcasting emergence in 1996, and Doha's foray into foreign policy and overseas investment.

“Doha made a lot of bets, and the bets seem to have come off over the last two decades, but [the country] lately seem to be losing time and again, in Libya, Egypt, and going into extra time with the world cup,” said Roberts, in relation to Qatar’s support for now ousted Egyptian President Mohamed Morsi and the Tripoli-based government in Libya.

While the country has wealth that is backed by huge hydrocarbon reserves, to weather any economic losses, if the FIFA corruption allegations are proven true, there would be a reduction in the confidence of international players and clubs to enter the game. Doha's ambitions to diversify its economy through becoming a financial hub to rival neighbouring Dubai would also likely be dented.

“The loss of the event would not be positive, as Doha has been struggling to create itself as an economic hub to match the Dubai International Finance Centre," said Elias Moubarak, head of finance at the law firm Trowers & Hamlins in the UAE.

“Bad publicity will not encourage people to move to the Qatar Financial Centre for example, and I think generally [have] a negative impact on Qatar's objectives.”

The biggest impact of losing the world's most watched sports event would be the knock to Qatar's reputation.

“First and foremost Qatar would see it as an embarrassing loss, and care about that far more than financial implications,” said Roberts. “They would be livid if [they] lost it, and I'm sure Qatar would try to sue FIFA - and anyone they can - back to the Stone Age, as probably hundreds of millions has been spent on public relations, consultancy, designs for stadiums.”

If proven, the bribes, alleged at several million, would be a minimal loss by comparison.

One potential consequence of Qatar losing the World Cup would be shifting away from its favoured investment destination, Britain, which accounts for around $57bn of the Qatar Investment Authority's estimated $170bn global asset spread.
“Domestically it will be a rally around the flag thing as anger will be 100 percent directed externally, especially towards Britain. Qataris are already a vast minority in their homeland and are increasingly resenting the number of foreigners in Qatar as well as the rough time that their state is getting in the Western press,” said Roberts.

“Additionally, there's an overt recognition Qatar is overly invested in London. I imagine this need to diversify would become more pronounced [if the games were scrapped] and [Qatar would] augment the relationship with East Asia countries.”

“Pouring further fuel on the fire to such Qatari sentiment has been England saying they are ‘ready to host’ the 2022 World Cup if asked,” he added.

A flip-side?

A potential flip-side for Qatar losing the tournament would be the spotlight being turn off on labour rights issues and other muck-raking stories that Doha has exposed itself to in the lead up to the World Cup. Media coverage has focused on human rights abuses, while anti-logos, depicting slavery as part of a campaign to urge corporate sponsors to withdraw from the 2022 event, has been doing the rounds online.

“Qatar's brand image might be more dented if they actually host the cup through exposure of the exploitation of the labour force,” said Hannes Baumann, Leverhulme Research Fellow at King's College London.

“By comparison, the Bahrain Formula One has been an opportunity for progressive activism, and a risk for the regime.”

Such coverage and related Qatar-bashing would only heat up as the event approaches and the world's media descends on the peninsula.

“European taxi drivers now know where Qatar is on the map - due to the successful bid - but on the other hand [they also] know about labour deaths,” said Baumann. “If anything, that risk is even greater. People in the know might not have a high opinion of the Qatari regime necessarily, but at the popular level the branding really [could] backfire.”

Monday, June 01, 2015

Legal ivory trade could keep elephants safe

Global Times

Just over a quarter of a century ago, in 1989, an international ban on ivory was imposed. It initially had great success, certainly in making the owning of ivory taboo in much of the world. Many owners of ivory duly packed their tusks, figurines and jewelry away out of sight.

However, with demand for ivory still there, the ban is not working. Neither has the London Conference on Illegal Wildlife Trade, inked by 46 countries in February 2014 to control the illegal ivory trade, resulted in a drop in poaching. In fact, the illegal trade has doubled since 2007.

According to the Convention on International Trade in Endangered Species, elephant poaching levels in Africa have steadily risen between 2002 and 2014, with over 20,000 African elephants killed for their ivory tusks in 2013.

With poaching once again at catastrophic levels, debate has reignited as to whether a legal ivory trade should be allowed.

There are two camps in this conservationist tussle. One advocates keeping the 1989 ban in force no matter what to protect elephants. The other camp advocates allowing a more controlled, legal trade to curb poaching.

The issue with the ban is that there is clearly demand. As with so many banned items, if there is demand, people will resort to extraordinary measures to get it, especially if there is a good profit to be made. Part of the ban's problem is that the ivory is sourced from countries with low incomes, making poaching economically attractive. As an Ugandan wildlife guide told me, "There is a spike in poaching in the lead up to holidays and when school fees are due, as people's expenses increase."

Another factor undermining the ban is enforcement. Many African countries have increased the number of rangers to protect animals and ward off poachers, but national parks are huge spaces, hard to secure. The army could, for instance, be assigned to such a role, to protect a national resource that brings in tourism dollars via wildlife safaris, but when asked about this option, the reply was that is not the army's role, but instead that of the invariably underfunded environment ministry.

This comes to, well, the elephant in the room regarding the ban: corruption. Many of the African countries where elephants and rhinos abound are highly corrupt, meaning the ban is circumvented through the greasing of palms.

So what should be done to preserve these wonderful, endangered creatures? Quelling demand is one way, which is slated to decline as attitudes change toward ivory, as touted by film star and conservationist Jackie Chan. Dying tusks and rhino horns so they have no commercial value is another option. Using synthetic celluloid ivory, known as "French Ivory," is another solution. Such approaches should be encouraged.

But in our financial system, money is king, and the ivory trade is worth an estimated $18.5 billion a year. A controversial solution is to allow the legal trade of ivory. In the past, one-off sales were made, lastly in 2008. It is since then that illegal ivory sales have spiked, driven in part by speculators stockpiling tusks for greater profit down the line. This has also pushed a lucrative black market.

If legal sales of raw ivory were allowed, through regular auctions, this could circumvent the illegal trade by providing enough ivory to meet demand. The ivory would be sourced from elephants that died of natural causes or that had to be put down.

As a result, speculation and poaching would drop through demand being met, of say 50 tons a year. The proceeds of sales could then be passed on for conservation efforts and help bolster African economies as well as environment ministries.

Ultimately, nobody actually needs ivory, or rhino horns for supposed medical uses; there is no actual benefit. But as the demand is there, a realistic debate needs to occur around how best to deal with the trade as well as to preserve Africa's large mammals at the same time.

Wednesday, April 22, 2015

GCC starts tightening its belt on glimmers of future austerity

Middle East Eye

The GCC can weather low oil prices for now, but if this continues in the medium term, wide reforms will become necessary

In economics, markets are considered cyclical. Markets slump and after a period of contraction, rebound, more bullish than before. Gulf Cooperation Council (GCC) countries are banking on such a cycle to keep the status quo.
In the 1980s and 90s, oil prices were low and GCC states were running deficits. Once the oil price started moving upwards to the $100 a barrel territory, surpluses increased and the GCC had the liquidity to embark on vast spending programmes to open up and diversify their economies away from hydrocarbons. The 2000s were a boom period, epitomised in the glitz of Dubai, the skyline of Doha's West Bay, and the global spending spree of the Gulf Sovereign Wealth Funds (SWFs).
The 2008 financial crisis hobbled the boom times, but petrodollars kept these economies buoyant to ride out the crisis better than much of the world. The so-called Arab Spring from 2011 onwards presented a political challenge, but the cash was there.
The 45 percent drop in oil prices over the past twelve months has been a much bigger blow, although only the most optimistic opponent of the GCC order would consider it a nail in the coffin of the Gulf monarchies. The region simply has too much access to capital, and with small local populations – Saudi Arabia aside – able to fund its way out of this downturn in the near term.
Keeping the status quo, however, is proving costly. “It has become quite a bit more expensive to be a state in the region following the Arab uprisings, calculated in the vicinity of 10 to 15 percent more costly following large [government] handouts. It will be hard to roll that back, but eventually that's what will need to happen,” said Martin Hvidt, professor at Zayed University in Dubai.

Downward shift

The drop in oil prices is slated to reduce GCC energy export receipts from $743bn in 2012 to around $410bn in 2015, according to the Institute of International Finance (IIF), a 45 percent slide. This is projected to lead to the consolidated fiscal balance of the GCC to go from a surplus of 4.8 percent of GDP in 2014, to a deficit of 7.5 percent of GDP this year.
“For larger GCC economies this is not an issue in the short term, there is confidence, but it does affect fiscal strategies. Except for Qatar, all economies are slowing down and this will affect the private sector,” said Steffen Hertog, associate professor in Comparative Politics at the London School of Economics.
All the GCC states' budgetary break- even oil price is above the current barrel price of around $56. Qatar has the lowest at $65.3 per barrel, followed by Kuwait at $68.2, and the UAE at $78.2, but for Saudi Arabia it is $104.6, Oman $113.2, and $130.2 for Bahrain, according to April figures from the IIF. “Bahrain has pretty much no liquid solvent savings. Oman has a fair amount but it will burn through reserves quickly if it doesn't cut spending, which looks unlikely,” added Hertog.
Bahrain, the GCC's problem child since the 2011 uprising, will need to be financially propped up, with $10bn pledged by the GCC Fund. “Bahrain will be bailed out by the UAE and Saudi Arabia. I don't think it will be a generous bail-out, so will perhaps be the first one to do substantial reforms,” said Hertog.
While Qatar is expected to be the least affected, the fiscal break-even oil price is expected to increase 14.2 percent this year, according to the IIF, but with the bulk of government revenues coming from liquefied natural gas (LNG), this poses a further challenge, as gas prices are not expected to rise in the short to medium term. Indeed, with Australia and the US ramping up LNG output, Qatar has been knocked out of pole position as the world's largest LNG exporter.
Somewhat opportunely for Doha, having had its wings clipped by Riyadh and the UAE after a decade as an expansive regional foreign policy actor, culminating in the “loss” of Egypt when the Muslim Brotherhood was overthrown in 2013, there are fewer external funding constraints.
“If Qatar was continuing its expansionary approach at full pace, perhaps we'd look closer at the consequences,” said Richard Mallinson, geopolitical analyst at London-based Energy Aspects.
For the GCC's big economic and political players, Saudi Arabia and the UAE, constrained times are ahead. Saudi Arabia's budget expenditure grew by 12 percent a year from 2009 to 2014, almost doubling from $126.7bn to $228bn, and overspent last year by $38.6bn. But Riyadh has the cash and the economic clout to weather a deficit for the immediate term.
“Saudi Arabia has substantial reserves, some $100bn in overseas bank deposits and can withdraw them any time, so it doesn't need to liquidate investments and has significant deposits in local banks,” said Hertog.

No austerity, but no handouts either

Riyadh's budget this year is $230bn, up on 2014, and will strive to not go over budget again. As for all GCC states, the government is looking into areas to cut funding. Military spending could be one area, budgeted at $80bn in 2014, according to Citi figures, but with the war in Yemen any cuts there are unlikely.
The kingdom will be hoping that instability doesn't spread from its southern neighbour, particularly to its restive eastern provinces, lacking the largesse to fork out “loyalty handouts” to citizens, as happened in 2011 when Riyadh shelled out $100bn. In February, following the accession of King Salman, two months additional salary was given to state employees, costing some $32bn, according to Citi figures.
“Current spending is more politically sensitive. They would be wary of another handout if there is a political crisis to keep citizens happy. Something really bad would need to happen” for that to occur, said Hertog.
The fiscal squeeze is going to have significant knock-on effects, especially as the GCC states have not diversified away enough from hydrocarbon revenues. Indeed, the GCC is in a Catch-22 situation, needing petrodollars to bankroll diversification efforts, but, with less revenues, not able to do so at the rates needed. Furthermore, much of the diversification is on the back of the hydrocarbon sector, such as downstream petrochemicals.
“The atmosphere in the UAE is a wider economic slowdown. Low oil prices isn't just about government spending, the whole economy is linked to it,” said Mallinson.
The GCC's diversification attempts, particularly getting citizens into the private sector through nationalisation programmes – Saudisation, Qatarisation etc. - have broadly failed due to high public sector salaries. If low oil prices continue, and budgets are increasingly squeezed, GCC governments will have to carry out reforms, be it introducing value added tax, slashing energy subsidies, and/or reducing benefits.
“It will very much be up to the ruling families to persuade nationals of the need to reduce benefits, to make everyone see they are all in the same boat, that there is a crisis, to maybe survive without any political problems,” said Hvidt. “If low prices keep up for another year, there is no doubt in my mind they'll have to readjust their budgets.”

Impact on rest of MENA

The economic slowdown in the GCC due to the low oil price is going to have a wider ripple effect, lowering consumer spending, impacting financial services, and halting the infrastructure and related projects that provides much needed regional employment.
To what degree financial assistance and FDI from the Gulf to the rest of the region will be impacted is hard to gauge. The lower oil prices are clearly having an impact at the MENA level though, with current account balances projected to slide from 7 percent in 2014, to negative 2 percent in 2015.
“Largesse may become a bit more limited but I don't think the taps will be turned off entirely. You can see from the crisis in Yemen a lot of premium is paid to regional alliances, and the GCC realises the expectations of less wealthy states for inward investment, as seen with the relationship with the [Abdul Fattah al-]Sisi government,” said Mallinson. Indeed, the UAE, Kuwait and Saudi Arabia have provided Egypt with over $12bn in aid, central bank deposits and for petroleum products, while cumulative Saudi investments in Egypt are estimated at nearly $32bn.
As GCC states eat through their reserves, such funding could become more constrained, especially given global economic volatility and the turbulence in the MENA. Egypt will continue to need major funding - it is not as easily propped up as Jordan - and Yemen will need significant funds for Riyadh to capitalise on its military adventurism to shore up future political support. As such, the GCC, Riyadh in particular, could face tough choices as to whether to direct financial support externally or internally.
“Egypt is considered a priority, but between domestic needs and funds to Egypt, the domestic needs will be grandfathered,” said Hertog.
Ultimately, the GCC faces tough choices to rein in budgetary spending unless oil prices rebound. “In the short to mid run they're fine, if low prices continue it could be a really severe crisis, although reforms could postpone the reckoning. Now it’s like the mid-1980s, maybe soon back to like the 1990s,” added Hertog.
A full cyclical return to the boom times of the 2000s however, seems unlikely, and in the midst of geopolitical turbulence, major challenges lie ahead.

Monday, April 20, 2015

Mist on the Nile – an Egyptian Record

Money Laundering Bulletin

Political turmoil in Egypt since the uprising that ousted President Hosni Mubarak four years ago has served anti-money laundering as both stimulus – through pursuit of embezzled state funds – and brake with delays in the introduction and implementation of new supervisory standards and good practice. Paul Cochrane reports from Cairo.

Unrest and Context
There were high hopes that Egypt was embarking on a new, clean financial era following mass protests in January 2011 that ousted President Hosni Mubarak. Popular calls for an end to the corruption and cronyism that had characterised Mubarak's 30 year rule appeared to be heeded.
In April 2011, Mubarak along with his sons, Alaa and Gamal, were arrested for misuse of government funds. In July 2011, former interior minister Habib el-Adly was convicted and sentenced to five years for involvement in a no-bid government contract that squandered some US$15 million. Former Prime Minister Ahmed Nazif was arrested for "squandering public funds and profiteering." The foreign accounts of Mubarak and other high-level officials were frozen in Switzerland, Britain, Canada and the European Union (EU), pending investigations.
In the meantime, Egypt went through more political turbulence following the Muslim Brotherhood coming to power in 2012 with Mohamed Morsi elected president. In July 2013, following further mass demonstrations, Morsi was put under house arrest, with the military taking control of the country, formalised with the election of General Abdel Fattah el-Sisi as President in April 2014.

Qualified Progress
Despite the political chaos, Egypt does seem to have made progress in fighting money laundering. The US State Department in its 2014 International Narcotics Control Strategy Report noted that: “In the past two years, the Government of Egypt has shown increased willingness to tackle the issue of money laundering, especially with regard to investigating allegations of illicit gains or corruption of public figures and organisations.”
But this has been far from a spotless record. There have been no anti-money laundering legislative proposals in the past two years. El-Adly and Nazif were both cleared in February (2015). Mubarak's sons, who were convicted for embezzling over US$13.5 million in state assets in May 2014, were released in January under a technicality in Egyptian law as they had served the maximum period of 'preventative detention'. It is a sore point with advocates for greater accountability. They knew how to hide everything,” said a compliance officer at an Egyptian bank who wanted anonymity.
Judicial investigations dealing with frozen assets abroad have not moved forward either. The handling of the looted funds of Mubarak's regime was very badly handled, starting from the Morsi regime and ending with the Sisi regime. They spent a lot of money appointing famous legal firms abroad but without proper documentation or court orders. Counterparts were not able to release or breach banking secrecy,” said Hany Abou-El-Fotouh, president of Alraya Consulting and Training in Cairo.

Corruption costs
Meanwhile, corruption remains a major issue in Egypt. According to an interview with the head of the Central Auditing Organisation aired on Nile News TV in November 2014, financial and administrative corruption is estimated to cost Egypt around USD28 billion a year. Egyptian media reported in January that the country’s Administrative Prosecution Authority investigated 151,000 corruption cases in 2013, an increase of 80,000 cases on 2012, and more than double the cases in 2011.
Which is good news. But while the prosecutor is being more active, this does not always extend to public tenders. We are in a similar situation, in a broad sense, to the South American military dictatorships of the 1980s. Sweeping legal reforms are taking place in secret through a committee made of judges connected to the president. We don't have any judicial oversight of the administrative court, or of public contracts,” said Amr Adly, a nonresident visiting scholar at the Carnegie Middle East Centre, in Cairo.

Military intervention – in the economy
To get the economy back on its feet, the government is trying to attract US$15-20 billion a year in foreign investment, particularly from Gulf allies the United Arab Emirates (UAE) and Saudi Arabia, which have been providing financial aid. The government organised an Egypt Economic Development Conference which was to be held in mid-March (2015) in the Red Sea resort of Sharm el-Sheikh, with some US$12 billion earmarked for infrastructure projects. Many of the major infrastructure projects, however, are expected to be carried out by the military, with its commercial arms estimated (by a leaked US government diplomatic cable) to account anywhere from 5% to 30% percent of the overall economy.(1) “Since the military came to power they are having an expanded economic role, with mega projects financed by the state and executed by the military, driving out the public sector. Emirati (firms) are asking for direct partnership with the military to avoid tenders and inefficient bureaucracy,” added Adly.

Terrorist finance
Despite this torpor over public contracts, the authorities are more active in enforcing the rule of law is in its own domestic CFT (combating the financing of terrorism).
In December 2013, Sisi designated the Muslim Brotherhood – formerly in government - a terrorist organisation. The move was followed by Gulf allies Saudi Arabia in March 2014, and the UAE in November, 2014. Previously, only two other countries had listed the group: Russia in 2003, and Syria in October 2013.
The security forces have detained an estimated 41,000 people on political charges since Morsi's ouster, according to European Parliament figures from January 2015; some 29,000 of that figure were arrested for suspected ties to the Muslim Brotherhood. Prominent members of the Brotherhood have been arrested and had assets seized by the state, including two supermarkets run by businessmen with alleged links to the group. In February, 2015, 169 non-governmental organisations (NGOs) linked to the group were dissolved, with funds and property seized.

Compulsive viewing; inadequate screening
The Central Bank of Egypt (ECB) sends financial institutions blacklisted names and accounts to be blocked that includes the Brotherhood, said the compliance officer. Not all of those arrested for ties to the Brotherhood are being blacklisted. If there's no proof from the ECB, a customer cannot be prohibited. Otherwise, we'd need to sit in front of the TV all day to see who is named [by the authorities to carry out due diligence], which wouldn't work. We don't know if somebody voted for or supports the Brotherhood,” said the compliance officer. Family members of Muslim Brotherhood leaders are “the ABC of politically exposed persons (PEPs),” he added.
The ability of banks to screen blacklisted names and designated individuals by the Egyptian and international authorities is complicated by only 10 out of the country's 40 banks having adequate software, added the compliance officer.
Automated screening systems are not widespread. With the exception of the big banks, most just perform basic checking on either manual lists or databases. This is one big hurdle and challenge for the sector,” said Abou-El-Fotouh. “Very few buy these filters to screen blacklists, so how would they identify a potential Brotherhood leader and associates? They wouldn't be able to identify these persons because of their screening techniques.”
Such shortcomings in screening may be addressed soon. “At the last ECB meeting they said such software may become mandatory, to save banks from United States Office of Foreign Assets Control (OFAC) sanctions,” said the Middle East bank compliance officer.

KYC – an aspiration
The last know-your-customer (KYC) update from the ECB came in 2011. Such compliance is not always up to par. “Mostly HR people are hired for customer service, and they have to do KYC, insisting on filling four or five pages with signatures, but the problem is they don't see what is being done with the form in the back office. If I say my annual income is [Egyptian Pounds] EGP 50,000 [USD6,565], and want to open account with EGP500,000 [US$65,659), is anyone stopping me? No,” said Ahmed Hussein, partner at Developers for Training and Consultancy (DTC), in Cairo.
Complicating overall compliance and regulating the sector is that just 7% of Egyptians are estimated to have a bank account, according to Dubai-based online payment provider PayFort; Egypt's population is 88 million. Furthermore, 80% of GDP is estimated to come from small-and-medium-sized enterprises that are unregulated and part of the informal economy.
Banking culture is not clear to all Egyptians and people like to keep money at home. KYC is new to society; some people are annoyed if you ask them if they are married, have kids, or rent or own a place,” said Hamdy El Sayed, partner at DTC.

Supervision in catch-up
One potential engine of reform is the main financial regulator the Egyptian Financial Supervisory Authority (EFSA) which was established in 1997, and has been active in relation to improving financial control standards, especially at the Egyptian Exchange (the stock exchange). However, the political upheaval has delayed implementation of recent international standards on, for example, corporate governance.
Abou-El-Fotouh is not that impressed though: “The EFSA is far behind international best practices - they have their own local issues, particularly after the revolution.”

FATF scorecard
Egypt was one of the founding members of the regional AML body MENA-FATF, and was last subjected to a FATF Mutual Evaluation Report in 2009. Egypt was deemed ‘compliant’ for five and ‘largely compliant’ for 20 of the 40+9 Special Recommendations; it was ‘partially or non-compliant’ for three of the six core Recommendations, notably regarding regulation, supervision and monitoring of designated non-financial business and professions (DNFBP).
As regards the Special Recommendations, Egypt was deemed partially compliant in implementing UN instruments; criminalising terrorist financing; freezing and confiscating terrorist assets; international cooperation; wire transfer rules; and cash at border declaration and disclosure systems.
The ECB is strong, but they are not as strong as they should be,” said Abou-El-Fotouh. “I severely criticise [the country’s financial intelligence unit – (FIU)] the Egyptian Money Laundering Combating Unit,” he said, as Egypt's Anti-Money Laundering Law and its Amendments No.80 of 2002 stipulates that an FIU should have annual statistics on cases and STRs (suspicious transaction reports) filed by financial institutions, “but until today, 10 years since it started, I haven't seen any.”
According to El Sayed, STRs are only shared with other FIUs. The US State Department (2014) reported that 1,549 STRs were received by the Egyptian Money Laundering Combating Unit, which is part of the central bank, between July 2012 and June 2013. There is no data on prosecutions, while El Sayed said there has been “no public naming and shaming.” The ECB's FIU did not respond to interview requests.
1) According to a leaked US Embassy cable from 2008, the Egyptian government “retains direct economic management of one-third of the Egyptian economy.”

Wednesday, April 15, 2015

Peaceful Drones

 MIT Technology Review Pan Arab

 The UAE is encouraging the development of non-militaristic drones. 

Wadi Drone, Martin Slosarik on the right

Drones, or Unmanned Aerial Vehicles (UAVs), have a reputation problem. Media attention has overwhelmingly focused on military use, particularly the United States’ controversial use of UAVs for extra-judicial assassinations, the circumvention of sovereign airspace, and the ‘collateral damage’ of civilians killed in Pakistan, Yemen and elsewhere. Indeed, the mosquito like buzzing of overhead drones is a source of nightmares for some, fearing death from the sky. Surveillance drones are also viewed with suspicion, while the unlicensed use of off-the-shelf UAVs is causing regulatory issues in multiple jurisdictions.
To counter such militaristic and ‘Big Brother’ type uses of UAVs, the United Arab Emirates launched the Drones for Good Award last year to push the development of drones for civil and peaceful purposes. The largest event of its kind globally, the tournament attracted over 800 applications.
In the Middle East, Saudi Arabia topped the list with 18 entries, followed by Egypt with eight entries, while other entries came from Jordan, Lebanon, Qatar, Algeria, Libya, Sudan, and Tunisia.
Some of the more interesting ideas submitted included a drone that can transfer organs for transplant from donor centers to the receiver in the shortest period of time, a drone that can eliminate fog from the atmosphere in an environmental friendly way, and a project that makes detection of land mines efficient and safe.
Awards were given along three categories: Government, National and International. Local telecom provider Etisalat won the Government award with its Network Drone, which can expand GSM network coverage vis UAVs during emergencies and disaster relief.


Inspired from insects

Patrick Thevoz, co-founder and CEO of Flyability in Switzerland, won US$1 million in the International category for Gimball, a lightweight, spherical collision-proof drone for search and rescue. A failing of search and rescue drones, indoor and out, has been censors’ blind spots, leading to crashes or damage to the drone. Gimball can collide with an object and keep on going, enabling the drone to enter restricted areas with numerous obstacles bolstering search and rescue capabilities.
While the US military is researching the use of insects’ exoskeletons for adaption in robots and as body armor, Thevoz utilized millions of years of insect evolution as an inspiration. “Insects don’t have a protective cage, so Gimball is not mimicking how insects fly but how to collide and continue flying without falling,” he said.
Already, Flyability has garnered interest from customers in Europe and the US with an aim to make the drone widely available in 2016. “There are a lot of drones with protective cages, but the separate aspect of the drone and its protection, we’ve not seen that flying anywhere so far (…),” he added.

Testing Wadi Drone

Supporting park rangers

Wadi Drone won the AED 1 million ($272,253) National prize, developed by four students at the New York University in Abu Dhabi, overseen by Matt Karau, a visiting instructor and research associate. The drone is a fixed wing airplane with a 2.5-meter wingspan carrying a small communications payload that retrieves information from ground-based scientific measurement devices including camera traps. Covering Wadi Wurayah National Park in the Emirate of Fujairah, the drone is able to fly for up to 40 kilometers and collects data from 120 camera traps that photograph wild animals, and gathers images of flora and fauna to aid research and monitoring by park rangers and conservationists.
“We sought to design something that respects the sensitivities of the Gulf, so there is no camera on the plane itself – no aerial photography – which rings alarm bells in many parts of the world,” said Karau.

While drones are already used for conservation purposes, there are many gaps in available technology that the team chose to develop. The drone is a Mobile Ubiquitous Land Extension (MULE), which carries a computer onboard to create a data communication link with the remote areas. While the concept of a data MULE is not new, “nobody put a data MULE and conservation together in a specific application,” such as for retrieving photographs in remote locations, said said Martin Slosar“Rangers have to hike three days to get these (camera) SD cards, and in the summer use a helicopter that costs 100,000 AED ($27,000) a day to employ,” he added.
The team’s non-urban setting will help them develop the concept further, as ironically in March 2015, Abu Dhabi banned the sale of recreational drones. New legislation is underway, and drone developers are slated to engage with the government to get the right balance between recreational use and development.

More competitions ahead

The Drones for Good Award has certainly sparked more interest in drone technology and related development. With 2015 designated by the UAE government as an innovation year, the success of the awards gave rise to another upcoming competition, the Artificial Intelligence (AI) & Robotics Award for Good, which was launched in February 2015 with the aim of improving government services for citizens through combining robotics, AI, and technology. The award is to take place at the 2016 Government Summit in Dubai.
As with drones, the competition’s aim is to show that AI and robotics are more than just for militaristic and surveillance purposes as they can be applied real for positive good in society and nature.

Photos courtesy Martin Slosarik

Wednesday, April 08, 2015

Egypt’s Bet on Nanotechnology

MIT Technology Review Pan Arab

Universities in Egypt are investing in nanotechnology to address some of the country’s pressing problems.


 A silicon wafer in the clean room

A khamseen engulfs Cairo; dust is everywhere, coating all surfaces and there is grit in one’s teeth. It is not an ideal day to visit a ‘clean room’ where technology is used at the nanoscale. Nano means one-billionth, so a nano-meter is one-billionth of a meter, or 1/1,000th the thickness of a human hair. At that scale, dust particles are huge. But safely zipped up in an all-in-one protective suit and the air-filtration system pumping away, the environment can live up to its name.
The 150 square meter clean room at Zewail City of Science and Technology in 6th of October City, outside of Cairo, is the largest in Egypt and aims to take nanotechnology development to the next level. The American University of Cairo (AUC) is equally at the frontiers of nanotech, but does not have the same facilities – just 20 square meters compared to Zewail’s three rooms, including a wet area. Zewail City, brainchild of the 1999 Nobel Laureate in Chemistry, Ahmed Zewail, aims to address some of the core challenges scientific research and development faces in Egypt. The country is not short of brains, but access to funds, equipment and cooperation with industry has been lacking.
It is still early days, said Professor Sherif Sedky, Academic President of Zewail City and Director of the Center for Nanotechnology, with expectations for greater application of nano devices and smart nano gels, for example, in the next two years. Zewail City is tapping into the local talent available by actively cooperating with other education institutions. Professors from AUC, like Sedky and Dr Nageh Allam, assistant professor of physics at AUC, are pushing such developments.

Addressing pressing problems

The dust storm ranging outside is thematically appropriate. Some of the nanotech research underway at Egyptian institutions is aimed at tackling climate change and other pressing problems such as water and energy. For instance, Allam, who also teaches at Zewail City, is working at the micro and nano level on desalinization to address the issue of water scarcity. “We have the Mediterranean and Red seas, so the aim is to make nano materials hold the salt from sea water to give fresh water,” he said. Through a grant from Qatar Foundation, a further project is to convert carbon dioxide in the presence of sunlight into natural gas. Related research is to produce natural gas from agricultural or kitchen waste, which, as Allam notes, in a country with 88 million people and counting, there is not a shortage of.

Despite the challenges

However, Allam is facing obstacles in his research. While facilities have improved, with Zewail’s clean room being utilized by Egyptian researchers, they pale in comparison to those elsewhere in the globally burgeoning nanotech field. MIT’s lab for instance supports 2,000 researchers, while other institutions have clean rooms of over 1,000 sq.m, several times larger than Zewail’s and 20 times larger than AUC’s.
“For Egypt the huge problem is funding, and secondly, there are no companies to supply us with chemicals or the small factories to make specialized items,” said Allam. “It may take eight months for a delivery, during which time someone else may have published (relating to my research). When I am at MIT, if I order in the morning it is on my desk that day.”
Despite such challenges, cutting-edge research is underway in Egypt. Dr Wael Mamdouh, assistant professor at the Nanotechnology Graduate Program at AUC, specializes in molecular systems at the nano scale. After groundbreaking work and numerous publications at European institutions, he returned to Cairo to shift the scope of his research in line with the needs of applied science in Egypt and the region. One such area is bacterial infections, a particularly common problem at local healthcare facilities.
To develop affordable solutions, Mamdouh and his team – including undergraduates – are researching natural properties for use in nano-fibers for dressings, such as the insulin in honey, herbs and shrimps. “We are investigating how to design novel techniques from these materials and analyze their properties to come up with prototypes that could solve some bio-medical problems with cancer, especially breast cancer, and bacterial infections,” said Mamdouh. “It is really promising to transfer material to nano materials as the properties change significantly.” Broken down at the nano level, the compounds from these natural extracts create a synergistic effect. “It is amazing to see. Insulin has no anti-bacterial products, but at the nano scale it does,” he said.
One student already has a provisional US patent relating to the electro-spinning of polysaccharide nano fibers, and others filed this year for anti-bacterial coatings and wound dressings. Through an electro-spinner, the anti-bacterial properties in the nano-fiber increase tremendously, making it close to an antibiotic. “It is the first time in Egypt, maybe even in the region, that an undergraduate is developing anti-bacterial coatings and wound dressings by electro-spinning,” said Mamdouh.

Yellow lighting protects photosensitive research materials at Zewail’s wet room in the clean room

Nano in physics

The uses of nano particles in biomedical research extends from the external to the internal. Dr Mohamed Swillam, assistant professor of physics at AUC, is focused on nano-photonics or optics. This is a new field in physics, at the nano-scale, that integrates nanotechnology with light. In previous research, for which Swillam won the Best Publication in Physical Science award from Misr El-Kheir Foundation in 2013, he proposed an ultrafast method to control and manipulate a laser beam on a nanoscale. His research has application in nanolithography, whereby tiny electronic devices control and manipulate nanoparticles to deliver drugs within the human body. “It can move a drug from one location to the other using light, like a nano-optical tweezer,” he said.

Further nano developments

Far removed from the human body, Dr Hanadi Salem, Professor in Materials Science and Director of the Nanotechnology Program at AUC, is researching severe plastic deformations to take bulk materials and reduce them to the nano level. One project involving applied nanotech is to produce components of superior mechanical properties and with optimum resistance, such as self-lubricating solids and high-wear resistance materials. Such development can be used to produce gears for machines with high wear resistance, and carbon nanotubes for metal-based break pads for vehicles. Last year, Salem’s team tested a self-lubricating solid in Germany that they had produced. “We had excellent performance, with very low wear rates. It has the capability to be commercialized,” she said.
A further area under research is thermomechanical treatment associated with intense plastic deformation related to steel rebar – the steel rods commonly used to reinforce concrete in buildings. By restructuring low carbon steel it produces equal strength and toughness as conventional steel but at a lower cost and with similar properties. Salem and students have managed to refine the structure from two microns to one micron using thermo-mechanical treatment. The second stage is to take it to the nano-scale, for which Salem has applied for grants and is seeking collaboration with the steel industry.

Photos by Paul Cochrane