Egypt Treasury Management Profile 2018 - Together we thrive - HSBC Group

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Egypt Treasury Management Profile 2018 - Together we thrive - HSBC Group
Egypt
Treasury Management
Profile 2018

                      Together we thrive
Egypt Treasury Management Profile 2018 - Together we thrive - HSBC Group
2                                HSBC Treasury Management Profile 2018 | Egypt   HSBC Treasury Management Profile 2018 | Egypt                                                                                                                                   3

Contents                                                                         Introduction and
                                                                                 Purpose

Introduction and Purpose   3                                                    Egypt
                                                                                 This is one of a series of Treasury Management Profiles designed for finance and treasury professionals worldwide. By providing a
Legal and Regulatory       6                                                    snapshot of banking, payments and cash management in selected locations, these profiles can help treasury managers to make
                                                                                 informed decisions, manage risks effectively and take advantage of new opportunities. However, this information is not intended to
Taxation8                                                                       be comprehensive and does not constitute financial, legal, tax or other professional advice. Accordingly you should not act upon the
                                                                                 information contained in this document without obtaining your own independent professional advice. The materials contained in this
Banking13
                                                                                 document were assembled in May 2017 (unless otherwise dated) and were based on the law enforceable and information available
Payment Instruments        14                                                   at that time.

Payment Systems            16
                                                                                  Facts and Figures
Cash Management            17
                                                                                  Capital/Other major cities: Cairo/Alexandria, El Giza,                                    National holidays:                      2019 — 7, 25 Jan,
                                                                                                              Port Said                                                     Source: www.goodbusinessday.com.        25, 28, 29 Apr, 1 May, 5, 6 Jun*,
Electronic Banking         19
                                                                                                                                                                                                                    1, 23 Jul, 10–12 Aug*, 1 Sep*,
                                                                                  Area:                                   1,001,450km2
Trade Finance              20                                                                                                                                                                                      6 Oct, 9 Nov*
                                                                                  Population:                             94.67m
                                                                                                                                                                            Business hours:                         08:00–17:00 (Sun–Thu)
Useful Websites            22
                                                                                  Languages:                              Arabic, English, French
                                                                                                                                                                            Banking hours:                          08:00–16:00 (Sun–Thu)
                                                                                  Currency:                               Egyptian pound (EGP)
                                                                                                                                                                            Stock exchange:                         The Egyptian Exchange (EGX)
                                                                                  Country telephone code:                 20
                                                                                                                                                                            Leading share index:                    EGX 30 Index
                                                                                  Weekend:                                Friday and Saturday
                                                                                                                                                                            Sectoral distribution                   Agriculture 11.9%,
                                                                                  National holidays:                      2018 — 1, 7, 25 Jan,                              of GDP (% of GDP):                      Industry 33.1%,
                                                                                                                                                                            Source: https://www.cia.gov/library/
                                                                                  Source: www.goodbusinessday.com.        8, 9, 25 Apr, 1 May, 15, 16 Jun*,                                                         Services 55.7%
                                                                                                                                                                            publications/resources/the-world-
                                                                                                                          1, 23 Jul, 21–23 Aug*, 11 Sep*,                   factbook/index.html.                    (2017 estimate)
                                                                                                                          6 Oct, 20 Nov*

                                                                                  * The date shown may vary by plus or minus one day. These dates are derived by converting from a non‑Gregorian calendar (e.g., Muslim or Hindu) to the Gregorian calendar.
                                                                                  Some of these dates cannot be determined in advance with absolute accuracy, even by the governing authorities. In the case of Muslim dates in particular, the feast days are
                                                                                  determined by the sighting of a new/full moon.

                                                                                 Government                                                                               Head of state
                                                                                 Legislature                                                                              Abdel Fatah al-Sisi, president since 8 June 2014.
                                                                                 A republic with a unicameral parliament.
                                                                                                                                                                          ®® The president is elected every four years and can serve two
                                                                                 ®® House of Representatives: currently 596 members are elected                              terms in office.
                                                                                    to serve five-year terms.
                                                                                                                                                                          Political leader
                                                                                                                                                                          Sherif Ismail, prime minister since 12 September 2015.
4                                                                                                               HSBC Treasury Management Profile 2018 | Egypt                         HSBC Treasury Management Profile 2018 | Egypt                                                                                                                        5

                                                                                                                                                                                                                                                                            Country credit rating
                                                                                                                                                                                                                                                                            Fitch Ratings rates Egypt for issuer default as:

                                                                                                                                                                                                                                                                              Term                                    Issuer Default Rating

                                                                                                                                                                                                                                                                              Short                                   B

                                                                                                                                                                                                                                                                              Long                                    B

                                                                                                                                                                                                                                                                              Long-term rating outlook                Positive
                                                                                                                                                                                                                                                                                                                    Source: www.fitchratings.com, April 2018.

                                                                                                                                                                                      Exchange rate & Interest rate (%)                                                     Consumer inflation & GDP volume growth (%)
    Economy

                                                                                                                                2017
                                                2011         2012          2013         2014          2015         2016                                                               20                                                                       20            16                                                                    16
                                                                                                                                Q1           Q2           Q3           Q4

    Exchange rate* (EGP/USD)                    6.0169       6.3057        6.9430       7.1431        7.8080       18.1250 18.084            18.040       17.606       17.681
                                                                                                                                                                                      15                                                                       15            12                                                                    12

    Interest rate (lending rate) (%)  **
                                                11.0         12.0          12.3         11.7          11.6         13.6         16.6         17.2         19.2         19.7

    Unemployment (%)                            12.0         12.7          13.2         12.9          12,8         12.6         12.0         12.0         11.9         NA             10                                                                       10             8                                                                    8

    Consumer inflation*** (%)                   + 10.1       + 7.1         + 9.4        + 10.1        + 10.4       + 13.8       + 29.8       + 30.3       + 32.2       + 26.1
                                                                                                                                                                                       5                                                                       5              4                                                                    4

    GDP volume growth*** (%)                    + 1.8        + 3.7         + 1.5        + 13.5        + 4.3        + 4.3        NA           NA           NA           NA

    GDP (EGP bn)                                1,371        1,542         1,887        2,047         2,242        2,708        –            –            –            –               0                                                                       0              0                                                                    0

                                                                                                                                                                                               2012           2013             2014    2015         2016                              2012            2013   2014           2015         2016

    GDP (USD bn)                                228          245           272          287           287          149          –            –            –            –
                                                                                                                                                                                            Exchange rate (EGP/USD)                                                                Consumer inflation %
    GDP per capita (USD)                        2,870        2,855         3,102        3,436         3,062        1,561        –            –            –            –                    Interest rate (lending rate) (%)                                                       GDP volume growth %

    BoP (goods/services/income) as % GDP        – 9.1        – 10.9        – 10.2       – 11.7        – 12.8       – 24.6       –            –            –            –
    * End period. ** Upper margin on commercial bank loans to the general public. *** Year on year.           Sources: IMF, International Financial Statistics, April 2018 and 2017   Sources: IMF, International Financial Statistics, April 2018 and 2017 Yearbook; and World Trade Organization.
                                                                                                                                        Yearbook; and World Trade Organization.
6                                                                                HSBC Treasury Management Profile 2018 | Egypt        HSBC Treasury Management Profile 2018 | Egypt                                                  7

Legal and
Regulatory

Central bank
The Central Bank of Egypt (CBE) is an autonomous institution
                                                                  Reporting
                                                                  All transactions between residents and non-residents must be
                                                                                                                                      ®® Anti-Money Laundering Law No 80 of 2002, as amended and
                                                                                                                                         supplemented by subsequent laws and Decrees in 2003, 2008          In 2017, the CBE
operating in accordance with Law No 88 of 2003 (of the Central    reported to the CBE on a monthly basis.                                and 2014; and
Bank, Banking Sector and Money) and its amendments.
                                                                  Companies are responsible for submitting transactions data
                                                                                                                                      ®® The Anti-Terrorism Law of August 2015.
                                                                                                                                                                                                            announced the
Bank supervision                                                  directly to the CBE. Data can be submitted electronically.          The CBE has also published associated AML Regulations and
The CBE’s Banking Control Department supervises the banking
sector in Egypt.                                                  Exchange controls
                                                                                                                                      Rules.                                                                cancellation of the
                                                                                                                                                                                                            USD 100,000 limit on
                                                                  Egypt is a member of the Common Market for Eastern and              Egypt is a member of the Middle East and North Africa Financial
Resident/non-resident status                                      Southern Africa (COMESA) regional trade zone. COMESA has            Action Task Force (MENAFATF). The Egyptian Money Laundering
A company is considered resident in Egypt if:                     implemented a Regional Payment and Settlement System                Combating Unit (EMLCU), the country’s financial intelligence

®® It is incorporated in accordance with Egyptian law;
                                                                  (REPSS), a multilateral netting system designed to facilitate
                                                                  cross-border payment and settlement between central banks in
                                                                                                                                      unit, is housed within the CBE. The EMLCU is a member of the
                                                                                                                                      Egmont Group.                                                         individuals’ transfers
®® The company’s headquarters are located in Egypt or if it’s     the COMESA area. The Bank of Mauritius acts as the settlement
   actual centre of management and top management are
   located in Egypt; or
                                                                  bank. REPSS processes payments in EUR or USD and reduces
                                                                  the time taken to effect transfers from five days to one.
                                                                                                                                      Account opening procedures require formal identification of the
                                                                                                                                      account holder and beneficial owners. Identification procedures       abroad and the
                                                                                                                                      should include the data of originator, trustee and beneficiaries
                                                                                                                                                                                                            USD 50,000 monthly
®® It is a company in which the Egyptian state, or any public
   juridical entities, own 50% or more of its share capital.      The Egyptian pound (EGP) is Egypt’s official currency. In           and the purpose of the accounts. Financial institutions are also
                                                                  November 2016, the CBE floated the EGP.                             required to identify the names and addresses of the authorised

                                                                                                                                                                                                            deposit cap on non-
Bank accounts                                                                                                                         signatories for the legal person and legal arrangement, in addition
Resident                                                          ®® Foreign exchange controls are administered by the CBE. Since     to identifying the legal status of the legal arrangement.
Foreign exchange accounts can be held by residents both              the flotation of the EGP, some restrictions on the export of
domestically and abroad. Resident domestic currency (EGP)
accounts cannot be held abroad, but are freely convertible into
                                                                     capital and the repatriation of funds have been relaxed.

                                                                  In June and November 2017 respectively, Egypt’s central
                                                                                                                                      Any individual conducting occasional transactions above a
                                                                                                                                      threshold set by the relevant supervisory authorities must be         priority imports.
foreign currency.                                                                                                                     identified. For banks, the Post Office and foreign exchange
                                                                  bank announced the cancellation of the USD 100,000 limit on         dealers, the threshold is EGP 30,000.
Non-resident                                                      individuals’ transfers abroad and the USD 50,000 monthly deposit
Non-resident bank accounts are permitted in both foreign and      cap on non-priority imports.                                        Financial institutions in the broadest sense must record and
domestic currency. Foreign exchange accounts (free accounts)                                                                          report suspicious transactions to EMCLU.
                                                                  Travellers may take out/bring in up to EGP 5,000 in cash and must
may be credited and debited with foreign currency payments
                                                                  disclose any foreign currency exceeding the amount or equivalent    All records must be kept for at least five years after the end of a
between accounts held abroad, and may be used to make
                                                                  of USD 10,000.                                                      business relationship.
payments within Egypt. Non‑resident domestic currency
accounts are freely convertible into foreign currency.
                                                                  CBE approval is required by a company intending to acquire more     Individuals entering or leaving Egypt must declare any foreign
                                                                  than a 10% stake in, or take actual control of, an Egyptian bank.   currency they are carrying equivalent to, or exceeding,
Interest can be offered on current accounts, savings accounts
and demand deposits. Overdraft facilities are available to                                                                            USD 10,000 to the customs authorities who must record this
                                                                  Anti-money laundering/counter-terrorist financing1                  information.
residents and non‑residents.
                                                                  Egypt has implemented anti-money laundering and counter-
                                                                  terrorist financing legislation. Notable legislation includes:
                                                                                                                                      1.
                                                                                                                                           Data as at May 2017.
8                                                HSBC Treasury Management Profile 2018 | Egypt                     HSBC Treasury Management Profile 2018 | Egypt                                                                                                                                            9

Taxation
                  1

    The rate of corporate     Resident/non-resident
                              A company is considered to be resident in Egypt if it is
                                                                                                                    Withholding tax (subject to tax treaties)
                              incorporated or effectively managed in Egypt.                                         Payments to:                                           Interest                   Dividends             Royalties            Services                Branch remittances

    income tax is a 22.5%     Any entity in which the Egyptian state or any of its companies                        Resident companies                                     0%/20%/32%*                5%/10%                None                 2%                      NA
                              owns more than 50% is also deemed to be a resident in Egypt.
    flat rate on annual net
                                                                                                                    Non-resident companies                                 0%/20%      **
                                                                                                                                                                                                      5%/10%                20%                  20%   ***
                                                                                                                                                                                                                                                                         5%

                              Tax authority                                                                         * Government bonds issued by the Ministry of Finance suffer 32% withholding tax on their interest. Treasury notes and bonds are subject to withholding tax of 20%.
                                                                                                                    ** The Egyptian-resident payer must withhold 20% tax at source (regardless of whether a lower rate applies under an applicable tax treaty); the recipient must submit a request
                              ®® Egyptian Tax Authority.
    profits. Companies        Tax year/filing
                                                                                                                    to the Egyptian tax authorities to obtain a refund of the tax over-withheld within six months of the date the interest was paid. Interest paid under a long-term loan (i.e. exceeding
                                                                                                                    three years) is not subject to withholding tax.
                                                                                                                    *** The Egyptian tax code does not have any specific withholding tax rules governing technical service fees, although the tax authorities may treat such payments as royalties for

    undertaking oil and
                              The fiscal year is the Gregorian calendar year, unless otherwise                      withholding tax purposes (and, thus, taxable at 20%). The ultimate tax treatment will depend on the scope of services provided and will be determined on a case-by-case basis.

                              stated in the company’s articles of association.

    gas exploration or        Companies must file a tax return within four months following
                              the end of the financial year. Tax is assessed on the basis of the                   Under the participation exemption, 90% of dividends received by
                                                                                                                   a resident parent company are exempt from tax if the Egyptian
                                                                                                                                                                                                                Capital gains tax
                                                                                                                                                                                                                Capital gains derived by a resident or non-resident company
                              information provided in the tax return.

    production are taxed      Companies are required to pay their corporate tax in advance in
                                                                                                                   parent holds at least 25% of the share capital or voting rights
                                                                                                                   of the payer for at least two years from the date the shares are
                                                                                                                                                                                                                from the sale of shares listed on the Egyptian stock exchange are
                                                                                                                                                                                                                subject to a 10% corporate income tax in a separate income pool.
                              three quarterly (in June, September and December) pre-payments                       acquired, or if the holding period is not met at the time of the                             This tax was initially suspended for two years as from 17 May

    at 40.55%.                of 20% of the previous years profit.                                                 distribution, the parent commits to hold the shares for two years.                           2015. However, a freeze on capital gains tax was extended for a
                                                                                                                                                                                                                further three years in May 2017.
                              Consolidated returns are not permitted and each company must                         Losses may be carried forward for five years. The carryback
                              file a separate return.                                                              of losses is not permitted, except for losses incurred by a                                  Capital gains derived by a resident or non-resident entity from the
                                                                                                                   construction company on long‑term contracts. Tax losses                                      disposal of unlisted shares in Egyptian companies are included in
                              Corporate taxation                                                                   incurred on the trading of shares may be carried forward only for                            taxable income and taxed at the standard corporate tax rate.
                              Resident companies are taxed on worldwide income with a credit                       three years.
                              for foreign tax; non-resident companies are taxed on Egyptian-                                                                                                                    Withholding tax (subject to tax treaties)
                              sourced income only.                                                                 Advance tax ruling availability                                                              Dividends paid to a resident or a non-resident entity are subject
                                                                                                                   Taxpayers may apply for an advance ruling by submitting a                                    to a 10% withholding tax (the tax withheld is deductible from
                              The rate of corporate income tax is a 22.5% flat rate on annual                      written request and copies of relevant documents to the tax                                  corporate income tax where the dividends are paid to a resident
                              net profits. Companies undertaking exploration or production of                      authorities. The tax authorities will issues a decision concerning                           corporate entity). The withholding tax rate is reduced to 5%
                              oil and gas are taxed at 40.55%. There is no surtax or alternative                   the request within 60 days.                                                                  where the recipient holds more than 25% of the capital or voting
                              minimum tax.                                                                                                                                                                      rights in the distributing company for at least two years. The rate
                                                                                                                   Wealth tax                                                                                   for non-residents may be reduced under a tax treaty.
                              Foreign taxes paid overseas may be deducted from Egyptian                            Religious wealth tax (zakat) is not levied in Egypt.
                              income tax payable, but the deduction may not exceed the total                                                                                                                    Profits realised by a branch or permanent establishment of a
                              tax payable in Egypt.                                                                                                                                                             foreign company are deemed distributed to the head office within

                              1.
                                 All tax information supplied by Deloitte Touche Tohmatsu (www.deloitte.com) and
                              Deloitte Highlight, 2017.
10                                                                                   HSBC Treasury Management Profile 2018 | Egypt           HSBC Treasury Management Profile 2018 | Egypt                                                                                          11

60 days from the year-end and are subject to the 5% dividend          Controlled foreign companies                                           Residential units with an annual rental value of less than            Payroll and social security taxes
withholding tax, subject to the provisions of an applicable tax       Income from investments in non-resident companies is                   EGP 24,000 are exempt. Non-residential property that is used          There is no payroll tax payable by employers. Domestic tax law
treaty.                                                               recognised under the equity method of revenue recognition and is       for commercial, industrial and administrative purposes with an        provides that the employee’s income is subject to the Egyptian
                                                                      taxed in Egypt if:                                                     annual rental value of less than EGP 1,200 is also exempt. The        salary tax in the following cases:
Tax treaties/tax information exchange agreements (TIEAs)                                                                                     user of the property pays the tax in two instalments. The annual
Egypt has concluded over 56 tax treaties with various countries.      ®® The Egyptian entity owns more than 10% of the non-resident          rental value of real estate is assessed every five years.             ®® Work is performed in Egypt whether or not the income is paid
                                                                         entity;                                                                                                                                      from an Egyptian or foreign source; or
Thin capitalisation                                                   ®® More than 70% of the non-resident company’s income is               Sales taxes/VAT (incl. financial services)                            ®® Work is performed outside Egypt and the income is paid or
Thin capitalisation laws in Egypt apply a 4:1 (debt to equity)           derived from dividends, interest, royalties, management fees or     VAT applies to all commodities and services. Input VAT may be            charged to an Egyptian office.
gearing ratio. Interest expense exceeding this amount is non-            rental fees; and                                                    offset against output VAT on most items.
deductible.                                                                                                                                                                                                        Employers make social insurance contributions at rates of 26%
                                                                      ®® The profits of the non-resident entity are not subject to tax in
                                                                                                                                             Companies with annual turnover of EGP 500,000 or more are             of the basic wage (to a maximum of EGP 1,120) and 24% of the
                                                                         its country of residence, are exempt or are subject to a tax rate
Transfer pricing                                                                                                                             required to register for VAT purposes. Voluntary registration is      variable wage (to a maximum of EGP 1,830).
                                                                         of less than 75% of the tax rate in Egypt.
Related-party transactions must be conducted on arm’s-length                                                                                 possible below this limit.
terms. Transfer pricing rules apply to the exchange of goods,                                                                                                                                                      The basic wage consists of basic salary and all fixed allowances,
                                                                      General anti-avoidance
services and the licensing of intangibles (brand, technology,                                                                                The VAT applies at the rates of:                                      while the variable wage comprises bonuses and incentives that
                                                                      General anti-avoidance rules have been introduced into Egyptian
etc.), as well as to loans (financing, guarantee fees, cash pooling                                                                                                                                                may be paid by the employer from time to time.
                                                                      tax law, under which if an essential purpose of any transaction is
agreements, etc.).                                                                                                                           ®® 13% until 30 June 2017;
                                                                      tax savings or the deferral of tax, the transaction may be adjusted
                                                                                                                                             ®® 14% from 1 July 2017;                                              Employees pay at rates of 14% of the basic wage and 11% of the
                                                                      to eliminate the benefit.
Five transfer pricing methods are specified:                                                                                                 ®® 5% on machinery and equipment used to produce a                    variable wage.
                                                                      In 2016, Egypt formally joined the OECD/G20 BEPS project to               commodity or render a service; and
®® Comparable uncontrolled price;                                                                                                                                                                                  Statutory payments to employees under profit-sharing regulations
                                                                      tackle Base Erosion and Profit Shifting.                               ®® 0% for exports.
®® Resale price;                                                                                                                                                                                                   may not be deducted for corporate income tax purposes and are
®® Total cost plus profit margin;                                     Stamp duty                                                             The additional tax/surcharge of 0.5% per week under the previous      not subject to salary tax.
®® Profit split; and                                                  Stamp duty is charged at various rates and fixed charges. The          law is reduced under the new VAT law to 1.5% per month.
®® Transactional net margin methods.                                  rate on banking transactions is 0.1% per quarter; the rate is
                                                                      20% on commercial advertisements; and from 1.08% to 10% on             Goods and services provided by companies in the free zones will
Priority is given to the comparable uncontrolled price method.        insurance premiums.                                                    be subject to a zero VAT rate.
However, if the information needed to apply this method is
unavailable, the other methods are used in a hierarchical order.      Cash pooling                                                           Financial transactions/banking services tax
The transfer pricing rules recommend that taxpayers follow            Egypt has no specific tax rules for cash pooling arrangements.         There are no specific financial transactions/banking services taxes
a four‑step approach to demonstrate that their controlled                                                                                    in Egypt, but see Stamp duty section.
transactions are in accordance with the arm’s-length principle.       Real property tax
Egyptian taxpayers are expected to prepare transfer pricing           Most real property in Egypt is subject to the real estate tax.
documentation annually.                                               The rate is 10% on the annual rental value after allowing a 30%
                                                                      deduction to cover related costs for residential property (a 32%
Advance pricing agreements (APAs) are allowed under Egyptian          deduction is allowed for non-residential property).
tax law, but there are no formalised procedures for applying for
an APA.
12   HSBC Treasury Management Profile 2018 | Egypt   HSBC Treasury Management Profile 2018 | Egypt                                                                                       13

                                                     Banking

                                                     Overview
                                                                                                                            Major banks
                                                     There are five public sector banks, 27 private and joint-venture
                                                     banks and eight branches of foreign banks in Egypt, operating a                                     Total assets (USD millions)
                                                                                                                            Bank
                                                     total of 3,768 branches. There are also 22 representative offices of                                30 June 2017
                                                     foreign banks.
                                                                                                                            National Bank of Egypt       75,460
                                                     The Egyptian banking sector is dominated by two state-owned            Banque Misr                  43,518
                                                     institutions: the National Bank of Egypt and Banque Misr.
                                                     Together these two banks accounted for approximately 31.7%             Commercial International     16,301
                                                     of the banking sector’s total assets at the end of 2016; Egypt’s       Bank (Egypt)
                                                     five largest banks by assets accounted for 63.3% of all banking        Qatar National Bank Alahli   10,833
                                                     assets.
                                                                                                                            Arab African International   110,705
                                                     There are 14 banks licensed to provide Sharia-compliant                Bank
                                                     products in Egypt – three full Islamic banks (Abu Dhabi Islamic                                     Source: www.accuity.com, April 2018.
                                                     Bank (ADIB), Al Baraka Bank and Faisal Islamic Bank) and 11
                                                     conventional banks with Islamic windows.

                                                     Foreign banks, including HSBC (HSBC Bank Egypt) and Qatar
                                                     National Bank, play an active role in the country’s financial
                                                     sector. In October 2016 Barclays sold its operations in Egypt to
                                                     Moroccan bank Attijariwafa Bank, ending 150 years of operations
                                                     in the country.

                                                     The CBE plans to sell 20% of the shares it owns in Banque du
                                                     Caire and Arab African International Bank. The IPO of Banque du
                                                     Caire is expected in 2018.

                                                     Approximately 85% of Egypt’s population is unbanked, according
                                                     to the World Bank. To encourage financial inclusion and to
                                                     increase access to financial services across the country, the CBE
                                                     has introduced new regulations for mobile payments. CBE figures
                                                     indicate that there are currently more than 6.2 million mobile
                                                     payment subscribers in Egypt.

                                                     Digital banking services are being developed by the country’s
                                                     larger banks and made available to both retail and corporate
                                                     customers.
14                                                                                        HSBC Treasury Management Profile 2018 | Egypt                       HSBC Treasury Management Profile 2018 | Egypt                                                                                                           15

Payment
                                                           1

Instruments

 Payment statistics                                                                                                                                           % value of all                                                    % volume of all
                                                                                                                                                              cashless payments 2015-16                                         cashless payments 2015-16
                                               Thousands of transactions   % change        Traffic (EGP billions)                     % change
                                                                           2015–16/                                                   2015–16/
                                               2014–15         2015–16     2014–15         2014–15              2015–16               2014–15

 High-value credit transfers                   1,021.1         1,074.5     5.2             22,587               29,709                31.5
                                                                                                                                                                 Cheques              3.5%                                              Cheques                       47.5%
 Low-value credit and                                                                                                                                            High-Value                                                             High-Value
                                               13,439          13,500      0.4             966                  1,047                 8.4
 debit transfers*                                                                                                                                                Credit Transfers     93.2%                                             Credit Transfers              3.9%
                                                                                                                                                                 Low-Value                                                              Low-Value
 Cheques                                       13,585.7        13,161.9    – 3.0           1,017.9              1,117.5               10.0
                                                                                                                                                                 Credit Transfers     3.3%                                              Credit Transfers              48.7%
 Total                                         28,045.8        27,736.4    – 1.1           24,570.9             31,873.5              29.7
 * Credit and debit transfers processed via the CBE ACH.                                       Source: Central Bank of Egypt, Monthly Statistical Bulletin.                                                                                                   Source: Central Bank of Egypt, Monthly Statistical Bulletin.

Cash                                                                       Direct debits                                                                      and MasterCard are the principal payment card brands issued,      Electronic wallets
Cash is an important payment medium in Egypt, particularly for             Direct debits are available in Egypt for low-value recurring                       although American Express and Diners Club credit cards are also   Electronic money schemes are available in the form of reloadable
low-value retail and commercial transactions. It is estimated that         payments such as utility bills.                                                    available. All cards issued are EMV-compliant.                    pre-paid cards.
over 94% of all transactions are conducted in cash.
                                                                           Interbank direct debit payments are processed via the ACH.                         Government Payroll cards enable government and public             Mobile wallet payment apps are offered by a number of banks
In January 2017, the CBE established the National Council for              Funds are available to the beneficiary on a next-day basis.                        sector employees to collect their salaries and pensions via ATM   and by providers such as Etisalat, Vodafone and Orange. There
Payments with the goal of transforming Egypt into a cashless                                                                                                  terminals. There are currently five banks participating in this   are more than 4.5 million mobile wallet users in Egypt, according
society.                                                                   Cheques                                                                            scheme.                                                           to MasterCard.
                                                                           The cheque is the dominant cashless payment instrument for
Credit transfers                                                           both retail and commercial payments.                                               Internationally branded debit and credit card payments are        The Phone Cash mobile service is available to the country’s
Credit transfers in Egypt can be paper based or automated.                                                                                                    processed by the card-issuing companies.                          banked and unbanked population. The service can be linked to
                                                                           Cheques are processed manually by the CCH. Final settlement                                                                                          credit cards and payroll cards and enables the user to pay bills,
®® High-value and urgent credit transfers are cleared and settled          is via the RTGS. Cheques drawn at banks within Cairo’s clearing                    There were 9,832 ATMs and 61,764 POS terminals in Egypt at        deposit/withdraw cash and to transfer funds.
   via Egypt’s national RTGS system on a same‑day basis.                   house district are settled on a next-day basis. All other cheques                  the end of 2016. The national ATM network, the 123 network, is
®® High-value credit transfers can also be effected on an                  can take up to five working days to clear.                                         operated by the Egyptian Banks Company. All ATMs are EMV-
   interbank basis via SWIFT’s FIN Y-Copy service (a high-value                                                                                               compliant. 123 is also a debit and pre-paid card brand. Its 37
   settlement system) with the CBE acting as settlement agent.             Card payments                                                                      bank participants have issued an estimated 18 million cards.
                                                                           There is limited use of payment cards in Egypt.
®® Low-value and non-urgent credit transfers are processed and
   settled via the ACH. Low-value credit transfers include payroll,
                                                                           There were approximately 12.1 million debit cards and 3.9 million
   supplier and third-party payments. All government employees
                                                                           credit cards in circulation at the end of 2016, a year-on-year fall
   receive their salaries through bank accounts.
                                                                           of 1.7% in debit cards but a rise of 17.6% in credit cards. Visa

                                                                                                                                                                                                                                1.
                                                                                                                                                                                                                                     Central Bank of Egypt, Monthly Statistical Bulletin.
16                                                                                         HSBC Treasury Management Profile 2018 | Egypt                         HSBC Treasury Management Profile 2018 | Egypt                                                                                          17

Payment                                                                                                                                                          Cash
Systems                                                                                                                                                          Management

Type                                                                   The CCH                                                                                   Domestic                                                                Custody and securities settlement1
The RTGS system, Egypt’s national interbank real-time gross            Cheques are manually exchanged at the CCH.                                                Notional pooling                                                        Depository
settlement (RTGS) system, is operated by the CBE.                                                                                                                Notional pooling is permitted between resident and non-resident         ®® Misr for Clearing, Settlement and Central Depository (MCDR).
                                                                       Final settlement takes place across participants’ accounts held                           companies on a domestic and cross-border basis. One or more
The CCH (Cheque Clearing House) is operated by the CBE.                at the CBE via the RTGS. Cheques drawn in Cairo are settled on                            legal entities may be included.                                         The main objectives of the MCDR are to apply the central
                                                                       a next-day basis. All other cheques can take up to five working                                                                                                   depository system, effect central registry of securities traded in
The EG-ACH (Egyptian Automated Clearing House) is operated             days to clear.                                                                            Cash concentration                                                      the Egyptian capital markets, and facilitate securities trading on
by the Egyptian Banks Company, an organisation made up of the                                                                                                    Cash concentration is permitted between resident and non-               dematerialised shares. The MCDR also aims to undertake clearing
CBE and Egypt’s leading banks.                                         The EG-ACH                                                                                resident companies on a domestic and cross-border basis. One or         and settlement on securities traded in the capital markets and
                                                                       The EG-ACH processes credits and debits on a net settlement                               more legal entities may be included.                                    apply the delivery versus payment system.
Participants                                                           basis.
The RTGS, CCH and ACH systems have 40 participants.                                                                                                              Collections                                                             Settlements cycle
                                                                       Final settlement takes place across participants’ accounts held at                        Several banks in Egypt offer cash and cheque collection services        ®® T+0 for securities traded on the Intra-day Trading System.
Transaction types processed                                            the CBE via the RTGS.                                                                     to corporate clients.                                                   ®® T+1 for government bonds that are traded through the Primary
The RTGS system processes high-value and urgent EGP-
                                                                                                                                                                                                                                            Dealers System.
denominated electronic credit transfers. In addition, it effects the                                                                                             Cross-border
                                                                                                                                                                                                                                         ®® T+2 for all other securities.
final settlement of participants’ net balances originating from                                                                                                  Cross-border payments are routed via SWIFT and settled through
Egypt’s other clearing houses.                                                                                                                                   accounts held with correspondent banks abroad.
                                                                        Currency centre holidays
The CCH manually processes all cheque payments.                         2018                         1, 7, 25 Jan, 8, 9, 25 Apr, 1 May,                          Lifting fees
                                                                                                     15, 16 Jun*, 1, 23 Jul, 21–23 Aug*,                         ®® Per mille or percentage-based fees are applied on funds
The EG-ACH processes electronic credits and debits.                                                  11 Sep*, 6 Oct, 20 Nov*                                        transfers between resident and non-resident accounts.
Operating hours                                                         2019                         7, 25 Jan, 25, 28, 29 Apr, 1 May,
The RTGS, CCH and EG-ACH systems operate from 08:00 to                                                                                                           Short-term investments
                                                                                                     5, 6 Jun*, 1, 23 Jul, 10–12 Aug*, 1 Sep*,
17:00 EST, Sunday to Thursday.                                                                                                                                   ®® Interest can be earned on resident and non-residents current
                                                                                                     6 Oct, 9 Nov*
                                                                                                                                                                    accounts, savings accounts and short‑term deposits.
                                                                       * The date shown may vary by plus or minus one day. These dates are derived by
Clearing cycle details                                                                                                                                           ®® Time deposits are popular with large companies and typically
                                                                       converting from a non-Gregorian calendar (e.g., Muslim or Hindu) to the Gregorian
The RTGS system                                                        calendar. Some of these dates cannot be determined in advance with absolute                  have maturities of one, three, six and 12 months.
®® 08:30–16:00 EST: the RTGS system settles transactions in real       accuracy, even by the governing authorities. In the case of Muslim dates in particular,   ®® Certificates of deposit are offered in EGP, USD, EUR and GBP.
                                                                       the feast days are determined by the sighting of a new/full moon.
   time and with immediate finality. (During Ramadan, the RTGS                                                                                                      Maturities range up to ten years. Interest can be paid monthly,
   is operational from 08:00 to 13:00.)                                                                                 Source: www.goodbusinessday.com.            semi-annually or annually.
                                                                                                                                                                 ®® Corporate bonds are issued in EGP and are available to both
Payment instructions are submitted using SWIFT messages.                                                                                                            residents and non‑residents.
Settlement takes place across the participant banks’
                                                                                                                                                                 ®® Treasury bills (T-bills) are issued by the CBE via weekly auctions
correspondent accounts at the CBE.
                                                                                                                                                                    or via the secondary market. T-bills typically have maturities of
                                                                                                                                                                    91, 182, 273 and 364 days.
                                                                                                                                                                 ®® Seven-day and 28-day repo agreements are available.
                                                                                                                                                                 ®® Money market funds are widely available.
                                                                                                                                                                                                                                         1.
                                                                                                                                                                                                                                              Data as at May 2017.
18   HSBC Treasury Management Profile 2018 | Egypt   HSBC Treasury Management Profile 2018 | Egypt                                                                   19

                                                     Electronic
                                                     Banking

                                                            The CBE has                              Electronic banking is available in Egypt. There is no bank
                                                                                                     independent electronic banking standard; each bank offers its
                                                                                                     own proprietary systems for corporate banking purposes.

                                                            authorised Egypt                         Internet and mobile banking is offered by Egypt’s leading
                                                                                                     commercial banks, but it is not commonplace. Under CBE
                                                            Banks Company to                         regulations, mobile banking transactions are subject to a
                                                                                                     EGP 3,000 limit for cash withdrawals.

                                                            build and operate                        The CBE is keen to promote the use of electronic payments,
                                                                                                     and mobile payments in particular, given the country’s mobile

                                                            a mobile payment                         penetration rate (112%). As such, it has authorised Egypt Banks
                                                                                                     Company to build and operate a mobile payment interbank and
                                                                                                     clearing service, the Mobile Interbank Switch.

                                                            interbank and clearing                   The CBE requires telecommunications companies (along with
                                                                                                     their partner banks) to obtain a licence to operate mobile banking
                                                            service, the Mobile                      services from the National Telecom Regulatory Authority.

                                                                                                     Egypt had an estimated internet penetration rate of 48% at
                                                            Interbank Switch.                        the end of 20171; mobile penetration is an estimated 111%2;
                                                                                                     smartphone penetration is 57%3.

                                                                                                     1.
                                                                                                          www.statista.com.
                                                                                                     2.
                                                                                                          BuddeComm.
                                                                                                     3.
                                                                                                          Focus on Egypt, 2017, mideastmedia.org.
20                                        HSBC Treasury Management Profile 2018 | Egypt             HSBC Treasury Management Profile 2018 | Egypt                                                                                                            21

Trade
Finance

     Exporters must        Imports
                           Documents
                                                                                                    Prohibited imports
                                                                                                    A negative list (of products that may not be imported) is in
                                                                                                                                                                            Key import partners

                           In order to import goods into Egypt, a customs declaration,              operation. It is prohibited to import certain commodities into

     register with the     commercial invoice (including a full description of the imported
                           goods), bill of lading, custom procedural certificate, delivery order,
                                                                                                    Egypt, in order to protect fauna and flora, and for national
                                                                                                    security and property reasons.
                                                                                                                                                                                 China                    13%

     GOEIC. They must
                           packing list and certificate of origin are required. Imports also
                           require an inspection report.                                            Imports of used telecommunications materials for trading                     Germany                  8.8%
                                                                                                    purposes are prohibited.                                                     USA                      5.4%

     meet a minimum
                           Licences                                                                                                                                              Italy                    4.6%
                           All importers are required to register with the General                  Exports                                                                      Turkey                   4.3%
                           Organisation for Export and Import Control (GOEIC) within the            Documents                                                                    Saudi Arabia             4.2%

     capital requirement   Ministry of Foreign Trade and Industry. All registered importers
                           must be Egyptian nationals and satisfy a number of conditions,
                                                                                                    In order to export goods from Egypt, a customs declaration,
                                                                                                    commercial invoice, packing list, customs procedural certificate,
                                                                                                                                                                                 Russia                   3.8%

                           including those regarding financial liability.                           export statistical form, bill of lading and certificate of origin are

     of EGP 3,000 and      Payments for imports must be made through a bank operating in
                                                                                                    required.
                                                                                                                                                                            Key export partners
                                                                                                    Exports also require a technical standard or health certificate.
     must not have a
                           Egypt.

                           Taxes/tariffs and other fees                                             Licences
                                                                                                    Exporters must register with the GOEIC. They must meet a
     criminal record.
                           Egypt is a member of the Common Market for Eastern and
                           Southern Africa (COMESA). Tariffs on trade within the COMESA             minimum capital requirement of EGP 3,000 and must not have a
                                                                                                                                                                                 UAE                      13%
                           free trade area have been abolished.                                     criminal record.
                                                                                                                                                                                 Saudi Arabia             7.8%
                                                                                                    Taxes/tariffs and other fees                                                 Italy                    6.6%
                           Egypt is also a participant in the Agadir Agreement, a free trade
                           agreement between Egypt, Jordan, Morocco and Tunisia.                    No taxes are charged on exports from Egypt.                                  Turkey                   6.4%
                                                                                                                                                                                 UK                       4.47%
                           As a member of the Greater Arab Free Trade Area (GAFTA), Egypt           Prohibited exports                                                           USA                      4.5%
                           has eliminated most trade tariffs with GAFTA’s 16 other member           A negative list (of products that may not be exported) is in                 Lebanon                  3.6%
                           states. GAFTA has established a bilateral free trade agreement           operation.
                           with the USA.                                                                                                                                    Source: The World Factbook. Washington, DC: Central Intelligence Agency, 2017
                                                                                                    Financing imports and exports                                           (https://www.cia.gov/library/publications/resources/the-world-factbook/index.html).
                           Imports are separated into six groups for tariff purposes ranging        Imports
                           from 2% up to 32%.                                                       There are no financing requirements for imports.

                           There are ten free trade zones in operation in Egypt (Alexandria,        Exports
                           Nasr City, Port Said, Port Said East, Suez, Ismailia, Damietta,          There are no financing requirements for exports.
                           Shebin El Kom, Keft and Media Production City). There is also a
                           North-West Suez Special Economic Zone near the Red Sea Port
                           of Sokhna.
22                                                                        HSBC Treasury Management Profile 2018 | Egypt   HSBC Treasury Management Profile 2018 | Egypt                                                                                                                                    23

Useful
Websites

 Central Bank of Egypt                                         www.cbe.org.eg

 Leading Banks:        Arab African International Bank         www.aaib.com

                       Banque Misr                             www.banquemisr.com

                       Commercial International Bank (Egypt)   www.cibeg.com

                       National Bank of Egypt                  www.nbe.com.eg

                       QNB Alahli                              www.qnbalahli.com

 Egyptian Banking Institute                                    www.ebi.gov.eg

 Federation of Egyptian Banks                                  www.febanks.com

 Egyptian Banks Company                                        www.egyptianbanks.com
                                                                                                                          Disclaimer
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