Second Largest Spanish Investor in Egypt Remains Committed to the Market 

 

July 07, 2011

 

Arabian Cement Company discusses its plans in Egypt and requests attention from the GoE to mitigate its investment issues

 

Arabian Cement Company (ACC) held a press conference today to discuss the cement industry in Egypt, the company’s business strategy and future plans in the country, as well as issues regarding their local and international legal cases related to the Government of Egypt. Speakers at the press conference included Jose Magrina, ACC CEO; Karim Hafez, Managing Partner of Hafez Firm and Adjunct Professor of Law at the American University in Cairo.

 

Magrina commenced the press conference with a brief history on the company and the issues it has been dealing with since it entered the market in 2007. 

 

“Arabian Cement Company has invested more than US$ 566 million in the market to-date, representing the second largest Spanish investor in Egypt, generating an estimated 0.16% of the country’s gross domestic product,” explained Jose Magrina, ACC CEO. “In addition, ACC employs approximately 1,700 workers both directly and indirectly, mostly residents of the governorate of Suez. We are here for the long term and we have plans to expand, but we cannot do this without being able to operate our lines and produce more cement.”

 

"We have submitted a proposal more than 3 months ago to the Ministry of Industry to settle our differences: a solution which would provide the GoE with revenue that is not being collecting now, but we have been neglected so far.”

 

Hafez elaborated on the legal issues of ACC, stating that “in 2006 when the company first filed for the operations license, it was not awarded the license as per the industry law at the time dictated; instead it was left on hold. In 2007, after the construction of the factory was finished, a tender for operation licenses was held and ACC was forced to abide by the results of the tender, even though the tender law was not an ex post facto law and ACC were not even allowed to participate in the tender. As a result, the company was mandatorily required to bear the cost of the EGP 560 million for the license as well as an additional EGP 230 million for the electricity license.”

 

Commenting on the licensing issue, Magrina stated “apart from our original license being withheld from us and our company being forced not to participate in the tender, what is truly bias in this situation is that all other cement producers do not have to pay these fees, only new companies are obligated to pay. This creates a non-competitive market where prices will not decrease since new companies have a bigger debt to cover and old companies have a cost advantage."

 

The above has led to ACC filing a legal suit in the local courts as well as an international arbitration suit. The Comissaires d’Etat has already issued its opinion in favor of the company for the local court case, but the case continues. Due to the company’s legal issues, their hope of fully operating their second line of production has yet to be materialized because the Industrial Development Agency (IDA) refuses to provide ACC with the gas they need to operate.

 

“Fixing this issue means more jobs will be created and more cement will be produced, adding to the supply and reducing the cost for all Egyptians,” said Jose Magrina, ACC CEO. “Our ongoing dispute with the IDA is benefiting no one and is in contrast harming the development of the cement industry in specific and foreign investment in Egypt at large.

 

” Magrina concluded the conference by outlining the company’s proposal for the government of Egypt in order to mitigate their issues and commence operations in their factory. ACC is prepared to offer the IDA incremental payments, until the final verdict of the local courts is decreed, in which time, ACC will fully respect and abide by the verdict. In return, ACC would like the IDA to return gas to its second line of operation, so that their level of production will not be diminished and so that, simply put, business can resume as usual, a request that is currently resonating through much of the country.