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Egypt’s government will lend EgyptAir 2 billion Egyptian pounds ($127.39 million) due to the impact of the coronavirus on its operations, the finance ministry said.

A member of the Star Alliance led by Germany’s Lufthansa LHAF.DE, EgyptAir halted regular international flights on March 19 when the government closed the country’s airports to combat the spread of the virus.

The government will support state-owned EgyptAir until it returns to 80% of its 2019 operations, the ministry said in a statement.

EgyptAir has continued flying some domestic routes and repatriation flights for citizens stranded abroad.

Egypt is allowing hotels to reopen for domestic tourists on condition they operate at no more than 25% capacity until the end of May.

From June 1, hotels will be allowed to work at up to 50% capacity.

The virus has shut down Egypt’s tourist sector, which accounts for 12%-15% of gross domestic product, leading to losses estimated at $1 billion per month.

 First Abu Dhabi Bank (FAB) has put on hold discussions to acquire the Egyptian assets of Lebanon’s Bank Audi AUDI.BY due to difficult market conditions.

FAB, the United Arab Emirates’ biggest lender, communicated the request a few days ago to Bank Audi, sources with direct knowledge of the matter told Reuters, declining to be identified due to commercial sensitivities.

Neither FAB nor Bank Audi were immediately available to comment. FAB said in February it would decide on the deal in the second quarter.

Bank Audi Egypt has grown from a three-branch operation acquired by Bank Audi in 2005 to 50 branches with total assets of $4.4 billion at the end of September.

One of the sources said the timing of the deal, which the source said was worth $700 million, was not right due to the need to support the UAE economy in light of the coronavirus pandemic.

The UAE central bank has launched $70 billion worth of capital and liquidity measures to support the economy during the crisis.

FAB said last month it was among the first UAE lenders to launch relief measures for customers, including the postponement of loan repayments and the suspension or reduction of fees and charges across a wide range of financial products.

FAB’s move came after Kuwait Finance House last month agreed to postpone finalising its acquisition of Bahrain’s Ahli United Bank, one of the biggest cross-border banking deals for years, until December due to the coronavirus outbreak.

Lebanese banks are trying to strengthen their finances as the country endures its worst financial crisis since the civil war.

Morgan Stanley struck a buy call on emerging markets sovereign debt, citing cheap valuations, the prospect of significant policy support and the fact that sell-offs in recent months have created a space for investors to move into.

The U.S. investment bank said EM (emerging market) sovereign credit spreads had stabilised at cheap levels, especially against U.S. credit, fund outflows have stopped and issuance has resumed, suggesting that markets have priced in much of recent COVID-19 “shock”.

“While we don’t dismiss the risk of another leg down, we see many factors as supportive,” Morgan Stanley analysts said.

So-called ‘high-yield’ countries with lowly credit ratings were “the only place to go” they added, recommending Argentina, Bahrain, Ghana and Pakistan.

Pemex (Mexico’s state oil firm) also remained a top pick. However, they said they we’re not adding Egypt to the buy list as it was already “priced to perfection”. They also moved Ukraine down to a “dislike.”

National Investment Bank (NIB) agreed to increase the capital of Arab Investment Bank (aiBANK) by EGP 800 million, Hala el Said, Egypt’s planning minister and chairman of NIB, announced in a statement.

The authorized capital of aiBANK will become EGP 2 billion following the increase, while its paid-up capital will stand at EGP 1.84 billion.

aiBANK is a subsidiary of NIB, which will have a share of EGP 731.4 million from the capital hike process.

El Said noted that an updated strategic plan has been approved for aiBANK for the period from 2019 until 2022. The plan includes offering new banking products, as well as improving the internal work environment.

The coronavirus pandemic has had a negative impact on the startup ecosystem across the Middle East and North Africa, a recent research report showed.

The report showed that the pandemic has negatively impacted 71 percent of startups in the region with 50 percent of the respondents confirming they have a cash runway of less than six months.

The survey was conducted by Wamda, the regional ecosystem enabler, and Arabnet, the event, insights, and innovation program organizer. Findings are based on data collected from 247 startup founders, with the UAE representing the largest share (24.7 percent) followed by Lebanon, Saudi Arabia and Egypt.

For e-commerce startups, 54.2 percent reported having a cash runway of less than six months, while a third of logistics startups said they have between one and two months of runway left. For healthtech startups, 43.8 percent of respondents said they have less than two months of runways.

Just 12 percent of startups reported having a runway of more than 12 months.

According to the report, founders have started putting aside talks of growth and expansion in favor of prioritising product development and adjusting business models to sustain operations while the pandemic persists.

Two thirds are now working remotely, while 8.6 percent said they introduced salary cuts of 50 percent or more and 15.9 percent said they reduced their number of employees.

“The survival factor for over half of the startups in the region is getting new investment or grants. Financial aid whether in the form of investment, loans or bill waiver are necessary to support the region’s startup ecosystem,” the report said.

As for funding rounds, 49.6 percent said that their funding round has been affected by the pandemic, while 29.5 percent said that they are not looking to fundraise, 11 percent said they will still receive funding as planned and 9.8 percent reported that their funding environment has improved.

UAE fintech startup Ziina, which raised a $850,000 funding, has launched a mobile-to-mobile payment service for instant money transfer to friends and family in the country.

Users can complete the transaction just by submitting a phone number and without details such as IBAN, SWIFT code.

“Currently, the app is available only to UAE residents with a UAE bank account. At a later stage, Ziina will launch in Saudi Arabia,” a spokesperson said.

Customers will need to install the Ziina app on their mobile phones to start sending money. They will be required to connect their bank account to the digital tool in order to access their personal funds or receive money transfers.

The maximum amount that users can send is 11,000 UAE dirhams. Transferring amounts as low as one dirham would be possible for most banks, although there are at least two banks in the country that have set a minimum limit of 100 UAE dirhams per transaction.

Ziina was founded by Faisal Toukan, CEO; Sarah Toukan, chief product officer, and Andrew Gold, VP for engineering.

Ziina’s advisory board includes Samih Toukan, the co-founder of Maktoob, Souq and Jabbar Internet Group, and Emre Tok, the ex-Careem VP of growth.

Faisal said they want to redefine the way people in the Middle East think of, interact with and experience financial services.

The UAE has a huge potential for companies like Ziina to expand, considering that it has one of the highest percentages of smartphone penetration in the world, at 91 percent of the population.

During Ramadan, the use of social media increases even more, with 95.2 percent of people who celebrate the holy month in the UAE using their mobile phones, according to Facebook’s research data.

The new firm also said it is also looking to introduce other services, such as QR code integration, prepaid cards and utility payments, among others.

“We want to democratize access to financial services by placing one platform in the hands of every individual. For example, we want to make it possible for anyone who wishes to invest to do so easily by integrating third-party robe-advisors to Ziina’s platform. We will prioritize use-cases based on customers’ largest pain points and add them product by product,” said Sarah.

By the end of 2019, a new virus from the Corona family has emerged from Wuhan province and spread worldwide. Within few months hundreds of thousands of people got infected, confusing governments and threatening economies.

Despite the catastrophic damage this virus has caused at various levels, no one can deny that it has had unexpected positive repercussions as well; because of this virus, we have come to realize what is essential and important: our health, our family and our diet…

Pollution and carbon emissions decreased, and the planet began to recover and everyone realized that working from home is possible. We also recognized that health workers are the true heroes.

And just like any country around the world, this virus has reached Lebanon and infections have started to appear in some Lebanese regions, which sometimes led to panic. As a result, the Lebanese banking sector, like other sectors, had to adopt some flexible measures in order to face this imminent danger on one hand, and to continue providing the urgent banking services for clients and access to their money on another hand.

Since the first days of the crisis, and with the first cases of the new Corona virus registered in Lebanon, the AM bank took the necessary measures to ensure the safety of everyone, both employees and customers. Even before the declaration of a health emergency, we implemented a complete sterilization process for buildings, offices and branches, in addition to providing sterilization materials to employees and customers within the branches.

With the increase in the number of injuries and the decision to declare a state of health emergency, we adhered to the decisions of the Lebanese government and the Association of Banks in Lebanon, so we chose carefully to open a number of branches spread geographically to cover the largest possible area of ​​Lebanese territory, and therefore we continued to serve our customers and secure urgent banking operations related to food security and medical supplies and Cards issuing and delivering. We have worked to fill in our ATMs systematically and periodically and ensured that they are always ready for service. In addition to that, we have made our online banking platform customer friendly, so that customers could conduct transactions, make inquiries and submit orders. Payment of domiciled salaries continued and coordination with the Central Bank didn’t stop with regards to clearing services.

AM Bank gave high priority to its employees’ safety as well as clients visiting the bank’s branches. Instructive boards with important preventive measures were installed within branches in addition to disinfectants. Moreover, the bank was keen to secure protective clothing that covers the entire body worn by employees and plastic insulator were installed on the counters to protect those in the branch. Add to that, part of the social distancing measures, only a certain number of clients were allowed to enter a branch at the same.

AM Bank has never lost contact with its customers and we have been keen to stand beside our larger family (clients) at this precise time. Our customer service center is ready around the clock to receive calls, answer questions and fulfill requests in the best way possible. On social media, triggered by our social responsibility, we made sure to spread awareness, prevention and positivity, and were always available to answer customer inquiries.

Despite commitment to a health emergency, AM Bank employees have acted responsibly to ensure business continuity and provide the necessary banking services. The bank has implemented a deliberate shift system that guarantees the safety of both employees and the smooth running of work. As for departments that can work remotely, they continue to function normally from home.

In conclusion, there is no doubt that life after the Coronavirus will not be the same as before, this pandemic has taught highlighted the fragility of our lifestyles and systems. It has also emphasized the importance of flexibility for institutions and individuals in order to adapt to any situation that may arise. We are convinced that surviving in this ever-changing world will.

During the past 10 years, Chinese companies have made important steps in integrating environmental, social, and governance (ESG) issues into their decision-making. However, the road is still long…

The idea of corporate social responsibility is relatively new in China. Among the Chinese public, CSR began to gain traction in 2008, after a magnitude 8.0 earthquake struck Sichuan province, killing 69,181 people, injuring 374,171 more, and leaving 18,498 unaccounted for. More than 15 million homes were destroyed, leaving ten million people homeless. The total damage was estimated at $150 billion.

After the so-called Great Sichuan Earthquake, the Chinese public demanded that business contribute to the recovery. Companies responded, offering $1.5 billion in support – and setting a new precedent for philanthropic CSR in China.

When Sichuan suffered another serious, though less devastating, earthquake in 2013, major multinationals were quick to offer support. Samsung’s CN¥60 million ($8.5 million) contribution, and Apple’s CN¥50 million ($7 million), confirmed that social responsibility had become an integral part of doing business.

As China’s new middle class flourishes, demands for CSR will only grow. Well aware of global norms and developments, middle-class Chinese expect safer products, better services, and a healthier environment. They are no longer willing to tolerate companies that prioritize profits over human and environmental welfare.

But, as powerful as public pressure is, it is no substitute for regulations. In 2006, Chinese corporate law was revised to include the concept of CSR, and the Shanghai and Shenzhen stock exchanges issued guidelines for disclosing CSR performance. More recently, China’s government introduced harsher punishments for companies that fail to meet ESG standards, including significantly higher fines and jail sentences for senior officials.

External rules have also helped. For example, in 2003, the European Union adopted new regulatory requirements on waste electric and electronic equipment and reduction of hazardous substances, which apply to the entire supply chain of any company operating in, or exporting to, EU countries.

Moreover, in 2016, the Hong Kong Stock Exchange made ESG reporting compulsory for listed companies. The HKSE followed up in 2018, when it introduced more stringent disclosure requirements.

These measures have had a powerful effect. From 1991 to 2005, Chinese companies issued just 22 CSR reports. In 2006-2009, the total rose to nearly 1,600. In 2018, that number was matched in just ten months: from January to October, companies issued 1,676 CSR reports – an 8.5% year-on-year increase.

Listed state-owned or state-controlled companies – which are more likely to incorporate the government’s priorities, from poverty alleviation to pollution control, into their business models – issue the most CSR reports. Government priorities are also reflected in the ways companies implement CSR: for example, in 2004, when China’s state forestry administration launched its “National Forest City” program, many companies focused their CSR efforts on tree-planting.

But the ESG record of Chinese business remains mixed, at best. For example, the quality of CSR reports varies widely, as do their rates of publication. And, in fact, as the number of CSR reports has risen, the share that can be considered good has declined.

This should not be surprising, since CSR reporting is still not mandatory, and there no penalties for failing to disclose ESG information, let alone for issuing poor-quality reports. Companies listed on the HKSE generally offer much higher-quality sustainability reporting than their counterparts listed in Shanghai and Shenzhen.

Local governments further undermine China’s ESG record. Despite Chinese President Xi Jinping’s 2012 declaration that economic growth should no longer be pursued without regard for its social and environmental consequences, local governments have remained focused on GDP. (A strong growth record can, after all, lead to promotions for Communist Party officials.) According to China’s former deputy minister of the environment, Pan Yue, many provincial governments have openly protected, and even actively supported, their biggest corporate polluters.

The good news is that this seems to be shifting, as the central government sustains – and, indeed, deepens – its commitment to ensuring that companies embed ESG objectives in their operations. Next year, new regulations will make ESG disclosure mandatory for 3,000 of China’s listed companies and bond issuers.

China’s CSR landscape has changed almost as much as its urban skylines over the last decade. But the next ten years should bring even faster progress. China’s people and their leaders are no longer willing to allow companies to shirk their social and environmental responsibilities.

Overview

A Pandemic may be the best manifestation in digging and highlighting differences in major countries economic systems’.

When it comes to the economies of the United States and China which are ideologically different, those differences became very obvious during the pandemic and soon after it. But the two countries have at least one thing in common: when this is all over, they will need to rethink their social contracts.

Different Strategies with different Outcomes

To control and reduce the virus transmission, China and the US have implemented social-distancing measures, which – together with the unemployment they produce – have broken the cycle of earning and spending that sustains global growth. The International Monetary Fund estimates that world GDP will contract by 3% this year. China’s shrank by 6.8% in the first quarter.

Yet the type of public-health measures pursued – and their outcomes – have diverged sharply. China’s strong lockdowns produced a dramatic decline in new cases, whereas America’s delayed and fragmented response allowed infections – and the death toll – to mount.

This divergence is often attributed to political differences: Chinese central planning allows for more resolute action. But this explanation misses the extent to which the US and Chinese growth models have shaped their responses – and the financial and economic effects.

The USA Model

In the US, decades of neoliberal policies have led to a dependence on debt-financed consumption. Americans saved little but borrowed a lot. Thanks to the “exorbitant privilege” afforded by the US dollar’s position as the leading global reserve currency, so did the government. Fiscal and current-account deficits swelled.

Inflation, however, remained low, even when the US Federal Reserve pursued expansionary policies, largely because of the positive supply shocks produced by the integration of China and other developing countries into the global economy. The Fed is taking that route again during the pandemic, slashing interest rates and expanding its balance sheet by more than $2.4 trillion in the past six weeks to prevent a systemic liquidity shortage.

The US financial system has also built up excessive leverage, while becoming increasingly disconnected from the real economy. Wall Street firms trade among themselves, rather than serving Main Street. Corporations rely more on capital markets than on banks.

Moreover, despite advancements in electronic payments, households and small businesses continue to operate mainly in less efficient cash, paper checks, and credit cards. The US Treasury is delivering pandemic stimulus payments through direct deposits and mailed checks.

Technology platforms have capitalized on this debt-driven growth model, pushing endless consumption by users – through, say, targeted ads – with less concern for supporting those attempting to generate income online. The “gig economy” exemplifies this one-way dynamic: a platform like Uber is optimized for sales and provides workers with the bare minimum of training and protection, while regulators take a hands-off approach.

It has long been clear that the US model is financially, environmentally, and – given skyrocketing inequality – socially unsustainable. But the COVID-19 pandemic has shown that any disruption of the debt-consumption cycle threatens to trigger collapse almost immediately: as soon as incomes are interrupted, private financial institutions curtail credit, fearing non-performing loans. Consumption plummets, depleting incomes further. To stave off disaster, the Fed and Treasury must step in, shifting credit risks to the public-sector balance sheet.

The Chinese Model

The Chinese model avoids many of these pitfalls. Beyond high savings, China has relied on exports and investment, rather than unsustainable levels of domestic consumption, to fuel growth. Furthermore, innovative technology platforms – especially in fintech – have linked the traditional economy with a broadly accessible digital ecosystem that encourages users both to consume and to earn, thereby boosting the Chinese economy’s structural and organizational resilience.

These are the results not of central planning, but of continuous experimentation on the ground and adaptation based on bottom-up feedback. It was tech platforms, not central planners that developed inclusive networks that fostered innovation, created new markets, and generated jobs. Regulators merely facilitated it.

The COVID-19 crisis has underscored the benefits of this approach. Chinese “super app” ecosystems create sustainable, circular digital “earn-spend-pay” business models that merge business and consumer functions, far more broad-based than Western models that are still segmented by sectoral regulations. During lockdown, Alibaba, Pinduoduo, and other marketplaces became a lifeline for many small- and micro-business owners, keeping them connected to millions of domestic and international consumers. Online logistics companies, such as JD.com, were also critical, as they ensured the delivery of essential goods throughout the lockdown.

Tencent’s WeChat, a social media platform, enabled people to stay in touch with their families and friends during the lockdown, while allowing some creative individuals to earn incomes from blogs and vlogs. Payments were sent via WeChat Pay. WeChat also enabled the government to relay critical messages to the public, and facilitated the coordination of complex projects, such as the delivery of critical medical equipment and supplies. Tencent’s Meeting app allowed schools to continue operating through online classrooms.

As lockdowns are eased, software installed in WeChat and Alipay, Alibaba’s online payment platform, is being used to monitor residents’ health and determine where they can go. This is possible because of these platforms’ reach: one or both of these apps is already installed on nearly every smartphone in China.

So, on top of the hierarchical traditional banking system, China has developed a flat, adaptive system connecting 800 million domestic smartphones in productive ways. This is a crucial element of China’s broader hybrid-circular savings-consumption-debt-income model, which is more resilient than the Western model of debt-financed consumption. Indeed, it is a major reason why China’s financial sector did not confront severe liquidity shortages that warranted a drastic central-bank response during the economy’s lockdown.

Source: WUAB Research Department – Project Syndicate