Khattab expounds results of 10 years of Egypt's privatization program
Egypt, Economics, 5/8/2002

Ten years since the beginning of the privatization program in Egypt, the following questions are still being posed: Should we sell the companies to investors for no return? Would the Ministry of Public Business Sector devote its efforts for restructuring the companies instead of selling them because of the slow pace of the privatization program? What are the results of 10 years of privatization?

Attempting to answer these question, Moukhtar Khattab, Minister of Public Business Sector said that from the year 1993 until the end of February 2002, some 190 companies and factories were privatized, out of an aggregate of 314 companies which were held by the public business sector. He said only 181 companies are still in the possession of his Ministry and are still subject to the public business law.

On the proceeds of Egypt's privatization program during the past 10 years, the Minister noted that units worth L.E. 16.9 billion were privatized, of which L.E. 6312 million in value of the selling of the majority or the whole of the shares of 38 companies floated in the Egyptian Stock Exchange (ESE).

This besides a sum of L.E. 6979 million in selling 29 companies to anchor investors; L.E. 950 million in value of selling to the shareholders' Workers Association and L.E. 655 million in selling 40 per cent of 10 companies.

The proceeds also include L.E. 1100 million in selling tranches less than 50 percent of six companies and L.E. 909 million in value of floating assets of factories and production lines.

Khattab further noted that the year 1997 witnessed the peak in terms of privatization revenues which amounted to L.E. 3396 million, followed by the year 1996 where returns amounted to L.E. 2791 million.

The Minister expounded that the sum accruing from privatization amounted to L.E. 14689 million of which L.E. 4500 were spent on settling the debts owed to banks and L.E. 6628 million transferred to the Ministry of Finance. Moreover, a sum of L.E. 2705 million was devoted for early retirement; L.E. 578 million for technical and administrative reform of the companies and L.E. 265 million for going ahead with the reform process.

"The privatization program now focuses on selling the loss-making companies and restructuring some others, which have proved to be difficult to sell at the present time," Khattab noted.

"Because of social circumstances or these companies' big volume, the Cabinet has extended some facilities to lure investors to buy those companies in order to reactivate the selling process," Khattab said.

"The Minister dismissed as incorrect the reports that there is a tendency to grant ownership for the losing companies to investors for no return. Selling is restricted to investors who can pump funds for developing those companies in future," he expounded.

Khattab said that incentives aim at facilitating privatization and at the same time maintaining the State's rights, as well as enabling investors to manage modernization process.

"Only 34 companies out of 190 companies were sold to the Shareholders' Workers Association in the context of expanding the ownership base, as selling to the Workers' Association exempts the Ministry from paying compensations for early retirement," Khattab noted.

The process of the restructuring of a number of companies, Khattab pointed out that it costs not less than L.E. 12 billion for the nearly losing and less profitable companies. "This sum is enormous given the fact that we are dealing with entities, machines, labour, technology and competitive markets," he added.

"The Ministry has started to restructure the sectors of iron and steel and spinning and weaving, at the same time, the Ministry is making contacts with banks for settling a part of these companies' debts," he said.

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