Privatization remains thorny issue
Egypt, Economics, 6/12/2002

As part of economic reforms, launched in the early 1990s, shares in state-owned enterprises were sold to the public through the Stock Exchange, or directly to employees and anchor investors.

Privatization was intended to increase productivity and growth, returns on assets and equity, while raising efficiency, improving capital structure, and increasing capital expenditure.

Last February's progress report by the Ministry of Public Enterprise (MPE) on privatization said that a total of 190 companies and production facilities, collectively worth LE16.9 billion, had been privatized. Among them were 38 companies, whose shares were sold on the Stock Exchange for LE6.3 billion, plus LE7 billion worth of shares in 29 firms sold to anchor investors, 34 companies that sold LE950 million in stock options to employees and 10 companies that sold 40 per cent of their stock, worth LE650 million, on the Bourse.

There are still 181 firms that have not yet been sold.

1997 marked a peak in the privatization program, which earned LE3.4 billion, about 20.1 per cent of total revenues of the program.

Four years later the recession bit deep and earnings stood at LE91 million, approximately 0.05 per cent of the total revenue.

In other words, between 1996 and 1999, privatization boomed as 116 companies worth LE1.332 billion were sold during that period.

Out of the ten holding companies, the Holding Company for Mining and Metallurgical Industries brought in the highest price -- LE6.74 billion, about 40 per cent of the total revenue, whereas the Holding Company for Pharmaceuticals and Chemicals was at the other end of the scale at LE233 million.

Until 31 December 2001, out of the LE14.670 billion earned from privatization, LE4.5 billion repaid the companies' debts to banks, LE2.7 billion went towards early retirement schemes, assistance and payrolls of loss-making concerns, LE560 million was allocated to administrative and technical improvements, and LE6.63 million went to the Ministry of Finance.

Former Minister of Planning, Ismail Sabri criticized the lack of accurate data on the privatization program, which renders the task of assessing the program thus far difficult.

Sabri, who is also head of the Third World Forum, cited examples of deals concluded with anchor investors, saying that investors are never mentioned by name, hence no one knows if that person is capable of running the company or of guaranteeing the rights of employees.

Sabri added that the Egypt's privatization program did not comply with regulations issued by World Bank (WB).

"There seems to be no noticeable improvement in the management or productivity of the companies that were sold off...Privatization for its own sake is surely not the main objective," Sabri said, adding that the money to buy these companies should not be borrowed from banks working in the same country.

"It is incredible that people's money is being used to buy their own companies," he said. The privatization program would be better carried out with open bargaining with full transparency in the process," he said.

Former Minister of Economy, Sultan Abu Ali said that privatization was meant in the first place to boost productivity and speed up development.

"But there are other considerations, which make it difficult to evaluate the privatization program. For example, the government are still the majority shareholders in some companies," Ali said.

One important aspect of the privatization program is that it began with the sale of profit-making companies in order to attract investors.

"The toughest task will be to sell of loss-making enterprises," he said.

Previous Stories:
  Italy, major market for Egyptian exports   (6/11/2002)
  Central Bank of Egypt governor opens new check clearing house   (6/11/2002)
  People's Assembly to review new budget   (6/8/2002)
  Khattab expounds results of 10 years of Egypt's privatization program   (5/8/2002)
  Egypt one of US important trade partners   (5/4/2002)
  Insight into present economic development in Egypt   (4/30/2002)

Please add a link on your webiste pointing to ArabicNews.com and bookmark ArabicNews.com & subscribe to our daily email news bulletin.

Search