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Al-Ahram Weekly 1 - 7 July 1999 Issue No. 436 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 1 - 7 July 1999 Issue No. 436
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Profile Features Special Interview Travel Living Sports Time Out Chronicles People Cartoons Letters New privatisation drive
By Gamal Essam El-DinThe government is launching a new initiative to sell 35 public companies that have so far remained firmly in the grip of the state. The pricing and valuation groundwork for these companies has already been completed by the Public Enterprise Office (PEO) and the Central Auditing Agency (CAA), officials noted.
Public Enterprise Minister Atef Ebeid recently announced that the government is planning to sell state property worth LE6 billion over the next six months. He explained that the objective of the new sale is to avoid delays -- caused by complicated technical and debt problems inherited from the Nasser and Sadat eras and political objections from leftist opposition parties -- that have plagued previous attempts at privatisation and discouraged investors.
Besides, he said, a reform programme worth LE2.5 billion has already been endorsed to encourage the privatisation of 29 textile and engineering companies. "These companies failed to find buyers recently, but we are determined to rectify their financial and technical problems because we will never sell them at a loss," Ebeid said.
Addressing a recent "privatisation" symposium organised by the Egyptian Association of Stock Brokers, Ebeid said during the past five-and-a-half years, 123 public sector companies were either partly or fully privatised, generating receipts of almost LE12.5 billion. These companies, he added, account for 39.2 per cent of the targeted 314 firms slated for divestiture on the privatisation list.
Elaborating on these privatisation sales, Ebeid explained that the government has so far sold more than 51 per cent of its stakes in 77 companies. "This includes 36 companies which were privatised on the stock market, 13 sold outright to anchor investors and 28 sold to employees," Ebeid said.
In addition, 19 companies were partly privatised on the stock market, while 27 companies were either liquidated or sold as state assets.
The new privatisation plan includes selling the state's controlling stake (90 per cent) in such enterprises as the Egyptian Company for the Production of Starch and Yeast, the Egyptian Telephone Company, the General Egyptian Company for Electrical Projects and El-Delta Cotton Ginning Company, according to Ebeid. "These companies are mainly intended to be sold outright to strategic investors, be they Egyptian or foreign," he said.
The plan also includes disposing on the stock market of smaller percentages of the state's shares in several enterprises. These companies are: Kafr El-Zayyat Pesticides and Chemicals Company (25 per cent); Helwan Cement Company (15 per cent); and the Eastern Tobacco Company (11 per cent). "These percentages are, however, liable to be increased depending on demand," said Ebeid. He indicated that the plan aims to sell companies in the areas of foreign trade, cement, mining and cotton ginning known as "first-timers", whose shares are to be privatised for the first time.
In the tourism sector, the Public Enterprise Ministry last week took serious steps towards privatising a number of state-owned hotels located in different parts of Egypt. This move includes selling the historic three-star "Cosmopolitan Hotel" in downtown Cairo and the five-star "Dahab Helnan Hotel" in South Sinai's Dahab resort. The two hotels are currently affiliated to the state-owned Egyptian Hotels Company.
Salah El-Taroti, chairman of the Tourism Committee of the Peoples' Assembly, told Al-Ahram Weekly that the new privatisation efforts in the tourism sector should be highly welcomed "because it means that the glacial pace of privatisation in this sector is no longer accepted. We argued many times that the private sector has proved to be the best investor in tourism in Egypt. So, the faster the privatisation pace is in this field, the brighter and more thriving the tourism business in Egypt will be," El-Taroti said.
In the chemical sector, Ebeid indicated that final steps have already been taken to sell off the National Paper Company and 38.5 per cent of the Paints and Chemical Industries Company. He explained that negotiations are under way to sell the two companies to a consortium of Egyptian and British investors.
Despite Ebeid's optimistic announcements about the next period, there are signs that the privatisation programme may not be able to move much faster. Because of the high costs of improving financial and technical conditions in the remaining loss-making companies, only a few of the targeted 35 enterprises will be privatised in the second half of this year. Estimates show that the government needs an additional LE3 billion to persuade thousands of employees in the companies slated for privatisation to accept early retirement. "The excess labour in public enterprises is really a hurdle in the way of selling them to strategic investors. Not to mention their staggering debts and technical problems," said Amin Mubarak, chairman of the parliament's industry committee.
Mubarak, however, thinks that the privatisation programme has been moving at a reasonable pace. "It is good to see that the government has so far been highly successful in implementing this programme without any social upheavals or strong political opposition or wide-scale economic disturbances," he said.
Mubarak suggests selling off the remaining state-owned enterprises at a very cheap price to investors provided they will agree to tackle the labour, technical and financial problems of these companies. "This is what happened when the Federal Republic of Germany decided to privatise [the former] East Germany's giant enterprises. This policy is now starting to pay off, and we have to seriously consider it in Egypt," Mubarak said.
Ebeid said the number of loss-making companies has declined from 126 in 1993 to 57 at present. More than LE5 billion was paid to banks in settlement of debts owed by public companies, he added. Currently, efforts are being exerted to reduce the number of loss-making companies to just eight by the end of next year, he concluded.
