 |
Al-Ahram Weekly 12 - 18 August 1999 Issue No. 442 
|
||
Published in Cairo by AL-AHRAM established in 1875 |
| ||
|
Al-Ahram Weekly 12 - 18 August 1999 Issue No. 442
|
||
| Published in Cairo by AL-AHRAM established in 1875 |
| ||
Egypt Region International Economy Opinion Culture Profile Books Features Travel Living Sports Time Out Chronicles People Cartoons Letters Back to the public
By Mona El-FiqiDue to the negative impact on duty-free shops of the government's recent decrees imposing sale restrictions, the shareholders of Misr Company for Duty-Free Shops have entered into negotiations with officials in two key ministries to sell their stake in the company to the public business sector.
Two months ago, the government issued regulations banning the sale of durable goods in duty-free shops outside customs outlets and curtailing the period allowed for duty-free purchases by travellers from one month after arrival from abroad to only 24 hours.
These regulations resulted in a fall in the company's share price from LE40 to LE16, as well as an 80 per cent drop in sales.
Negotiations now in progress between the company's general assembly and officials from the ministries of trade and finance are seeking a solution to the shareholders' problem.
Three years ago, when the government offered 77 per cent of Misr Company for public subscription, investors, 25 per cent of them foreigners, were encouraged by the company's potential based on a forecast of high sales. However, the recent regulations have negatively affected the firm's business.
Now the government is studying the possibility of buying back the company's shares in order to retain the confidence of investors in the overall privatisation programme, an official source said.
The government has "wronged the shareholders" by applying the new regulations after selling the company's shares, the source said. The government should apply all the necessary regulatory reforms in a company or sector before privatising it, he added. "This would be a better approach, even if it leads to a reduction in the company's share price before it is offered for sale," according to the source.
Recommendations in a World Bank study follow the same line. Citing several successful privatisation programmes in other countries, the study said that regulatory reform should be applied before privatisation and not after. But some experts disagree with this viewpoint.
Hamdi Abdel-Azim, professor of economics and dean of El-Sadat Academy for Administrative Sciences, said that the government had the right to issue new regulations to deal with the foreign currency shortage in the market by decreasing commodities imported by duty-free shops. After the government opens the door wider to imports as part of its liberalisation policy, the need for duty-free shops will not be so pressing, Abdel-Azim said.
Moreover, the government is not supposed to protect duty-free shops whose business is mainly importing rather than exporting, he argued.
If the government submits to pressure from the company's shareholders to repurchase their shares, it would be a setback to its privatisation policy, according to Abdel-Azim. "No one has the right to change his mind after the contracts have been signed," he added.
Eid Imbabi, head of the commercial department in Misr Company for Duty-Free Shops, said that in the next two weeks, the company's general assembly will hold a meeting to inform shareholders of the results of negotiations with the ministries of finance and trade.
The company's shareholders have delegated the board of directors to file a suit if the government refuses to compensate them for their losses, Imbabi added.
