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Al-Ahram Weekly 14 - 20 October 1999 Issue No. 451 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 14 - 20 October 1999 Issue No. 451
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Books Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters Thinking globally
As the new prime minister was choosing his cabinet, the stability of the Egyptian banking sector was being threatened by rumours that the chairmen of its two leading public sector banks had been dismissed from their positions. National Bank of Egypt Chairman Mahmoud Abdel-Aziz was one of the targets of the rumours. In an interview with Al-Ahram Weekly, he lambasted what he considered regressive trends in the market and offered strong views on the issue of privatisation of banks.
How do you assess the state of the Egyptian banking sector, and the manner in which it has dealt with the "dollar crisis"?
Over the past eight years, Egypt has launched an aggressive and successful reform in which the banking sector has been the driving force. I cannot deny that over the past year we have had a problem in foreign exchange. I have my own views on this, which I relayed to the relevant authorities, but which were not aired in public. Now, after the new cabinet has been formed, I am more than optimistic that we will pull through.
Our revenue is back to normal from all resources. As soon as we apply a market-oriented plan, we will have our exchange rate in order. Minor fluctuations in the exchange rate are acceptable, and even healthy. There is no similarity between [the financial problems of] Egypt and Southeast Asia.
The question of the independence of the Central Bank of Egypt versus political intervention by the cabinet continues to be raised. What are your views on this?
I do not like to comment on the past, it was a crisis which did not last for more than 15 days. The banking sector is ready for any proper transactions in foreign currency.
What are your predictions regarding the stability of the exchange rate of the Egyptian pound versus the dollar?
I have no worries about the exchange rate. Over the past year, we have been preparing for a dynamic foreign exchange mechanism. The foreign exchange rate is a mirror of the economy.
The Egyptian pound will be strong, and no economic power can play against the market, neither the banks, nor the central bank nor the government.
The banks have come under fire in parliament and in the press for extending loans without guarantees to the private sector. What is your response?
From what readers find in the newspapers, they might think the economy -- its bankers and businessmen -- is a jungle of corruption. Nobody in the banking sector accepts corruption. Still, because of the nature of our profession, we cannot answer rumours in the market.
If I am accused of dispensing $2 billion to a businessman, do I have the right to say no, [that the correct] sum is only half a billion? Or can I say this businessman has no account in our bank, whatsoever? I cannot, because this violates the secrecy of the banking profession.
The question of the privatisation of Egypt's four public banks has been beset by ambiguities and contradictions. Announcements made over two years ago that one of these banks would soon be privatised were later retracted. What is the reason?
It is a sensitive matter. The government has done its job [in preparing for privatisation]. But at the same time, we are convinced that for 30 years the public has been fed [the story] that banks are the pillars of the economy and instruments of government in implementing its economic planning.
This is no longer true when we change our strategy from a centrally planned to a market-oriented economy. Funds in this case will go to the most efficient recipient. The National Bank of Egypt then will be playing the same role as the Egyptian American Bank or American Express Bank. The NBE will offer the same resources to shareholders, and will receive no orders from the government [on what] to finance.
But if we go on giving non-dynamic incentives [to the public sector banks] how can we compete with foreign banks and private banks in the domestic market, let alone compete globally.
Also, we cannot ignore that we have accepted [the terms of] the General Agreement on Trade in Services [GATS] agreement on the liberalisation of financial services. How can we compete when public ownership of the banks prevails? Why have our hands been tied?
You are a strong advocate of privatisation of Egypt's public sector banks. What is your prescription?
There is a widespread notion that we can privatise by selling five, 10 or 20 per cent [of bank assets] on the stock exchange. This is wrong. It is like begging money from uninformed stockholders. Three years ago [the current Prime Minister] Atef Ebeid ended this strategy.
We need new layers of management and a new business plan [which can only come about] through a strategic international banker and a reputable shareholder that will hold 20 per cent of the bank's assets and put in new money. Another 30 per cent of the privatised bank can be publicly owned by subscribers through the stock exchange after it has been determined who will run the bank and which technology and management policy [will be applied].
This is the ideal way of privatising banks. There should be no ambiguity or lack of transparency. Otherwise, it would be a disaster.
What are your predictions for privatisation under the new cabinet headed by Prime Minister Ebeid?
A faster rhythm. This doesn't mean that things should be sold cheaply, but over the past three years, companies have been over-valuated.
We need to have proper prices for companies. We also need to have no corruption. Our practices should be very clean, and companies should be open to all to buy, and sold to the highest bidder.
As chairman, would you support the privatisation of the NBE?
One of my hopes is to end my career by privatising NBE. At one time, it seemed like a dream because everybody was against it. Everyone was shocked because they did not know the depth of the revolution in the global economy.
This is the age of mega-banks. We have to think globally. We have to be ready for competition.
