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Al-Ahram Weekly 10 - 16 February 2000 Issue No. 468 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 10 - 16 February 2000 Issue No. 468
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Focus Profile Travel Books Sports People Time Out Chronicles Cartoons Letters No more hands off
By Gamal Essam El-DinBusiness circles were taken by surprise when the government embarked this week on breaking up the monopoly of two public assets previously considered taboo -- national airline EgyptAir and consumer cooperatives. The government's unprecedented decision follows an earlier surprise move towards privatising several economic authorities by bringing them under the jurisdiction of the Ministry of Public Enterprise.
In a recent announcement, Transport Minister Ibrahim El-Domeiri announced that a study is underway to examine the possibility of turning EgyptAir into a holding company. El-Domeiri said that the decision, a preliminary step towards privatisation, is aimed at increasing the airline's competitiveness in an international climate characterised by the increasing number of mergers between airlines.
A duty-free zone is to be established at Cairo airport with a targeted annual turnover of LE1 billion.
"The zone will be operated by the private sector," El-Domeiri said, "and will include special refrigerators for vegetables and fruit exports, as well as a tourist and entertainment area."
The Cairo Airport and Civil Aviation Authorities will be restructured into independent entities. The step was announced two weeks ago by Prime Minister Atef Ebeid, who said that the budgets of economic authorities will be separated from the state budget as a step towards privatisation.
As a holding company EgyptAir will comprise a number of companies -- some estimates suggest as many as 17 -- operating in separate areas such as duty-free shop management, cargo- handling, airplane maintenance and repair, land services and storage. The government is also examining options for EgyptAir to enter into partnership with new local airlines to rationalise domestic transport, over which the national carrier currently enjoys a monopoly.
Economic analysts are agreed that converting EgyptAir into a holding company is an inevitable first step towards privatisation. "This applied in the past to industrial public sector companies," said Saad El-Khawalka, chairman of the People's Assembly Transport Committee. "In 1991 the government decided to bring 314 industrial public sector companies under the umbrella of 17 holding companies as a basic step towards privatising them. Turning a public asset into a holding company means that this asset is about to be restructured [in preparation for] a more market-oriented environment. This is what I think is going to happen with EgyptAir".
An equally significant step was the government's decision last week to offer its nationwide chain of consumer cooperatives to private investors under leasing contracts. Minister of Supply and Internal Trade Hassan Khedr announced that the decision is aimed at bringing 156 consumer cooperatives spread throughout the country under private management in order to improve their performance and sales. According to Khedr, this is only "partial privatisation" since the actual ownership of the cooperatives will remain with the state.
Economic observers, however, think Khedr's partial privatisation is in all likelihood an introductory step towards full privatisation of cooperatives, further arguing that the main reason behind the dismissal of former Supply Minister Ahmed Guweili was his adamant rejection of the privatisation of consumer cooperatives. The former minister was in the habit of referring to consumer cooperatives as "the last line of defence " for limited-income groups against the ravages of the market economy and the greed of some producers.
Responding to the outcry provoked by the partial privatisation of consumer cooperatives, Khedr told Cairo's Chamber of Commerce that their lease was intended to provide consumers with high quality products at reasonable prices.
The announcement of the leasing deal accelerates government moves towards privatising the food retail market. The door was opened wide some months ago with huge foreign investments in the food retail market including Sainsbury's acquisition, last December, of an 88 per cent stake in the Egyptian Distribution Group (Edge).
