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Al-Ahram Weekly 27 July - 2 August 2000 Issue No. 492 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 27 July - 2 August 2000 Issue No. 492
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters No Trojan horse
By Aziza Sami
As the privatisation programme enters its final and most difficult phase more consistency is needed in its execution. Impending privatisations include not only the prize sectors -- utilities, petroleum and telecommunications -- but also the loss-making companies for whose restructuring almost half of the LE5 billion expected to accrue from privatisation this year has been set aside.
Some issues need to be addressed, though, if the programme is to receive a much-needed push. Duplications have abounded in the prerogatives given simultaneously to CEOs of holding companies and their affiliates. For instance, a holding company was negotiating a deal with one buyer, while an affiliated enterprise was simultaneously holding negotiations with another investor. The unviable pooling of incompatible production units and companies under one administration -- and the simultaneous flotation of companies similar in their production operations -- have repeatedly dogged what might otherwise have been successful privatisations.
The "prize" sectors have also suffered their share of contradictory statements -- the most recent of which was erroneously attributed to Minister of Telecommunications and Information Technology Ahmed Nazif, who was quoted as saying that "there will be no third mobile phone company." The announcement flew in the face of the government's decision to grant a third mobile phone license to Egypt Telecom. Is there any guarantee that similar retractions will not be voiced over the impending privatisation of Egypt Telecom itself?
Investors on the stock market are already frustrated by the government's dilly-dallying over privatisations. Anticipating the repeatedly promised flotations of telecommunications, oil and electricity investors have abstained from investing further funds in the stock market, contributing to the market's current depression.
To avert such back-tracking, privatisations must be gauged on an assessment of their strategic importance to consumers. The government is keen to market companies to "investors;" it should show the same keenness in placating consumers' concerns as to how the liberalisation of utilities will affect living standards.
Political sensitivity over the privatisation of utilities makes it all the more necessary for the government to address the issue with more realism rather than to make the by now usual, carte blanche claim that "no additional burdens whatsoever will be carried by the ordinary man."
Timing is also important. Is this is the right moment to privatise petroleum distribution companies when domestic oil revenues are dwindling and global oil stocks are plummeting thanks to OPEC's recent decision to raise its production ceiling?
U-turns abound: from overvaluation to undervaluation, from anchor investors to stock market flotations. The sudden launch of new cement companies on the stock market follows announcements that cement privatisations have been "terminated."
It took the Minister of Electricity Ali El-Sa'idi seven months to acknowledge that his ministry's electricity distribution companies would be partially sold off. Sa'idi's categoric denial last year that "there will be no privatisation of electricity distribution companies" was refuted one day later by the prime minister, who announced that "electricity distribution companies will be privatised."
One might be tempted to think a political conflict is being waged inside the government. A less sinister explanation would be that there is no coordination inside the cabinet vis-à-vis the implementation of privatisations. Ministers in every government department talk about privatisation although this should be the prerogative of the prime minister and the Minister of Public Enterprise Mokhtar Khattab.
Atef Ebeid's competence as the architect of Egypt's privatisation programme is beyond doubt. Surely now, at the cabinet's helm, he can bring more consistency to the implementation of privatisation which -- if administered correctly -- will attract badly needed investments.
But the government itself must first share the conviction that this is really the case. The privatisation programme is not a Trojan horse -- innocent on the outside and menacing from within -- and must not be administered as such.
Promises made by cabinet members for public consumption and simultaneous assurances to lure investors will backfire since neither, in the end, will be taken seriously by their intended constituencies.
