8 - 14 March 2001
Issue No.524
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Al-Ahram Weekly On-line 8 - 14 March 2001 Issue No.524 |
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High hopes
By Aziza Sami
When Prime Minister Atef Ebeid took office over a year ago, expectations ran high that the privatisation programme would be rejuvenated with the man considered to be its architect taking the government's helm. But privatisation continued at a relatively slow pace and its sluggishness was compounded by a host of factors related to the programme itself, as well as general economic conditions.
As some 49 companies are scheduled to go on the block this year -- attesting to the political will for seeing the programme through -- what is needed is a serious consideration of how challenges facing privatisation can be dealt with so as to achieve optimum results.
Announcements about the privatisation of Egypt Telecom reveal the unmet challenge of balancing political concerns and economic realities which has persistently dogged the programme. Declarations made mid-way through 2000 in this regard were replete with contradictions. No sooner had the head of the company gone on record saying a date had been set for Egypt Telecom's privatisation, then Minister of Telecommunications Ahmed Nazif denied this. Shortly thereafter the minister announced that the company would be put on the block. Then, last fall, privatisation was postponed due to the sharp slump in the sector worldwide as well as regional political tensions.
With the privatisation of Egypt Telecom now slated to take place some time this year, what is of key interest is that a stake of only 20 per cent is on offer -- a tranche that investors will likely view as too small to be worth going after.
While privatising more than 20 per cent of the company is viewed as politically undesirable, if the programme is to go forward, political concerns must be reconciled with economic viability. This is particularly critical given the ambitious privatisation plans for 2001.
Within this context, as well, there are other factors to be taken into account. For instance, there is widespread concern about the influence wielded by the chairmen of public enterprise holding companies over the privatisation process. These managers, who hold key positions in both the holding companies and affiliated companies, have continued to run the organisations after privatisation. Such a practice detracts from a company's competitiveness, as noted in the Carana Corporation's recently issued quarterly review of Egypt's privatisation programme which cited Giza Contracting as an instance of this phenomenon. Keeping the same management team on board a privatised company is one factor rendering the process more apparent than real.
Criticism has also been levelled at the programme's management, its transparency, the processes by which companies are selected to be privatised and appraised as well as the use of the proceeds accruing from the sale of assets.
Specific groups of stakeholders have voiced their additional concerns. Investors say that privatisation needs to be accelerated if it is to act as a dynamo for the economy. Another camp of detractors comprises people who are against the programme in principle saying that it jeopardises the livelihoods of average Egyptians and squanders strategic national assets in favour of the private sector and foreign interests. Proponents of this view include the parliamentarians who recently initiated the hearings about the performance of Kaha for Preserved Foods.
Such criticisms underline the need for the government to deal with the whole programme in a more candid fashion. Along with continuing administrative deficiencies, the absence of a clearly delineated strategy for privatisation has done little to alleviate concerns on either side of the fence, exacerbating them instead.
The government would be well-advised, therefore, in addition to seriously addressing the charges of corruption directed at its privatisation programme, to elevate it to a higher political level by elaborating on its rationale, costs and benefits and progress so far.
The Egyptian public, which the government continues to regard as a political "liability" constraining its reform efforts, must not be dealt with as unperceptive and incapable of absorbing intelligent discourse on economic issues.
Thus the government must not conduct privatisation away from the public eye, referring to the process only as a necessary evil for which no other explanations are given. Investors, for their part, should desist whispering their complaints amongst themselves and pressuring the government into action whenever its hesitation becomes unbearable.
These actions are imperative, otherwise the rift which pits the government and its reform ambitions against the investment community and the public will not only continue, but actually widen.
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