9 - 15 August 2001
Issue No.546
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Al-Ahram Weekly Online 9 - 15 August 2001 Issue No.546 |
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Against all odds?
With the golden period of selling lucrative companies long over, the privatisation programme is in its most difficult stage. The government has for some time been dragging its feet on the sale of companies weighed down by financial problems and surplus labour. As it gears up to divest these entities, the economy is presenting increasingly inauspicious conditions in which to entice already reticent investors.
In a market where employment opportunities are limited, privatisers must contend with the fallout expected as a result of the "restructuring of labour." Already the civil aviation and railway authorities have experienced what seems to be a harbinger of things to come. Having stopped hiring labour on a permanent basis, in attempts to operate in a more flexible manner, these authorities are faced with restive contractual employees who are pushing to obtain permanent positions.
In the absence of a labour law addressing issues related to layoffs, such as rehabilitation schemes and unemployment benefits, these problems will need to be resolved. It must be noted here that the issuing of the unified labour law was again postponed this year -- for the fifth year running -- despite presidential directives that it be discussed in parliament's 2000- 2001 session.
These constraints notwithstanding, the government appears to be relaying the message that privatisation will continue- against political and economic odds. It is now trying to build up momentum for the sale of 148 public enterprises, starting with 56 in the textiles, metallurgical and engineering industries. To entice potential investors, a more flexible process will be adopted so as to produce more realistic valuations for these public enterprise companies, which are mostly loss-making. Valuations for fixed assets and equipment will be made according to minimum book value, while "debts, excess labour and unnecessary land assets affixed to these companies will be referred to the holding companies." Investors are also being courted with an incentive package that includes a five-year tax exemption on condition that they form venture capital companies after the deal is completed.
This is on the one hand. But on the other, the government's keenness to assuage public fears over privatisation has induced Minister of Public Enterprise Mokhtar Khattab to declare almost synonymously that "there is no time-table for privatisations", meaning the government is under no pressure to implement them within a certain time-span. The statement was retracted soon thereafter following President Mubarak's meeting with the cabinet last week, and his injunction that privatisations be implemented "according to a definite schedule." Contradictory official statements were also issued on whether the loss-making companies will undergo any restructuring, as was formerly envisaged, prior to their sale. Until as late as mid-July, Khattab was consistently quoted as saying that prior restructuring would not be undertaken because of the scarcity of available funds. Then on 26 July it was announced that "restructuring of the administrative and financial systems of all companies where the government holds a stake will continue, so as to facilitate better terms for their sale." This might belie latent tensions between privatisers with constrained budgets on the one hand, and the chairmen of the Holding Companies as well as labour unions, who claim that restructuring is needed to enhance their companies' value on the market.
All of these continuing ambiguities in public statements need to be resolved. If the commendable achievement of the economic reform programme has lain in its ability to contain the negative consequences of reform, there must now be a realisation that at this critical juncture containment cannot do much more. Palliative announcements will backfire, and greater candour is requisite in announcements on privatisation and its consequences. But this, of course, cannot happen in the absence of viable policies enhancing productivity and chances for employment.
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