6 - 12 September 2001
Issue No.550
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Al-Ahram Weekly Online 6 - 12 September 2001 Issue No.550 |
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Slowly but surely
Mona El-Fiqi reviews an American consultancy firm's report on the challenges facing Egypt's privatisation programme
A report issued by an American consultancy firm suggests that the partnership agreement signed by Egypt and the European Union will increase competitive pressures on Egyptian industries, including the public sector companies slated to go on the block.
This argument was made by CARANA corporation, which was contracted by the US Agency for International Development (USAID) to monitor and support Egypt's privatisation programme. Egypt signed the partnership agreement with the EU in June, however its implementation will not begin until it is ratified by the People's Assembly, the EU parliament and the legislatures of its member states.
Although CARANA's prediction comes at a time when companies slated for privatisation are for the most part loss-making, and hence are in need of restructuring, the report was not without some hopeful observations.
CARANA cited the new mortgage law, which was approved by parliament at the end of its last session, as a measure that will reinvigorate the construction market. This law, suggests the report, should help improve liquidity in the local economy, the lack of which had negatively impacted the sale of public companies.
The report also noted the incentive package being offered by the Ministry of Public Enterprises to potential investors interested in the 66 distressed and loss-making companies. Among the carrots being offered buyers are elimination of debts, labour restructuring and the removal of excess inventory and overvalued land assets from the balance sheets of these companies.
CARANA praised the Ministry of Electricity's plans for privatisation which will see it through to the year 2017. A key part of the ministry's strategy is to build 50 per cent of its projects under the BOT system (build-operate-transfer). The ministry also plans to float on the stock market 10 to 20 per cent stakes in one or two of the electricity distribution companies during the second half of this year.
Towards invigorating the programme in general, CARANA suggested case by case privatisation, improved packaging, rapid batch tendering and auctions. Qualifying its recommendations, CARANA explained that these measures are "not mutually exclusive alternatives, but a tool kit of new procedures that can be adopted in different ways and to different degrees."
The report also provided a run down of privatisation activities in the key telecom, transportation and energy resource sectors.
Telecom Egypt (TE) is abuzz these days, working away on its plans for partial privatisation. The Ministry of Telecommunications and Information Technology has selected Merrill Lynch and the Commercial International Bank (CIB) to advise it in its search for an anchor investor. Floating a stake in the company on the stock market continues to be a possibility. Fixing a date for an IPO, however, requires more favourable market conditions.
Towards setting up the country's third mobile service provider, TE is preparing to offer an international tender to select a legal firm to complete the work required to select an anchor investor to be its partner in this endeavour. TE hopes to begin offering mobile services in 2002 following the end of the exclusivity period given to the two existing service-providers.
In the transport sector, three aviation companies are being studied for majority or minority privatisation including EgyptAir, the Egyptian Airport Company and the Air Traffic Control Company.
Six state-owned companies under the Ministry of Petroleum are also to be privatised starting with the offering of Misr Petroleum and Cooperative Cooperation for Petroleum to anchor investors.
CARANA's report also noted that the sale of two of the 49 state-owned companies and assets on offer since the beginning of the current year, are in the final stages of approval. The report covers the period April to June 2001.
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