20 - 26 December 2001
Issue No.565
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Al-Ahram Weekly Online 20 - 26 December 2001 Issue No.565 |
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Plodding along
Egypt's privatisation programme has been seriously affected by last September's attacks on America. Sherine Nasr reports
The first two months of the third quarter of 2001 were smooth and fruitful for the ongoing Egyptian privatisation programme, as five privatisation transactions -- led by the sale of Helwan Cement -- took place.
"The combination of improved liquidity and balance of payments and the passage of several liberalisation measures served to create the impression that the current difficult economic period was about to end," according to a quarterly report on privatisation in Egypt. The report was written by CARANA corporation, and contracted by the US Agency for International Development (USAID), to monitor and support Egypt's privatisation programme.
The most important event to occur in the first part of the quarter was the sale of the Metallurgy Holding Company's remaining stake (47.8 per cent) in Helwan Cement to the Arab Swiss Engineering Company (ASEC) for LE661.2 million. ASEC also acquired a further 11.75 million shares in Helwan Cement -- valued at LE648 million -- from the stock market.
Market-based financing for the purchase was arranged and led by Citibank. Most of the local funding came from government- owned banks, which control most Egyptian pound deposits.
The cement sales were a major part of Egypt's privatisation efforts so far -- in terms of value, they account for 37.9 per cent of the total privatisation programme since it started in 1991, according to the CARANA report.
Helwan Cement was not the only company to be privatised, however. The Ministry of Public Enterprises successfully concluded four other sales -- including that of Misr Import-Export, after successfully negotiating an LE17.9 million bid on a majority sale of the company to an Employee Shareholder Association.
A 90 per cent stake in the Gharbiya Rice Mills Company was also sold to its Employee Shareholders Association for LE51.9 million. Arab Carpet was sold to the pension fund of the Wafd for LE50.1 million, while a 90 per cent stake in Alexandria Cooling was sold to the Investment Group for Industrial Development for LE33 million during the first half of the quarter.
However, September's attacks on the US created a state of uncertainty and imposed new challenges for the Egyptian economy in general, and for the privatisation programme in particular.
The renewed possibility of devaluation pressures is being heavily felt, particularly in the tourism sector where revenues are continuing to decline. Many tourism experts believe that tourist revenues have dropped so drastically that they are lower than they were in 1993, when there was a series of terrorist attacks on tourists in Egypt.
The attacks have taken their toll not only on the tourism business worldwide, but have affected the economies of tourist-exporting countries as well. Potential tourists are reconsidering their options and the result is that a great many overseas tours have been called off.
In an attempt to revive the market, EgyptAir recently announced a drastic discount (of up to 40 per cent) on its domestic fares for foreigners. Unfortunately, this trial has not borne fruit. Many hotels in Luxor and Aswan had been reportedly shut down, while a number of small and medium-sized tourist companies have laid off their employees to cut down expenditure. In desperation, tourism establishments along the Red Sea coast are announcing incredible discounts to attract Egyptian consumers.
None of these measures has helped to revitalise the ailing tourist market, however. The severe lack of foreign currency resulting from the drop in tourism is the worst impact of the attacks on the Egyptian economy.
Meanwhile, preparation continued throughout the quarter for the sale of a minority share in Telecom Egypt. The company's reports suggest that it will offer up to 34 per cent of its shares to an anchor investor. Plans also continue to develop regarding the start-up of a third mobile phone operator, which could become operational late in 2002. The Cairo Electricity Generation Company was planning an offering of 15 to 20 per cent of its shares on the market, as was the Canal Electricity Distribution Company. Most market experts feel that an offering this year is unlikely given the current market conditions, however.
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