Report slams Egypt’s government over privatization
The latest quarterly report, Privatization in Egypt, has criticized the slow pace of selling off state-owned concerns. Egyptian economists say they too are unhappy with the situation.
"During the 2nd Quarter of 2000 no privatization was completed," said the report, submitted to USAID by the Privatization Coordination Support Unit (PCSU).
The PCSU's previous report, covering January to March 2000, described Egypt's privatization efforts as "tepid" but did not go so far as to question the government's commitment. The latest report, however, hints that the government is less than enthusiastic about handing over any control to market forces.
"Until a commitment is made to implement alternative, market-based methods of privatization, Egypt will continue to have limited success in its efforts to unburden itself of its costly support of publicly-owned companies," the report says.
With many state-owned companies and governmental entities being considered for privatization or in the process, "the absence of privatization in the last quarter is particularly worrisome." This "is further exacerbated by the fact that no leases or management projects were completed during this period."
A depressed local stock market, fear of competition from private-sector stock issues, and a shortage of liquidity in the local market have all been cited as reasons for the government's hesitation to put companies on the block.
Meanwhile, potential local and foreign investors adopt a "wait and see" attitude to the sluggish Egyptian economy and are reluctant to bid for companies on the basis of the government's pre-set valuations.
The report says some of the companies slated for sale will need "pre-privatization action," such as labor agreements and operational or financial restructuring, if they are to become attractive to buyers.
Some positive developments are cited. These include government approval for selling joint-venture banks, a promise to sell the four state-owned insurance companies by the end of the year, and a commitment to offer a 20-percent stake in Egypt Telecom in October.
Hassan Shukri, an analyst with the Cairo-based HC Securities, told the local Business Monthly magazine shortly before the PCSU report came out: "We've seen a lot of promises. ... There is no delivery yet." – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)