The latest quarterly report, "Privatization in Egypt," echoes recent criticisms by economists and stock market analysts about the slow pace of selling off state-owned concerns.
"During the 2nd Quarter of 2000 no privatizations were completed," said the report, submitted to USAID by the Privatization Coordination Support Unit (PCSU).
The PCSU's previous report, covering January to March 2000, characterized Egypt's privatization efforts as "tepid" but did not go so far as to question the government's commitment to privatization. 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 form 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 already, "the absence of privatization success in the last quarter is a particularly worrisome statistic." The government's apparent stalling "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, while adopting a "wait and see" stance regarding the current sluggishness of the Egyptian economy, have shown reluctance to bid for companies based on the government's pre-set valuations.
But even if these excuses were all valid, "they would not sufficiently explain the lack of 2nd Quarter sales, which followed upon only five closed privatizations in the 1st Quarter 2000."
The report notes that some of the companies slated for sale under the privatization program will need "pre-privatization actions," such as labor, operational or financial restructuring, if they are to become sufficiently attractive to find buyers.
Some positive developments are cited, including government approval for sales of 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.
Yet as 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 )