Harsh reactions from workers unions, the media and even the president have caused the cabinet to revoke the decision to close a public sector chemicals plant. Sherine Abdel-Razek investigates Click to view caption The Egyptian Company for Chemical Industries (Kima) is a classic example of the public sector in action. Using subsidised electricity, the company annually produces essential chemicals and fertilisers worth LE120 million. In the fiscal year ending June 2001, the company announced profits of LE18 million. Had it been paying market rates for its electricity, however, the company would probably be deeply in the red. The Ministry of Electricity has even said the company owes it LE300 million in unpaid electricity bills. Kima counters that it has been paying a fixed rate to the ministry since 1992. The ministry has claimed that electricity rates have doubled since then. And so the story went, until Prime Minister Atef Ebeid surprised even the most senior public sector officials by announcing that the government was planning to liquidate Kima. In an attempt to temper the announcement with future plans for the company's workers, Ebeid said that LE50 million would be allocated as compensation for Kima's 2300 workers; that 1000 of these workers would be re-employed in a new oil project in the South Valley; and that the remaining workers would be given agricultural land to reclaim. His reassurances fell on deaf ears. The decision, which was met with an unprecedented uproar in the media and trade unions, prompted the attention of President Hosni Mubarak, who met with Ebeid last week to discuss the plight of Kima. After long discussions, which included concerned ministers, representatives of Kima, the Egyptian Federation of Workers Unions, the Head of the Holding Company for Chemical Industries Adel El-Mozi and Minister of Labour and Manpower Ahmed El-Ammawy, it was announced that the company would continue to operate. Ebeid said the government was "studying ways to reduce the uneconomical use of electricity over the coming five years and find ways of operating the company using natural gas". Yet, only a week earlier, Ebeid had cited the economic unfeasibility of extending gas pipelines to the company as a reason for the closure of Kima. Separately, representatives of Kima's workers told Al-Ahram Weekly that Ebeid's compensation offer was "totally impractical". The high cost of electricity used in operating Kima's factories has been a debated issue since the 70s. "The economic feasibility of Kima's operation was always questionable due to the fact that it uses subsidised electricity in the operation of its factories. However, this high cost did not undermine the company's performance or negatively affect its bottom line," said Mohamed Hassouna, an evaluation and financial analysis expert in the Public Enterprise Office. Kima was set up in 1959 to use the surplus power generated by the Aswan Dam and was transferred to a public enterprise company in 1992 as a step towards privatisation. More than 51 per cent of Kima is owned by the government, represented by the Holding Company for Chemical Industries. The Social Insurance Authority owns 25 per cent, Banque Misr 10 per cent, and about seven per cent is floated on the stock exchange. The company exported $15 million worth of nitrates last year. When Kima was first set up, electricity prices were a mere LE0.002 per Kilowatt. Today this has increased to LE0.27. The company consumes 1.5 billion Kilowatts annually, which makes resorting to another source of power crucial if the company is to continue operating viably. Last week, government officials put the cost of extending the gas pipeline, including research and exploration, at around $600 million. Amin Mubarak, head of the People's Assembly Industry Committee, told Al-Ahram that this was too high, considering that Kima will only use 500 million square metres of gas a day. However, Abdel-Qader El-Agami, general secretary of the petrochemical workers union disagrees. He told the Weekly, in an exclusive interview, that the pipeline, passing through upper Egypt, will not only benefit Kima but all the paper, sugar and aluminium factories located in the region. "All these factories still use electricity and will also benefit from the pipeline," El-Agami explained. Hassaballah Osman, the head of the Kima workers union, speaking with the Weekly, pointed out that the gas pipeline, when first suggested in the 80s, would only have cost LE75 million. "Now they refuse to extend it because it will cost much more," he said. The importance of Kima does not only lie in its production and workers but also in the number of industries depending on it. According to Osman both the sugar and paper pulp factories in Naga Hammadi depend on Kima. The 750,000 feddans of sugarcane which provide these factories with raw material use a special kind of fertiliser that only Kima produces. The row over Kima has caused a lot of tension among the company's investors and other traded chemical companies. On the stock exchange, Kima shares fell from LE11 before the announcement to LE7.89 on Monday's trading. About seven per cent of the company's shares are publicly traded. The chemicals sector as a whole suffered, with the shares of Pachin dropping a whopping 18 piastres in one day. But the main force behind the government's decision to keep Kima operating is angry workers. "How can industrial workers be given land to reclaim?" one indignant 55-year- old worker asked. "Do you know where this suggested oil project is located? In Al- Nokrah Valley, which we call Death Valley. There is no water, electricity and it is 100 kilometres away from our homes," he added. The vast majority of Kima's workers live in Kima City, a residential area set up during the 70s to accommodate the factory's workers. "If the factory is closed we would not have access to water as we depend on the wells located inside. All services in the city are based around the factory. We would not even have any means of transportation," the worker added.
