Niveen Wahish examines the details of a very public privatisation The government surprised the people with its latest privatisation -- it has long preferred the term asset management -- scheme. The aim, say officials, is to enable all adult Egyptians to become shareholders. This week the government came out of the blue with a new plan routing its asset management programme into a new direction. The scheme, which will be incorporated into a draft law and submitted to parliament in its upcoming session, will allow up to 40 million Egyptians to receive free shares in tens of public sector companies within a year. "It's a once-in-a-lifetime chance," announced Mahmoud Mohieldin, minister of investment, during a press conference publicising the plan. Egyptians aged 21 years or above will each receive a certificate representing holdings in a number of companies. The public will be allowed a grace period in which to register their certificates after which the distribution process takes place. The value of the shares included in the certificate has yet to be announced but Mohieldin says people should not hold their breath. Current estimates value them at between LE300 and LE500. "It's a start," says Sabri El-Shabrawi, professor of management and marketing and member of the National Democratic Party's (NDP) Policies Committee, the brain behind the new legislation. It will enable the public to "own a piece of Egypt" by sharing in the ownership and profits of these companies. "It is about time they got back part of what is rightfully theirs. This is what private ownership should be about, not the concentration of wealth in the hands of a few." Individuals will be free to sell on their certificates after receiving them and once they are registered the shares they cover can be traded on the stock exchange. Forty five companies out of a total of 153 subject to public sector law 203/1991 and which still remain under Ministry of Investment control will be included in the scheme. A discussion paper prepared by the Policies Committee of the NDP reveals that they include entities in the processing and service industries and some goods distribution companies. The government will retain a minimum 30 per cent stake. Gamal Mubarak, head of the NDP's Policies Committee, explained at the press conference that the government has been developing the plan for three years and it is not a response to the global financial crisis. It attempts to achieve what President Hosni Mubarak has often called for -- greater involvement of the people in managing public assets. The plan draws on the experience of similar schemes in Eastern Europe and in South East Asia, though it starts, insists Mohieldin, where these others ended, and will avoid the mistakes they have made. Companies excluded from the portfolio, in which the government intends to maintain a majority stake of 51 per cent or more, include strategic industries such as pharmaceuticals, iron and steel, aluminum, sugar and cement. Nor are those that are not making any profits, such as spinning and weaving companies, be included. The aim behind the new plan, as stated by the discussion paper, is to broaden popular participation in the decision-making process of public asset management. But while the intentions sound good putting them into practice, say experts, is likely to prove problematic. "The implementation will be difficult," says El-Shabrawi. And the determining factor in the success of this scheme, he argues, will be the performance of these companies in the future. Gouda Abdel-Khalek, professor of economics at Cairo University and member of the leftist Tagammu Party, finds it incomprehensible how 40 million people can manage a company, let alone take decisions to develop it and attract investment or technology. He points out that the ministry took back seven companies, control of which had been given to Employee Shareholders Associations, because they were unsuccessful. Employees should have been the most qualified to run their own companies but they could not, he says. And though the new plan foresees the creation of an agency to run the companies involved the details remain vague. Abdel-Khalek believes the public are being offered little more than leftovers. "The good companies all went first, what is left are companies which were not sufficiently attractive to be sold." He believes that the scheme is a clever piece of PR. Instead of taking the heat for selling the public sector, he charges, the government now intends to hand it over to the people who, needing cash, will in turn opt to sell it. There must be strict regulation on the sale of these shares, particularly to foreigners, he insists. Mohieldin points out that the exchange of certificates before registration will be restricted to Egyptians and that once they are traded on the stock exchange anyone seeking to acquire a more than five per cent stake in individual companies will be required to inform the Capital Market Authority. Abdel-Khalek also questions the Fund for Future Generations to be created by the proposed legislation. The fund will manage a percentage of the shares of the same group of companies and will be fed, in part at least, by their profits. Proceeds generated by the fund will be invested in education, health and housing projects. "If these companies do not make any profit then the fund will have nothing to invest," says Abdel-Khalek. It is a pity, he points out, that this scheme is only being introduced after the most profitable public sector companies have been sold. The 18-year-old privatisation drive has been a constant of government economic policy. Since it embarked on structural reform of the economy in 1991 the government has held firm its commitment to divest itself of public sector companies. Some observers believe the new scheme will deflect pressure from a government that has often been accused of selling public assets at below their market value.
