I normally do not praise a new legislation whose details did not yet become clear. Therefore, I have reservations on the new law on privatization that the government has announced recently. It is obvious that the government wants to get rid of the headache of privatization and its curse that has been haunting it over the years. It is also clear that the government is trying to retrieve some of the popularity that it has lost. Despite marketing it heavily, the word privatization has remained synonymous with selling the country short and wasting the gains of the old public sector that was entrenched in the heritage of the Egyptians. Although most of those gains turned into huge losses that the citizens had to pay for and the treasury had to bear, the anti-privatization trend has still prevailed like in many other countries. And the government, with its huge media clout, could not change that trend. The question has always been: Where would the shares of the Egyptians in their assets go even if the whole country was sold? This is why I think the new draft law was considered so as to cause a radical shift in the Egyptian privatization policy after more than 15 years of its inception. The idea is not new. It was done in Eastern Europe and Russia in the early nineties in the form of privatization coupons, whose aim was to transfer the assets of the public sector companies to the private sector, with all citizens taking their shares otherwise those countries would not have been able to sell.
While that policy has been successful in some countries, it failed in others due to disagreement on the assessment of citizen shares, company ownership fragmentation, the lack of capital investment as this would be the task of the new buyer, and the emergence of a black market of brokers that seize the biggest coupons and ultimately control the largest shares of the companies. On paper, the theory may be good, as it combines citizen participation and government desire to get rid of the burden of the public sector. But its application is what counts. Official statements say that the government would keep 51% to 67% of the shares (note that the government suddenly noticed that there are strategic industries after it sold most of those industries). How would the private sector buy a minority stake in a state-owned company when it normally buys to change the management and the work method? And if it did, how would the citizens take their shares? What we understood from Al-Akhbar newspaper is that each citizen share is worth LE 1000 to be distributed over 41 million citizens. In other words, the government has evaluated 155 companies at LE 41 billion. Who made such evaluation? And would those coupons be shares in the companies or a share of their sales? It is ambiguous. And what is that so-called Future Generations Fund (10% - 15% of the asset sale)? Actually, we are very good with this future generation concept. Let me remind you here of the selling of Egyptian gas for the cheapest prices and the devouring of the pension and insurance funds to offset the State Budget deficit. So who do we entrust the future generation with? Is it the Egyptian government? Was it not better the government would have provided for the new generation good education and medical and social insurance? If we acknowledged that all of the above has a secret logical justification that would be disclosed in good time, what about the coupons? This is where the black market or the so-called internal privatization takes place for the value of the coupons to deteriorate just as happened in Russia, where the value of the coupon dropped from 10,000 rubles to only US$ 5. Can this be repeated here, given our kind of government control and the poverty rate that has reached 40% of the Egyptian people? I leave the answer to you. Finally, what would those companies gain if they will have become fragmented and their shares deteriorated, with no new management to improve their conditions? I am afraid this would bring those companies back to the ownership of the government in the end, as they would be without shareholders. This would mean that the government was trying to get rid of a problem only to face 41 million more problems.
So what is the point then? Is it to get rid of the headache of privatization or simply to search for a lost political popularity? It seems the courage to take crucial economic decisions has vanished. I hope I am wrong.
