The Egyptian scene was all in a flutter over declarations that the government was in the process of investigating a new asset management plan that should allow 41 million Egyptians over the age of 21 to receive coupons they can exchange for shares in State-owned industries slated for privatisation. Receivers of coupons would be free to manage them as they see fit; they could retain them to collect dividends, or sell them. The process was expected to take 12 to 14 months beginning March 2009 once the relevant law was promulgated. Some three weeks ago, however, it was decided that the plan would not be placed on Parliament’s agenda this round until its constitutionality is assured.
A fair share
The scheme was expected to cover some 86 public enterprises. These would include six companies of group A operating in strategic sectors such as iron and steel, cement, sugar, fertilisers and textiles, in which the State would retain a majority stake of no less than 67 per cent. In another 35 companies of group B the State would retain a 51 per cent stake, while it would retain a minority stake of 30 per cent in 35 others belonging to group C.
Yumna El-Hamaqi who heads the Economics Department of Ain-Shams University and is member of the Shura council—the upper house of Egypt’s Parliament, said that the scheme aimed to give citizens a share in State-owned assets via an equal distribution of the shares of public enterprises. “The process,” she said, “will take place in accordance with regulations that are now under study. The relevant bill will be discussed by Parliament in due time.” Dr Hamaqi confirmed that the law is consistent with the Constitution. “The project will confront no legal problems as it will imply the foundation of a new authority with a legal personality that will be the new owner of the state-owned companies. The authority will be entitled to develop and restructure companies and follow their performance. Losing companies, particularly those in the textile sector, will be excluded.”
Wide ownership
Worries that assets will be eventually sold to local or foreign investors at low prices are unfounded, Dr Hamaqi insisted. The plan will be implemented in two phases. First, each citizen will receive a coupon containing a ‘basketful’ of shares of profitable companies. This phase will be exclusive to Egyptians. The second phase will involve selling the shares on the stock market. In this phase, shareholders are required to notify the relevant authorities once their ownership reaches five per cent of the total shares of any company, then again once this ownership reaches 10 per cent. These regulations should guarantee that nobody may own a majority stake in the companies, Dr Hamaqi explained. Shares not claimed by any one will be placed in a public fund for future generations,” she noted.
As for Ihab al-Dessouqi, expert in stock markets and professor at Sadat Academy, he said that the positive side of the programme is that it would achieve social equality as far as the manner in which the shares will be distributed. But Dr Dessouqi voiced concern that low-income Egyptians would sell their coupons to a tiny minority of the well-off. The outcome, he said, would be some sort of monopoly, which totally contradicts the purpose of the project”. Dr Dessouqi concluded that the present form of public ownership is indeed the broadest where ownership is concerned; the public sector, he said, is currently owned by the entire population.
Riddled with problems
Is the plan trouble-free? Ahmed Galal, executive manager of the Forum for Economic Research said that the plan, which emerged too suddenly, is expected to create a barrage of problems, especially when taking into account that the negative effects of Eastern European experience—which this plan emulates—far outstrip the positive ones. More importantly, he added “the people, not the government, are the owners of the public sector…hence the government has no right to dispense with it. The plan discriminates against the younger generations since those under 21 will have no share in it. It would be much more worthwhile to set a more efficient economic system that would guarantee better equality, Dr Galal said.