CAIRO: Devilish scheme, crime, conspiracy, chaos, hoax; are some of the labels a group of economists, lawyers, and opposition MPs gave the ruling party’s proposal to partially privatize some public sector firms through distributing free shares to citizens.
“This proposal concludes the government’s privatization program adopted since the 90s with a crime, said Ahmed El Naggar, economist at Al Ahram Center for Political and Strategic Studies.
“This new scheme will create giant monopolies, something that Egypt already suffers from, he added. “It concludes a crime the government has committed against the public by selling Egypt’s assets that were built by previous generations in a move the country has never witnessed before. He expects the majority of Egyptians to sell their shares to business tycoons to combat poverty.
The government – along with the National Democratic Party (NDP) – proposed on Nov. 10 selling its minority stakes in some state-run companies in a move it hailed and said would make privatization more popular and inject a windfall of cash into poor households.
Based on the proposal, all Egyptians over the age of 21 (estimated at around 41 million Egyptians) would receive free coupons redeemable for shares in up to 155 public companies lined up for privatization. The government said the initial plan would apply to some 86 companies after excluding non-profitable companies or companies whose shares the government wants to retain in full.
“This proposal is another form of privatization that is even more inappropriate than the traditional method of selling companies to investors. Through this new program, the government is giving a petty bribe to the Egyptian public against turning a deaf ear on privatization, pointed out Hamdeen Sabahy, opposition member of parliament.
“The hoax here is that under the new scheme, privatization is made in the name of the public and not the government. Simply put, the government is . making [the citizens] responsible for selling public companies, he added. “It’s the government telling Egyptians since you oppose privatization, take the shares and do the sale yourselves.
Egypt has sold stakes worth billions of dollars in public-run companies including banks, transport, and industrial firms since President Hosni Mubarak appointed a Cabinet of economic liberals in 2004. Since then, the government has so far accumulated LE 39.4 billion from the sale of 191 public companies and assets. The figure compares to LE 17.9 billion generated from the sale of 210 companies from 1991 to fiscal year 2003/04.
However, the government has faced a wave of ire from both the public at large and opposition parties over its privatization program; who called for a halt to privatization, some based on a desire to keep Egyptian assets out of foreign hands and others because they claim the process has been corrupt.
The latest wave burst last summer when the government auctioned off its Banque Du Caire – Egypt’s third largest state-owned bank. However, the privatization attempt fell flat in June when none of the bidders met the government’s reserve price.
The NDP said in November that all Egyptians – whether living in Egypt or abroad – would receive their shares within about 12 months of detailed proposals receiving parliamentary approval. However, the new privatization scheme will unlikely pass without resistance. Sabahy – together with several opposition MPs, economists, and lawyers – announced last Tuesday founding a social movement called “No to Selling Egypt’s Assets which aims to eradicate the proposal before it goes to Parliament.
“We [members of the movement] proclaim our complete opposition to this proposal which will squander public property at a trivial price, Sabahy explained. “‘No to Selling Egypt’s Assets’ will seek to stamp out this proposal before it ever sees the light.
According to a discussion paper distributed by the NDP in November, the government would keep stakes ranging between 30 and 67 percent in the majority of these firms.
It would keep a 67 percent majority stake in many vital sectors including pharmaceuticals, cement, iron and steel, aluminum, fertilizers, coke, sugar, and copper. It would also retain at least a 51 percent stake in companies in sectors such as transport and tourism.
The government would also keep at least 30 percent in other types of companies, including distribution and services. The spinning and weaving sector – along with consumer cooperatives – would be excluded from the program.
“This proposal entirely [overlooks] the possibility that these shares can settle into foreign hands, which will lead to the waning of the Egyptian state . negatively impacting its economy, said Galal Amin, professor of economics at the American University in Cairo. “It completely neglects who will end up owning these shares.
Several skeptics of the proposal believe that in a country where more than 14 million people live on less than $1 a day, most holders of these shares will prefer to sell them off for immediate gain.
“Foreign ownership is possible. There’s no [legislation] in the proposal that prevents that from happening, Sabahy argued.
Under the new scheme, adult Egyptians will receive the stocks through the “bundle system. The bundle would be equal in constituents and value, worth “several hundred Egyptian pounds for each Egyptian. The government has not yet confirmed total value for each Egyptian, but several experts estimate it around LE 400.
“No matter how poor the individual is, LE 400 does not represent something that is worthwhile . when you have inflation rates hiking at more than 20 percent, Amin pointed out. “Egyptians would rather see prices go down than be given LE 400 once [in a lifetime].
“How many kilos of meat will this LE 400 buy? he wondered. “The impact of the proposal on inflation hasn’t been mentioned, while inflationary pressure on the proposal confirms that this money will be spent on consumption.
“It is offensive that [the government] proposes that each Egyptian’s share in his/her country’s assets is worth a few hundred pounds only, Sabahy said.
Other critics claim the government initiated this new scheme after failing to sell the remaining public-owned companies on the heels of a deepening global economic crisis.
“Why has the government unveiled this proposal at this time? El Naggar asked. “[Because] it’s a wicked and mean attempt at privatization amid the global economic crisis. . Privatization cannot be at the forefront in the coming period, so the government wanted to conclude its privatization program in one shot . taking advantage of the people’s poverty.