World Bank highlights procedures to improve state-owned enterprise governance in Egypt

Daily News Egypt
3 Min Read

Despite Egypt’s growth potential, state-owned enterprises (SOEs) and restrictive regulations currently hinder competitiveness. The government aims to redefine the state’s economic role, enhance the business environment, and manage public assets more effectively. SOEs, which are pervasive across the economy, are targeted for reform through the State Ownership Policy (SOP). The SOP seeks to clarify state ownership rationales, promote asset monetization, and improve SOE governance, according to the World Bank’s recent report.

The report emphasizes that the Government’s SOE reform programme is outlined in the recent SOP, subsequent policy statements, and associated regulations. Approved by President Al-Sisi in December 2022, the SOP clarifies the state’s rationale for enterprise ownership. It includes an ambitious asset monetization programme, currently being implemented with support from IFC’s transaction advisory services.

However, the reform process faces technical and political challenges. SOEs in Egypt lack a uniform legal definition and governance, with nearly 1000 entities operating under various laws. Their fragmented ownership functions contribute to poor performance, often relying on state support and sovereign guarantees. The high presence of SOEs in competitive markets raises concerns about fair competition and deters private investment.

To address these issues, the government’s reform programme focuses on professionalizing SOE boards, ensuring competitive neutrality, and separating ownership from regulatory functions.

Representatives from the Ministry of Finance (MoF), Information and Decision Support Center (IDSC), Prime Minister’s Office, Ministry of Public Business Sector, Egyptian Competition Authority (ECA), and Ministry of International Cooperation (MoIC) serve on a coordination committee. This committee oversees programme implementation and prepares reports for the bank. IDSC’s Chair leads the committee, which meets quarterly. Upon formal confirmation, IDSC designates a full-time staff member to coordinate the programme.

The Programme Coordination Unit (PCU) operates within IDSC. In December 2022, PM Decree 4429 established a Higher Committee for the Implementation of State Ownership Policy for Implementation of the Standard Operating Procedure.

The programme focuses on three complementary areas: improving SOE governance, enhancing financial management, and enabling private sector opportunities. Monitoring and evaluation systems from MoF, IDSC, and ECA will be adapted to cover targeted indicators and levels of disaggregation.

Overall, the programme aims to enhance governance, competitive neutrality, transparency, and efficiency among SOEs. The organizational structure should include an Environmental, Social, and Governorate (ESG) Department, which will play a crucial role in environmentally and socially sensitive SOE reform.

 

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