Egypt to give public free shares in state firms

GIVE-AWAY: Long-serving culture minister Farouk Hosni stands in front of one of Egypt's state-owned properties. (Getty Images)

Egypt's ruling party proposed on Monday that the government give Egyptians free shares in public sector companies in a move that would make privatisation more popular and give poor households a windfall injection of cash.

The ruling National Democratic Party (NDP), which dominates the cabinet and parliament, said all Egyptians over 21 would receive the shares within about 12 months of detailed proposals receiving parliamentary approval.

Investment Minister Mahmoud Mohieldin told a news conference it was too early to decide how much each Egyptian's portfolio would be worth because the government has not decided which stakes to sell and because the market price is unknown.

"It cannot be fixed until after the distribution. But a family will be able to obtain a respectable amount," he said.

The plan would apply to up to 155 companies but some of those would be excluded because they are not profitable or because the government wants to retain all its shares.

The government would retain majority stakes in many vital sectors including pharmaceuticals, cement, iron and steel, aluminium, fertilisers, transport and tourism, according to a discussion paper distributed by the NDP.

The announcement came less than two months after Finance Minister Youssef Boutros-Ghali said Egypt was working on a package that would "put privatisation back in the forefront", along with a series of tax and social security reforms.

NDP official Gamal Mubarak, the son of Egyptian President Hosni Mubarak, told the news conference that the party had been working on the plan for two years and the announcement on Monday had nothing to do with the world financial crisis.

Egypt has sold stakes worth billions of dollars in state-owned companies including banks, transport, and industrial firms since Mubarak appointed economic liberals in 2004.

But the last major attempt at privatisation fell flat in June when none of the bidders met the reserve price set for Banque du Caire. The highest bid, from National Bank of Greece, valued the bank at $2.025 billion. (Reuters)

The privatisations have helped the Egyptian economy achieve its fastest pace of growth in decades but they have also aroused some popular resentment.

Opposition groups have called for a halt to privatisation, some based on a desire to keep state firms out of foreign hands and others because they claim the process has been corrupt.

The Egyptian government has faced a wave of discontent this year over high inflation and low pay, leading to street protests and labour strikes.

"People have been critical of privatisation for decades, with some saying companies are being sold to foreigners and they are being sold too cheaply," said Simon Kitchen, senior economist at Egyptian investment bank EFG-Hermes. "This addresses that concern squarely."

Angus Blair, head of research at investment bank Beltone Financial, said: "The reason for the plan is to make people feel part of the reform process ... It will need to be implemented carefully to make sure it is equitable."

The NDP discussion paper said companies would be classified into categories based on what stake the state wanted to retain. Shares would be transferred to a holding company and distributed through outlets to be identified across the country.

Some shares would go to a fund for future generations.

The state would keep a 67 percent stake in companies in sectors including pharmaceuticals, iron and steel, aluminium, coke, sugar, copper, fertilisers and cement. It would retain at least a 51 percent stake in companies in sectors such as transport and tourism, the NDP said.

The government would also retain at least 30 percent in other types of companies, including those which distribute commodities. The spinning and weaving sector, along with consumer cooperatives, would be excluded from the programme.

Egypt's last major privatisation was the sale of 80 percent of Bank of Alexandria in 2006 for $1.6 billion.

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READERS' COMMENTS

Wrong Information and Misleading Picture
Posted by Mounir, Dubai, UAE on Wednesday 12 November 2008 at 10:54 UAE time

I'm referring to the picture you have published along side the article. the minister is standing in front of one of the Pyramids and the comment below the picture says that the minister is standing in front of one of the state owned properties!
Just for your information, the Pyramids are actually a monument and not a property owned by anyone.

Furthermore, privatization has started about 10 years ago and not only since 2004. Please refer to the world Bank website for more information.

Also, the photographs implies that the government is privatizing properties, while the body of the text says "companies" are going to be offered for public.

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