Private sector gaining ground

For some time now, Egypt has been keeping things private: In private hands.

As economic reforms continue, or as some investors, say hobble along, many Government enterprises have been changing hands.

The process began three years ago with the disposal of Nasr City Housing, an offering which was oversubscribed. Since then, of the 314 Government enterprises earmarked for privatisation, more than half have been sold to the private sector, either partly or completely.

The current focus, however, is the utilities sector, according to an investment banker in Cairo.

Hassan Heikal, managing director of the investment banking division of EFG-Hermes, said from Cairo yesterday, that seven regional electricity companies were set for privatisation.

'The mandate for privatisation has been awarded to Merrill Lynch and EFG-Hermes,' he said.

There is also progress in the telecommunications sector.

'The Government invited investment banks to bid for the fixed line operator, Telecom Egypt,' Mr Heikal said. 'And six investment banks have been shortlisted,' he said, including EFG-Hermes, a leading investment bank in Egypt. The mandate is expected to be awarded at the end of next month Mr Heikal said.

These are signs that the private influence in the economy is deepening.

Recently, Ibrahim Fawzi, chairman of the General Authority for Investment and Free Zones, said domestic and foreign investors committed US$2.8 billion in 849 new companies in the first five months of the year. The bulk of the capital came from Egyptian investors.

Mr Fawzi attributed this trend to streamlined investment procedures, such as the removal of certain fees for setting up companies.

More companies are expected to woo private capital, and hopefully, they will emulate successes such as that of Al Ahram Beverages Company, which, after privatisation, has seen its share price rocket and is making profits.

Last year, the Government earned $1.32 billion from the sale of two mobile phone licences. One of the cellular operators, Egyptian Company for Mobile Services, or MobiNil, declared a $2.3 m profit for the three months ending in June this year. When a consortium took over the business from the Government last year, it had 83,000 subscribers. Now it claims to have more than 290,000.

But for some private investors, things are not moving fast enough. The Government is not in a hurry with regard to sectors such as banking and insurance. And other high potential sectors such as mobile telecoms, remains closed for new players until May 2002. However, laws have been passed to allow private investors to own shares in banks.

Despite the privatisations, the public sector is formidable, accounting for about 75 per cent of GDP. The four state banks, for example, control 60 per cent of retail banking in Egypt.

The Egyptian British Bank says in a study that the Government stands to gain US$15 billion 'when the privatisation programme is completed'.