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On the brink of a big boom - Strengthening the economy -
New investment vehicles - Telecommunications on the Nile - Thriving export potential -
Pharaonic projects - Improving its overall infrastructure - Shifting towards the private sector -
New era in tourism 
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IINTERVIEW WITH
H.E. Dr. ATEF EBEID
MINISTER OF THE PUBLIC ENTERPRISE SECTOR
Tuesday, October 27th,1998 |
1/Q. Seven years after the Government started its privatization programs, Egypt has already achieved some major goals. How would you evaluate the current economic situation today?
A: A little bit of a correction here, we started the preparation for the privatization program in Egypt in 1993. We tested the potentialities of the market from 1993 till 1994 in parallel with these preparations. The active program did start in
1996. Therefore, the program lasted actually for three years. As to where we stand, let me refer to the study that was published by a group of the staff of the International Monetary Fund and the World Bank. They rank Egypt among the top four in achievements. The other three are Malaysia, Hungary and the Czech Republic. They put us among the top four because we succeeded in collecting receipts from the sales in 1997 equivalent to 3% of the GDP, which is about L.E 9.6 billion. Well, in reference to evaluation program. First the program was known in the world because transparency was allowed to the maximum. Second, it was human. We did not fire one single workers, but we gave incentives for a good number to leave voluntarily. Twelve per cent of the labor force working in public companies left in less than three years and there are more that are applying to leave. Third, the program was clean. None of the private interests were allowed to act directly or indirectly to influence the decision, whether the decision of preparation or evaluation or selling. It was a program that was protected 100 % against possible pressures from any private interests. The program started with some push among the public, which not strongly supported the program until they saw the results. The program is now supported 100%. There is no resistance what so ever. The labor, the political parties, the intelligentsia, and the Parliament support it. So you can say that the program also succeeded in improving the objectives that were set for privatization.
What did we set for the program? We told the people from the very beginning that we were seeking to get better management for the companies being privatized through the private owners, who would seek to get the best management. Second, we were seeking to get economic interests that would put more resources for modernization and hence the companies will get more efficient. Third, we were seeking for these companies to be more capable to contribute, not only to the economy but also to the welfare of the people. All the three objectives were achieved in the companies that have been privatized. After privatization most of them had higher value added, higher profits, did modernize and expanded their activities. So, this is where we stand.
We did not wait for the three years to prove that success. It came out in 1996/1997 and encouraged us to move to areas that were postponed for some time. Most of the privatization program in the world started with the utilities, which are easier to privatize because they are monopolies, which by definition are profitable. Once it is a monopoly with a profit that is guaranteed almost certain for the years to come it does have both a local and international demand.
So we took the hard way. This is one of the characteristics of the program. We started with the economic enterprises that are competitive and competing in the market not with the monopolies. The success in selling companies that are competing in a competitive market encourages us to start earlier than planned with the utilities. Last year we opened the market for the first time for local and international investment to invest in utilities, to invest in new courts, airports, roads, power stations, distribution networks for the natural gas, and in the cellular phones. The success in inviting the private sector to add up to the existing capacities in utilities encouraged us to move one more step and to corporatize the telecommunications system and the electric generation industries in preparation for privatization. These are the next steps. The success in also moving to the utility sectors and selling our equity in joint venture banks encouraged us to move to the financial sector and prepare the insurance companies for privatization and one of the public banks to be offered for sale. That is for the financial sector.
2/Q. Major privatization are going to take place in the financial sector, with the big four banks. What is the current situation of this privatization regarding these four banks?
A: Before I move to the banks [let me say that] the success in the program is seen in what we offer now. Just in six weeks we offer for sale seventeen companies and they are being offered for import strategic investors, in less than six weeks. Every day they put ads in the newspapers, calling for bids. We will be receiving bids for seventeen companies in one shot within the next few weeks. We have in the pipeline. And we take from the pipeline and add until December. We used to have last month sixty-eight; we sold eight to workers. So, we have sixty in the pipeline so we put an ad because they are ready for sale before December. By December 1998 we will add a new batch to be offered during the year 1999. So, the number of companies in the pipeline will increase as we go.
In the financial sector or in the banks, we do have four public commercial banks. These banks are giants. First of all we needed a legal licensing because the law did not allow us to privatize the public banks. So the Parliament, before it recessed last June, approved the privatization of the public banks. Immediately after the legal licensing, the logical step is the evaluation and we are seeking the participation of international consultants to do the evaluation simply because we will be offering a big corporation. We have to have reliable a evaluation. Immediately after we finish the evaluation we will set the criteria for calling upon the future investors in the bank.
3/Q. Since as we are representing American media, since Egypt agreed on a partnership with the USA for Economic Growth & Development, much has been done in terms of economic growth, inflation and environmental issues. According to you, what should be done between Egypt and the USA to strengthen this relationship?
A: If I would be managing something like that I should manage it in a business style, to conclude any business deal. How did you decide to get your job done? You moved to see my colleagues and me and through the direct meetings you can get the job done. If we want more business to be concluded we have to bring as many partners
-potential partners- together as possible. So, the only effective way for business deals on the international scene is to bring the people who can do the business together. If I were managing that job I would seek to get the groups of Egyptians and Americans together almost every week. I would pick forty-four areas where joint work could be done, or linkages could be carried, or mutual interests could be developed. I would pick the forty-four areas and bring the interested groups together, whether here [in Egypt] or somewhere in the United States. When people meet, they talk. Some of them will agree and some of them will disagree. But they will discover that there are interests. When they discover for themselves where they can serve their interests, they move a step forward to probably a temporary relation or a medium-term or long-term relations. It is like matchmaking, which is not carried by mail or by correspondence or by the telephone, but rather when people get together.
4/Q. Talking about bringing people together, because this is the issue, what are the comparative advantages that Egypt offers to strategic investors?
A: I am talking as a former businessman. What attracts me is the market. I would not put my money in a business where there is no market. There is a market that is growing and is expected to grow between 6% to 8% for the years to come. And look at our import bill. We are importing to the value of $16 billion in last year. And the bill of imports will increase. It is a market that is open. The market is also seeking for quality so there is a room for whoever would come because he does have the know-how; they can come and introduce something different.
Look at those who came earlier. What did they do? They found a market. They took the Coca Cola company and provided an international standard of Coca-Cola. What is said about beverages is said about machines and equipment, televisions and computer. This is the first.
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Second, there are reasonably costed inputs. For many products the raw material is here. The raw material is either coming from the agricultural sector or mining or from the petroleum sector. There is also enough guaranteed energy at reasonable cost, electricity, petroleum and natural gas. There is cheap land that appreciates in value because it is a heavily populated country. So you buy the land and gain from the appreciation in value. The labor force; we do have 18 million young people in schools, actually 27% of the population is in schools which means that the labor force coming out and seeking for jobs is educated and trainable. And look at the wages and wage structure. You can get a young bright engineer and he would be happy if he can get as a starting salary $300 per month or a technician for $450, Where can you get that, working 40 hours a week.
Look at the potentialities for enlarging the market to regional markets. We have almost open borders with Libya, Sudan and the eastern part of the Middle East. The negotiations are ongoing for lifting restrictions on trade among the countries in the region so you can use Egypt as a hub. And this is what some companies are doing. I was visited by Unileague just a week ago telling me that they decided to take Egypt as a hub for some of our operations.
The financial services and other services are coming to be excellent. A good, strong banking system, regulated by the Central Bank, a capital market that is moving to be very fast and as active as other capital markets in the world. By the way, we were the second stock market established in history. The other services like the port services, telecommunications services did significantly improve and come very close to the international standards. So, this is the second incentive.
The third incentive is the social life. Whoever will come will bring with him people to live temporarily and some live permanently in this country. This country has to receive well and welcome the non-Egyptians. This country has been known over history as a cosmopolitan country that is never hostile to non-Egyptians. As a matter of fact, Egypt was a melting pot for many races for 7000 years and they melted very peacefully. When you walk in the streets you will find the dark and the white, the tall and the short, the pharaonic features and European features. All of them are Egyptians. So, the warm and friendly attitude and perceptions of the people of Egypt. As a matter of fact, they appreciate and welcome the presence of the non-Egyptians here in Egypt either as businessmen or visitors or tourists.
The most important point is the macro stability, the macro stable economy. The economy did succeed in reaching the level of stability, the almost balanced budget with a deficit of less than 1% and almost a surplus in the current account for several years and a surplus in the balance of payments. There is a little deficit that came a year ago but it is a temporarily deficit.
5/Q. You were talking about lifting barriers on trade. Could you tell us a little bit more on the implementation of the free zone here in Egypt? How successful has the implementation been?
A: Let me finish the environment first. For the environment also, this is my personal opinion. AT the top of all what I have said are two basic things: the end of the state of war with Israel, the peace and the local stability; the strong regime we have here in Egypt.
Given all what I have said and considering that if there is a threat of war no investor will ever think to come and even the people who do have the money here will try to keep that money outside, peace is indeed very important. The decision to take peace, permanently, will hopefully stay for good. It was a very important factor for attracting investment, local and international. You would not stay in a country if you were threatened, in your health or in your life. So, you have to feel secure and walk in any street in Cairo at any time, day or night. So, I think we were privileged in overcoming our challenges and problems during the last twenty years and cementing the peace and the local stability.
On trade, we are very keen to integrate the Egyptian market with the global markets. We do not think that the turbulence that took place in Asia, Russia and Latin America will affect the move for globalization. Globalization will take place and it is our responsibility to prepare ourselves to the time where whatever left from the restrictions will be lifted. We are part of the GATT agreement but we have been given some time for the lifting of quantitative restrictions on textile and pharmaceuticals for, I think the year 2004 or 2005. We have to prepare ourselves. We’ll be moving to lift all qualitative restrictions. We did that. And also reducing our customs one year after the other, until we satisfy our obligations with the GATT agreement to the year 2004.
6/Q: You told us that you were a businessman before. Our readers are always interested in a brief historical background as well as your professional experience?
A: I started with the University of Cairo. Then I was given a fellowship in the United States where I got my Ph.D. from the University of [---] Then I came back to Egypt and worked with the University and in business. I used to co-manage a management consultant firm from 1964 until 1975, for 10 years, but I also worked on an ad hoc basis with the ministries as consultant to the Ministry of Industry, to the Ministry of Construction, and to the Ministry of Electricity. In 1974 I decided to gain from the experience of working as a manager to start my own business and we started a firm that specialized in restructuring the losing companies and advised on improving the profitability. From 1974 to 1984 we were number one in the Middle East. Then I was approached to join the cabinet. The decision was to compare between your personal interests and serving your country and there is no way to compare, you serve the country. I liquidated my business and joined the government since 1984. So, I have been there for
14 years.
7/Q: Minister, keeping in mind that our FORBES reaches more than 4.5 million readers, what will be your final message to them?
A: I know the readers of Forbes are influential. They influence others. My message is : "Please support peace anywhere in the world. The world will never be better off unless peace prevails. We can support peace by supporting governments that strongly support peace, media that advocate peace, and politicians who strongly support peace". If around the world more and more influential people support peace, peace will prevail and peace means construction and development whereas war means destruction and misery.
The second enemy for development anywhere in the world is terrorism. So, we have to join forces. Everybody has to support and help all initiatives. It is through international cooperation that we can hopefully pressure terrorism initiatives that take place around the world.
The third part of the message is that the development of the developing part of the world will help the growth in developed countries. Caring and sharing development in the newly developed world will reflect itself on growth and prosperity of the developed part of the world. |
© World INvestment NEws, 1998.
This is the electronic edition of the special country report on Egypt published in FORBES Magazine,
May 31st issue.
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EGYPT
