- Ahmed Shousha
- BBC – Cairo
3 hours ago
The government sold a minority stake in companies owned by it to Saudi and Emirati funds
Deal following deal announced by the Egyptian government to sell its stakes in commercial companies to countries in the Gulf.
A few days ago, Egypt announced that the Saudi Investment Fund had acquired minority stakes owned by the Egyptian state in four leading companies listed on the stock exchange, at a value of $1.3 billion. Egypt in two other companies for the UAE Fund.
The Egyptian Minister of Planning, Hala Al-Saeed, said in a statement announcing the latest deal, “It comes in accordance with objectives that achieve the highest benefit for the Egyptian state, maximize the exploitation of assets owned by it, and guarantee the rights of future generations.”
swapping debts for assets
Hani Tawfik, the former head of the Egyptian and Arab Investment Associations, believes that “the sale was forced to Saudi Arabia and the UAE because of Egypt’s need to pay the installments and interests of its owed debts.”
But Tawfik praises, in an interview with the BBC, the selection of the type of companies that are sold, saying: “They do not fall within the list of strategic companies that may be related to Egyptian national security, such as arms or infrastructure companies.”
Egypt’s external debt reached regarding $158 billion at the end of the first quarter of this year, rising by regarding $13 billion within three months.
Egypt needs regarding $35 billion to cover the current account deficit and pay interest and debt installments during the current fiscal year 2022/2023, according to the head of the Planning and Budget Committee in the Egyptian House of Representatives, Fakhry El-Feki.
This comes at a time when foreign exchange resources from exports and tourism have declined, and what is known as hot money has come out, following the Russian invasion of Ukraine.
But a member of the Egyptian Association for Economics, Statistics and Legislation, Walid Gaballah, disagrees with that and says that Saudi Arabia renewed its deposits with Egypt and deposited a new five billion dollars, which means that there is flexibility between the two countries and that the recent deals are not only related to debts.
The role of the private sector
photo released, Getty Images
The global inflation crisis affected Egypt and raised the prices of food commodities
“The Egyptian government is facing pressure from international economic institutions to relinquish its control over much of Egypt’s economic activity,” Gaballah told the BBC.
A few months ago, the Egyptian government presented a draft of what it called the “state ownership document”, through which it announces the exit from some economic activities in the country, and the expansion of the role of the private sector in the national gross product.
The former chairman of the Board of Directors of the Holding Company for Metallurgical Industries, Medhat Nafeh, says that the difference between choosing to sell assets to pay off debts or maintain them to achieve returns is accurate accounts that have not been announced and related to the value of assets, demand for products, opportunities for their future expansion and energy price increases, in addition to the possibility of finding payment alternatives. debt burden.
“This sale may become more beneficial if conditions are not in favor of the company’s future, or we find that the debts that will fall are much less than the company’s expected returns if they are kept,” Nafeh explains to the BBC.
Nafeh points out the importance of diversity in the countries to which the Egyptian government sells its shares, fearing that “some relations with Egypt will fluctuate, or some countries will go through difficult economic conditions.”
Egypt targets foreign investments worth $10 billion next year, in a plan to attract a number of Arab sovereign funds, in the UAE, Saudi Arabia, Qatar, Bahrain, and other destinations, according to the Egyptian Minister of Planning.
Privatization Policy
Egypt has devalued the currency once morest the dollar and suffers from a lack of foreign exchange resources
The former director of the Nile Center for Economic and Strategic Studies, Abdel-Khaleq Farouk, criticizes the lack of transparency in announcing the details of the deals that show the extent of their fairness, in addition to his objection to what he called “the policy of allocating and selling state property to pay off debts dating back to the 1990s.”
Farouk explains to the BBC that there are other options, which are “reactivating government companies to increase production and revenue, tax reform, and reconsidering spending on major projects without priority.”
Egypt has expanded over the past years in building major cities, road and infrastructure projects, at a cost estimated at more than six trillion Egyptian pounds (320 billion dollars).
Areal investment
The shortage of the required dollar in Egypt is a symptom of a basic problem represented in the weakness of the so-called real foreign and domestic investment, which depends on agriculture, industry and export.
Experts have long said that this is due to “bureaucracy, high taxes and energy prices, and government competition with the private sector.”
The announcement of the recent deal between Egypt and Saudi Arabia, which included Abu Qir Fertilizers and Chemicals companies, Egypt for the production of fertilizers, Alexandria for the handling of containers and goods, and e-finance for financial and digital investments, within the framework of the agreement concluded last June for cooperation between the Saudi Public Investment Fund and the Sovereign Fund of Egypt.
The Sovereign Fund of Egypt was established regarding three years ago to transfer untapped state property to it for development, and its properties are now estimated at tens of billions of dollars.
Deals to sell government stakes in companies are concluded at a time when the Egyptian cash reserve declined to regarding $33 billion last June, and Egypt is negotiating with the International Monetary Fund to obtain a new loan, following borrowing from it nearly $20 billion since 2016.
Since these deals were announced, the controversy that has spread to social media does not stop over whether this is the required investment to add to the economy.
It depends on the extent to which the deals achieve, in raising capital, for example, or adopting newer technology in operation, according to experts, which have not been announced so far, while they unanimously agree that establishing projects from scratch is a more feasible investment.