News Analysis: Selling ownership of Egyptian army-held firms helps achieve structural reform for economy: experts

Source: Xinhua| 2021-01-07 23:42:31|Editor: huaxia

by Marwa Yahya

CAIRO, Jan. 7 (Xinhua) -- Egypt is considering selling the ownership of some army-held companies, a move that will help achieve the structural reform for the economy, experts said.

"It's a significant potential opening for private investment in part of the economy," Waleed Gab-Allah, a professor of economic jurisdictions with Cairo University, told Xinhua.

The move will activate the stock exchange, because the army firms are believed to be profitable and will definitely lure new investments, he said.

Egyptian Planning Minister Hala al-Saaed said on Sunday that the military plans on selling two companies, the oil distribution company Wataniya Petroleum which runs a network of petrol stations across the country, and bottled-water maker Safi.

The two companies, owned by the National Service Products Organization (NSPO) affiliated to the Egyptian Ministry of Defense, will be offered for sale in the first quarter of 2021, al-Saeed added.

She explained that part of the stakes of the two companies may first go to strategic investors and the remaining ones will be sold in an initial public offering.

More firms would follow the road, the minister noted.

Offering shares of army-owned firms is a move in line with Egyptian President Abdel-Fattah al-Sisi's instructions, according to Gab-Allah.

In 2019, al-Sisi said in a televised speech that the army-held companies should be listed on Egypt's stock exchange for the citizens to have a chance to own their shares.

Describing the move as "a historic shift in structuring the Egyptian economy," Gab-Allah said it is an indication that the government has started the second phase of the economic reform, which began in 2016 and focuses on expanding the scale of the private sector in the economic activities.

"The government has adopted a new philosophy by selling the profitable companies and investing in others, which will increase the volume of investments and encourage acquisition by investors," the economic expert explained, noting the foreign investors prefer to buy established companies rather than creating new ones.

Gamal Bayoumi, head of the Cairo-based Arab Investors Union, described the new government plan as a "radical step toward transferring to the private sector."

The government wants to rid itself of the stereotype of owning everything by selling some of its assets to important investors as part of its privatization project, Bayoumi said.

In 2017, the Egyptian government identified about 20 state-owned firms that should be listed on Egypt's stock exchange or have additional stakes offered. However, only one of the selected companies has been offered to the public so far given the delay caused by the COVID-19 pandemic.

"Undoubtedly, the decision will have positive impact on the stock exchange and the economy in general, because it will allow the access of new factors into the markets, improve the production structure, increase the share of the private sector in the economy, and encourage new investors," Bayoumi told Xinhua. Enditem