The Egyptian government is set to exit 79 sectors within three years and maintain investments in 45 sectors.
The draft state ownership policy document, of which Al-Masry Al-Youm obtained a copy, showed the government was about to exit all its investments in 79 sectors, the topmost being fish farming, livestock, slaughterhouses and the construction sectors -except for social housing projects- TV program and movie production, retail trade, automobile sector, and the electrical, furniture, leather, fertilizer and glass industries.
The draft showed that the government is keeping its investments in 45 sectors, but plans to reduce it later and allow a greater share of the private sector.
These sectors included the industries of cement, iron, aluminum, meat, birds, fodder, dairy, cigarettes, smoke, power plants, transmission and distribution networks, and wastewater treatment plants.
According to the draft document, the government maintained investments in 27 sectors and plans to increase it in the future.
These sectors include infrastructure and sectors with strategic and social dimensions, such as education and health, while also allowing the private sector to have a larger share in some of these sectors, including the wholesale trade activities, drinking water production plants, water distribution networks, infrastructure in maritime transport, railways, subways, air transport and ship industries, land telephone services, wireless communications, and radio and television broadcasting.
The draft identified three dimensions of the government’s investments in different economic sectors:
- Fully exit the sectors within three years.
- Maintain investment with a tendency to reduce investments later and allow a larger share of the private sector.
- Maintain investment with a tendency to increase it later while also allowing a share for the private sector.
The draft, which the government submitted to some concerned parties, organizations and bodies for review was devoid of a specific definition of the term “state ownership” and the proposed exit mechanisms.
It also included the state’s vision to encourage the private sector, its objectives aimed at raising economic growth rates and the governance of the state in economic sectors, as well as its vision for the future of the Sovereign Fund of Egypt and its role in enhancing the private sector’s role.
The draft includes features of a legislative environment conducive to economic activity, achieving competitive neutrality, and the principles governing the state’s investment in economic sectors in accordance with the standards of international organizations – the Organization for Economic Cooperation and Development – as well as frameworks for forming partnerships between the public and private sectors under a program to increase the efficiency of state-owned assets.
The current document represents the first stage of the strategy to determine the state’s ownership of its assets.
The document also aims to raise investment rates by values ranging between 25 percent and 30 percent, which will contribute to achieving an economic growth rate between seven percent and nine percent, providing job opportunities, and enabling the private sector to increase its economic share to the domestic product.
The draft assured of the government’s commitment to enhancing its investments in economic sectors that the private sector is reluctant to enter due to the failure of market mechanisms, however its development directly contributes to improving the work environment of the private sector.
It added that its investment in economic sectors will be in accordance with specific criteria, which will take into account the transformation from the management of state institutions to the management of state capital.
In determining owned assets, the draft document relied on six criteria:
- The relation between the commodity and national security and the daily needs of the citizen.
- The importance of the government joining as an organizer, supporter and financier for future technological industries.
- Ensuring that public investments do not crowd out private investments.
- The level of profitability of state-owned assets.
- The attractiveness of the sector for private investments.
- Exit from sectors whose market is saturated and do not need state support.
Regarding the sectors that the state will exit within three years:
-The government plans to exit five sectors in the agricultural field, such as grains other than wheat, fish farming, livestock, horticultural crops, planting tree forests, river transport sectors and establishing dry and land ports, except for those located in border areas, in which the state plans to increase its investments.
-It also plans to exit investment in drinking water plants depending on desalination plants, software activities, computer consulting, TV program publishing and film production, and building construction – except for social housing projects – civil residency engineering, retail trade and specialized services activities, and food services where the state plans to exit management only and not ownership.
-The government will maintain its investments with a tendency to reduce it later and allow a larger share of the private sector in the following sectors: transport sector in areas such as the operation and maintenance of containers, management, operation and maintenance of the metro, pre-primary education, dairy in the agricultural sector.
In the water and sanitation sector, the government will maintain its investments in sewage collection networks, lifting stations, wastewater treatment and recycling plants, mining and quarrying in coal, oil and natural gas, ore and minerals, and service activities related to the mining sector.
In the electricity sector it has maintained investment in power plants, transmission and distribution networks, gas supply and air conditioning. It also maintains investment in real estate, telecommunications sectors, Internet and mobile phone services, and postal services.
The third phase, where the government will maintain its investment with plans to increase it in the future, included the establishment of docks and infrastructure for each of the maritime transport, railways, and metro; management, operation and maintenance of railways, air transport; the education sector starting from the primary education stage until the general, industrial, agricultural and commercial secondary education stages; activities related to the agricultural, industrial and health sectors and wholesale trade, while maintaining the role of the General Authority for Supply Commodities in managing strategic goods and securing stock in the country because of its paramount importance.
The government will raise its investments in a number of areas, such as plants for the production and lifting of drinking water, activities related to the Suez Canal and its economic zone, activities in the brokerage and insurance sector, such as financial intermediation and pension insurance.
The government also plans to raise investments in the information and communications sector in areas such as telecommunications services, publishing activities, radio and television broadcasting, and information services.
For the manufacturing industries, the government plans to exit from most industrial sectors, announcing it would leave about 63 industrial areas in ten industrial sectors – namely engineering, food, leather, chemicals, pharmaceuticals, cosmetics, medical supplies, printing, packaging, metal, textile, wood and furniture.
The most prominent activities that the government plans to fully exit according to the draft are:
– Automotive industries, transportation equipment, electrical appliances, computers and electronic products, medical devices, paper industries, printing and packaging materials, advertising and printed advertisements, perfumes and cosmetics industries, furniture industries, leather products and leather tanning, ready-made garments production requirements, furnishings, processing and industrial fibers, glass, fertilizers and rubber industries, industrial detergents and disinfectants, foundries and goldsmiths, ready-made meal chains, salt, ice and oil industries, juices, beverages and dairy products industries, frozen and fresh vegetables and fruits, slaughterhouses sector, and book printing and binding.
The most prominent activities that the government plans to maintain but might reduce later include cement, iron, aluminum, copper, batteries, bricks, new energy industries, meat, poultry and fish industries, fodder, sugar, sweets, towels, cigarettes and smoke, coal, acids, chemical compounds, industrial and medical gases, cotton and wool ginning and weaving, medical supplies, petroleum refining and new energy industries.
The government plans to maintain and later increase its investment in the following sectors: pharmaceutical industries, newspaper printing, digital printing, the semiconductor industry, and the manufacture of ships and boats.
Edited translation from Al-Masry Al-Youm
