Last week the government announced proposed legislation which would allow for the distribution of shares of some of the public sector companies to the population, free of charge. Every citizen aged 21 and above would receive a certificate representing a number of shares in dozens of companies. To acquire the certificates, citizens would be expected to register and later be informed on how to receive them. Should citizens forego the opportunity to acquire their certificate within a year of distribution, they would no longer be entitled to it. The certificates are estimated to have a value of between LE300 and LE500. The government has said that the aim behind this proposed legislation is to allow the population to benefit from the asset management programme. But for the most part the government's good intentions seem not to have seeped through to the public. On the contrary, many viewed the proposal with suspicion and have aired their reservations. But the reservations are not all unfounded seeing that the government has decided to change the way it goes about the asset management of public sector companies 18 years after it first launched it. Official figures by the Ministry of Investment, the body in charge of the asset management of public sector companies, show that during the past four years alone the financial performance of the 155 companies included in the ministry's portfolio has gone from net losses of LE1.3 billion in 2003/04 to net profit of LE5.5 billion in 2007/08. This the ministry attributed to a number of measures, which include slashing the debt of indebted companies from LE31.5 billion in June 2004 to LE10 billion in June 2007, pumping new indirect investments reaching LE8.5 billion during the period of July 2004 to June 2005 in these indebted companies, carrying out some mergers, acquisitions, and changing 80 per cent of the management of the holding and affiliate companies in the past four years. Al-Ahram Weekly sounds out the opinion of experts and the average citizen who is the primary target of the proposed legislation. National Democratic Party (NDP) members were expecting the announcement of the new asset management plan. During his speech at the ninth general assembly in 2007, President Hosni Mubarak said he was looking forward to a new system that would allow for greater popular support, and whose profits would benefit a wider proportion of Egyptian society. Since 2007 we have been expecting this promise to be translated into action by the minister of investment, who is responsible for this issue. The core of what Mubarak's speech signalled at was to help the average citizen gain from the wave of economic development which has been reflected in macroeconomic indicators, but has not yet been felt among the people. In the end, the format of the plan to make this promise come true as it turned out was not quite what we had expected. I had imagined that it would be directed at the needier rather than be distributed equally. Of course the main issue here is implementation -- not what the programme looks like on paper. We have good policies in Egypt, but we are often confronted with obstacles upon implementation. The programme is beneficial on more than one front. First, it aims to achieve social equality in the way that shares will be distributed. Second, it encourages popular participation. And third, it maximises companies' efficiency, as they follow the rules of good governance. Nonetheless, we must be prepared for the worst by drawing on various scenarios. We must find out what people intend to do with their certificates. Do they intend to keep them or will they sell them? If they sell them, what guarantees do we have that these shares do not fall in the wrong hands? We also need to know what effect this huge number of shares will have on the value of the companies in question, should any of their shares be traded. The effect of this plan on the macroeconomic level must also be carefully studied. We need to know what the consequences will be on consumption, savings and investments. Yomn El-Hamaki, head of the department of economics, Ain Shams University, and member of the NDP's General Secretariat. A government's role is to make sure that the public business sector, built by the previous governments and generations, is managed efficiently and honestly in a way that generates profits that can be siphoned to finance new investments. New investments create more job opportunities for citizens that enable them to earn a decent living. This also implies that the government leaves public assets, after renovating and adding to them, to the new generations to come. Under the pretext of widening the scope of public ownership, the Egyptian government has recently disclosed its new asset management plan for the public sector. Ironically enough, the present form of public ownership is considered to be the widest form of ownership, simply because the public sector is currently owned by the entire population. As a matter of fact, the proposed privatisation plan emulates the experience of some Eastern European countries, where poor or medium class citizens who lacked investment experience rushed to sell their ownership deeds to those who had financial abilities -- therefore mainly to black market tycoons and mafia gangsters. By the same token, it is widely expected that the members of the low-income strata in Egypt, and as such the majority, will rush to sell their newly acquired ownership deeds, estimated to value some LE400. In this way, the public business sector will eventually be sold to the private sector at low prices. In this scenario, it will be the Egyptian people to blame, not the government. It is also interesting to note the proposed ownership deeds would be granted to those who are over 21 years old, which implies an unjustified discrimination, and in the meantime denies the citizens under that age their right over their country's assets. If the government is really interested in fulfilling President Hosni Mubarak's promise of social justice, the right way forward is to give citizens annual quotas from the revenues from the country's natural resources, such as oil and natural gas, or from the well-established organisations such as the Suez Canal. Ahmed El-Sayed El-Naggar , editor of Strategic Economic Trends report issued by Al-Ahram Centre for Political and Strategic Studies. In the late 1990s, in the aftermath of Egypt's successful economic reform programme, an overwhelming majority of the population supported the government's policies, including its ambitious privatisation plans. A survey conducted in 1998 by Al-Ahram Centre for Strategic Studies, showed that more than 80 per cent of the Egyptian people, including a sample of academics and public opinion leaders, were fully behind the reforms. The survey showed clear support for the rationale behind privatisation, as focussed on ridding strained government finances of the burden of over-staffed, inefficient public sector enterprises that would otherwise thrive in private hands. The reform record since, including this most recent proposal, reveals how the government's own hesitation and clear loss of direction has managed to confuse the public and eventually create serious doubts about the legitimacy as well as the benefits of privatisation. In the protracted process, the government lost instrumental public support for its programme and eventually began to look for alternatives to implement privatisation by any other name. It is unfortunate for the stellar ministerial team of economists making the proposed distribution of public assets, that they did not heed the fundamental lessons of reform gleaned from the historic experience of once-Communist Eastern European countries as well as the transformed former Soviet republics. Countries that embarked on protracted and complex reform programmes just prolonged the pains and ended up with botched schemes. Those which undertook bold and unwavering measures were out of the financial blues sooner and the fortunes of their population rode high on the waves of reform. The so-called coupon system, the mother of the proposed distribution of assets, was one of the very first privatisation instruments introduced in Eastern Europe and the former Soviet republics. These were countries where virtually all assets were publicly owned, and where no financial institutions, qualified investors, or stock markets existed. The coupon system was a primitive ploy to overcome insurmountable obstacles to the non-existent culture of private ownership. The situation in Egypt is different, a country which embarked on reforming its economy more than 17 years ago, in February 1991. The first few years of the programme produced clear results that changed the country's prospects from stagnation and decline to stability and robust growth. The privatisation programme was the exception, and the present plan still falls far short of expectations. Policy-makers in Egypt should perhaps heed US President-elect Barack Obama's lesson on how to conduct a successful campaign to win against all odds. Obama did not get bogged down in controversial debates. Rather, he gave the public a very clear sense of direction, one of change for the better. Then he embarked on implementing a well-designed campaign to enlist strong public commitment and financial support. The rest is history. Ahmed Abu Shadi, journalist and member of the Egyptian Council for Foreign Affairs. The companies in question were in the possession of the state, and the government's role was to effectively run them and to direct their yields to finance public services, and to push forward the economic development with the aim of improving the living standard of Egyptian citizens. In other words, the state was not the owner; rather it was running those companies in proxy for the real owners, who were the people. The proposed programme would only transfer the ownership of those projects to their original owners, the people, while the state will maintain its role in running them. This means that the programme changed only the form, not the essence. However, the proposed programme will not achieve the cherished justice. The present pattern of wealth and income distribution in Egypt increasingly disfavours the poor and low-income classes. One of the weakest points of the Egyptian economy is the lack of a clear mechanism for wealth distribution to bridge the gap between rich and poor. The social security system is so vulnerable that it has become unable to provide a decent living standard for the middle class. The latter plays an important role in protecting the values and culture of society as well as spearheading development. The current erosion of the middle class is no doubt one of Egypt's most profound problems. The implementation of the programme will widen the scope of public ownership in the short run, but it will eventually lead to a greater concentration of wealth in the hands of the rich. It is widely expected that the vast majority of the new owners, mainly from the lower income strata, will rush to sell their ownership deeds to those with money, whether Egyptians or foreigners. Subsequently, the rich will get richer and the poor will become poorer. The programme will negatively affect the state's ability to attract more investments needed to push forward the development process. Investors, especially foreigners, will prefer to buy existing projects in order to avoid the troubles of getting approvals and licences needed to establish new ones. The implementation of the programme in its present form will increase the state budget deficit. The distribution of around 40 million deeds, for free, will deprive the state budget of the present value and future yields of these stocks. The planned management system will not improve the performance of the projects, as the members of the new entity that will undertake the management of the assets will be appointed by the government. While the pattern of management will be changed in form, the efficiency and productivity will remain unchanged. Fakhry El-Fiki , professor of economics at the Faculty of Economics and Political Science, Cairo University, and former assistant executive director of the International Monetary Fund. The new proposal regarding the asset management of public sector companies is not yet clear. At this stage one can only comment, but not really analyse. Personally I do not see the feasibility of this scheme, neither for the citizen nor for the government. In a country where 43 per cent of the population is living on $2 per day, people are in dire need of cash. Most will choose to sell their deeds. It is a matter of necessity. And what benefit will the government gain from the application of this new scheme? Moreover, is it constitutional to take away the right of those below 21 of age to access their shares? Surely what we are envisaging here is unequal distribution. At the start of the privatisation process in 1991, similar ideas were showcased to Egyptian officials and they chose not to adopt them. What has changed since then? The way the scheme was presented to the public was like a trial balloon. It did not reflect the government claim that this idea has been in the making for the past three years. The scheme should have been more detailed upon presentation and it should have showed us exactly how the countries which applied this technique previously have since fared. And we need to know how the authorities plan to sidestep all the problems which those other countries have faced. As things stand, the lack of information has resulted in a state of confusion. What augmented this state is the fact that the scheme was announced through the National Democratic Party, and not through the government. Such an announcement needs to have been made by the government, or otherwise both by the government and the ruling party together. Sherif Delawar , management professor at the Arab Academy for Administrative Sciences
