Dr. Ashraf Hassan Abdelwahab Acting Minister Ministry of State for Administrative Development (MSAD) Arab Republic of Egypt 1

Introduction Historical background Current situation for Public Sector Enterprises in Egypt: – Legislation and structure – Challenges The new vision for Public Sector Enterprises role 2/16

Starting 1952, Egypt adopted a communist regime and state owned enterprises emerged – Represented the core economic back bone – Governed by Nationalization program and specific legislations – Totally owned by Government Egypt went through a thorough review of its economical structures in the mid 80s 3/16

In 1991, Public Sector Agencies were reorganized into Holding Companies (ownership) and Public Sector Enterprises. – June 1991, 314 company constituted the Public sector in Egypt The privatization program started to emerge in 1993 and in parallel to economic reform, it reduced the no. of PSEs from 314 to 147 in /16

Public Sector: – In 1983, Economic Establishments were converted into Public Sector Organizations (Law 97/1983) – State owned and currently, 5 sectors remained public sector: Media General Authority for Oil (12 Companies) Suez Canal Authority (7 Companies) Banks (5 Banks) Arab Contractors Company 5/16

Public Sector Enterprises: – 9 Holding Companies: Cotton, Spinning and Weaving Metallic Industries Chemical Industries Pharmaceutical Food Industries Construction and Development Tourism, Hotels and Cinema Insurance Maritime and Land Transportation 6/16

Basic principles of the law: Establish state-owned holding companies (owning and not managing) Establish affiliated companies, where holding company owns 51% Set rules and criteria for the selection of companies management board (holding and affiliated) Monitoring through periodical reports to the Cabinet of Ministers on the companies’ activities Give right to the holding and affiliated companies to develop their administrative regulations Determine audit unit inside the companies (holding and affiliated) 7/16

Disadvantages affecting Public Sector Enterprises’ performance: Vision: – Lack of common vision and coordination of strategic objectives Transparency and Accountability: – Lack of clear determined criteria for the selection of enterprises’ management board and members – Misuse of liabilities – Restriction of auditing bodies 8/16

03/0404/0505/0606/0707/0808/0909/10 Number of Affiliate Companies Number of profitable companies Number of losing companies Operating Revenues (EGP Million) Net Profit (EGP Million) Total Salaries (EGP Million) ___ Number of employees ___ 9/16

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Privatization program was highly criticized for: – Lack of transparency (companies selection, pricing standards, boards…) – Miscommunication of policies – Lack of experience – Mal distribution of returns and contribution to unemployment – No tangible contribution to national economy in terms of productivity or employment – Was it too fast for the society? – Corruption? 11/16

During the 25 th Jan. revolution, the society was calling for employment and social justice. Egypt has adopted a new strategic vision for PSEs: – To become the main pillar for Socio-economic development in Egypt 12/16

Public Sector Enterprises have to a partner in realizing Socio-economic development in Egypt through the following: – Building and developing the Egyptian community – Realizing social justice 13/16

Termination of all privatization processes Preparation of a complete strategic plan for the public sector companies to be implemented according to a determined schedule Apply good governance principles – Establishing new criteria for the selection of companies’ management board and members – Tighten control, monitoring and accountability Re-engineering the companies’ organizational structures 14/16

It is always about Why and How? Why we need to keep these companies and there benefit to us (state) – Supported Political vision – Clear public policy on their role in the society – The balance between commercial and social objectives How to run these Enterprises ‘Right’ – Good governance (transparency, ownership, accountability,…) – Expertise – Access to finance 15/16

Thank you … 16/16