EGYPT: Public Assets Sold at Bargain Prices, Critics Complain

By Emad Mekay Reprint | | Print |

Emad Mekay

CAIRO, Sep 9 2005 (IPS) - Egypt has some real deals these days. For example, a historic hotel built on its own island in the Nile River not far from the country’s fabulous ancient pharaonic monuments was recently sold for less than three million dollars, although local real estate experts value it at closer to 10 million.

It is all part of a privatisation programme sponsored by three powerful international finance institutions – the World Bank, the International Monetary Fund (IMF) and the U.S. Agency for International Development (USAID) – which play a key role in steering the economic policy of the most populous Arab country in the Middle East.

The trio found a natural ally in the U.S.-backed government of Pres. Hosni Mubarak, who appointed a new cabinet last year that included several former businessmen who worked for foreign corporations.

In another transaction under the privatisation programme that local newspapers complained had “the smell of corruption”, the Amoun Hotel in the southern tourist city of Aswan was sold to businessmen Sameh and Nagiub Sawiris, two friends of the Mubarak family.

The programme, which started in the late 1980s under pressure from the World Bank, the IMF and the USAID in exchange for loans and technical expertise, has picked up since the new cabinet came to office in July 2004. Millions of dollars in assets have already changed hands, often amid allegations of corruption and favouritism.

“Privatisation has come to mean getting rid of public assets, and they are there for the taking. And I find this very crude,” said Gouda Abdel-Khalik, an economics professor at Cairo University. “The motto now is sell any and every asset you lay hands on to whoever, at any price, at any time. This is going too far.”

In June, the World Bank approved 2.8 billion dollars in loans under a new Country Assistance Strategy (CAS) for Egypt covering the next three years. Mubarak had signed a memorandum of understanding with the United States in 2004 for loan guarantees worth two billion dollars. Both programmes have stringent conditions for further privatisation and other economic changes.

Also in June, the IMF completed its consultations with Egypt, recommending that the country implement more “structural reforms”. The Fund said it welcomes “the re-launching of Egypt’s privatisation programme” and said that “the sales finalised since late 2004 and the public listing of companies up for sale in 2005 attested to the government’s commitment to the programme.”

USAID has been implementing a programme to encourage foreign investment in Egypt for the past three decades, which includes constant recommendations for the country to sell its public assets. In March, a USAID release said that Washington gave Egypt 100 million dollars to back economic changes and “prepar(e) the banking sector for a wave of privatisations”.

The sale of the Amoun Hotel, however, has attracted a different kind attention for its low price and for who bought it. The hotel came to exemplify the shift of ownership from the Egyptian public to the hands of the rich and the powerful under the re-launch of the privatisation programme..

The hotel contains historic artwork and furniture that makes it stand out for tourists who flock to the ancient country.

“If you sold the doors, the woodwork and the historic furniture in the hotel alone, you’d get a price far more than 15 million (Egyptian) pounds that were paid for the entire hotel,” said Mostapha Bakri, editor of the weekly independent Osboaa newspaper.

Other prominent hotels have met a similar fate. The 256-room Sonesta Hotel in a popular part of Cairo was sold in 1999 to another businessman with ties to the government, Mounir Ghabbour, at an undervalued price of 1.3 million dollars, when some real estate experts said the land alone could fetch as much as 2.7 million dollars.

Other undervalued sales that have drawn criticism from the political opposition and independent analysts include the Meridian Hotel in downtown Cairo, and the Egyptian Boilers Company.

“The IMF and the (World) Bank would be happy to turn a blind eye because they have their own agenda,” said Abdel-Khalik, who noted that he previously worked for the World Bank. “Do not believe whatever they say about good governance and all that. They would be quite willing to sacrifice that for their agenda. I wouldn’t take them seriously on that score.”

Despite the allegations of corruption, the programme is now on a fast track, sponsored by the trio of international finance institutions and cheered by lobbying groups like the American Chamber of Commerce, whose membership comprises local businessmen who work with or for U.S. corporations.

The World Bank’s Country Assistance Strategy (CAS) for the coming three years in Egypt says the new cabinet, which sold 19 companies in the first year in office, plans to further expand the scope of privatisation in such areas as large infrastructure projects, an area that was initially shielded from privatization on national security grounds.

The document says the government has short-listed 83 companies for sale during the remainder of 2005 alone, many of them through direct sales and shares offers. The main target of the next wave of privatisation will be the four major public banks, with the Bank of Alexandria the first to go.

And despite the lack of oversight from civil society groups or the parliament, the CAS says the Mubarak government and its allies in the business community have plans to divest most remaining state-owned enterprises over the next three years.

They will privatise the gas distribution network, and sell public sector shares in joint venture insurance companies, petroleum companies, and parts of the postal service, as well as 20 percent of the telephone monopoly, Egypt Telecom, one of the most lucrative companies in the Middle East.

Analysts here say that what is happening in Egypt now is a process of selling public assets by former businessmen in government to businessmen both outside the government and abroad with the blessing of foreign international financial institutions.

“They have this trio – IMF, the World Bank and USAID – which sits for the U.S. Treasury Department, representing in the eyes of our top government officials the ultimate in terms of expertise and state-of-the-art knowledge and technical advice. And that’s the heart of the problem,” said Abdel-Khalik.

No one from the IMF, the Bank or the USAID was immediately available for comment.