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Egypt: MPs divided over ‘privatisation bill’

MPs express reservations over government-drafted amendments to the public enterprise law

Gamal Essam El-Din , Thursday 4 Jun 2020
MPs divided over ‘privatisation bill’
MPs divided over ‘privatisation bill’
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MPs will resume discussing amendments to Public Enterprise Law 203/1991 on 7 June. Though the House of Representatives gave a preliminary nod to the amendments on 18 May, MPs are divided over the changes.

Mohamed Wahba, a member of the Labour Committee and deputy chairman of the General Egyptian Federation of Trade Unions (GEFTU), says the amendments undermine state-owned companies and the rights of their employees.

“The government says it wants to develop the industrial sector but this law does the opposite. It will allow publicly owned companies to be closed,” said Wahba.

MP Mustafa Bakri said the proposed changes constitute an attack on public sector companies and workers.

“The government sees the public sector as a burden, and sees privatisation as a way to offload the sector as quickly as possible. Former businessman and stock broker Hisham Tawfik, the public enterprise minister, is leading the moves against the public sector in order to promote private sector interests,” argued Bakri.

According to MP Osama Sharshar, Tawfik wants to disrupt the public sector and give private sector companies the upper hand in the industrial sector.

MP Mohamed Fouad has argued that rather than reforming public companies in a manner that will enhance Egypt’s industrial capabilities, the law will result in the selling of public assets to businessmen at knockdown prices.

Parliament Speaker Ali Abdel-Aal appeared to be taken aback by the array of attacks.

“The articles and provisions speak about liquidation [of public sector companies] as a last-ditch option,” said Abdel-Aal. He argued that the law is tailored to reform public sector companies, and that only the most hopeless cases will be closed.

“The government is moving on multiple fronts to reform public companies in a number of strategic sectors, including spinning and weaving, steel and sugar,” said Abdel-Aal.

Abdel-Aal noted that Tawfik had made a lot of money from brokering on the stock exchange yet “accepted the public sector portfolio so he could use his experience to reform and streamline public companies”.

Ahmed Samir, head of the Economic Affairs Committee, praised the amendments, saying they would help save the public industrial sector from financial and other mismanagement.

The General Egyptian Federation of Trade Unions (GEFTU) and the Labour Committee, however, announced their rejection of the government-drafted amendments and accused Tawfik of trying to “assassinate the public sector in Egypt”.

“After much discussion of the amendments, members agreed that they were not in the interest of workers and companies in the industrial sector,” said Labour Committee head Gibali Al-Maraghi.

“Article 38 of the amended law states that a company incurring losses that exceed half its capital shall be liquidated. This would push 40 per cent of companies into liquidation, and consequently harm workers,” said Al-Maraghi.

MP Maysa Atwa noted that the amendments strip workers of representation on the boards and in assemblies of public companies, and argued the provision was an attempt to allow the liquidation of companies to go ahead without protests.

The amendments clearly aim to marginalise trade unions and render them unable to defend the interests of workers in publicly-owned companies, said MP Sulaf Darwish.

Al-Maraghi insisted that the aim of any changes to the current law should be to safeguard strategic industries against unfair competition, preserve the rights of workers and the public ownership of the companies, and attract investment to upgrade their performance.

He argued that while the current public enterprise law, passed in 1991, was intended to modernise the public sector, it had instead been used by the government “to kick off a massive privatization programme that resulted in the sale of two-thirds of publicly owned companies”.

The cabinet approved the amendments to the public enterprise law in a meeting on 26 February. Following the meeting the government issued a statement saying “the amendments aim to update the legal rules regulating the performance of public sector companies and restructure their financial and administrative systems.”

Tawfik told MPs on 18 May the amendments seek to increase the contribution of public sector companies to the national economy.

“The changes oblige holding companies and their subsidiaries to fully abide by transparency and governance regulations. The public assemblies of companies will be required to improve governance, oversee company boards, and remove boards that deliver poor results and fail to secure profits.”

Tawfik argued the current composition of boards, which include both shareholders and workers representatives, undermines the performance of public sector companies.

“Shareholders who invest money should have the upper hand in selecting board members who will upgrade performance and boost production,” said Tawfik.

According to Tawfik, the amendments require any changes in public companies — even the establishing of a new production line — to be first approved by an investment committee which will review the economic feasibility of new projects.

“The aim of this amendment is to stem the tide of losses in public sector companies,” he said.

“In fiscal year 2017-18, 48 companies affiliated with the public enterprise sector incurred LE16 billion in losses and amassed LE44 billion in debts,” said Tawfik.

“This is no longer acceptable, and we need to act to end such losses as soon as possible.”

The 121 companies affiliated to the public enterprise sector employ an estimated 250,000 workers.

 

 

*A version of this article appears in print in the 4 June, 2020 edition of Al-Ahram Weekly

 

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