The government has embarked on three main paths to rectify the economic path, namely pumping government investments to support economic activity — half of which are directed to the infrastructure, transport, education, and health sectors — implementing national projects, and launching economic reform programmes to boost economic growth.
Hereunder are the cornerstones of the recently announced policy and the key mechanisms it will adopt for the sake of expanding the role of the private sector, which subsequently will benefit the country’s GDP growth.
Q: What are the key objectives of Egypt’s State Ownership Policy?
A: The policy targets increasing the country’s real GDP growth to between seven percent and nine percent by increasing public investments by between 25 percent and 30 percent, thereby creating more job opportunities.
It is also founded on the principle of raising the private sector’s share in country’s economic activity and its development process to 65 percent over the coming three years. This means increasing its contribution to the country’s GDP, taken-up investments, operation, exports, and governmental revenues.
Government interference in economic activity, however, will be intensified in sectors that are stagnant for the sake of revitalisation, which will lead to creating a more attractive investment climate for investors.
The policy also aims to attain more financial savings, enact financial discipline, and keep the state’s economy resilient against internal and external shocks, as well as boost social protection nets.
Q: What type of ownership schemes has the policy set for investments in state-owned assets?
A: The policy has set three key ownership schemes — the government disassociating from a number of economic activities over three years to give room for the private sector to do its work, partnering with the private sector in certain fields, or gradually increasing or decreasing government investments in a sector according to its needs under the Public Private Partnership (PPP) mechanism.
Q: What are the cornerstones of the policy?
- The government incrementally disassociating from a number of economic activities for the private sector, which will be over a short-term in some cases.
- Taking into account the strategic and security dimensions while taking up this disassociation.
- Upgrading the mechanisms of allocating assets to economic activities.
- Designing a clear plan to deal with the impacts of disassociation, especially in terms of the workforce and revenues.
- Setting a package of comprehensive macroeconomic policies that aims to stimulate the private sector.
Q: Which sectors does the government plan to exit over the short-term?
A: According to the policy, the government will exit 15 economic activities across seven sectors over the coming three years, including agriculture, water, sanitation, desalination, telecoms and IT, retail, food and beverages, as well as construction.
The government will also exit a number of activities across the leather, timber, engineering, jewellery, chemical, textile, printing, and pharmaceutical industries.
Q: What are the activities that the government will keep investing in in collaboration with the private sector?
A: Transport, primary education, electricity, mining, real estate, oil and natural gas extraction, ICT, and sports. The government will keep investing in these activities with a possibility of lowering its share of investments for the private sector.
The government will also maintain its investments in some activities across such sectors with a plan to increase its share of investments. These activities also include social protection, Suez Canal related activities, health, higher education, pharmaceuticals, and fertilisers.
Q: What are the mechanisms of executing the policy?
A: The policy sets three types of partnership with the private sector that will govern the total or partial exit of the government from the mentioned economic activities.
These types include reviving the initial public offering (IPO) programme for state-owned assets, the PPP, and increasing the private sector’s share in state-owned assets while keeping the assets under the state’s ownership.
The last type involves nine types of partnership:
- Concession contracts
- Build, Operate, and Transform (B.O.T) contracts
- Design, Build, and Operate (D.B.O) contracts
- Build, Finance, Operate, and Transform (B.F.O.T) contracts
- Build, Own, Operate, and Transform (B.O.O.T) contract.
- Build, Own, and Operate (B.O.O) contracts
- Performance contracts
- Management contracts
- Privatisation of a number of state-owned assets
Q: What is the role that the Sovereign Fund of Egypt (TSFE) is expected to play under this policy?
A: A number of projects will be executed through the TSFE with the aim of maximising the state’s proceeds, boosting the services the state extended through its utilities, encouraging private sector investments — especially foreign direct investments — and furthering local manufacturing.