CAIRO: Egypt’s Minister of Trade and Industry Mahmoud Issa said that the country’s iron and steel industry will not be affected as the government proceeds to withdraw licenses from a “limited” number of factories.
Issa stressed that the Central Bank and the bank unions have a key role to play in solving the problems of the factories, according to a report by Egynews.net.
He is currently in the process of submitting a draft to amend the law that protects competition among businesses as well as drafting a more strict anti-trust law to prevent monopolistic practices.
The minister’s announcement comes in light of the recent court ruling in the case of Ahmed Ezz, chairman of Ezz Steel and Amr Assal, former industrial development chief, who were found guilty of graft, sentenced to 10 years in prison, and fined LE 660 million ($110.9 million), according to Reuters.
A court ordered two of Ezz Steel’s licenses be withdrawn, but the company said the decision would not affect current operations but would hit future investments. The company said withdrawing the licenses "is not related to the existing activity of the (Ezz) companies or current production, but it is expected to affect directly and indirectly on Ezz and its companies regarding future investments."
The minister said he plans to address the “old, defective laws” with the Cabinet.
“This is part of the reform process they should be doing in general, not just for monopoly or steel industry,” said Magda Kandil, executive director of the Egyptian Center for Economic Studies.
“There’s no question that the business we witnessed over the past years was filled with many monopolistic schemes.”
Issa stressed that the ministry will be supporting a free market in Egypt and providing “attractive” investment regulations to simplify procedures in the future.
However, he pointed out that this not means there will be an absence of control and oversight provisions.
In this transition phase after the country’s revolution, Egypt’s economy, along with its political scene, is witnessing a process of new growth. “The ministry right now does not want investors to be afraid, they are trying to isolate what’s happening in Ezz Steel from other investors,” she added.
The ministry is trying to say that the country is against monopolization and against illegal practices, and supports fair and healthy competition and investments, Kandil added.
During the previous regime, rather than providing a “leveled” atmosphere for doing business, the laws provided officials in power with excuses that they could use to “milk the system,” Kandil said.
“We need to continue putting together the right laws so we do not allow someone to milk the system and monopolize,” she said.
“We have to preserve the pillars of private-led growth; we have to have checks and balances so we don’t find ourselves complaining from those who achieve wealth behind measures through these schemes.”
Earlier this month, a Cairo Criminal court issued an order to freeze all assets of Ezz, a close associate of ousted president Hosni Mubarak, who is currently on trial for ordering the killing of protesters during the January uprising.
After the court issued the order on Ezz’s case last week, Ezz Steel dropped down 8.9 percent, although he had quit the board of the company and its affiliates in May, according to Reuters.
“Obviously, investors will be somewhat retracting from the industry because of what happened,” said Kandil. “But, it is better for the economy to reform the system and laws.”
According to Kandil, this will be a temporary set back as the country is in a process of changing its economic policies and reshaping its future.
“But to fix these setbacks, we have to continue with reform so we don’t end up at the same spot that sparked the revolution.”
Moreover, Kamel Galal, head of investor relations at Ezz Steel, recently announced that the company has decided to freeze all its investments, which are worth LE 5 billion, according to Al Mal newspaper.
“It’s not wise for a company that has been found in the spotlight and found guilty of monopolizing to continue in their investments,” said Kandl.
“I think they are making the right decision by freezing these investments; we are more worried about the bigger picture of the country’s economy not just the future of one company.”
Kandil pointed out the country must continue making changes even if Ezz Steel will be “affected by a forward-looking agenda,” because what is more important now is the new path that the country will take.
With the minister of trade’s recent announcements, other steel companies have been adjusting in order to make sure they are on the same path of reform as the country’s policies are changing.
Steel companies have met with the ministry of trade and industry on Saturday to discuss payment of license penalties, according to Egyptian independent daily, Al-Masry Al-Youm.
Bishay Steel agreed to pay the license cost of LE 385 million, while Tiba Steel will pay LE 38 million.
According to the official, Suez Steel is supposed to pay LE 385 million, and Ezz Steel should pay LE 660 million; meanwhile both companies are discussing the issue internally.
Ezz Steel said the decision would particularly affect a reduced iron project and expansion of its furnaces in Ain Sokhna area, which is on the Red Sea east of Cairo, adding it would "study legal options available and take necessary measures to confront the harm resulting from the ruling."
Ezz said it would "review future investments, the execution of which has not yet started, to determine the extent of the temporary freeze necessary and reconsider these investments in light of the prevailing economic conditions."
The firm said it was seeking to guarantee the continuation of a reduced iron project now being implemented by one of its units, with a total investment of more than LE 2.6 billion. It has spent LE 1.7 billion so far. –Additional reporting by Reuters
