CAIRO: The Egyptian government won’t take any steps to end the country’s privatization plans, Minister of Planning and International Cooperation said on Saturday.
Following a meeting the Prime Minister, Minister Fayza Aboul Naga reiterated the government’s position, at a time when national companies are struggling as the public sector debts increase, the official news agency MENA reported.
With growing discontent from laid-off workers, who are demanding compensation and nationalization of privatized companies, the transitional government has continued to struggle over the past year in finding a middle ground to appease both workers and private businesses.
An administrative court ruled in September that the Shebeen Al-Koum Spinning, Nasr Steam Boilers and Tanta Flax & Oil Companies be returned to the state because they had been “sold for less than their estimated value and because of sales irregularities since their privatization.”
Owners of Tanta Flax and Shebeen Al-Koum filed lawsuits against the state for violating the previous deals. The owners won the case and the companies remained private. However, just last month, workers demonstrated at General Authority of Foreign Investment (GAFI)to have the deals annulled.
Dozens of workers from Shebin El-Kom Textiles Company and Tanta for Flax and Oil staged demonstrations, demanding that the companies be returned to the state once again so that the workers could have their jobs back.
“The state is currently in no shape to respond to the demands of protests of the workers, which the cabinet generally views as legitimate demands,” Aboul Naga, was quoted as saying.
The privatization of the current companies is still going on as planned, she added. Prime Minister Kamal El Ganzoury has ordered that an individual study be conducted for each of the 100 state companies in question.
“The issue is that the government does not have resources to fund loss-making operations. In the general sense, if a business is owned by the state and the state has to fund it, then that might be a problem in terms of not having resources,” Angus Blair, financial analyst, told Daily News Egypt.
But, with Egypt in a crunch with a budget deficit of about LE 140 billion and rising public expenses, the state can’t afford to manage all of its companies.
“A government having a lot of enterprises is a problem. They are badly managed, based on ancient rules, and often have a lot of bureaucratic procedures within. The way t o fix this is privatization,” said Sondos Faramawy, a corporate governance financial consultant.
While privatization is often a necessary step to boost the management and production state-owned companies, the state sometimes overlooks the rights of employees when finalizing the deals.
“In terms of policies, there must be some sort of agreement between the government and the company, for example, on not laying off the people at least for the first two years, until after introducing new policies and seeing how efficient they would be,” said Faramawy.
“The government should be concerned with the rights of the employees, and make it clear.”
She added that it would be even more harmful for a company to reverse a privatization deal than to go forward with production.
Since last year’s Jan. 25 uprising, hundreds of workers across the country staged sit-ins, halting production in the process, to demand that the state enforces a minimum and maximum wage.
In December, El Ganzoury approved a law that would make the maximum wage 35 times the minimum; a move to battle the growing budget deficit, which government officials expected would eventually reach LE 182 billion.
Just months before, the government had also set the minimum public sector salaries at LE 700, which includes meals and bonuses.
However, in light of recent mass protests to commemorate Egypt’s ongoing revolution, El Ganzoury approved a 10 percent increase of pensions starting this month, according to Egypt’s State Information Service.
As government spending increases and the country’s $18.1 billion foreign reserves continue to fall at a rate of about $1-2 billion a month, it is unclear how the government will fulfill this promise.
