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Interim government striving to reduce prices by restructuring public sector companies - Daily News Egypt

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Interim government striving to reduce prices by restructuring public sector companies

By Mohammed Ayad The government is set to remove various heads of its holding companies in a step aimed at restructuring the crisis-stricken public business sector and increasing competitiveness through price adjustment, according to the prime minister’s spokesman, Sherif Shawky. Shawky added that Prime Minister Ibrahim Mehleb is consulting with Minister of Industry Foreign Trade …


By Mohammed Ayad

The government is set to remove various heads of its holding companies in a step aimed at restructuring the crisis-stricken public business sector and increasing competitiveness through price adjustment, according to the prime minister’s spokesman, Sherif Shawky.

Shawky added that Prime Minister Ibrahim Mehleb is consulting with Minister of Industry Foreign Trade and Investment Mounir Fakhry Abdel Nour on the matter.

Shawky declined to name those to be removed, but described the change as a “narrow” one. “The change is primarily intended to increase efficiency in the management sector, allowing for an increase in competitiveness and stronger government price control,” he said.

But sources within the Ministry of Investment told Daily News Egypt that Fouad Abd-al-Alim, chairman of Misr Spinning and Weaving Company, was one of the most prominent heads to be removed during the coming changes. His company suffers from poor liquidity, and its employees’ salaries are paid from the fund dedicated to restructuring the public sector.

The first steps towards the hierarchal changes was made Saturday after Fouad Abd-al-Alim, chairman of Misr Spinning and Weaving Company, submitted his resignation during the general assembly’s meeting .

Prior to the meeting, Abd-al-Alim said he did not know anything about whether he would be leaving or remaining in his position, but said the spinning and weaving industry had “reaped the fruits of years of government negligence toward the sector, as companies failed to produce at high rates thanks to poor equipment and machinery.” He called on the government to pump liquidity into the spinning and weaving sector as part of his plan to increase productivity.

The government owns nine holding companies that include 150 subsidiary companies – and their investment arms present in various sectors such as steel, retail, consumer cooperatives, milling, insurance and construction – in order to provide products that compete with the private sector as a means to control prices.

Abdel Nour has previously said the government is striving to restructure the public business sector by registering shares of its companies on the stock market as a means to secure funding outside the deficit-ridden state budget. Through this process, the government aims to increase the sector’s competitiveness and adjust prices through competition with the private sector.

Markets were hit with a wave of increases that affected all goods and services in the absence of government control and an inability to provide alternatives for citizens. The price of one ton of cement jumped to more than EGP 800 as of the beginning of May, alongside price increases for meat, oil, and sugar. Although the government owns companies that produce these goods, their poor quality and lack of availability force citizens to make do with the prices offered by commercial chains.

Mahmoud Diab, spokesman for the Ministry of Supply, which took over government control of consumer cooperatives, said he believes the problem will only be addressed by distributing large amounts of quality goods at 1,250 cooperatives, and companies’ wholesale and grocery branches nationwide.

Presidential candidates’ platforms, which will be revealed over the coming weeks, have yet to touch on the restructuring of the public sector. Presidential hopeful Abdel Fattah Al-Sisi feels that it is essential to restructure the public sector, denying any intention to privatise its companies. He instead wants to work to make up for its losses, allowing for competition with private sector products.

However, he hinted at the army’s distributing goods and services such as meat, and if merchants fail to stabilise prices, Al-Sisi pledged to set them in order to permit the public sector to recover.

Presidential candidate Hamdeen Sabahi also stressed that he does not intend to privatise state-owned enterprises, but added that restructuring the companies is the solution for returning the public sector to its role in adjusting distorted market prices.

A cabinet source, who wished to remain anonymous, said that the government will establish an economic commission, employing the experiences of the private sector to manage a fund being created by the government to encompass all of the public business sector’s assets. The goal is to enhance sector revenues, and the source stressed that the financial, investment, and planning ministers and the governor of the Central Bank of Egypt are currently coordinating in order to limit those assets and set regulations for the economic commission’s work.

The source expected the fund to be launched before the end of 2014, adding that negotiations between the government and investment bank asset management professionals have so far been “friendly”.

Selling public sector companies has stirred controversy in Egypt, as former president Hosni Mubarak’s regime was accused of selling the sector’s assets at extremely low values in an operation marred by serious corruption. Interim President Adly Mansour said during May Day celebrations that he has no intention of selling public sector companies and that he will work to restructure them in order to maximise their returns.

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https://dailyfeed.dailynewsegypt.com/2014/05/10/interim-government-striving-reduce-prices-restructuring-public-sector-companies/
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