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French Version

Egypt insists privatization has been a win-win proposition

Supporters says sell-offs help generate new jobs

Since Egypt launched its privatization drive almost a decade ago, the strategy has been a consistent target for both "Washington Consensus" advocates who criticize the slow pace of economic deregulation and left-wing opponents calling on the state to increase its welfare provisions.

Now at the helm of the liberalization program, Prime Minister Ahmed Nafiz has attempted to spur the pace of reforms and introduce social safety nets to temper their impact.

"The Egyptian government does not manage companies successfully," said Mohammad Ozalp, vice chairman of Bank of Misr in Egypt. "Privatization is necessary because it offers the technological know-how as well as the necessary training for employees while providing better structures for the companies."

He added that the private sector may succeed where the public one has failed by introducing productive niches of skilled workers and training unskilled laborers.

According to a 2005 World Bank presentation for a Middle East and North Africa conference entitled "Creating jobs: the role of the investment climate," private firms of all types are the key actors in growth and poverty reduction as they create more than 90 percent of jobs, provide most of the goods and services consumed, and pay most of the taxes needed for public funding of health, education and other services.

Talal Fadli, consul general at the Egyptian Embassy in Lebanon, acknowledged that the initial transition can be difficult for the labor force, and that unemployment will go up before it does down.

"The owners of privatized companies aim to get [new or] more advanced machines necessary to do the required job while getting rid of the excessive number of employees that were needed before introducing new technologies to the companies," he said.

He said that in the past Egyptian laborers have depended on work experience rather than formal education, and that many are too technology-illiterate to be properly trained.

Ashraf Ezzedine, the embassy's commercial counselor, suggested that for the government's part, it would rather privatize certain sectors than deal with the staggering losses incurred by state inefficiency.

"The Egyptian government seeks privatization of certain companies in order to minimize their loss, which leads to success after privatization," Ezzedine said. "The generation of revenues [leads] also to a greater demand for labor. The Egyptian government is concerned about the earnings of laborers and the preservation of their rights, but any employee hurt by this process will definitely complain and stand against it."

Egypt's Investment Ministry says it is preparing a database for employees in the public business sector - including their names, positions, previous jobs, the date they joined, credentials and training received - which will be used to guide decision-making regarding posts, training and transfers. Moreover, a new early retirement scheme has been introduced that gives workers better severance packages if they voluntarily ask to be retired early. Twenty-five percent of the package is to be paid in cash to an early retiree, with the remainder deposited at a bank.

The manager of Egypt's Al-Ahram newspaper in Lebanon, Fathi Mahmoud, said that workers at or above the age of 50 prefer to accept retirement packages that include immediate cash payouts, which enable them to start their own businesses and create jobs opportunities for others.

"More important is the fact that when old people choose to retire, their previous employers will be able to employ new people in their places by giving them lower salaries," said Mahmoud. "This leads to creating more job opportunities and decreasing unemployment by employing two or three people sometimes in the place of one."

And contrary to arguments put forward by some labor-rights activists, Mahmoud said privatization does not necessarily erode education.

"When a company is privatized," he said, "it is to the benefit of the new owner to improve the skills of employees by providing them with training programs for the usage of new, more productive and advanced technologies."

Cairo,07 09 2006
Redaction
The Daily Star
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