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Egypt to sell shares in state oil firms

Move part of privatization drive aimed at attracting foreign investment

Egypt said Wednesday it plans to sell off shares in state oil firms as part of its privatization program and efforts to attract foreign investment and enhance performance.The process will begin by selling stakes in the Alexandria Mineral Oils Co. (AMOC) and the Sidi Krir Company for Petrochemicals, Investment Minister Mahmoud Mohieddin was quoted by the official MENA news agency as saying.

The state will offer 20 percent of its shares in Sidi Krir and 25 percent in AMOC through CitiBank and the National Bank of Egypt. "The coming period will witness notable activity in the privatization program," said Mohieddin, adding that this would include selling stakes in banks partly owned by the state.

In September, Egypt launched a sweeping reform of its banking sector to prepare for the privatization of the country's state-owned banks and open up the industry to foreign investors.

Under a five-year plan, the government wants to integrate small banks into their parent companies, reorganize public banks, broaden the capital base of mixed-ownership banks, merge some banks and reinforce regulations.

The future of the industry, which is dominated by a handful of state-owned institutions, has been a hot topic for years.

Mohieddin explained that "foreign investments, be they direct or through the acquisition of existing companies, are beneficial to the national economy, as they increase state revenues and create more jobs."

He added that a drop in foreign investment from $1.5 billion to $450 million in the fiscal year that ended on June 30, 2004 "had a negative impact on Egypt's economic growth rates." Thanks to rising prices, exports of petroleum and petroleum products amounted to $4.1 billion in the same period, according to official figures. The Petroleum Ministry hopes to attract $10 billion in investment in order to build more plants and boost production. It forecasts that this will create some 100,000 new jobs and generate $7 billion in annual revenues. Egypt has an abundance of natural gas, with proven reserves of around 58.5 trillion cubic feet (tcf) and 120 tcf of unproven reserves. Parliament approved a law early last year aimed at attracting international companies by offering them investment incentives such as tax reductions and exemptions for up to 20 years in priority sectors, including oil.

In October, Prime Minister Ahmed Nazif said the economy needed investment of $100 billion pounds ($16 billion) a year to achieve a growth target of around 6 percent.

The International Monetary Fund says Egypt must achieve that rate in order to be able to create the 600,000 jobs a year it needs to accommodate new job seekers and the unemployed among its population of more than 70 million.

Beirut,03 07 2005
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