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Wednesday, 18 May 2022

The government wants to fully exit these sectors within 3 years

The draft of the government’s ownership policy just leaked: The government intends to fully withdraw from as many as 79 industries over the next three years as part of plans to restructure the economy in favor of the private sector, according to a draft of its state ownership policy obtained by Al Masry Al Youm yesterday. Coming two days after Prime Minister Moustafa Madbouly announced new details of the government’s privatization plans, the draft document outlines the industries which the government plans to open up to private companies and the ringfenced strategic sectors which will continue to see heavy state involvement.

REFRESHER- The government wants to double the private sector’s role in the economy over the next three years in a bid to attract bns of USD of fresh investment into the country, Madbouly announced Sunday. It is aiming to raise USD 40 bn over the next four years by selling stakes in state-owned assets to local and international investors.

The document obtained by AMAY divides the economy into three groups:

#1 “Take it all”: There are 79 sectors that the government intends to “fully exit” over the next three years. These include the automotive sector, some manufacturing industries like furniture, electrical appliances, leather and glass, fertilizers, and agricultural production (minus wheat).

Caveat: “Fully exit” doesn’t necessarily mean fully exit: Some industries in this group ⁠— such as food and drink ⁠— the government intends only to hand over management to the private sector, and will retain ownership of the assets.

#2 “We’ll give you some of these”: The government will phase out its involvement in another 45 sectors. Heavy industries such as cement, iron and aluminum manufacturing, and consumer-facing industries like meat and cigarettes are listed here. It also includes some infrastructure: energy infrastructure such as oil refineries, power plants, transmission and distribution networks and renewable energy projects, as well as wastewater treatment plants and desalination projects will all see greater private sector participation.

#3 “Hands off”: These are sectors the government considers strategic and are mostly infrastructure-related. Think: transport networks, telecoms infrastructure and water systems. Wholesale trade, health, education and pharma are also listed here as are some financial services such as brokerages and ins. The document notes that the private sector will be allowed to increase ownership in some of these sectors, without providing details.

NOTE- The document says that privatization will be “phased and gradual” to minimize “unfavorable” repercussions on revenues and employees.

High-tech sectors are earmarked for PPPs: The document says that the government will explore public-private partnerships (PPPs) in 18 tech industries, including artificial intelligence, the Internet of Things (IoT), cybersecurity and energy storage, to support the country’s digital transformation. There are also plans to set up a dedicated committee made up of government and private sector representatives that will assess the legal and regulatory environment to shift the economy towards next-generation technologies.

The ECA would get sharper teeth: The Egyptian Competition Authority (ECA) would be handed new powers to take “proactive steps” to limit market entry barriers and prevent state interference in the economy. The regulator doesn’t currently have the authority to enforce competition laws or penalize anti-competitive practices by the state.

THE BIG REVEAL: The final document will be published by the government before the end of May.

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