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Tuesday, 31 May 2022

A level playing field?

PM spearheads fair competition push to boost privatization plans: Prime Minister Mostafa Madbouly will head a new ministerial committee to shore up competition policy and ensure all businesses are playing on a level field, according to a cabinet statement. The committee will work with the Egyptian Competition Authority (ECA) to make sure the Sisi administration’s policies encourage fair competition and to “correct regulations in markets that suffer from a lack of competitiveness.”

What’s this “competitive neutrality” of which the statement speaks? It’s a key concept in competition law that holds that state-owned enterprises should not hold unfair advantages over their private-sector competitors.

Stronger competition rules were mentioned in the early version of the government’s privatization strategy: According to the copy of the state ownership document obtained by the press last month, the government intends to hand the ECA new powers to prevent state entities from interfering in the economy and blocking private sector players from entering markets.

Some state-owned enterprises continue to have unfair advantages, such as tax privileges and preferential access to finance from state banks, while the absence of publicly-available information and the lack of separation of commercial from non-commercial activities makes it difficult to assess their finances and market activity.

The ECA doesn’t have enforcement powers to penalize anti-competitive practices by the state or, in some respects, the private sector. The ECA is also lacks teeth to regulate mergers and acquisitions that could have an impact on competition — but that hasn’t stopped it from (a) angling for the power to block and M&A before it goes through or (b) publicly weighing in potential transactions it doesn’t like. The current law gives ECA no power over public utilities and allows the agency to grant exemptions to state-owned companies.

Amendments to the Competition Act have been in limbo for over a year: Legal changes that would give the ECA the power to reject mergers and acquisitions were being discussed in the House last year, but were never put to a final vote in the general assembly.

This could be among the keys to the success of the state’s renewed privatization push, which includes plans to double the private sector’s role in the economy, bring in USD 40 bn in fresh investment through sales of state-owned assets by 2026, and fully withdraw from as many as 79 industries over the next three years.

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