Privatisation Aided Egypt Revolt, Army Says

• by Emad Mekay (cairo)
• Friday, April 08, 2011
• Inter Press Service

Major General Mohammed Al-Assar, a leading member of the Supreme Council of the Armed Forces, a group of top military generals who are running the country until a civilian leadership is elected, said the military brass were deeply opposed to the privatisation programme. That in turn eased their decision to side with the Egyptian public against the 30-year autocratic rule of Mubarak.

Al-Assar told state television on Wednesday that the army has been against the 'plans to sell Egypt' and viewed them as a threat to social peace.

Al-Assasr said that Field Marshal Mohammed Tantawy, the council's president and minister of defence, had repeatedly raised objections to the privatisation programme as shown in the minutes of several cabinet meetings he attended.

His opinion was often over-ruled by Mubarak and other top officials who had favoured to follow economic prescriptions from Western countries. Many of those officials stood to gain from the sale of public enterprises.

Prodded by the Washington-based trio -- United States Agency for International Development (USAID), the World Bank, and the International Monetary Fund (IMF) -- Egypt under Mubarak adopted an aggressive programme to sell public companies to both local and foreign investors since early in 1990.

The programme peaked between 1996 and 1999 with the sale of at least some 30 profitable public companies a year.

Mubarak, and his backers in Washington, marketed the programme as necessary to release the burden of supporting these companies from the government, advance competitiveness, enhance private investment and create jobs.

But the public had grown suspicious as it witnessed the sale of companies cheaply without enough oversight to foreign investors and firms.

Egyptians were further irked as they saw how a large number of workers were made redundant in the process and accusations flew of corruption and kickbacks in the transaction

The programme hit its strongest resistance when Mubarak started to eye the country's four public banks for privatisation despite widespread public opposition. Mubarak went ahead and sold the Bank of Alexandria, the smallest of the four.

Tantawy, even though appointed by Mubarak to lead the ministry of defence, particularly opposed the sale of Bank Misr, the country's second largest bank, according to Al-Assar, amid public questions over the nationality of foreigners bidding to buy national banks.

The sensitive financial sector was being restructured in a programme funded by the World Bank, USAID and the African Development Bank (AfDB) at a cost of some 8.7 billion U.S. dollar.

After the 18-day revolution that toppled Mubarak after 30 years in power, officials who promoted the sale of such public assets under Mubarak have come under both media and legal scrutiny.

On Wednesday, the country's general prosecutor Abdel Megeed Mahmoud froze all assets of three champions of the privatisation programme under Mubarak. All three had cooperated closely with the USAID, the World Bank and the IMF.

The general prosecutor said former Prime Minister Atef Ebeid, former Public Sector Minister Mokhtar Khattab, whose job was to supervise the sale programme, and head of The Metals Holding Company Mohammed Al-Danaf stand accused of 'wasting public money' and possible personal profits during the sale of Assiut Cement Company.

The company, the largest cement producer in Egypt, was sold to Mexico’s Cemex in 1999 for only 373 million dollar. Former board members provided documents that show the real value was at least four times that figure. Now, the contract is being investigated.

This week, Egypt's general prosecutor said his office is examining several other privatisation contracts and was seeking technical opinion on the sale, valuation, legality and the procedure of such transactions.

These investigations could open a Pandora's Box for the programme and its supporters in the Western-dominated financial institutions.

For example, several criminal investigations have now been opened against former Finance Minister Youssef Boutros-Ghali, who oversaw the design and implementation of Egypt's economic changes programmes. Ghali was the head of the International Monetary and Financial Committee of the IMF whose role was to advise the Fund's governors on international monetary policy.

Investigations have also been opened involving former Investment Minister Mahmoud Moheidin's role in the sale of a hotel and an a retail chain. Moheidin is now the World Bank Managing Director. Both are out of the country.

Next week, a Cairo court will look into a case brought by independent whistle blowers to cancel the sale of Egypt’s famous retailer, Omar Effandi, to the Saudi company Anwal on the grounds that corruption was involved and the valuation was inaccurate.

According to the court documents, the 82 stores of the Omar Effandi chain, that include historical buildings dating back to the 19th century, were sold for only 590 million Egyptian pounds when in fact the land value alone of the stores could fetch 4 billion pounds.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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