Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Doctorate of Business Administration (DBA)
Intake 3 – 2015
Strategic Management (SM)
Egypt Privatization program
.
Prepare...
Strategic Management (SM)
Egypt Privatization program Page: 1 / 5
Walid Saafan – Jul., 2015
Contents
1 Definition of Priva...
Strategic Management (SM)
Egypt Privatization program Page: 2 / 5
Walid Saafan – Jul., 2015
1 Definition of Privatization ...
Strategic Management (SM)
Egypt Privatization program Page: 3 / 5
Walid Saafan – Jul., 2015
private investment to avoid pu...
Strategic Management (SM)
Egypt Privatization program Page: 4 / 5
Walid Saafan – Jul., 2015
6 Privatization program impact...
Strategic Management (SM)
Egypt Privatization program Page: 5 / 5
Walid Saafan – Jul., 2015
Assets, good brand and large c...
Upcoming SlideShare
Loading in …5
×

Egypt privatization program

710 views

Published on

Short paper

Published in: Business
  • Be the first to comment

Egypt privatization program

  1. 1. Doctorate of Business Administration (DBA) Intake 3 – 2015 Strategic Management (SM) Egypt Privatization program . Prepared by: Supervisor: Walid Saafan Prof. Dr. Adel M. Zayed Jul., 2015
  2. 2. Strategic Management (SM) Egypt Privatization program Page: 1 / 5 Walid Saafan – Jul., 2015 Contents 1 Definition of Privatization concept ........................................................................2 2 Privatization Objectives .........................................................................................2 3 Egypt Privatization Program ..................................................................................2 4 Egypt Privatization Program implementation ........................................................3 5 Privatization program results.................................................................................3 6 Privatization program impact ................................................................................4 6.1 Impact on the macro level ...............................................................................4 6.2 Impact on company level.................................................................................4 7 Conclusion .............................................................................................................4 8 References.............................................................................................................5
  3. 3. Strategic Management (SM) Egypt Privatization program Page: 2 / 5 Walid Saafan – Jul., 2015 1 Definition of Privatization concept Privatization is the process of selling public owned companies to private sector owners that mean transferring state activities to private ownership. The process can be derived by political or economic reasons. Companies can be more economical efficient due to free competition. Privatization is a complex and wide task that goes through three stages: The first stage involves transforming the public owned companies (under privatization) into a new juridical form of private law. The second stage involves transferring ownership over the companies under privatization to the interested private investors. The third stage involves is to enforce the new owners to adopt an efficient management without financial support similar to that provided to the state owned companies. This treats the privatization process as a part from the country economic reform. 2 Privatization Objectives The strategic objective of privatization is to have a positive effect on the population by building an efficient and completive economy and involve more individuals in the economic process. The following general privatization objectives can be classifies as: a) Growth of economy’s efficiency by increasing the efficiency of resource allocation from the entire economy, increase productivity through the new private investors, introducing new coordination systems and eliminate the controlled economy. b) General acceptance by the society and improvement in the population. c) Reduce budget deficit by generating new revenue from selling inefficient public companies and increase tax collection from private companies that turned to be profitable. 3 Egypt Privatization Program The program went through multiple phases that started by collecting public companies under holding companies that are responsible on both operational and investment plans. The ministry of public companies in charge of the program, they inform the Egyptian government about the target companies for the privatization. The program was restricted on small part of the public companies and it was implemented through the stock market aiming for more efficiency and transparency, with priority to companies with low profitability without workforce layoff, on the other hand it was intended to leave the profitable public owned companies that were able to attract
  4. 4. Strategic Management (SM) Egypt Privatization program Page: 3 / 5 Walid Saafan – Jul., 2015 private investment to avoid public opposition to the whole program. The program excluded the productive economic sectors like banking and telecommunication. The government established a Social Development Fund (SDF) to support the social elements of the workers especially the poor segments by assist small projects of unemployed young investors. SDF mobilized over LE 2.5 Billion and created around 300K jobs. 4 Egypt Privatization Program implementation The Egyptian privatization program was considered the foundation for the government move towards free economy based on free market demand and supply mechanisms. The government maintained three fundamental principles to protect public funds adopting fair control on private investors’ participation, while protecting employees’ rights and keep control of strategic sectors under government controls like public universities, military production, public transportation, petroleum, etc... The privatization program in Jun 1991 was implemented on 114 companies representing 38% of the total 314 public owned companies, 36 companies were sold through the stock exchange market through IPO with total amount of LE 5.6 Billion (36% of total privatization proceeds), 19 companies had partial privatization with nearly LE 1.76 Billion. 28 companies were sold to strategic investors with about LE 6.4 Billion (42% of the total privatization proceeds), and approve 30 Employee Stock Ownership Programs with 10% share of public companies with about LE 870 Million. 5 companies follow the lease management contracts. 5 Privatization program results By end of Jun 2002, 190 out of the 314 public owned companies was privatized: Majority Privatization (>51% sold) Number of firms Anchor investor 28 Majority IPO’s 38 ESA 34 Liquidation 32 Total 132 Partial Privatization/Leases Number of firms Minority IPO’s 16 Asset sales 21 Leases 20 Total 57
  5. 5. Strategic Management (SM) Egypt Privatization program Page: 4 / 5 Walid Saafan – Jul., 2015 6 Privatization program impact 6.1 Impact on the macro level The privatization program made a considerable positive impact on the government’s adjustment and restructuring, this led to achieving four main objectives: fiscal deficit reduction through transferring LE 6.6 Billion to budget (out of LE 14.7 billion proceeds collected) representing 10% of the total budget deficit. The program also led to higher tax collected from the more profitable private companies. The second objective was to better utilize the government assets and resources by transferring 0.4% of GDP to private sector. The third objective was to access the markets through direct foreign investment (DFI) that generated LE 4 billion from 11 anchor sales. The final objective was to widen the ownership of companies through the successful IPOs. 6.2 Impact on company level Companies with foreign strategic investors went into significant restructuring projects. The privatization project had a positive impact on the financial performance of the organizations. On the other hand the privatized companies under law 203 improved the performance of public owned enterprises in terms managing over employed staff and improve the financial results. 7 Conclusion The Egyptian governments adopted defensive strategy in the privatization program and liquidate many state owned organization. On analyzing the situation of the companies that went into privatization, We find that there were other strategies that can lead to a better results on the companies under study and the whole public owned assets. It is difficult to assess all the internal and external environment at that time but the indicators show that the sold companies were affected by the same forces and delivered an improved results after the privatization, this led to conclude that the main issue with the organization performance is the management and leadership factors. The public owned companies has a good internal resources and faces a moderate external forces that if managed properly can adopted different strategies even a growth strategies. If We take two different strategies that were adopted by the Egyptian government in two similar state owned banks in Egypt. Liquidation strategy was implemented on the ‘Bank of Alexandria’, the forth bank in the market with 192 branches, LE 42 billion in
  6. 6. Strategic Management (SM) Egypt Privatization program Page: 5 / 5 Walid Saafan – Jul., 2015 Assets, good brand and large customer base. The government paid LE 13 billion to clear the portfolio (bad debt) and sold 80% of its shares to strategic Italian bank Intesa Sanpaolo in 2006 for US 1.6 billion. The new management went through bank restructure programs, attract new caliber to the bank, utilize the bank resources and large customer base, rebrand the bank, along with other management practices. The bank results is improved significantly in Jun 2015 as follows: branch network increased to 210 branches, total assets increased to LE 45 billion, profit reached over LE 1 billion (annualized). The second strategy was implemented in Banque Du Caire, the third largest bank with 222 branches, total assets LE 45 billion that was managed by different strategy. The government adopted Merger and acquisition strategy in 2007 (due to reaching un acceptable bid price by National Bank of Greece) where Banque Misr acquired Banque Du Caire, Banque Misr management invested in the development of Banque Du Caire, clean its bad debt and appointed a new management that went through a successful restructure project, attract new calibers, develop the employees, improved the systems that led to an significant increase in Banque Du Caire’s results in 2013 as follows: Total assets increase to LE 65 billion and net profits to LE 1.7 billion. It is clear from the presented examples that the government should adopt liquidation strategy as the last strategy after failure to adopt other strategies that improve the return of available assets and resources. 8 References “The Privatization’s Mechanisms and Methods in Egypt”, Dr. Ezzat Molouk Kenawy, Journal of Applied Sciences Research 5(4): 420-442, 2009 “The Results and Impacts of Egypt’s Privatization Program”, August 2002, CARANA Corporation.

×