Short paper

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. 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. 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

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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

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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

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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.