[A-List] EGYPT: Opposition Protests Plans for Bank Sell-Off

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

<http://ipsnews.net/news.asp?idnews=38655>
EGYPT:  Opposition Protests Plans for Bank Sell-Off
By Adam Morrow and Khaled Moussa al-Omrani

CAIRO, Jul 25 (IPS) - Earlier this month, the government announced its
intention to sell a majority stake of Banque du Caire (BDC), Egypt's
third largest state-owned bank, to a strategic investor. But the
planned sell-off, which comes as part of the technocratic government's
much-vaunted privatisation programme, has come under heavy criticism
by the political opposition.

"Our chief reason for opposing the sale is the lack of transparency
governing the privatisation process," Gamal Fahmy, managing editor of
weekly newspaper al-Arabi al-Nassiri, the mouthpiece of the opposition
Nasserist Party, told IPS.

On Jul. 10, the government announced its plan to sell 80 percent of
BDC to the highest bidder. According to reports in the state press,
another 15 percent is to be offered publicly on the stock exchange,
while the remaining 5 percent will be allocated to bank employees.

BDC is Egypt's third largest state-owned bank in terms of total asset
value. According to official estimates, it enjoys a roughly six
percent share of the Egyptian banking market.

While no specific date was given for the sale, government sources
quoted in the state press said the deal would likely be concluded
within six to eight months. Interested parties, sources added, would
be invited to submit bids within coming weeks.

According to the government daily al-Ahram, proceeds from the
transaction would be allocated to pay off outstanding public sector
debts and to support badly needed housing projects for limited-income
citizens.

CBE Governor Farouk al-Okda attributed the timing of the announcement
to strong foreign investment interest in the Egyptian banking sector.
"There is an obvious desire on the part of several Arab banks to enter
the local market," he was quoted as saying on Jul. 17.

Al-Okda also reaffirmed the government's intention to keep Egypt's two
larger state banks, Bank Misr and Bank Ahli, under state ownership.
Together, those two banks are estimated to enjoy a 41 percent share of
the local market.

The move comes less than a year after the majority sale of another
major state-owned bank, the Bank of Alexandria. Purchased by San Paolo
Bank of Italy for 1.6 billion dollars last November, the Bank of
Alexandria represented the first major state-owned bank to be
privatised.

Some Cairo-based analysts, however, question whether the government
will be able to make as much on BDC, particularly in light of the
bank's crippling number of non-performing loans. At the end of last
year, BDC's non-performing loans reportedly constituted 73 percent of
its total loan portfolio.

"Because BDC is so weak, getting the price that the government is
asking -- between 2 billion dollars and 2.5 billion dollars -- is a
tall order," Simon Kitchen, an economist at Cairo-based investment
bank CI Capital told IPS. "There might be a lot of interested parties,
but they won't be willing to pay that much."

Meanwhile, given historical public sentiment against the privatisation
of state assets, popular opposition to the move was quick in coming.

On the same day as the announcement, a movement calling itself 'No to
the sale of Egypt', established last year to oppose the privatisation
drive, condemned the scheduled sale. In a statement, the group urged
BDC depositors to withdraw their funds in protest, comparing would-be
foreign buyers to "merchants who deal in stolen goods by exploiting
the political oppression of the people."

The decision also met with considerable resistance in parliament.

At a Jul. 18 parliamentary session, opposition and independent MPs
blasted the intended sell-off. Although the debate was downplayed in
state media, it made front-page news in much of the opposition press.

'Revolution in parliament over bank sale', read the next day's
headlines of liberal opposition daily al-Wafd. 'MPs warn of bank
falling into hands of foreigners'.

"Members of the parliamentary economy committee revolted in the
People's Assembly yesterday, expressing anger over the planned sale of
BDC," the paper reported. "Parliamentarians warned against selling the
bank off to foreign interests, lest Egypt return to the age of foreign
capitulations."

The paper went on to report that several opposition and independent
MPs urged that shares of the bank be offered exclusively to Egyptian
investors rather than to foreign or multinational parties. Other
parliamentarians suggested that the issue be decided by way of a
nationwide referendum.

Prime Minister Ahmed Nazif, a leading proponent of the privatisation
programme, quickly moved to allay popular fears of economic
neo-colonialism.

"There is no prospect of foreign domination over the Egyptian banking
sector," he was quoted as saying in the Jul. 19 edition of independent
daily al-Masry al-Youm. Nazif went on to reiterate the government's
commitment to keeping Egypt's two biggest state banks -- which he
called "pillars of the national economy" -- well within the public
fold.

Kitchen agreed that, given BDC's limited market share, the looming
spectre of foreign dominance was exaggerated.

"The sale of BDC will hardly amount to foreign domination," said
Kitchen. "There's already a considerable foreign presence in the local
banking sector anyway, and this sale isn't going to tip the balance."

Opposition figures, however, say that much of their objection to bank
privatisation is less about market share and more about the
availability of public financing for national development.

According to the Nasserist Party's Fahmy, private banks are simply
less inclined to finance unprofitable, albeit badly needed national
development projects.

"Most of these projects, like housing for the poor, offer little in
the way of big returns on investment," Fahmy said. "If a bank goes
private, it will look for other ways to turn a profit."

By way of example, he pointed to agricultural projects, which,
although they provide valuable produce and numerous job opportunities,
are not particularly lucrative. "Projects like these will be neglected
by a private bank in favour of more profitable ventures in other
sectors, like telecommunications," he said.

"Poverty and unemployment are at levels unprecedented in Egypt's
modern history," Fahmy added. "This has only compounded the need for a
responsible public banking sector that will put the national interest
over mere profit seeking." (END/2007)

--
Yoshie