Privatization and Corruption in Egypt.

Privatization and Corruption in Egypt.

Cairo : Egypt | Jan 29, 2011 at 10:11 AM PST
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Last June there were protests against privatization in Egypt. The protests were so severe that the government actually decided to effectively end the program. Since the 1990's a key economic priority in Egypt was the privatization of state owned industries and a transition from a centrally controlled economy to a more free market oriented economy that would be part of the global capitalist system.

The justification for such a move was the inefficiency of the state controlled command economy. However, the more pressing concern was to open up the country to foreign investment and also enrich crony supporters of the government through privatization of state owned assets at fire sale prices.

Many in the public long believed that privatization of state companies involved corruption involving insider dealings and opposed it for this reason but also there was oppoosition from some old guard officials who thought that privatization would be destabilizing. When the state owned companies this ownership could be used to help control dissent. Wages could be raised and people could be employed even when in purely capitalist market terms they were not needed. In fact they provided a social safety net of sorts.

The privatization has already gone about as far as it could go. Remaining state companies often are technologically outdated and overstaffed with poorly trained workers. No capitalist investors are interested in buying them except perhaps at very low prices.

In June of 2010 thousands of workers protested outside parliament complaining about lost jobs, wages, and social protections. Fearing even more political unrest the government decided to drop further privatization for now. The government has even bought back several companies from investors.

The demand from the international business community has been for further "reform"to cut Egyptians expectations. Egyptians expect their government to do things for them not just for business! Experts claim that the fundamental mistake of the government was in failing to reduce public expectations. Under the command economy and state ownership people expected the state to be the primary provider. People supported the government because the government gave everyone jobs. The experts complain that there are still about six million state civil service employees. Of course the reform would be to privatize most of these services, make them centers for private profit and investment and hire only if this made money for investors.

The new view of this is expressed by an official. Anonymous of course and to the New York Times! ‘You educate me, give me a degree, you give me a job, when I die you bury me - and I do nothing.' " Of course they did do something they kept the system going inefficient or not. The problem is that it is not part of the system of global capitalism and it does not provide much for private profit or investors.

Political scientist Amr El-Shobaki said that privatization was a way that friends of the rich and powerful could grow more rich and powerful. The privatization process had begun under Anwar Sadat but it begin in earnest in 1991.

The goal was to privatize 314 companies. All the bargains are gone to investors, dissolved or merged with other state companies. 150 are still left.

Shobaki said:"There is always a cost for reform, but the problem here is that people now have the impression that those who always pay the cost of every reform are the simple people, while businessmen are never held accountable for corruption and while privatization of companies takes place in secret, without the knowledge or participation of the people," Perhaps people's impressions are correct.

Faced with opposition to privatization the government took another tack. Open the door to foreign investment and let state industries wither.In the Egyptian context, economists say it is a victory that this work force has shrunk, to about 300,000 from about 1.3 million in 1978. Right, it is a victory that jobs are lost. THe government that scored that victory is now in danger of falling. One of the reasons is the high unemployment.

The government has adopted other "reforms" to reduce expectations of the Egyptian working class and whip them into shape. The government adopted a law that allowed state-owned companies to deal with employees in the same way as private-sector companies. In 2009 it began to carry out a new law allowing the private firms to build infrastructure, including sewage plants and hospitals, another unpopular move intended to whittle away the state-dominated system.

A study of Egyptian attitudes show a quite different view of privatization and the role of government than in the U.S. Consider this:

""The majority of citizens believe that the best system would strengthen the role of the state and the public sector; only 20% of citizens considered privatization to be beneficial to Egypt’s economy. ""


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Protests over Privatization
Egyptian protesters. This was last June and the protest was about government privatization policy.
northsunm32 is based in Brandon, Manitoba, Canada, and is an Anchor on Allvoices.
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