Egypt Prepares To Privatize

Putting Egypt's state enterprises into the private sector will also mean making thousands of people jobless. Can the nation adjust?

PRIVATIZATION usually means major labor layoffs. So, as Egypt embarks down the difficult path toward public-sector reform, the country is struggling to devise schemes to deal with its future unemployed.

"The problem of labor is a time bomb," says one government source. "If you have a company with 13,000 employees and you only need 3,000, what do you do with the 10,000 extra?"

Egypt's economic reform program, begun in May 1991, also means joblessness for hundreds of thousands of university graduates, previously guaranteed government positions, and others. It is estimated that 40,000 to 250,000 people a year will be added to the number of jobless over the next three to four years.

At present, unemployment in Egypt is around 15 percent, according to some estimates.

Privatization, a major element of reform, finally began in earnest this fall with the creation of the Public Enterprise Office to supervise the process.

International companies are evaluating a selected group of public-sector firms to assess their values. The boards of holding companies that will manage the public firms' portfolios should be decided early this month, and sales of the companies' assets should begin this fall. Once they are sold, the new owners will decide their employees' fate.

According to Egypt's strict labor laws, workers cannot be fired. So employers must create alternatives to a salaried job to entice and coerce people to leave. Workers here realize, however, that the privatization program may force them to take whatever incentives are offered.

Meanwhile, efforts have begun to deal with the problem of increased unemployment. The nation is relying heavily on the World Bank-initiated Social Fund to do this.

The Social Fund has been slow in starting, however. Programs that were supposed to start in September are finally being implemented under a new director. These include a public works project to upgrade and protect the Nile River and a credit program for small businesses of one to 15 employees.

Future plans include compensation packages, training programs, and credit extension for small entrepreneurs to offset the downsizing of the public sector.

With a budget of over $600 million, the Social Fund hopes to create 150,000 to 250,000 jobs.

"I think the Social Fund will contribute significantly to other efforts to combat unemployment," says Hussein al-Gamal, the fund's secretary general. "Also, it will contribute from a moral point of view. It will set the scene for other resource organizations to follow suit and it will give more hope to the public."

Since 1985, the Ministry of Agriculture, a pioneer in privatization, has sold its reclaimed desert land to employees of the ministry if they agree to leave their jobs.

Since then, 6,000 people have left in return for five to 10 acres of productive desert land, up to 30 years to pay the discounted price of the land, and easy credit. While employees can also accept early retirement and monetary compensation, 90 percent opt for land, says Monir Agazy, manager of the Agriculture Ministry's Information Documentation Center.

THE government also offers incentives of easy credit and business space in Egypt's new desert communities to encourage people to start small businesses there. In 10 years, the government estimates, 3.5 million people will have relocated to 12 of these cities.

Some observers doubt these efforts will even begin to solve the problem. One critic, labor specialist Nadir Fargany, says giving desert land in return for a job is "utter madness," because it is expensive to make a desert farm work and most people do not have enough savings.

Other sources are optimistic that Egypt's economic reform will increase jobs in the future.

"Part of restructuring the economy means going through a transition period. The adjustment program foresees two to three years of retrenchment, then the economy will start growing," says Heba Handusa, an economist at the American University in Cairo.