From few days it was announced that Bank of Alexandria , the third biggest public bank in Egypt was sold to an Italian group. It is something unique I guess because Bank of Alexandria was an Italian bank in the beginning before the nationalization of 1960 , I studied for a whole semester the Egyptian banking system and believe this semester I was so shocked from knowing more and more about our Egyptian economy.
Bank Alexandria faced a lot of corruption , and lots and lots and lots of Billions transferred abroad to the Bahamas and Switzerland Banks !!
Technorati tags: Egypt, Economis, Economy, Bank, Italy Bank of Alexandria, Middle East, Africa, Arab
It's my dream that one day I wake up with no state owned banks (at least) and here is why:
ReplyDelete1952 - Military coup D’état
(July 23 revolution)
(The six principals)
of which
“Terminating the control of capital on ruling” came as
one of the said principals.
Where capital at that time was totally owned by private
sector.
1956 - Suez Canal Company nationalization
mobilization of public opinion against foreign investment
1958 - Egyptianization of Banks’ Ownership
deepening the public perception against foreign investment in the financial system even for the Arab ownership.
1960 -Nationalization of banks and insurance companies.
New role for banks to finance the first national plan 1960-1965 without competition among them and no role for private ownership in financial institution.
1961 -Mass Nationalization across the board for most of the companies in all economic sectors.
(Services, Trade, Industry, Agriculture)
Announcement of socialism as a system for economic management in Egypt.
1964 -Merging 32 banks, to have only 5 banks each of them allocated to serve specific companies working in specific activity.
Endeavoring to implement control by the unit of currency like control by the role implemented in the Soviet Union at that time.
1972 -The establishment of Arab international bank.
In the form of private off-shore bank exempted from all regulations other banks are subject to.
1974 -The issuance of law 120
- Allowing establishment of private bank and also foreign banks to open branches.
- Liberalize public banks from rigid governmental regulations.
- Easing foreign exchange rules.
- Strengthening the authority of the central bank.
- Public banks established private banks in collaboration with foreign or national private sector
1981 -National conference of economic reform
- Infrastructure reform
- Reform and modernization of P.S.C
- Allow private sector to work in some sectors in a conditional way.
1991 -Economic reform and structural adjustment program with IMF
- For the first time in the recent history the country accepted and adopted comprehensive economic program based on realistic givens.
- The program included explicitly privatization among the policies to be adopted, where privatization of industrial and commercial companies would enhance the capabilities of supply, and privatization of banks would enhance demand side.
-Although the program achieved remarkable improvement specially on the demand side, yet Egypt was
very reluctant to implement the privatization program as planned to start on 1994.
1996 -Privatization Starts
In spite of the commitment of the government to start on aggressive privatization plan including banks specifically one of the public sector banks, the implementation results were disappointing (few companies only).
Much to ones surprise the formal address to people from officials was not expressing a favorable opinion towards privatization.
1997-2004 -Do-nothing government
(No comment)
Now after the above brief history of the mess in our banking sector I'll tell you what privatization can do to help improve our quality of life in Egypt :
-For the first time, new faces with no “socialist background, which means capable decision makers for change management as required in strong and transparent manner without being hindered by precedent social commitment.
-Young internationally experienced and well educated decision makers.
-To the first time, strong formal commitment towards privatization (between July 2004 and March 2005, 17 non financial companies were privatized, generated proceeds of LE 2,35 Billion.)
-The basic economic argument given for privatization is that governments have few incentives to ensure that the enterprises they own are well run. Governments have the de facto monopoly to raise money by taxation should revenues be insufficient. As Governments may borrow money more cheaply from the debt markets than private enterprises, they will squeeze out more efficient private companies through this misallocation of resources. The high costs of tax subsidies are not readily seen.
-Where governments lack it, it is said that private owners do have profit motive. The theory holds that, not only will the enterprise's clients see benefits, but as the privatized enterprise becomes more efficient, the whole economy will benefit. Ideally, privatization propels the establishment of social, organizational and legal infrastructures and institutions that are essential for an effective market economy.
-Privatizing a non-profitable (or severe loss-making) company which was state-owned would shift the burden of financing off taxpayers, as well as freeing some national budget resources which may be subsequently used for something else. Especially, proponents of the laissez-faire capitalism will argue, that it is both unethical and inefficient for the state to force taxpayers to fund the functions or industries that they oppose or do not require. Also, they hold that the privatized entity would have to adapt to market forces or be penalised if it fails to adapt to the market reality by offering goods and/or services which are preferred by the customers.
It's for our long term value to return Egypt 54 years...yes we need to turn back Egypt to be "economically" as it was before 1952..and I see it's getting close, I'll keep my fingers crossed and I hope we all do the same!
Cheers!
I don't know ,we should be so hopeful that we can return back to pre-1954
ReplyDeleteNow about what you said ,there is one point I will stand against ,the privatization of the Suez canal ,as I believe is that was from the few good things the regime did then ,I look to from a political and security point of view
why should n't be so happy by those foreign investments
remember Ismail Basha and Tawfik Basha
The nationalization of the Suez Canal is an exception for sure, but what happened after that is what I disagree with...economically :), I'm only looking forward for the pre 1954 status economically ONLY, and not politically, I think that the revolution was a great landmark in our modern history "as a stand alone case" but something(s) went wrong after that both in the economy and the political ground. You know what, many revolutions in the modern history went wrong because the "Elitism" concept, thats why few revolution ACTUALLY led to a democratic system! For me, Elitism= group dictatorship.
ReplyDeleteCheers