A Program for Offering Some State-O

In a further expression of the government's policy to sell part of its companies in private markets, the Prime Minister issued a decree on 13 September 2017 reshaping the ministerial committee responsible for the program overseeing the sale of shares of some state-owned enterprises (the “Decree”).[1]

Background

The Decree comes a few days after another decree by the Prime Minister, which gave greater freedom to state-owned banks and insurance companies to sell their shares in mixed capital companies that are listed on the stock exchange, whether they represent a majority or minority stake in these companies.[2] This was analysed in last week’s issue (September Week 1) of the Egypt Legal Update. The latest Decree also comes in the context of the decisions taken by the Supreme Investment Council in November 2016, which included an increase in the number of state companies that will offer 20 – 24% of their capital in the markets within three years, with a focus on agricultural projects companies, the new administrative capital, the new city of El Alamein, and power stations. The latter decision was analysed in the November 2016 Issue of the Egypt Legal Update.

The New Decree

The Prime Minister’s latest Decree introduces a new formation for the ministerial committee responsible for overseeing the public offerings of some state-owned companies in the markets (the “Committee”). It should be noted that the Decree is not limited to the supervision of a particular type of companies, (e.g. public-sector companies or companies overseen by the Ministry of Public Sector Enterprise). The Decree also explicitly applies to state-owned shares in companies that are partially or wholly owned by the state, which also means that the work of the Committee will not be limited to mixed capital companies (i.e. companies whose ownership is shared by the state and the private sector). According to the Decree, the Committee will include the Minister of Investment and International Cooperation as its Rapporteur, as well as the Minister of Finance, the Minister of Public Sector Enterprise, and the Minister of Petroleum and Mineral Resources. The Committee is responsible for supervising the program for the sale of state shares in some companies, for setting a comprehensive timetable for these operations, setting rules and criteria for choosing the companies to be offered and for proposing the percentage of shares allocated to employees, in addition to other competencies. The Decree details the objectives pursued by the government through this program, including stimulating the stock exchange, developing relevant public companies and improving their efficiency, as well as seeking to diversify sources of income for the state. The Decree clearly states that NI Capital (wholly owned by the National Investment Bank) will be the exclusive advisor to the initial and / or secondary IPO of some state-owned companies on the stock exchange after obtaining the necessary approvals.

Conclusion

The Prime Minister's Decree is part of a broader policy to sell some state-owned assets in the market, and is also part of other recent legislative amendments such as the decisions of the Supreme Investment Council and the Prime Minister's decree on the sale of shares owned by public banks and insurance companies. In view of Egypt's thorny experience with privatization, the Committee may play an important role by setting clear criteria for the offering processes, and by ensuring policy coherence and preventing confusion between various overlapping entities. Two (rather procedural) issues must be noted, however. The new Decree formally refers to Prime Minister's Decree No. 1874 of 2007 on the rules governing the management of public funds owned by public-sector banks and public-sector insurance companies, although that decree was repealed by another Prime Minister decree only a few days ago (Decree No. 1962 of 2017). It should also be noted that the recent Decree is strongly linked to three other decrees adopted in 2016 and 2017 to "form a ministerial committee to oversee the public offering of some state-owned companies." However, these latter decrees were not published in the Official Gazette, which means that the differences between the old and current composition and mandate of the Committee remain unknown.   [1] Prime Minister’s Decree No. 1994/2017 on the Program Overseeing the Sale of Shares of Fully or Partially State-Owned Enterprises, Official Gazette, Issue No. 36 (bis)(a), 13 September 2017. [2] Prime Minister’s Decree No. 1962/2017 on the Sale of Contributions of Public Banks and Insurance Companies in Mixed Companies, Official Gazette, Issue No. 35 (bis), 6 September 2017.