What does it mean to put the Egyptian military companies on the stock exchange?

The Egyptian state has reaffirmed its commitment to put the military-owned companies on the stock market before the end of this year, as part of a comprehensive plan for private-sector participation in the management of its assets, to raise the capital base on on the one hand, and attracts foreign capital from outside the country on the other.

Egyptian President Abdel Fattah El-Sisi mentioned the listing of companies affiliated with the armed forces on the stock exchange on two occasions over a three-year period. The first time was a hint when, during the inauguration of a national project in November, he defended against allegations by some about the Egyptian army’s control of the local economy, saying: “The army’s scope of work does not exceed three percent of the size of the national product, “which justifies the introduction of troop-owned companies. The Egyptian military said in the stock exchange, “so that citizens can buy shares in it.”

What was a tip three years ago became a confirmation when the Egyptian president confirmed last Tuesday night on the sidelines of the “Egyptian Family Breakfast” that shares of state-owned companies and the armed forces are being offered on the stock market. before the end of this year, as part of the government’s IPO program.

In 2017, Cairo announced a national program to offer the interests of state-owned public companies to the stock exchange, and over five years, the government has only offered interests of three state-owned companies already listed on the stock market.

In March 2019, Cairo offered approximately 4.5 percent of the shares of the Eastern Company for Tobacco (Eastern Company), and then, 31 months later, the “E-Finance” company operating in the digital services and information technology sector work, offered before it was offered. about ten percent of the shares of Abu Qir Fertilizer Company in December 2021.

In January, Egyptian Prime Minister Mostafa Madbouly answered a question in an interview with BBC Radio about a report issued by the World Bank, which indicated that there were about 60 military-affiliated companies in 19 industries in Egypt. are active, including: A total of 24 are listed on the industrial classification table, saying: “All countries of the world always enter investments in strategic sectors. The state sees this from its point of view as an influence on national security and economic stability, and we have studied all global investigations. experiences in this regard. ” Madbouly stressed that the size of the armed forces’ institutions is less than one percent of the size of the Egyptian economy.

The state’s tendency to list its public companies, in addition to listing companies owned by the Egyptian military, has created a state of optimism among analysts and specialists with whom The Independent has spoken, despite the long list of conditions which they set aside, to achieve it. step the desired results and goals.

Prepare 10 military affiliates

In turn, the deputy chairman of the board of directors of Egypt’s Sovereign Wealth Fund, Nevin El-Tahri, said there were about ten companies attached to the National Service Authority, run by the armed forces, that would be prepared to be ready. . for listing, the most prominent and closest offering in the near future are National Petroleum Services and Safi Mineral Water.

Al-Tahri reaffirmed the role of the sovereign wealth fund in selecting companies, preparing them and promoting them to investors, pointing out that placing these companies next to public companies “creates a good climate for investment during the coming period will create. “

The National Service Projects Organization of the Army owns more than 30 companies in the sectors of building materials, food, mining and petrochemicals.

The head of the Sovereign Fund of Egypt, Ayman Soliman, announced in press releases yesterday that a meeting will be held after the Eid Al-Fitr holiday to discuss the work plan of the Sovereign Fund of Egypt and the new projects that are the fund, to explain. work on during the coming period.

He explained that the coming period will show great contact with the financial and business communities and Egyptian society, to clarify the state’s guidelines for listing state-owned companies and Egyptian military companies on the stock exchange.

A good step requires more steps

The head of the research sector at the American University in Cairo, Hani Genena, said that the state’s orientations regarding disclosure and transparency, especially in the file of hosting military companies, “is a good step towards the improving disclosure and transparency, which will attract Arabs and foreign investors along with the Egyptians. ” He added: “But there are other steps.”

Geneina explained that achieving the goal of offering public companies “requires other steps, the first of which is a social dialogue in which local capital market parties participate, including the Financial Supervisory Authority, the stock exchange management, companies, investors and workers.” He stressed that we’re facing a golden opportunity to achieve the desired goals. But the issue is not only related to the importance of the government, but it should include all the details of trade, motivate companies to register and encourage investors. “

The economist, Hani Tawfiq, welcomed the state’s recent steps, saying: “The state’s exit from investment, albeit gradually, and the encouragement of the private sector, and foreign direct investment have become necessary.”

Tawfiq stressed that achieving the state’s demands, announced by the Egyptian president at the Egyptian family’s breakfast ceremony, “requires a lot of work from the government.” He called for more day-to-day follow-up with the government and relevant authorities, turning these prescriptions into “direct instructions to specific people, followed by rapid implementation programs. I fear these commendable directions will end in oblivion.”

Abolition of capital gains tax

Member of the Board of Directors of the stock exchange, Rania Yaqoub, said that there are “crises and negative aspects in the local market, and their treatment will ensure that the objectives are achieved to public and military companies in the capital market. offer. , “and note that the presentation in the presence of negative aspects” will yield nothing, and the presentation will remain. Those companies on the stock exchange are just a number added to the number of listed companies.

Yacoub called for “the abolition of the capital gains tax, which has been reintroduced since last January, and it is the decision that has affected the stock market the most negatively since the beginning of this year.” She wondered: “Losses are the title of investors in the recent period, so on what profits will they pay taxes. Companies should be encouraged to list in the stock market by giving them tax benefits and incentives for listed companies.”

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Is the stock market regaining its luster?

In turn, financial markets specialist Hanan Ramses said the offer from public companies and military companies “would positively impact the performance of the Egyptian stock exchange.” She explained in press releases that it would give the local financial market its importance as a platform for financing, as a contributor to economic growth, and as a source of increasing foreign exchange reserves.

She expected the local market to regain its faint luster as a destination that could attract Arab and foreign investment, which would motivate investors to take up their interests in projects in the country, and indicated that it would contribute to the competitiveness of increase government projects.

Farouk Soussa, an economist at Goldman Sachs for the Middle East and North Africa, said the reports indicating the government’s intention to list military-owned companies on the Egyptian stock exchange before the end of this year were a positive step. is, and can help increase private sector investment in the economy. “

He pointed out that the expanded role of the state in the economy was one of the biggest constraints on private investment, and pointed out that any steps to change it, according to Bloomberg, would be “very positive” for investor sentiment.

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