Egyptian state-owned companies are “eclipsing” the private sector despite IMF-backed structural reforms designed to reorient the economy toward private sector growth, according to Reuters
Revenues at 17 non-oil, public sector holding companies more than doubled from July 2016 to June 2019 to 60.6 billion Egyptian pounds, while income after tax more than quadrupled, according to Reuters calculations using Finance Ministry data
Net profit after tax at the 17 holding companies – which together control about 180 smaller companies – more than quadrupled over the three-year period, the data shows.
Egypt’s economy was growing at nearly 6% before COVID-19 struck and economists say state-led activity has helped cushion the blow from the pandemic.
Meanwhile, in the private sector: Non-oil private sector activity expanded in only five of the 36 months during the same period, Reuters says, pointing to the IHS / Markit Purchasing Managers Index.
However, Egyptian officials say they are working to boost the private sector for long-term growth after stabilising the economy and implementing widely praised reforms backed by the International Monetary Fund (IMF) that included devaluing the currency, removing most energy subsidies and imposing a value-added tax.
On the other hand, However, last month the World Bank said state-owned enterprises (SOEs) often receive special tax exemptions and enjoy a regulatory environment that favours incumbents, causing private investors to shy away.
Foreign direct investment in Egypt rose to $8.24 billion in 2018/19 from $6.93 billion in 2015/16, according to central bank figures, but much of this was in the thriving oil and gas sector.
Egypt has not attracted the strong private investment that would help reduce poverty and absorb an estimated 800,000 workers entering the labour force every year, the World Bank said in its December report.
“The widespread presence of SOEs across the economy affects competition and distorts market outcomes,” the World Bank said.