Egypt

Throughout the past two decades, Egyptian President Hosni Mubarak and his team have pursued an increasingly liberal economic policy - easing currency controls and restrictions on private capital, encouraging inward investment and recognizing that the free market is a powerful modernizing force. Privatization is one of the key components of this trend.

The appointment of Atef Ebeid, the former minister of privatization, as Egypt's new prime minister, underscored President Mubarak's fourth term strategy. It is no surprise that quickening the pace of privatization is on top of Prime Minister Ebeid's agenda for moving along economic reform.

The recent acquisition by Arab Swiss Engineering (ASEC) of Helwan Portland Cement is a case in point. Purchasing 100 percent of Helwan's shares, ASEC widened its business scope from service provision and local manufacturing to actual production.

"In a message published in 1999, I mentioned that my dream was to one day see ASEC producing its own cement under its own name. Now I can truly say that my dream has come true," says ASEC's president, Omar Guemei.
Arab Swiss Engineering Managing Director Omar Guemei

Last year was marked by fierce battles raged over majority stakes in five state-owned cement companies. This resulted in four multinational cement companies gaining a significant foothold in the sector, now 30 percent foreign owned. The experience pushed the government to adopt a more cautious and pragmatic approach to avert foreign dominance.

The problem was that the government had stipulated that payment had to be made in US dollars, making it difficult for many Egyptian corporate suitors to comply. "When Helwan was offered for sale on the 15th of March 2001, no one showed any interest for more than five months," Guemei relates. "After this period, I told the government I was interested in buying it, but in Egyptian pounds." By this time, after almost half a year of silence from investors, the goverment was more than willing to consider alternatives.

Mokhtar Khattab, Egypt's minister of public enterprise

ASEC made its offer on the 21st of August, and by the 9th September 2001 it had clinched the deal. Many industry observers had thought that Guemei's company did not have the money to pay for such a large investment - even in Egyptian pounds - but the deal went through thanks to expert help from Citibank Egypt and financing from Bank Misr.

"Citibank is an experienced and accomplished 'arranger' when it comes to complex financial transactions," notes Michel Accad, head of Citibank Egypt. "Banque Misr was keen on the transaction given the strong cash flows of Helwan Portland, and they were satisfied with the loan structuring we proposed.

The next step for ASEC will be upgrading production facilities. "We will modernize the plant to meet international standards by reducing emissions and upgrading existing kilns," says Guemei. "It will set an example of Egyptian efficiency, planning, research, engineering and production capabilities."

Dr Mokhtar Khattab, the present Minister of Public Enterprises, is satisfied with the result: "ASEC is a major player in the cement sector. When we studied their bid for Helwan Portland, we could see that their engineering capabilities meant they were an ideal candidate."

"With new incentives and relaxed taxation we hope to have more success stories in the future," he adds. "Over the last ten years, government intervention has declined dramatically. Once dominating 80 percent of Egyptian industry, state ownership is now down to 34 percent."

Guemei is looking to other frontiers: "Perhaps in two or three years, when Helwan is on track, we will look to buy another cement plant. Today my hands are full, but Sudan and Syria look like good markets. Cement is a local product and needs to be 90 percent consumed locally. This could be my next dream."

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