Introduction
Amr Adly

Privatization can be defined as a process of transferring the ownership of economic assets from the public sector, i.e., the state and its affiliated institutions, agencies, and companies – to the private sector with its various types, whether local or foreign, large or small. Transfer of ownership adds a legal dimension to the privatization process related to the redefinition of property rights and the return on revenue. At the same time, privatization is an issue with direct economic consequences because it determines the rules for allocating physical, monetary or other productive assets. This makes privatization a first and foremost political issue in terms of its origins and ramifications and considering the details of the process itself as an unambiguous manifestation of actions by the public authority through which resources and values are allocated in society. Based on this overlap between law, economy and politics, this report acquires its approach in an attempt to understand privatization as a political process that has legal manifestations, whether legislative or, especially, judicial, and of course has economic repercussions at the macro level as it affects the institutional frameworks governing the management of the economy and thus development opportunities, its sectoral composition and the presence of foreign investors etc., as well as at the micro level in view of the redistribution of assets that were once owned by the state – and consequently by the people whose will and interests it is supposed to embody – in favor of new owners who belong to the private sector and receive the return from their acquisition, use or disposal.

This report includes two research papers, the first written by Emad Mubarak on the legal and judicial aspects of the privatization process in Egypt since its inception in the early nineties of the last century, while the second, authored by Mohamed Gad, focuses on the economic aspects of privatization in terms of its effects on development opportunities in Egypt, especially the process of industrialization that expanded with the establishment of the public sector during the Nasser era, in an attempt to assess the impact of privatization on the overall economic performance.

This report, with its two constituent papers, gains importance in the discussion of the privatization file in Egypt over the past thirty years from three angles:

The first is that it is a research work that seeks to create a bigger picture that gathers legal, judicial and economic details and traces what has happened in Egypt since the launch of the privatization path in 1991 following the adoption of the economic reform and structural adjustment program, in order to understand the content of that complex multidimensional process, which had profound effects on Egyptian political economy. Hence, the two researchers engage with academic and semi-academic literature that has accumulated in the study of the various aspects of privatization, and they build on many of the details contained therein, whether in how the privatization process was managed, including factors such as corruption, nepotism and lack of transparency, or with regard to taking the constitutional and then the highest administrative courts as arenas to resolve the conflict that developed in the process of redefining property rights and the effects of this distribution on workers and the general public. Here, it can be said that we really need to form a wholistic picture of the privatization process in terms of its origins and repercussions in order to allow re-framing the public debate at the current stage, which brings us to the second angle of the importance of this report, which is the timing of its publication.

The timing of the issuance of this report represents the second angle of its importance because it provides a comprehensive, thorough and integrated study of the legal and economic aspects of privatization in view of the two major phases of that path during the era of Hosni Mubarak (1981-2011) in view of the first period that began with the issuance of Law No. 203 of 1991, which laid the legislative foundations to restructure, sell and liquidate the public sector (transferring a large part of it to public business sector companies), which allowed the first phase under the government of Kamal Al-Ganzouri (1996-1999) and then the second, more extensive phase in terms of the number and value of privatization deals under the government of Ahmed Nazif (2004- 2011). The first and second phases exhausted the largest balance of public business sector companies and witnessed a significant expansion in the allocation of state-owned lands to private investors in important sectors such as construction, manufacturing, tourism and agricultural reclamation. In the past few years, interest in the privatization file has been revived again within the framework of restructuring the Egyptian economy, especially after the International Monetary Fund agreement at the end of 2016.

This interest included the re-establishment of the Ministry of Public Business Sector with the aim of selling the remainder of the previous two phases, passing a new investment law (No. 72 of 2017) and starting to activate the partnership between the private and public sectors in sectors and activities that were not the subject of total or partial privatization before, especially in the fields of public utilities and services such as transportation, water and electricity, up to the state ownership document issued in 2022, which specified the ways and means of state exit from certain economic activities. Although this stage is different from its predecessors, whether with regard to the sectors subject to privatization or the legal and regulatory tools that are designed or employed, the essence of the privatization process remains the same, which is the transfer of property rights from the public to the private, which makes understanding and analyzing, and rather forming a big picture of the previous stages, a very important matter in order to provide the public debate – and what remains of it – with the necessary material at the level of information and analysis. This is what this report seeks.

The third angle of importance of this report is that it revolves around public policy in its substance, structure, language and target audience, where it clearly starts out from a base of earlier academic work that addressed privatization in great depth, whether in the field of political science, political economy or macroeconomics, in addition to law studies, of course.

While the preface deals with the subject of the current report in relation to the previous academic and semi-academic literature that dealt with the privatization process in Egypt, the next two sections will seek to address an overview of each of the two papers as an introduction to the reader.

Privatization as a political process with legal manifestations

It has already been pointed out that privatization is a process of redefining property rights, which involves transferring them from public ownership – which usually means state ownership – to private ownership, making it a primarily political issue with legal manifestations. From this point of view, the first paper deals with both the legislative and judicial aspects of the process as representatives of the legality of privatization, with a focus on the judicial aspect, whether constitutional or administrative. This is due to the fact that the privatization process – and for political reasons related to the ruling regime under Mubarak – was not framed in a legislative framework except in the narrowest sense through Law 203 of 1991, which came as general and vague as will be explained in the paper explains, and which opened the way to change the status of public sector companies by separating them from the ministries they were affiliated with financially and administratively, an arrangement inherited from the Nasser era, and transformed them into the public business sector. However, this change was not necessarily limited to privatization by transferring ownership to the private sector, but also included restructuring and organizing the public sector with the state retaining its ownership until liquidation. Perhaps this legislative ambiguity at the time was due to the Mubarak regime’s assessment of the risks of economic transformation in general, including privatization. In contrast to the pressures of the World Bank towards privatization – which is the context in which the legislation was drafted – the system was facing other pressures from workers concentrated in some business sector companies, organized by unions and who were mobilized in the face of the risks of changing their situation for the worse as well as preferring the system to keep its options – thus leaving options for reconsideration.

According to the research paper, this legislative ambiguity has produced a situation in which the privatization file as a political process – conflictive in many aspects in view of its distributive consequences – has moved to the courts. This started with the constitutional judiciary, and the Supreme Constitutional Court was at that time a relatively new actor that took its final form in 1989, an evolution from the formula of the Supreme Court whose law was promulgated in 1979. This did not mean a crude politicization of the judiciary in the sense of using it as a tool to pass policies that the regime does not want to translate into legislation because the constitutional court at that time enjoyed significant degrees of independence and even retained a relatively large margin of maneuver in the face of the regime. It is true that the court granted constitutionality to the path of privatization in its historic ruling in 1997, but this reflected a liberal orientation of its judges and the ability to express this as actors relatively independent from the regime. So, while some rulings of the court at that time were aligned with the plans of the regime, such as the taxes to be paid by Egyptians working abroad or the sales tax – the court also went in opposite directions against those of the regime to the point of depriving it at times of financial resources. This means that the judiciary was indeed a space that functionally replaced politics in launching the privatization process, but it was effective in itself as much as it was a space for expressing its own orientations, convictions, and capabilities.

It is very interesting to consider that what the regime started with referring privatization to the judiciary was reversed at a later stage with the acceleration of privatization during the era of Ahmed Nazif’s government when opponents of the privatization of business sector companies resorted to activists in the field of economic and social rights, representatives of workers affected by privatization deals and officials in some company offered for privatization to the administrative judiciary – the State Council – as a space for resistance with legal tools aimed at undermining the privatization path by challenging the administrative decisions under which contracts were signed to privatize public business sector companies or to allocate state-owned land to local or foreign private investors. Once again, the judiciary was effective, and not just an arena for conflict between supporters and opponents of privatization. The State Council issued a series of rulings that led to the invalidation of several privatization deals and land allocations starting in 2008. This pace accelerated after the 2011 revolution. Emad Mubarak’s research paper sheds light on the judicial aspects of privatization as a manifestation of the economic-political conflict. To my knowledge, it is one of the first attempts to create a bigger picture that addresses both the constitutional and administrative judiciary in their relationship to privatization in a way that combines knowledge of the techniques of law and judicial work, and the literature of political science on the judiciary as part of the political system.

Privatization as a political process with economic repercussions

The paper addressing the economic aspect of privatization, by researcher Mohamed Gad, makes an excellent contribution to the discussion of path of the privatization, whether at the level of focusing on its developmental impact in the industrial sector on the overall Egyptian economy, or at the level of its results. As for the approach, Gad posed a new question, which is how the privatization of the public sector – focusing on the manufacturing sector – affected the development path. This perspective differs from what occupied most of the studies and comments on privatization, which focused on the micro aspect on how to manage the privatization process and associated corruption, nepotism, lack of transparency and accountability, or rebuilding networks of nepotism and corruption, through which ownership was transferred from the state to certain actors in the sector, the private sector or the impact of privatization on workers and their attempts to adapt or resist in various ways. However, few scholars have been interested in trying to extrapolate the results of the privatization process thirty years after its launch at the sectoral (industry) and macro (development) levels. Gad focuses on industrialization, as it has settled in most economic and political economy literature as the locomotive of economic modernization, raising the added value achieved in the economy as a whole. However, it was also the focus of the expansion of the public sector during the Nasser era, whether through the nationalization of private companies that were owned by Egyptians or foreigners, or by entering into new sectors of heavy industries such as iron, steel, aluminum, fertilizers, cement and engineering industries. Hence, the contribution of this paper can be considered as a continuation of and addition to an ongoing discussion.

Mohamed Gad does not reach a final conclusion regarding the developmental impact of privatization. The data he provides or extracts shows that the industrial sector did not witness a major contraction as some reckon after the successive privatization deals in the nineties and the first decade of the twenty-first century. It may be true that the beginning of the sixties was exceptional in generating growth compared to all the periods that followed, but mostly this was due to the launch of heavy industrialization from a very low baseline in Egypt in the fifties, as the process of industrialization itself was soon disrupted and declined even in light of the leadership of the he public sector with the faltering of the second five-year plan. The author here attempts to put the privatization decisions in their historical context by addressing the crisis of the import substitution model in Egypt, and how privatization as a process of transfer of ownership from public to private came after years of declining investment and growth in many public sector facilities.

Gad does not seek thereby to consider the privatization path – or the way in which it was carried out – inevitable. Rather, he considers it to have come to express the hegemony of neoliberalism as a global ideology that found its way to countries in the global south such as Egypt in the midst of debt crises and through the conditionality of the International Monetary Fund and the World Bank. The data contained in the paper indicates that the privatization of the industrial sector – in the broad sense of the transfer of weight in growth, employment and investment from the public sector to the private sector and not only the transfer of ownership of assets – did not lead to a general decline in manufacturing as a percentage of GDP compared to the previous period. This means that privatization as part of the neoliberal transformation was not linked to wasting industrialization or shifting towards parasitic activities marred by speculation and other non-productive activities, as indicated by the critical discourse of the transformations that the Egyptian economy has witnessed since the nineties. However, at the same time the privatization of the industrial sector did not solve the problems of economic transformation in Egypt in favor of a more developmental formula, whether at the level of industrial exports with higher added value or by deepening the industry and increasing its competitiveness. The conclusion, then, is that privatization – at least in the industrial sector – may not be the disease, but neither was it the cure, contrary to what its advocates and supporters in the international financial institutions promoted.

Although the paper dealing with the economic aspect of privatization does not reach definitive answers, it certainly raises important and urgent questions at the current stage, which calls for developing a future research agenda to assess the path of privatization and its repercussions at the macro and sectoral levels.

Finally, the report provides an excellent opportunity to open the discussion about the privatization file in Egypt by starting from evaluating the previous path of privatization processes from the economic and legal angles by placing it in its historical context. To this end it presents analyses based on data and documents in a way that feeds the public debate and evaluates it on objective bases without underestimating the political nature of the privatization process.